TIDMNANO
RNS Number : 0342C
Nanoco Group PLC
13 October 2015
For immediate release 13 October 2015
NANOCO GROUP PLC
("Nanoco" or the "Company")
Preliminary results for the year ended 31 July 2015
Nanoco Group plc (LSE: NANO), a world leader in the development
and manufacture of cadmium-free quantum dots and other
nanomaterials, is pleased to announce its preliminary results for
the year ended 31 July 2015.
Highlights
-- Substantial progress in the commercialisation of the
Company's technology in the display industry in partnership with
worldwide licensing partner The Dow Chemical Company ("Dow")
-- Mechanical completion of Dow's large-scale cadmium-free
quantum dot manufacturing plant in South Korea during the year with
customer sampling expected to begin in the very near term
-- Robust display pipeline with Nanoco and Dow currently working
with 11 display OEMs globally from countries including Korea,
China, Japan, Taiwan and the USA
-- Further joint development agreement announced today with
Osram for the use of quantum dots in near-chip lighting
applications - see separate announcement released today. Other
progress in lighting including the development of niche lighting
products with Marl International Limited and the formation of a
lighting business unit
-- Progress in other target markets of solar and life sciences
including the award of an Innovate UK grant for solar work with
Loughborough University's Centre for Renewable Energy Systems
Technology
-- Team strengthened with the appointment of David Blain as
Chief Financial Officer, Keith Wiggins as Chief Operating Officer,
Brendan Cummins as a Non-executive Director and Caroline Watson as
Investor Relations Manager
-- Moved from AIM to the main market of the London Stock
Exchange in May 2015, accompanied by a GBP20 million
fundraising
-- Balance sheet remains robust with cash, cash equivalents and
deposits at 31 July 2015 of GBP24.3 million (31 July 2014: GBP12.2
million)
Commenting on the results, Anthony Clinch, Nanoco's Chairman,
said:
"The past year has been one of rapid development at Nanoco and
we continue to configure the organisation to meet the needs of an
emerging, global licensing and manufacturing business.
"Mechanical completion of Dow's mass production plant in South
Korea at the year end marked a major milestone in the
commercialisation of our cadmium-free quantum dots in the display
industry. The commissioning of the plant is ongoing and proceeding
well. Customer sampling from the plant, which was initially
expected to start in Q3 CY 2015, is now expected to begin in the
very near term. As a result we expect recurring income in the
second half of our current financial year rather than in Q4 CY
2015.
"The commercialisation of our technology in lighting is also
well advanced and, as we develop our other market opportunities in
life sciences and solar, we become ever more enthusiastic about the
potential for our technology across all four of our target markets.
We look forward to the year ahead with confidence."
Analyst meeting: A meeting for analysts will be held at 10am
this morning, 13 October 2015, at the offices of Buchanan, 107
Cheapside, London EC2V 6DN. For further details, please contact
Buchanan on 020 7466 5000.
For further information, please contact:
Nanoco Tel: +44 (0) 161
603 7900
Michael Edelman, Chief Executive
Officer
David Blain, Chief Financial
Officer
Canaccord Genuity - Joint Broker Tel: +44 (0) 20
7523 8000
Simon Bridges
Cameron Duncan
Mark Whitmore
Liberum - Joint Broker Tel: +44 (0) 20
3100 2000
Neil Patel
Richard Bootle
Steven Tredget
Buchanan Tel: +44 (0) 20
7466 5000
Mark Court / Sophie Cowles
/ Stephanie Watson
Notes for editors:
About Nanoco Group plc
Nanoco is a world leader in the development and production of
cadmium-free quantum dots and other nanomaterials for use in
multiple applications including LCD displays, lighting, solar cells
and bio-imaging. In the display market, it has an exclusive
manufacturing and marketing licensing agreement with The Dow
Chemical Company.
Nanoco was founded in 2001 and is headquartered in Manchester,
UK. It has production facilities in Runcorn, UK, and a US
subsidiary, Nanoco Inc, based in Concord, MA. Nanoco also has
business development executives in Japan, Korea and Taiwan. Its
technology is protected worldwide by a large and growing patent
estate.
Nanoco is listed on the main market of the London Stock Exchange
and trades under the ticker symbol NANO. For further information
please visit: www.nanocotechnologies.com.
Chairman's and Chief Executive Officer's joint review
Overview
We continued to drive the development of Nanoco during the year
and to deliver our strategy for the commercialisation of the
Company's nanomaterial technologies. Progress at the Company was
accompanied by positive trends in our marketplace, increasing the
opportunities open to us. These trends included the increasing
recognition that cadmium-free quantum dots are the preferred option
for the protection of human and environmental health compared with
cadmium-based technologies.
This was underlined in May this year when Members of the
European Parliament (MEPs) voted overwhelmingly (618 to 33) against
an EU proposal to prolong the permission to use cadmium-containing
quantum dots in Europe under an amendment to the Restriction of
Hazardous Substances Directive (RoHS). Along with MEPs, we continue
to urge the European Commission to enact anti-cadmium legislation
promptly. Following the MEPs' vote in May, the Company has seen
increased activity with display OEMs that had previously chosen to
pursue other technologies.
Nanoco evolved during the year, continuing to make the
transition from a research-based company to an integrated business
capable of research, manufacturing and delivering consistent
product to customer requirements. This has been a major cultural
and organisational shift for the Company. We have strengthened our
executive, non-executive and wider team to ensure that the Company
successfully manages its development and growth.
In May 2015, Nanoco took a major step in its corporate
development when it moved from AIM to the main market of the London
Stock Exchange. The move was also accompanied by a fundraising of
GBP20 million (gross) to further advance the Company's commercial
leadership in display and exploit other major market opportunities
in LED lighting, solar and bio-imaging.
Whilst last year was a year of progress, the past few weeks have
also been particularly exciting with the ongoing commissioning of
the mass production plant for cadmium-free quantum dots built in
South Korea by our worldwide licensing partner for the display
industry, Dow. This plant represents the world's leading mass
production plant for cadmium-free quantum dots and both Dow and
Nanoco are very proud of this achievement. Customer sampling from
the plant is expected to begin in the very near term.
We are pleased to announce today a further follow-on joint
development agreement ("JDA") with Osram, one of the world's
largest lighting companies. This JDA continues the work carried out
to date on a near-chip design for lighting applications.
Nanoco's business is built on robust intellectual property. We
continued to reinforce our patent estate during the year and now
have about 360 granted or pending patents with worldwide
protection.
Commercial applications - displays
The display industry has invested billions of dollars in
building LCD TV manufacturing capacity and is committed to
supporting the further development and evolution of LCD technology.
New investment in LCD manufacturing capacity is continuing to come
on-stream, particularly in China.
Nanoco's cadmium-free quantum dot technology improves the colour
quality of LCD displays and is of compelling interest to the
display industry. Nanoco and Dow are currently working at various
stages of the development process with a total of 11 LCD display
OEMs around the world. They range from multi-national organisations
to emerging consumer electronics brands from countries including
Korea, China, Japan, Taiwan and the USA.
Nanoco's technology is applicable to all LCD displays.
Innovations in LCD technology are often first introduced in top-end
TVs but the technology is also suited to smartphones and other
handheld devices, tablets and laptop computers. LCD TV screens are
becoming larger, with TVs with greater than 55 inch screens now
readily available, which is another positive trend in the roll-out
of our technology.
Nanoco is commercialising its technology in the LCD display
industry through a worldwide licensing agreement with Dow. Under
the agreement, which was signed in January 2013, Dow is marketing
the Company's cadmium-free technology under the brand name
TREVISTA(TM) Quantum Dots.
In July this year, Dow finished mechanical completion of its
large-scale plant in Cheonan, South Korea, for the manufacture of
Nanoco cadmium-free quantum dots. Commissioning has been ongoing in
preparation for customer sampling, which is expected to begin in
the very near term.
The Cheonan plant is based on Nanoco's designs and Nanoco has
worked very closely with Dow throughout the construction and
commissioning stages, which have been a period of intense activity
at Nanoco. A significant portion of Nanoco's staff has been
involved in the various stages of the Cheonan plant.
Dow has also made progress in the marketing of TREVISTA(TM)
Quantum Dots. In January this year, Dow announced a partnering
agreement with LG Electronics in connection with the supply of
TREVISTA(TM) Quantum Dots.
(MORE TO FOLLOW) Dow Jones Newswires
October 13, 2015 02:00 ET (06:00 GMT)
It was initially anticipated that LG's quantum dot TVs would be
launched on a modest scale using Nanoco quantum dots from the
Company's Runcorn production plant with full commercial roll-out
anticipated once Dow's plant was on-line. LG continues to work with
Dow as plans are progressed for commercial launch, which is
ultimately a market timing decision that will be made by LG.
Nanoco received a significant milestone payment from Dow during
the year. Fees paid by Dow follow a commonly used structure whereby
earn-outs are paid on achievement on agreed total sales milestones
up to an agreed cap and royalties are earned on sales achieved for
the lifetime of the agreement.
Commercial applications - general lighting
LEDs have compelling advantages over traditional lighting,
particularly in long service life and reduced power consumption. A
limiting factor to the widespread adoption of LEDs remains colour
performance as existing products tend to offer either bright cold
light or warm dull light. Nanoco's quantum dots have been shown to
transform LEDs so they produce bright, warm light with a high
colour rendering index without the loss of lumens. In addition, as
Nanoco quantum dots are tuneable to any specific wavelength, any
shade of light can be produced. This opens up new opportunities, in
both general and niche applications, such as the ability to create
artificial daylight.
Our general lighting activities gained momentum during the year,
particularly in niche lighting. We have been working on these niche
applications with Marl International Limited ("Marl"), a privately
held UK company, and with other companies. The quantum dots, which
are manufactured in Runcorn, are supplied under the Nanoco
brand.
Marl has developed products for architectural lighting, such as
panels that reproduce daylight; downlighting for the retail sector;
and LEDs for horticulture to assist seed germination and plant
growth. Marl has already satisfied initial orders for products
containing Nanoco CFQD(R) quantum dots.
Nanoco has been working under JDAs with Osram, one of the
world's largest lighting companies, since August 2011, and we are
pleased to announce today that we have signed a further JDA with
Osram. We continue to make good progress in this joint development
work, which is focused on encapsulating our quantum dots to
optimise them for the operating conditions associated with LEDs.
The Company is also working with a number of other lighting
companies in Asia, the USA and Europe on both general lighting and
niche applications such as the lighting of food in retail
premises.
The Company formed a lighting division in July 2015 to
accelerate progress in this area. The division, called Nanoco
Lighting, is based at the Company's Manchester headquarters and is
headed by Torsten Schanze, General Manager, and Dale Needham as
Business Development Director.
Commercial applications - solar
Nanoco's solar ink, developed from cadmium-free nanomaterials,
has been designed to maximise the absorption of solar energy and to
have physical characteristics such that it can be printed by low
cost methods and annealed into a photovoltaic film. The technology
is based on copper, indium, gallium, selenium ("CIGS")
materials.
Thin-film solar panels have considerable potential advantages
over traditional panels in that they are potentially more efficient
along with being cheaper, more flexible, lighter weight and
consequently easier to handle. However, the thin-film solar market
is currently dominated by cadmium-containing solar panels.
Our development work on our CIGS materials has been focused on
increasing the efficiency of the conversion of light into
electricity and we have now reached a conversion rate of
approximately 17%, which we believe is close to the efficiency
level required to form the basis for low cost, printable solar
panels. We believe that we could achieve a cost performance of less
than 0.33$/W, which is very competitive when compared with existing
technologies.
Development work to scale up the CIGS PV technology from small
lab-sized cells to larger 300mm x 300mm square cells, or
mini-modules, is on-going.
In April 2015, Nanoco was awarded a grant from Innovate UK, the
Government agency formerly known as the Technology Strategy Board,
to fund a collaborative project with Loughborough University's
Centre for Renewable Energy Systems Technology ("CREST"), a major
UK centre of photovoltaic research. In the two year project, Nanoco
and CREST will work together to optimise the architecture of the
mini-modules. Nanoco will receive about GBP400,000 over the two
year period.
Given the resource requirements for eventual production, the
Company intends to identify a suitable partner to pursue the solar
opportunity. Early stage discussions have already begun with a
number of third parties with the objective of forming a
partnership, initially to prove the technology on 300mm x 300mm
square panels. A portion of the proceeds of the recent GBP20
million fundraising has been allocated to progress the solar
opportunity.
Commercial applications - life sciences
We have been working with University College London since 2009
on the use of cadmium-free quantum dots in the in-vivo imaging of
cancer. The fluorescence of Nanoco quantum dots is being used in
this work to pinpoint malignant lymph nodes to guide surgeons in
the removal of cancerous tissue. Other materials have already been
used in this way in clinical practice but Nanoco quantum dots offer
the major advantage of being able to fluoresce for a longer period
of time, and their fluorescence can be detected from deeper
tissues, giving surgeons more time and accuracy to visualise the
cancer which we believe will lead to a greater improvement in
patient outcomes.
Nanoco won a second grant award from Innovate UK, the UK's
innovation agency, totalling GBP308,000, in support of the current
phase of this research work at University College London. This
grant funded phase commenced in October 2014 and, at the
appropriate time, we will seek suitable commercial partners from
the healthcare industry.
We see a substantial opportunity for our cadmium-free quantum
dot technology in the healthcare sector, both as a cancer
diagnostic and as a surgical tool. We are currently developing a
detailed business plan to map out the commercialisation of our
technology in this target market. Once the business plan is
complete, we will set up a life sciences business unit and recruit
a leadership team.
People
The Nanoco board was strengthened considerably during the year
at executive and non-executive levels.
In October 2014, Keith Wiggins was appointed to the newly
created board position of Chief Operating Officer. Keith has more
than 20 years' experience at Dow and is a great asset to Nanoco. In
May this year, Brendan Cummins joined the board as a Non-executive
Director. Brendan has 40 years' experience of the international
chemicals sector and is a former CEO of Ciba Inc.
Shortly after the period end, David Blain joined the Company as
Chief Financial Officer, following his recruitment in early May
this year. David has a wealth of financial and commercial
experience and we look forward to his input to the Company.
Recently Caroline Watson joined Nanoco as Investor Relations
Manager. Caroline has 20 years of experience having worked on both
the buy and sell side of London based financial institutions.
Additionally the Company is actively recruiting a commercial
director and product engineering director to strengthen the
executive team further.
The Nanoco team, most of whom are based in Manchester, UK, had
grown to 113 people at the year end, compared with 98 people a year
earlier, with most of the increase being technical and scientific
staff. We would like to offer our sincere thanks to all at Nanoco
for their enthusiasm, commitment and achievement during the
year.
Financial results
Our revenues in the year to 31 July 2015 were GBP2.03m (2014:
GBP1.43m). Our loss before tax was GBP10.88m (2014: GBP9.06m). This
increase in loss before tax reflected increased research and
development plus additional staff costs and a one-off cost of
GBP0.9m (2014: Nil) in relation to the move to the main market.
Cash, cash equivalents and deposits at the year-end were
GBP24.31m (2014: GBP12.18m). The increase reflects the proceeds of
a placing on 1 May 2015 when the Company moved to the main
market.
Outlook
The past year has been one of rapid development at Nanoco and we
continue to configure the organisation to meet the needs of an
emerging, global licensing and manufacturing business.
Mechanical completion of Dow's mass production plant in South
Korea at the year end marked a major milestone in the
commercialisation of our cadmium-free quantum dots in the display
industry. The commissioning of the plant is ongoing and proceeding
well. Customer sampling from the plant, which was initially
expected to start in Q3 CY 2015, is now expected to begin in the
very near term. As a result we expect recurring income in the
second half of our current financial year rather than in Q4 CY
2015.
The commercialisation of our technology in lighting is also well
advanced and, as we develop our other market opportunities in life
sciences and solar, we become ever more enthusiastic about the
potential for our technology across all four of our target markets.
We look forward to the year ahead with confidence.
Anthony Clinch Michael Edelman
Chairman Chief Executive Officer
13 October 2015 13 October 2015
Financial review
Results
(MORE TO FOLLOW) Dow Jones Newswires
October 13, 2015 02:00 ET (06:00 GMT)
Revenue for the year increased by GBP596,000 to GBP2,029,000
(2014: GBP1,433,000) and the loss before tax was GBP10,881,000
(2014: GBP9,060,000). As has historically been the case, the timing
of revenue receipts in the form of milestone and joint development
payments from strategic partners continued to be the major
determinant of the results of the business. During the year,
revenue has benefited from the inclusion of a milestone payment
from Dow, triggered by the announcement that it was beginning the
construction of the cadmium-free quantum dot manufacturing plant in
South Korea, whilst JDA revenue has reduced as work has reached its
completion. Almost all JDA revenues in both the current and prior
year were denominated in US Dollars having originated primarily
from customers in the USA and Asia.
Historically, the Company has disclosed all R&D materials as
cost of sales and included all R&D labour costs within
administrative expenses. As the revenue from product sales begins
to come on stream and with the aim of providing greater
transparency, the Company now sets out to disclose as cost of
sales, those materials, labour and ancillary costs attributable to
product sales and to government grants included within revenue from
the rendering of services.
Accordingly the comparatives have been restated and the figure
previously reported as cost of sales has been reduced by
GBP1,259,000 and the aggregate sum of administrative expenses and
R&D expenses increased by an equivalent amount; with
administrative expenses increasing by GBP1,518,000 and R&D
expenses being reduced by GBP259,000. There has been no impact on
the reported loss for the year.
In the current period, cost of sales has reduced by GBP977,000
and the aggregate sum of administrative expenses and R&D
expenses increased by an equivalent amount; with administrative
expenses increasing by GBP1,293,000 and R&D expenses being
reduced by GBP316,000. There is no impact on the reported loss for
the year-ended 31 July 2015. Cost of sales comprises the labour,
materials and power costs incurred in the generation of revenue
from products sold and government grants.
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.
The increase in research and development expenditure of
GBP662,000 to GBP5,580,000 (2014: GBP4,918,000) comprises an
increase in R&D labour costs associated with the trialling of
production scale-up, partially offset by a decrease in R&D
materials costs, as the formulations for production materials
become more refined.
Total payroll costs (before the charge for share-based payments)
increased by GBP1,089,000 to GBP5,623,000 (2014: GBP4,534,000). The
increase in payroll costs is attributable to a number of factors
including, the recognition during the year of director and employee
bonuses in respect of both the year ended 31 July 2014 and the year
ended 31 July 2015, pay increases and regrades and some additional
recruitment including that of the newly created role of chief
operating officer. Average staffing numbers increased by 5 heads
from an average of 104 heads in 2014 to an average of 109 heads in
2015. During the year, a number of former pure R&D staff were
redeployed to assist with production scale-up R&D.
Of the increase in administrative costs of GBP1,670,000 to
GBP7,130,000 (2014: GBP5,460,000), GBP926,000 comprised that
element of the costs associated with the move to the main market
charged to the Consolidated statement of comprehensive income.
After deducting operating costs the adjusted operating loss* for
the year ending 31 July 2015 was GBP9,452,000 (2014: adjusted
operating loss* of GBP8,676,000).
The Group aims to incentivise and retain key staff through the
use of equity-settled share awards. The IFRS2 (share-based payment)
charge in respect of share schemes totalled GBP619,000 (2014:
GBP573,000). This increase in the charge reflects the additional
options awarded in the year, which totalled 380,000 (2014:
444,000). The total number of share options in issue as at 31 July
2015 were 12.0 million (31 July 2014: 13.4 million). Of these, 8.7
million (2014: 4.1 million) have met their performance criteria and
are therefore capable of being exercised. During the year 1.5
million options were exercised (2014: no options exercised) and
0.25 million (2014: 0.1 million) options lapsed or were forfeited.
In addition to the above options, a further 0.5 million (31 July
2014: 0.9 million) of shares are jointly owned by the Group's
Employee Benefit Trust ("EBT") and certain senior management
through a Jointly Owned Agreement ("JOA"). Under the JOA, the
employee beneficiaries have the option to acquire the trustee's
shares at an agreed option price subject to meeting certain
performance criteria. At 31 July 2015, all of the JOA shares had
met their performance criteria and were capable of being acquired
from the trustees. 0.3 million JOA shares (2014: no JOA shares)
were exercised during the year. Details on the various share
schemes are provided in note 19 to the accounts.
With interest income (net of interest payments) of GBP116,000
(2014: GBP189,000), a decrease of GBP73,000, the loss before tax
was GBP10,881,000 (2014: loss of GBP9,060,000).
The tax credit for the year is GBP1,906,000 (2014:
GBP1,249,000). The tax credit to be claimed, in respect of R&D
spend, is GBP1,800,000 (2014: GBP1,210,000). There was also a
GBP113,000 credit in respect of the prior year R&D tax claim
(2014: GBP48,000 credit). Overseas corporation tax in respect of
the US subsidiary, Nanoco US Inc., was GBP7,000 during the year
(2014: GBP9,000). There was no deferred tax credit or charge (2014:
nil).
Adjusted basic loss* per share was 3.36 pence (2014: adjusted
loss* of 3.38 pence). Basic loss per share was 4.05 pence (2014:
loss of 3.65 pence).
No dividend has been proposed (2014: nil).
Cash flow and balance sheet
During the year cash, cash equivalents, deposits and short-term
investments increased by GBP12,129,000 to GBP24,311,000 (2014:
GBP12,182,000). The Company raised gross proceeds of GBP20,000,000
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 charged to share premium totalled
GBP560,000.
The Group reduced its capital spend in the year, to a total of
GBP385,000 (2014: GBP494,000). Expenditure incurred in registering
patents totalled GBP533,000 (2014: GBP536,000) during the year
reflecting the Group's continued focus on developing and
registering intellectual property. Capitalised patent spend is
amortised over ten years in line with the Group's accounting
policy.
Treasury activities and policies
The Group manages its cash deposits prudently and invests its
funds across a number of financial institutions which have
investment grade credit ratings. The deposits range from instant
access to 12 month term deposits and are regularly reviewed by the
board. Cash forecasts are updated monthly to ensure that there is
sufficient cash available for foreseeable requirements. More
details on the Group's treasury policies are provided in note 23 to
the financial statements.
Credit risk
The Group only trades with recognised, creditworthy third
parties. Receivable balances are monitored on an on-going basis and
any late payments are promptly investigated to ensure that the
Group's exposure to bad debts is not significant.
Foreign exchange management
The Group invoices most of its revenues in US Dollars. The Group
is therefore exposed to movements in the US Dollar relative to
Sterling. The Group uses forward currency contracts to fix the
exchange rate on invoiced or confirmed foreign currency receipts.
The Group does not take out forward contracts against uncertain or
forecast income. There were no open forward contracts as at 31 July
2015 (2014: none). At the year end the Group had net USD assets of
GBP51,000 (2014: net USD assets of GBP135,000). The Group's net
profit and its equity are exposed to movements in the value of
Sterling relative to the US Dollar. The indicative impact of
movements in the Sterling exchange rate on profits and equity based
on the re-translation of the closing balance sheet are summarised
in note 23 to the financial statements and were based on the
year-end position. As US Dollar revenues increase so will the
exposure of the Group's profit and loss and equity to movements in
the Sterling/US Dollar exchange rate.
Summary
The Group is in a strong financial position to exploit the
exciting opportunities ahead.
David Blain
Chief Financial Officer
13 October 2015
* adjusted figures are stated before the share-based payment
charge and that element of the costs associated with the move to
the main market charged to the Consolidated statement of
comprehensive income.
Consolidated statement of comprehensive income
for the year ended 31 July 2015
Restated
Notes 2015 2014
GBP000 GBP000
----------------------------- ------ --------- ---------
Revenue 4 2,029 1,433
Cost of sales (316) (304)
----------------------------- ------ --------- ---------
Gross profit 1,713 1,129
Research and development
expenses (5,580) (4,918)
Administrative expenses (7,130) (5,460)
Operating loss
----------------------------- ------ --------- ---------
- before share-based
payments and the costs
of the move to the main
market (9,452) (8,676)
- cost of admission
to main market (926) -
- share-based payments 19 (619) (573)
(MORE TO FOLLOW) Dow Jones Newswires
October 13, 2015 02:00 ET (06:00 GMT)
----------------------------- ------ --------- ---------
5 (10,997) (9,249)
Finance income 7 119 194
Finance costs 7 (3) (5)
----------------------------- ------ --------- ---------
Loss on ordinary activities
before taxation (10,881) (9,060)
Taxation 8 1,906 1,249
----------------------------- ------ --------- ---------
Loss for the year and
total comprehensive
loss for the year (8,975) (7,811)
----------------------------- ------ --------- ---------
Loss per share
Basic and diluted loss
for the year 9 (4.05)p ( 3.65)p
----------------------------- ------ --------- ---------
The loss for the year arises from the Group's continuing
operations and is attributable to the equity holders of the
parent.
The basic and diluted loss per share are the same as the effect
of share options is anti-dilutive.
The notes below form an integral part of these financial
statements.
Consolidated statement of changes in equity
for the year ended
31 July 2015
Share
Issued -based
equity payment Merger Revenue
capital reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------- -------- -------- --------- --------
At 31 July 2013 28,054 1,253 (1,242) (13,671) 14,394
Loss for the year
and total comprehensive
loss for the year - - - (7,811) (7,811)
Issue of share capital 10,000 - - - 10,000
Expenses of placing (263) - - - (263)
Share-based payments - 573 - - 573
At 31 July 2014 37,791 1,826 (1,242) (21,482) 16,893
-------------------------- --------- -------- -------- --------- --------
Loss for the year
and total comprehensive
loss for the year - - - (8,975) (8,975)
Issue of share capital 20,826 - - - 20,826
Expenses of placing (560) - - - (560)
Issue of shares by
EBT - - - 297 297
Share-based payments - 619 - - 619
At 31 July 2015 58,057 2,445 (1,242) (30,160) 29,100
-------------------------- --------- -------- -------- --------- --------
Company statement of changes in equity
for the year ended 31 July 2015
Share-
Issued based
equity payment Capital redemption Revenue
capital reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------- --------- ------------------- ---------- --------
At 31 July 2013 105,922 1,253 4,402 (25,710) 85,867
Profit for the year
and total comprehensive
profit for the year - - - 39 39
Issue of share capital 10,000 - - - 10,000
Expenses of placing (263) - - - (263)
Share-based payments - 573 - - 573
At 31 July 2014 115,659 1,826 4,402 (25,671) 96,216
-------------------------- --------- --------- ------------------- ---------- --------
Profit for the year
and total comprehensive
profit for the year - - - 82 82
Issue of share capital 20,826 - - - 20,826
Expenses of placing (560) - - - (560)
Issue of shares by
EBT - - - 297 297
Share-based payments - 619 - - 619
At 31 July 2015 135,925 2,445 4,402 (25,292) 117,480
-------------------------- --------- --------- ------------------- ---------- --------
Statements of financial position at 31 July 2015
31 July 31 July 31 July 31 July
2015 2015 2014 2014
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
------------------------- ------ ---------- ---------- ---------- ----------
Assets
Non-current assets
Tangible fixed
assets 10 2,062 - 2,783 -
Intangible assets 11 1,821 - 1,557 -
Investment in
subsidiaries 12 - 66,052 - 65,433
------------------------- ------ ---------- ---------- ---------- ----------
3,883 66,052 4,340 65,433
------------------------- ------ ---------- ---------- ---------- ----------
Current assets
Inventories 13 208 - 134 -
Trade and other
receivables 14 902 31,866 633 27,500
Income tax asset 1,800 - 1,210 -
Short-term investments
and cash on deposit 15 20,000 20,000 5,791 -
Cash and cash
equivalents 15 4,311 12 6,391 3,733
------------------------- ------ ---------- ---------- ---------- ----------
27,221 51,878 14,159 31,233
------------------------- ------ ---------- ---------- ---------- ----------
Total assets 31,104 117,930 18,499 96,666
------------------------- ------ ---------- ---------- ---------- ----------
Liabilities
Current liabilities
Trade and other
payables 16 1,909 - 1,448 -
Financial liabilities 17 63 - 63 -
------------------------- ------ ---------- ---------- ---------- ----------
1,972 - 1,511 -
------------------------- ------ ---------- ---------- ---------- ----------
Non-current liabilities
Financial liabilities 17 32 - 95 -
Other payables 16 - 450 - 450
------------------------- ------ ---------- ---------- ---------- ----------
32 450 95 450
------------------------- ------ ---------- ---------- ---------- ----------
Total liabilities 2,004 450 1,606 450
------------------------- ------ ---------- ---------- ---------- ----------
Net assets 29,100 117,480 16,893 96,216
------------------------- ------ ---------- ---------- ---------- ----------
Capital and reserves
Issued equity
capital 18 58,057 135,925 37,791 115,659
Share-based payment
reserve 19 2,445 2,445 1,826 1,826
Merger reserve 20 (1,242) - (1,242) -
Capital redemption
reserve 20 - 4,402 - 4,402
Revenue reserve 21 (30,160) (25,292) (21,482) (25,671)
------------------------- ------ ---------- ---------- ---------- ----------
Total equity 29,100 117,480 16,893 96,216
------------------------- ------ ---------- ---------- ---------- ----------
Approved by the board and authorised for issue on 13 October
2015.
Michael Edelman
Director
13 October 2015
Cash flow statements
For the year ended 31 July 2015
31
31 July 31 July July 31 July
2015 2015 2014 2014
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
--------------------------- ------ ---------- --------- -------- ---------
(Loss)/profit before
tax (10,881) 82 (9,060) 39
Adjustments for:
Net finance income 7 (116) (58) (189) (56)
Depreciation of
tangible fixed
assets 10 1,106 - 1,181 -
Amortisation of
intangible assets 11 269 - 209 -
Share-based payments 19 619 - 573 -
Changes in working
capital:
Increase in inventories (74) - (14) -
(Increase)/decrease
in trade and other
receivables (250) (24) 256 -
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Increase/(decrease)
in trade and other
payables 580 - (510) -
(Decrease)/increase
in deferred revenue (119) - 7 -
--------------------------- ------ ---------- --------- -------- ---------
Cash outflow from
operating activities (8,866) - (7,547) (17)
Research and development
tax credit received 1,323 - 918 -
Overseas corporation
tax paid (7) - (9) -
--------------------------- ------ ---------- --------- -------- ---------
Net cash outflow
from operating
activities (7,550) - (6,638) (17)
--------------------------- ------ ---------- --------- -------- ---------
Cash flows from
investing activities
Purchases of tangible
fixed assets 10 (385) - (494) -
Purchases of intangible
fixed assets 11 (533) - (536) -
Cash advance to
subsidiary - (4,323) - (10,445)
Increase in cash
placed on deposit 15 (20,000) (20,000) - -
Decrease in cash
placed on deposit 15 5,791 - 385 1,500
Interest received 100 39 237 56
Net cash outflow
from investing
activities (15,027) (24,284) (408) (8,889)
--------------------------- ------ ---------- --------- -------- ---------
Cash flows from
financing activities
Proceeds from issues
of ordinary share
capital 21,123 21,123 10,000 10,000
Expenses on issue
of shares 18 (560) (560) (263) (263)
Interest paid 7 (3) - (5) -
Loan repayment (63) - (63) -
--------------------------- ------ ---------- --------- -------- ---------
Net cash inflow
from financing
activities 20,497 20,563 9,669 9,737
--------------------------- ------ ---------- --------- -------- ---------
(Decrease)/increase
in cash and cash
equivalents (2,080) (3,721) 2,623 831
Cash and cash equivalents
at the start of
the year 6,391 3,733 3,768 2,902
--------------------------- ------ ---------- --------- -------- ---------
Cash and cash equivalents
at the end of the
year 4,311 12 6,391 3,733
Monies placed on
deposit at the
end of the year 20,000 20,000 5,791 -
--------------------------- ------ ---------- --------- -------- ---------
Cash, cash equivalents
and deposits at
the end of the
year 15 24,311 20,012 12,182 3,733
--------------------------- ------ ---------- --------- -------- ---------
Notes to the preliminary results
For the year ended 31 July 2015
1. Reporting entity
Nanoco Group plc ("the Company") is on the premium list of the
London Stock Exchange and is incorporated and domiciled in the
UK.
These preliminary results consolidate those of the Company and
its subsidiaries (together referred to as the 'Group' and
individually as 'Group entities') for the year ended 31 July
2015.
The preliminary results for the year ended 31 July 2015 were
authorised for issue by the Board of Directors on 13 October 2015
and the Statement of Financial Position was signed on the Board's
behalf by Dr Michael Edelman.
The preliminary results do not constitute statutory financial
statements within the meaning of section 435 of the Companies Act
2006. A copy of the statutory financial statements for the year
ended 31 July 2015 has not been delivered to the Registrar of
Companies. The Auditors' opinion on those financial statements was
unqualified, did not draw attention to any matters by way of an
emphasis of matter paragraph, and it contained no statement under
section 498(2) or section 498(3) of the Companies Act 2006.
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent Company's
income statement. The parent Company's result for the period ended
31 July 2015 was a profit of GBP82,000 (2014: profit of GBP39,000).
There were no other recognised gains or losses in either the
current or prior year.
The significant accounting policies adopted by the Group are set
out in note 3.
2. Basis of preparation
(a) Statement of compliance
The preliminary results are derived from the Group's financial
statements which were prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
("IFRS") and International Financial Reporting Committee ("IFRIC")
interpretations as they apply to the financial statements of the
Group for the period ended 31 July 2015.
(b) Basis of measurement
The parent Company and Group financial statements have been
prepared on the historical cost basis.
The methods used to measure fair values of assets and
liabilities are discussed in the respective notes in note 3
below.
(c) Going concern
The Chairman's and chief executive officer's review outlines the
business activities of the Group along with the factors which may
affect its future development and performance. The Group's
financial position is discussed in the Financial review along with
details of its cash flow and liquidity. Note 23 to the financial
statements sets out the Group's financial risks and the management
of those risks.
Having prepared management forecasts and made appropriate
enquiries, the directors are satisfied that the Group has adequate
resources for the foreseeable future. Accordingly they have
continued to adopt the going concern basis in preparing the Group
and Company financial statements.
(d) Functional and presentational currency
These financial statements are presented in pounds sterling,
which is the Company's functional currency. All financial
information presented has been rounded to the nearest thousand.
(e) Use of estimates and judgements
The preparation of financial statements requires management to
make estimates and judgements that affect the amounts reported for
assets and liabilities as at the reporting date and the amounts
reported for revenues and expenses during the year. The nature of
estimation means that actual amounts could differ from those
estimates. Estimates and judgements used in the preparation of the
financial statements are continually reviewed and revised as
necessary. While every effort is made to ensure that such estimates
and judgements are reasonable, by their nature they are uncertain
and, as such, changes in estimates and judgements may have a
material impact on the financial statements.
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements.
-- Equity-settled share-based payments
The determination of share-based payment costs requires: the
selection of an appropriate valuation method; consideration as to
the inputs necessary for the valuation model chosen; judgement
regarding when and if performance conditions will be met. Inputs
required for this arise from judgements relating to the future
volatility of the share price of Nanoco and comparable companies,
the Company's expected dividend yields, risk free interest rates
and expected lives of the options. The directors draw on a variety
of sources to aid in the determination of the appropriate data to
use in such calculations. The share-based payment expense is most
sensitive to vesting assumptions and to the future volatility of
the future share price factor. Further information is included in
note 3.
-- Taxation
Management judgement is required to determine the amount of tax
assets that can be recognised, based upon the likely timing and
level of future taxable profits together with an assessment of the
effect of future tax planning strategies. Further information is
included in note 8.
-- Research and development
Careful judgement by the directors is applied when deciding
whether the recognition requirements for development costs have
been met. This is necessary as the economic success of any product
development is uncertain until such time as technical viability has
been proven and commercial supply agreements are likely to be
achieved. Judgements are based on the information available at each
reporting date which includes the progress with testing and
certification and progress on, for example, establishment of
commercial arrangements with third parties. In addition, all
internal activities related to research and development of new
products are continuously monitored by the directors. Further
information is included in note 3.
-- Revenue recognition
Judgements are required as to whether and when contractual
milestones have been achieved and in turn the period over which
development revenue should be recognised. Management judgements are
similarly required to determine whether services or rights under
licence agreements have been delivered so as to enable licence
revenue to be recognised. Further information is included in note
3.
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The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are those relating to the estimation of the number of share options
that will ultimately vest (note 19). The Group based its
assumptions and estimates on parameters available when the
consolidated financial statements were prepared. Existing
circumstances and assumptions about future developments, however,
may change due 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 the 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.
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 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 and individual project development
programmes, 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 where 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 or when contractual rights for the
customer to recoup such payments have lapsed.
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
(rendering of services) revenue in the Consolidated statement of
comprehensive income in line with the terms of the underlying grant
agreement.
Government grants relating to capital expenditure are deducted
in arriving at the carrying amount of the asset.
(f) Cost of sales
Historically, the Company has disclosed all R&D materials as
cost of sales and included all R&D labour costs within
administrative expenses. As the revenue from product sales begins
to come on stream and with the aim of providing greater
transparency, the Company now sets out to disclose as cost of
sales, those materials, labour and ancillary costs attributable to
product sales and to government grants included within revenue from
the rendering of services.
Accordingly the comparatives have been restated and the figure
previously reported as cost of sales has been reduced by
GBP1,259,000 and the aggregate sum of administrative expenses and
R&D expenses increased by an equivalent amount; with
administrative expenses increasing by GBP1,518,000 and R&D
expenses being reduced by GBP259,000. There has been no impact on
the reported loss for the year.
In the current period, cost of sales has reduced by GBP977,000
and the aggregate sum of administrative expenses and R&D
expenses increased by an equivalent amount; with administrative
expenses increasing by GBP1,293,000 and R&D expenses being
reduced by GBP316,000. There is no impact on the reported loss for
the year-ended 31 July 2015. Cost of sales comprises the labour,
materials and power costs incurred in the generation of revenue
from products sold and government grants.
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) 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.
(h) 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.
(i) Finance income and expense
Finance income comprises interest income on funds invested.
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.
(j) 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.
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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 nor
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 substantially enacted by the 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 or 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.
(k) 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 de-recognised 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
de-recognition of the asset is included in the Consolidated
statement of comprehensive income in the period of
de-recognition.
(l) 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
(m) 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, these
calculations 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 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.
(n) Investments in subsidiaries
Investments in subsidiaries are stated in the Company statement
of financial position at cost less provision for any
impairment.
(o) 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.
(p) 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.
(q) 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.
(r) 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.
(s) 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.
(t) 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.
(u) 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.
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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.
(v) 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.
(w) New accounting standards and interpretations
The following new and amended IFRS, IAS and IFRIC
interpretations were mandatory for accounting periods ending 31
July 2015 and thereafter, but have no material effect on the
Group's financial statements.
-- IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements
-- IFRS 11 Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures
-- IFRS 12 Disclosure of Interests in Other Entities
-- IFRS 10, IFRS 12 and IAS 27 Investment Entities - Amendments to IFRS 10, IFRS 12 and
IAS 27
-- IAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments)
-- IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (Amendments)
-- IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (Amendments)
-- Annual Improvements to IFRSs 2010 to 2012 Cycle (endorsed for use in the EU on 17 and
18 December 2014)
-- Annual Improvements to IFRSs 2011 to 2013 Cycle (endorsed for use in the EU on 17 and
18 December 2014)
A number of new standards, amendments to standards and
interpretations are effective for annual periods ending 31 July
2016 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 and IAS 28 Sale or Contribution 1 January
of Assets between an Investor and 2016
its
Associate or Joint Venture - Amendments
to IFRS 10 and IAS 28
----------------------------------------------- ----------
IFRS 10, IFRS 12 and IAS 28 Investment 1 January
Entities: Applying the Consolidation 2016
Exception - Amendments to IFRS 10,
IFRS 12 and IAS 28
----------------------------------------------- ----------
IFRS 11 Accounting for Acquisitions 1 January
of Interests in Joint Operations 2016
----------------------------------------------- ----------
IAS 1 Disclosure Initiative - Amendments 1 January
to IAS 1 2016
----------------------------------------------- ----------
IAS 16 and IAS 38 - Clarification 1 January
of Acceptable Methods of Depreciation 2016
and
Amortisation - Amendments to IAS 16
and IAS 38
----------------------------------------------- ----------
IAS 27 Equity Method in Separate Financial 1 January
Statements - Amendments to IAS 27 2016
----------------------------------------------- ----------
IFRS 15 Revenue from Contracts with 1 January
Customers 2018
----------------------------------------------- ----------
IFRS 9 Financial Instruments (issued 1 January
in 2013) 2018
----------------------------------------------- ----------
Annual Improvements to IFRSs 2012 1 January
to 2014 Cycle 2016
----------------------------------------------- ----------
4. Segmental information
Operating segments
At 31 July 2015 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 Chief
Executive) to make decisions about resources, and for which
financial information is available. From 1 August 2015, the manner
in which operating results are reported to the CEO have been
revised and now isolate those of the newly formed lighting
division. All revenues have been generated from continuing
operations and are from external customers.
31 July 31 July
2015 2014
GBP000 GBP000
------------------------ -------- --------
Analysis of revenue
Products sold 445 178
Rendering of services 353 1,255
Royalties and licences 1,231 -
2,029 1,433
------------------------ -------- --------
Included within rendering of services is revenue from one
material customer amounting to GBP106,000 (2014: one material
customer amounting to GBP754,000) and GBP129,000 (2014: GBP184,000)
from government grants. Revenue from royalties and licences is from
one material customer (2014: there was no revenue from royalties
and licences).
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 31 July
2015 2014
GBP000 GBP000
----------------------- -------- --------
Revenue
UK 130 159
Europe (excluding UK) - 26
Asia 395 1,139
USA 1,504 109
----------------------- -------- --------
2,029 1,433
----------------------- -------- --------
All the Group's assets are held in the UK and all of its capital
expenditure arises in the UK.
5. Operating loss
Restated
31 July 31 July
2015 2014
The Group GBP000 GBP000
------------------------------------ -------- ---------
Operating loss is stated after
charging /(crediting):
Depreciation of tangible fixed
assets (see note 10) 1,106 1,181
Amortisation of intangible
assets (see note 11) 269 209
Staff costs (see note 6) 6,242 5,107
Foreign exchange (gains)/losses (27) 4
Research and development expense** 5,580 4,918
Cost of inventories recognised
as an expense (included in
cost of sales) 106 47
Operating lease rentals (see
note 22):
Land and buildings 684 674
Auditors' remuneration:
Audit services:
* Fees payable to Company auditor for the audit of the
parent and the consolidated accounts 17 10
* Auditing the accounts of subsidiaries pursuant to
legislation 20 19
Fees payable to Company auditor
for other services:
* Services in connection with the Company's move to the
main market 173 -
* Other services - 2
-------------------------------------------------------------- ----- ---
Total auditor's remuneration 210 31
-------------------------------------------------------------- ----- ---
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** Included within research and development expenses are staff
costs totalling GBP4,150,000 (Restated 2014: GBP3,229,000) also
included in note 6.
6. Staff costs
31 July 31 July
2015 2014
GBP000 GBP000
------------------------------------ -------- --------
Wages and salaries 4,833 3,777
Social security costs 508 424
Pension contributions 282 333
Share-based payments 619 573
------------------------------------ -------- --------
6,242 5,107
------------------------------------ -------- --------
Directors' remuneration (including
benefits-in-kind) included
in the aggregate remuneration
above comprised:
Emoluments for qualifying services 1,012 749
------------------------------------ -------- --------
Directors' emoluments (excluding social security costs and long
term incentives, but including benefits in kind) disclosed above
include GBP322,000 paid to the highest paid director (2014:
GBP293,000).
Aggregate gains made by directors during the year following the
exercise of share options and jointly owned EBT shares were
GBP27,000 (2014: GBPnil).
An analysis of the highest paid director's remuneration is
included in the Directors' remuneration report.
The average number of employees during the year (including
directors), was as follows:
31 July 31 July
2015 2014
The Group Number Number
------------------------------- -------- --------
Directors 8 7
Laboratory and administrative
staff 101 97
109 104
------------------------------- -------- --------
7. Finance income and expense
31 July 31 July
2015 2014
The Group GBP000 GBP000
-------------------------- -------- --------
Finance income:
Bank interest receivable 119 194
Finance expense:
Loan interest payable (3) (5)
-------------------------- -------- --------
116 189
-------------------------- -------- --------
Bank interest receivable includes GBP44,000 (2014: GBP25,000)
which is receivable after the year end.
8. Income tax
The tax credit is made up as follows:
31 July 31
2015 July
2014
The Group GBP000 GBP000
------------------------------------------ ---------- --------
Current income tax:
UK corporation tax losses in the year - -
Research and development income tax
credit receivable (1,800) (1,210)
Adjustment in respect of prior years (113) (48)
Overseas corporation tax 7 9
------------------------------------------ ---------- --------
Total current income tax (1,906) (1,249)
------------------------------------------ ---------- --------
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 2014 was submitted in January
2015 and repayment received in February 2015.
The tax assessed for the year varies
from the standard rate of corporation
tax as explained below: 31 July 31
2015 July
2014
The Group GBP000 GBP000
------------------------------------------ ---------- --------
Loss on ordinary activities before
taxation (10,881) (9,060)
------------------------------------------ ---------- --------
Tax at standard rate of 20.67% (2014:
22.33%) (2,249) (2,023)
Effects of:
Expenses not deductible for tax purposes 194 43
Additional reduction for research
and development expenditure (1,456) (1,390)
Surrender of research and development
relief for repayable tax credit 2,609 2,471
Research and development tax credit
receivable (1,800) (1,210)
Share options exercised (CTA 2009 (155) -
Pt 12 deduction)
Overseas corporation tax 7 9
Losses and share-based payment charges
carried forward not recognised in
deferred tax 1,001 934
Adjustment in respect of prior years (113) (48)
Effect of changes in tax rate/other
adjustments 56 (35)
------------------------------------------ ---------- --------
Tax credit in income statement (1,906) (1,249)
------------------------------------------ ---------- --------
The Group has accumulated losses available to carry forward
against future trading profits of GBP19.2m (2014: GBP15.3m).
31 July 31
2015 July
2014
Deferred tax liabilities/(assets) GBP000 GBP000
provided/recognised are as follows:
-------------------------------------- ---------------- ---------
Accelerated capital allowances 336 464
Share-based payments (336) (464)
Tax losses - -
-------------------------------------- ---------------- ---------
- -
-------------------------------------- ---------------- ---------
The Group also has deferred tax assets, measured at a standard
rate of 20% (2014: 20%) in respect of share based payments of
GBP247,000 (2014: GBP18,000) and tax losses of GBP3,842,000 (2014:
GBP3,070,000) which have not been recognised as an asset as it is
not probable that future taxable profits will be available against
which the assets can be utilised.
9. Earnings per share
31 July 31 July
2015 2014
The Group GBP000 GBP000
---------- -------------- --------
Loss for the financial year
attributable to equity shareholders (8,975) (7,811)
Cost of the move to the main
market 926 -
Share-based payments 619 573
-------------------------------------- ------------------ ------------
Loss for the financial year
before the cost of the move
to the main market and share-based
payments (7,430) (7,238)
-------------------------------------- ------------------ ------------
Weighted average number of
shares:
Ordinary shares in issue 221,360,893 214,248,996
-------------------------------------- ------------------ ------------
Adjusted loss per share before
the cost of the move to the
main market and share-based
payments (pence) (3.36) (3.38)
-------------------------------------- ------------------ ------------
Basic loss per share (pence) (4.05) (3.65)
-------------------------------------- ------------------ ------------
Diluted loss per share has not been presented above as the
effect of share options issued is anti-dilutive.
10. Property, plant and equipment
Office
equipment,
Laboratory fixtures Plant
infrastructure and fittings and machinery Total
The Group GBP000 GBP000 GBP000 GBP000
Cost:
------------------------ ---------------- -------------- --------------- -------
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
Additions 77 36 272 385
Disposals - (114) - (114)
At 31 July 2015 2,578 230 4,652 7,460
------------------------ ---------------- -------------- --------------- -------
Depreciation:
------------------------ ---------------- -------------- --------------- -------
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
Provided during
the year 362 46 698 1,106
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Eliminated on disposal - (114) - (114)
------------------------ ---------------- -------------- --------------- -------
At 31 July 2015 2,007 161 3,230 5,398
------------------------ ---------------- -------------- --------------- -------
Net book value:
At 31 July 2015 571 69 1,422 2,062
------------------------ ---------------- -------------- --------------- -------
At 31 July 2014 856 79 1,848 2,783
------------------------ ---------------- -------------- --------------- -------
11. Intangible assets
Patents
The Group GBP000
Cost:
---------------------------------------- ------------
At 31 July 2013 1,734
Additions 536
---------------------------------------- ------------
At 31 July 2014 2,270
Additions 533
---------------------------------------- ------------
At 31 July 2015 2,803
---------------------------------------- ------------
Amortisation:
At 31 July 2013 504
Provided during the year 209
---------------------------------------- ------------
At 31 July 2014 713
Provided during the year 269
---------------------------------------- ------------
At 31 July 2015 982
---------------------------------------- ------------
Net book value:
At 31 July 2015 1,821
---------------------------------------- ------------
At 31 July 2014 1,557
---------------------------------------- ------------
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
Loan
Shares Loans impairment Total
The Company GBP000 GBP000 GBP000 GBP000
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
Increase in respect
of share-based payments - 619 - 619
At 31 July 2015 63,235 23,103 (20,286) 66,052
--------------------------- ------- ------- ------------ -------
By subsidiary
Nanoco Tech Limited 63,235 - - 63,235
Nanoco Life Sciences
Limited - 20,286 (20,286) -
Nanoco Technologies
Limited - 2,817 - 2,817
At 31 July 2015 63,235 23,103 (20,286) 66,052
---------------------- ------- ------- --------- -------
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 Country of 31 July 31 July
undertakings incorporation Principal activity 2015 2014
------------------------ ------------------------ ----------------------- -------------------- -------------------
Nanoco Life Sciences Research and
Limited England and Wales development 100% 100%
Nanoco Tech Limited England and Wales Holding company 100% 100%
Research and
Nanoco Technologies development of nano
Limited* England and Wales 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 U.S. located staff to the rest of the Group.
13. Inventories
31 July 31 July 31 July 31 July
2015 2015 2014 2014
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------------------------------- -------- -------- -------- --------
Raw materials and consumables 208 - 134 -
------------------------------- -------- -------- -------- --------
14. Trade and other receivables
31
31 July 31 July July 31 July
2015 2015 2014 2014
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
-------------------------- -------- -------- ------- --------
Trade receivables 107 - 116 -
Prepayments 430 43 375 -
Inter-company short-term
loan to subsidiary - 31,823 - 27,500
Other receivables 365 - 142 -
-------------------------- -------- -------- ------- --------
902 31,866 633 27,500
-------------------------- -------- -------- ------- --------
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
31 July 31 July July 31 July
2015 2015 2014 2014
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------------ -------- -------- ------- --------
US Dollars 106 - 116 -
Sterling 1 - - -
------------ -------- -------- ------- --------
107 - 116 -
------------ -------- -------- ------- --------
At 31 July the analysis of trade receivables that were past due
but not impaired was as follows:
Past
due
Neither but Past due
past not but not
due impaired impaired
nor >90 120 to
Total impaired days 150 days
GBP000 GBP000 GBP000 GBP000
------ ------- ---------- ---------- ----------
2015 107 107 - -
2014 116 89 18 9
------ ------- ---------- ---------- ----------
15. Cash, cash equivalents and deposits
31 July 31 July 31 July 31 July
2015 2015 2014 2014
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------------- -------- -------- -------- --------
Short-term investments
and cash on deposit
deposit 20,000 20,000 5,791 -
Cash and cash equivalents 4,311 12 6,391 3,733
--------------------------- -------- -------- -------- --------
24,311 20,012 12,182 3,733
--------------------------- -------- -------- -------- --------
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 2015 include deposits with
original maturity of three months or less of GBP4,311,000 (2014:
GBP6,391,000).
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An analysis of cash, cash equivalents and deposits by
denominated currency is given in note 23.
16. Trade and other payables
31 July 31 July 31 July 31 July
2015 2015 2014 2014
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- -------- --------
Current
Current payables 862 - 760 -
Other payables 137 - 98 -
Deferred revenue - - 119 -
Accruals 910 - 471 -
--------------------- -------- -------- -------- --------
` 1,909 - 1,448 -
--------------------- -------- -------- -------- --------
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 31 July 31 July
31 July2015 2015 2014 2014
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
----------------- ------------ -------- -------- --------
Other loan:
Current 63 - 63 -
Non--current 32 - 95 -
----------------- ------------ -------- -------- --------
95 - 158 -
----------------- ------------ -------- -------- --------
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
Reverse
Share Share acquisition
capital premium reserve Total
The Group Number GBP000 GBP000 GBP000 GBP000
Allotted, called
up and fully
paid ordinary
shares of 10p:
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
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)
As at 31 July
2015 237,077,578 23,708 112,217 (77,868) 58,057
--------------------- ------------ --------- --------- ------------- ------------
The Company raised gross proceeds of GBP20,000,000 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 GBP560,000.
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
The Company issued 784,947 shares on 22 October 2014, 15,000
shares on 5 November 2014 and a further 699,576 on 26 June 2015 on
the exercise of options, the shares issued had an average exercise
price of 55.1 pence (2014: no shares were issued on the exercise of
options).
Share capital Share premium Total
The Company Number GBP000 GBP000 GBP000
Allotted, called up and fully paid ordinary shares of 10p:
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
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)
As at 31 July 2015 237,077,578 23,708 112,217 135,925
------------------------------------------------------------ ------------ -------------- -------------- --------
19. Share-based payment reserve
The Group and Company GBP000
----------------------- -------
At 31 July 2013 1,253
Share-based payments 573
At 31 July 2014 1,826
Share-based payments 619
----------------------- -------
At 31 July 2015 2,445
----------------------- -------
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 GBP619,000 has been recognised in the Consolidated
statement of comprehensive income for the year (2014:
GBP573,000).
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.
As at 31 July 2015 no share options remain exercisable under the
Nanoco Tech Share Incentive Plan.
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 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 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
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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.
- 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 have been amended so as
to be in line with the new LTIPs scheme. Exercise of the award is
subject to the employee remaining a full time member of staff at
the point of exercise.
- 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 2015 2014
options EBT total total
The Group and Company Number Number Number Number
----------------------- ------------ ---------- ------------ -----------
Outstanding at
1 August 13,373,756 850,500 14,224,256 13,915,256
Granted during
the year 380,000 - 380,000 444,000
Exercised during
the year (1,499,523) (320,411) (1,819,934) -
Forfeited/cancelled (250,000) - (250,000) (135,000)
Outstanding at
31 July 12,004,233 530,089 12,534,322 14,224,256
----------------------- ------------ ---------- ------------ -----------
Exercisable at
31 July 8,721,900 530,089 9,251,989 4,968,590
----------------------- ------------ ---------- ------------ -----------
Weighted average exercise price of options
2015 2014
The Group and Company Pence Pence
--------------------------- ------ ------
Outstanding at 1 August 54.4 56.8
Granted during the year 10.0 89.0
Exercised during the year 61.7 -
Forfeited/cancelled 57.0 113.2
Outstanding at 31 July 51.9 54.4
--------------------------- ------ ------
The weighted average fair value of options granted during the
year to 31 July 2015 was 10 pence (2014: 89 pence). The range of
exercise prices for options and jointly owned EBT shares
outstanding at the end of the year was nil -146 pence, (2014: nil -
146 pence).
For the share options outstanding as at 31 July 2015, the
weighted average remaining contractual life is 6.8 years (2014: 7.6
years).
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 (2014: no share options exercised).
The following table lists the inputs to the models used for the
years ended 31 July 2015 and 31 July 2014.
The Group Performance linked Non-performance
and Company grants linked grants
2015 2014 2015 2014
---------------- ----------------------------------- ------------------------------------
Expected
volatility
(%) 55% n/a n/a 56%
Risk-free
interest
rate (%) 1.78% n/a n/a 1.84%
Expected 3 years n/a n/a 3 years
life of
options
(year's
average)
Weighted
average
exercise
price (pence) 10.0 n/a n/a 89.0
Weighted
average
share price
at date
of grant
(pence) 147.0 n/a n/a 89.0
Model used Binomial n/a n/a 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 GBP000
----------------------------------- --------
At 31 July 2013, 31 July 2014 and
31 July 2015 (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 reserve
The Company GBP000
----------------------------------- -------
At 31 July 2013, 31 July 2014 and
31 July 2015 4,402
----------------------------------- -------
The capital redemption reserve arises from the off-market
purchase of deferred shares on 4 May 2005 and their subsequent
cancellation.
21. Movement in revenue reserve and treasury shares
Total
Retained Treasury revenue
The Group deficit shares reserve
GBP000 GBP000 GBP000
------------------------ ---------- ---------- ----------
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)
Issue of shares by EBT - 297 297
Loss for the year (8,975) - (8,975)
------------------------ ---------- ---------- ----------
As at 31 July 2015 (30,063) (97) (30,160)
------------------------ ---------- ---------- ----------
No jointly owned EBT shares were granted during the year (2014:
no shares).
During the year, 320,411 jointly owned EBT shares were exercised
for an aggregate consideration of GBP297,000 (2014: no shares).
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 2015 530,089 shares in the
Company were held by the EBT (2014: 850,500). In addition there are
12,222 (2014: 12,222) treasury shares not held by the EBT.
Total
Retained Treasury revenue
deficit shares reserve
The Company GBP000 GBP000 GBP000
---------------------------- --------- --------- ----------
At 31 July 2013 (25,316) (394) (25,710)
Profit for the year 39 - 39
---------------------------- --------- --------- ----------
At 31 July 2014 (25,277) (394) (25,671)
Issue of shares by the EBT - 297 297
Profit for the year 82 - 82
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---------------------------- --------- --------- ----------
At 31 July 2015 (25,195) (97) (25,292)
---------------------------- --------- --------- ----------
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
31 July 2015 2014
Group Group
GBP000 GBP000
--------------------- ------------- --------
Land and buildings:
Not later than one
year 723 584
After one year but
not more than five
years 1,752 1,722
After five years 614 1,002
--------------------- ------------- --------
3,089 3,308
--------------------- ------------- --------
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 GBP29,100,000 at 31 July 2015 (GBP16,893,000 at 31
July 2014).
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
Loans liabilities
and at amortised Company
receivables cost Group
Financial assets/(liabilities) GBP000 GBP000 GBP000 GBP000
-------------------------------- ----------------- -------------- ----------------------- ----------
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
-------------------------------- ----------------- -------------- ----------------------- ----------
Financial
Loans liabilities
and at amortised Company
receivables cost Group
Financial assets/(liabilities) GBP000 GBP000 GBP000 GBP000
-------------------------------- ----------------- -------------- ----------------------- ----------
31 July 2014
Trade receivables 116 - 116 -
Inter-company short-term
loan to subsidiary - - - 27,500
Short-term investments
and cash on deposit 5,791 - 5,791 -
Trade and other
payables * - (1,329) (1,329) -
Inter-company long-term
loan from subsidiary - - - (450)
Financial liabilities - (158) (158) -
-------------------------------- ----------------- -------------- ----------------------- ----------
5,907 (1,487) 4,420 27,050
-------------------------------- ----------------- -------------- ----------------------- ----------
*Excluding deferred revenue.
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 (note 17) 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
are 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 on-going 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 14, 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 2015 or at 31 July 2014.
The split of Group assets between Sterling and other currencies
at the year-end is analysed as follows:
31 July 2015 31 July 2014
GBP USD Total GBP USD Total
The Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ -------- ------- -------- -------- ------- --------
Cash, cash equivalents
and deposits 24,271 40 24,311 12,032 150 12,182
Trade receivables 1 106 107 - 116 116
Trade payables (767) (95) (862) (629) (131) (760)
------------------------ -------- ------- -------- -------- ------- --------
23,505 51 23,556 11,403 135 11,538
------------------------ -------- ------- -------- -------- ------- --------
Sensitivity analysis to movement in exchange rates
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