TIDMNANO
RNS Number : 8756T
Nanoco Group PLC
30 March 2021
30 March 2021
NANOCO GROUP PLC
("Nanoco", the "Company" or the "Group")
Interim Results
Nanoco Group plc (LSE: NANO), a world leader in the development
and manufacture of cadmium-free quantum dots and other specific
nanomaterials emanating from its technology platform, announces
unaudited Interim Results for the half year ended 31 January 2021
("the Period" or "H1 FY21").
Operational Summary
-- Achieved all technical and commercial milestones on important
development project for sensing materials
-- Business restructuring completed during the Period to reduce monthly cash costs
-- Trial date for the alleged wilful infringement of the Group's
IP by Samsung set for October 2021
-- Secured Innovate UK grant of GBP0.8m for research on rapid
diagnostic test platform for pathogens (including Covid-19)
-- Customer focused operations maintained on a 'Covid-secure' basis to protect staff safety
Financial Summary
-- Revenue of GBP1.0m (H1 FY20: GBP2.9m with prior year largely
due to final US Customer deliverables)
-- Small increase in adjusted LBITDA [1] to GBP1.5m (H1 FY20:
loss GBP1.1m) reflecting cost savings
-- Average monthly cash burn GBP0.4m (H1 FY20: GBP0.7m) during the Period
-- Cash runway to H2 2022, with contingency plans in place if required
Brian Tenner, Chief Executive Officer of Nanoco Group plc,
said:
" Significant growth in mega-trends in electronics, automation
and the Internet of Things creates a very promising commercial
background for our value enhancing nano-materials that add
significant capability to the sensors used in these fields.
"During the period we successfully delivered all technical and
commercial milestones in our important development project for
sensing materials which is further validation of our capabilities
in developing and applying novel nano-materials. We continue to
work with this important customer and negotiations are ongoing on
the potential next phase of our work together. We have also seen
growing interest in a number of different materials covering a wide
range of wavelengths and commercial market applications and are now
engaged in exciting research and development activities with
additional new customers in these areas.
" We have continued our focus on cash and cost control. We
completed a small scale restructuring during the Period and our
gross monthly cash cost base has now stabilised in line with
expectations. We have successfully maintained our core capabilities
including our ability to move to commercial manufacture of material
on a large scale at our Runcorn facility in the medium term.
"Our lawsuit against Samsung for the alleged wilful infringement
of Nanoco's IP is progressing well and we are pleased that a trial
date has been set for October 2021. We will review the final
written report from the Judge presiding over the recent claim
construction hearing when it becomes available. At this stage, we
are pleased with the progress of the litigation process and the
initial indications arising from the Markman hearing, adding to our
confidence in the strength of our position.
"The Board strongly believes in the value that can be generated
from our organic business. Moreover, although there can be no
certainty as to the outcome, the Samsung litigation could result in
a very substantial settlement in our favour. While there is much
work to be done in the short term, the prospects are improving for
significantly enhancing shareholder value in the medium term."
Analyst meeting and webcast details
A conference call and webcast for analysts will be held at
10:00am (UK time) this morning (30 March 2021):
Dial in: +44 (0)330 336 9434
Link:
https://webcasting.brrmedia.co.uk/broadcast/604a5c131e24d464e23edbb2
PIN: 7036214
For further details please contact MHP Communications on 0203
128 8778 or at nanoco@mhpc.com
A recording of the webcast will also be made available on
Nanoco's website www.nanocotechnologies.com, later today.
For further information, please contact:
Nanoco Group PLC : +44 (0) 161 603 7900
Brian Tenner, CEO
Liam Gray, Company Secretary
Caroline Watson, Investor Relations Manager
cwatson@nanocotechnologies.com
Peel Hunt: +44 (0) 20 7418 8900
Edward Knight
Nick Prowting
James Smith
MHP Communications : +44 (0) 203 128 8778
Reg Hoare
Giles Robinson
Pete Lambie
nanoco@mhpc.com
The person responsible for arranging for the release of this
announcement is Liam Gray, Company Secretary.
FORWARD LOOKING STATEMENTS
This announcement (including information incorporated by
reference in this announcement) and other information published by
Nanoco may contain statements about Nanoco that are or may be
deemed to be forward looking statements. Such statements are
prospective in nature. All statements other than historical
statements of facts may be forward looking statements. Without
limitation, statements containing the words "targets", "plans",
"believes", "expects", "aims", "intends", "will", "may",
"anticipates", "estimates", "projects" or "considers" or other
similar words may be forward looking statements.
Forward looking statements inherently contain risks and
uncertainties as they relate to events or circumstances in the
future. Important factors such as business or economic cycles, the
terms and conditions of Nanoco's financing arrangements, tax rates,
or increased competition may cause Nanoco's actual financial
results, performance or achievements to differ materially from any
forward looking statements. Due to such uncertainties and risks,
readers are cautioned not to place undue reliance on such forward
looking statements, which speak only as of the date hereof. Nanoco
disclaims any obligation to update any forward looking or other
statements contained herein, except as required by applicable
law.
Notes for editors:
About Nanoco Group plc
Nanoco (LSE: NANO) harnesses the power of nano-materials.
Nano-materials are materials with dimensions typically in the range
1 - 100 nm. Nano-materials have a range of useful properties,
including optical and electronic. Quantum dots are a subclass of
nano-material that have size-dependent optical and electronic
properties. The Group produces quantum dots and other
nano-materials. Within the sphere of quantum dots, the Group
exploits different characteristics of the quantum dots to target
different performance criteria that are attractive to specific
markets or end-user applications such as the Display, Sensor and
Electronics markets. An interesting property of quantum dots is
size-tunable absorption spectrum. Nanoco's HEATWAVE(TM) quantum
dots can be tuned to absorb light at different wavelengths across
the near-infrared spectrum, rendering them useful for applications
including image sensors. Another interesting property of quantum
dots is photoluminescence: the emission of longer wavelength light
upon excitation by light of a shorter wavelength. The colour of
light emitted depends on the particle size. Nanoco's CFQD(R)
quantum dots are free of cadmium and other toxic heavy metals, and
can be tuned to emit light at different wavelengths across the
visible and infrared spectrum, rendering them useful for a wide
range of applications including displays, lighting and biological
imaging.
Nanoco was founded in 2001 and is headquartered in Manchester,
UK, with a US subsidiary, Nanoco Inc., in Concord, MA. Nanoco
continues to build out a world-class, patent-protected IP portfolio
generated both by its own innovation engine, as well as through
acquisition.
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 .
Business Review
Overview
We have continued to deliver novel R&D solutions to our
customers throughout the Period while safely conducting our
operations to protect our staff against the Covid pandemic. We have
also been pleased to see growing interest in using our materials in
a range of sensing applications across different market sectors.
This has led directly to engagement with a number of new customers
on R&D activities on a range of materials covering a wide range
of wavelengths.
Our litigation against Samsung is proceeding in line with
expectations and our confidence in the strength of our position has
grown as we have moved through the discovery and claim construction
phase of the legal process. The Board remains confident that the
litigation and robust defence of our IP portfolio represents an
opportunity to significantly enhance shareholder value in the
medium term.
Sensing materials
We achieved all of the development milestones in the Period
relating to our important project for sensing materials. We
continue to work with this important customer and are in active
discussions on the potential next phase of the project which, if
agreed and successfully delivered, will bring us one step closer to
our medium term strategic goal of re-balancing our revenue towards
recurring commercial production rather than services revenues.
We have also developed an important new customer relationship in
sensing applications which is generating R&D services income in
respect of other material sets and across a range of functional
wavelengths of material. This additional new relationship is with a
significant participant in another major electronics supply chain.
Other smaller relationships are being formed in parallel as
interest grows in the application of value adding nano-materials to
sensors, in response to mega-trends seen in electronics, automation
and the Internet of Things more generally.
Our R&D efforts in sensing materials also continued
throughout the Period. We are now able to offer different material
sets and also new materials that are capable of absorbing much
longer wavelengths of infrared light at specifically targeted bands
such as 1,400 nm, 1,550 nm and 1,800 nm.
Display materials (CFQD(R) Quantum Dots)
Activity in Display reduced following the end of our
collaboration with Merck. Merck has announced its intention to
continue investing in electronics materials that may create
opportunities for Nanoco in future but at present, there are no
ongoing commercial activities between the two companies. We have
continued to seek out new relationships and a number of these are
moving forward at a small scale. We hope that the final decision to
end the Restriction of Hazardous Substances (RoHS) cadmium
exemption for film-based displays will provide fresh impetus to
display panel manufacturers to embrace the benefits of our CFQD
Quantum Dots(R). While the European markets currently only see
limited sales of cadmium-based QD televisions, the focus of growth
on cadmium-free solutions may provide a helpful tailwind.
Display remains an important market for Nanoco, with our
existing materials under evaluation by a range of customers. In
addition, a number of small R&D projects were delivered for
customers during the Period. We retain our core capabilities to
deliver Display R&D services, scale up and commercial
production of material from our Runcorn facility. We are therefore
well positioned to take advantage of any broadening in the adoption
of non-toxic quantum dots by global display manufacturers when the
opportunity arises.
A successful outcome to the litigation with Samsung will also
positively affect our ability to derive income from our
capabilities in display, whether in production, further robust
defence of our existing IP portfolio, or in the future licensing of
our technology.
Life Sciences
The Life Sciences team secured a grant from Innovate UK, the
UK's innovation agency , for a life sciences project to develop a
heavy metal-free quantum dot testing kit for the accurate and rapid
visual detection of SARSCoV-2 ("Covid-19"). The project builds on
Nanoco's existing capabilities in utilising quantum dots conjugated
with anti-bodies as a diagnostic tool in the detection of cancer
(VIVODOTS(R) nanoparticles). The project will specifically focus on
anti-bodies for Covid-19.
However, as is the case with our other materials, our goal is to
create a platform technology that is applicable to other pathogens
and potential future variants of Covid-19. We therefore believe
that the project remains relevant despite other tests now being
available on the market for Covid-19.
The project will last 18 months. As part of the project, Nanoco
will explore opportunities to work with downstream partners for a
potential delivery system for the test. The project will cost just
under GBP1.0m - the Innovate grant contributes 80% of this and the
balance is funded by Nanoco. After deducting incremental costs, the
project is expected to have a neutral impact on the Group's net
cash flows in the short term. Any medium term value implications
will be wholly contingent on the successful delivery of the
targeted project outcomes.
Operations and staff
We completed a small scale restructuring during the Period and
our gross monthly cash cost base has now stabilised in line with
our target of GBP0.4m per month. However, it is important to note
that even with the reduced headcount, we still retain our core
capabilities in manufacturing and R&D while tightly managing
costs to preserve cash and our cash runway to allow for a
successful conclusion to the Samsung litigation.
During the current Covid-19 crisis, we continue to focus on
protecting the health, safety and wellbeing of our employees while
mitigating ongoing economic challenges. We have put together a
series of measures that allow us to continue to meet customer needs
from our Manchester R&D facility with limited support from our
Runcorn site as required. Our Runcorn site has much lower activity
levels and our facility for the large scale production of CFQD(R)
Quantum Dot has been temporarily mothballed. Other essential work
is being carried out remotely with limited numbers of staff now
utilising the Government's furlough scheme.
Defending our Intellectual Property portfolio - Samsung
litigation
As a UK-based business specialising in the design, scale up and
manufacture of novel nano-materials, it is critical that we take
steps to protect our platform technology and our IP portfolio that
underpins it. Historically, the Group worked collaboratively with
Samsung on developing enhanced quantum dots based on our unique and
patented CFQD(R) Quantum Dot technology and associated IP. We were
understandably disappointed when Samsung ended the collaboration
and launched its QD-based televisions without entering into either
a licensing or supply agreement with Nanoco.
We initiated an IP infringement lawsuit against Samsung for
damages and other equitable relief on 14 February 2020. The lawsuit
is funded by a third party who will receive a multiple of their
invested capital if the suit is successful.
The Claim Construction Hearing (also known as a 'Markman'
hearing) was held on 26 March 2021. A Markman hearing is used to
establish the Judge's interpretation of certain words or phrases
pertinent to the patents and the case. These definitions can be
important to either side's arguments but not necessarily so. The
Board is pleased with the progress of the litigation and early
indications from the Markman hearing itself and will review the
Judge's final written report which is expected in the next few
months.
A date has now been set for the jury trial in October 2021 in
the Eastern District of Texas in front of The Honourable Judge
Rodney Gilstrap (Case: 2:20-cv-00038-JRG). This date is at the
earlier end of previous expectations, though it may yet be subject
to delay.
In parallel and as expected, Samsung has requested that the
Patent Trial and Appeal Board ('PTAB') institute a formal validity
review of each patent asserted in the lawsuit via inter partes
reviews ('IPRs'). This is a parallel process to the litigation.
Nanoco will need to win both the trial and any relevant IPRs to be
successful overall. The PTAB is expected to decide whether or not
to institute IPR's in May 2021. IPRs are a common feature of patent
litigation, are often allowed to proceed, and therefore should not
necessarily be interpreted in a negative light. The IPR process can
then take up to 12 months.
If Nanoco is successful at trial and in any IPRs, normal
judicial appeals processes are available to the losing party. It
could therefore take two or more years for any successful verdict
or damages award to be enforced while the judicial and PTAB
processes are exhausted.
The Board expects that Nanoco will retain the majority of any
award or settlement arising from the case in most likely outcome
scenarios, with the percentage proportion going to advisers in
success fees reducing as the absolute award grows. While it is not
possible at this point to predict the amount of any award or
settlement due to the number of variables in play, the lawsuit does
have the potential to generate substantial upside for
shareholders.
The Board is also reviewing other parties who may be infringing
our IP and, subject to the outcome of the Samsung litigation, these
will be pursued vigorously.
Environment / Restriction of Hazardous Substances ("RoHS")
The European Commission (EC) was considering an appeal submitted
by three companies that the exemption allowing the use of
cadmium-based quantum dots in display films should continue. The
Commission was also considering an appeal for a five year exemption
to allow cadmium-based quantum dots to be applied directly onto LED
chips for displays and lighting.
The Commission has now received a recommendation that:
-- the exemption to allow cadmium (> 100 ppm) in QD films for
display is no longer justified and should be phased out by 31
October 2021; and
-- a new exemption is granted to allow cadmium-based quantum
dots applied directly onto LED chips for displays and high CRI
lighting for a period of five years.
Before becoming law, the recommendations need to be adopted by
the EC though this is not expected to take a significant length of
time. It should also be noted that for film-based displays there is
not an outright ban which could allow displays with cadmium content
below the limits above to continue to be sold.
Outlook
We continue to develop further commercial opportunities in the
sensing and display sectors with key players in both industries and
with a particular focus of our current activity on sensing markets.
We are actively negotiating on some short term opportunities for
further development work with a number of customers and
applications in the field of sensing.
It is critical that we continue to preserve the financial
position of the Company and maintain our cash runway to the second
half of 2022 to allow us to maximise the value inherent in our IP
(and the Samsung lawsuit) and our operational capabilities.
Contingency plans remain available if needed to protect the value
in our IP, though potentially at the cost of our operational
capability.
Significant growth in mega-trends in electronics, automation and
the Internet of Things creates a very promising commercial
background for our value enhancing nano-materials that add
significant capability to the sensors used in these fields. The
Board therefore remains confident that shareholder value can be
best maximised through the combination of a growing commercial
business and a successful outcome to the Samsung litigation.
Dr Christopher Richards Brian Tenner
Chairman Chief Executive Officer
30 March 2021 30 March 2021
Financial review
Revenue
Revenue in the Period was GBP1.0m (H1 2020: GBP2.9m), the
majority of which relates to the important development work on
sensing materials throughout the Period.
Sources of revenue H1 FY21 H1 FY20 FY20
GBPm GBPm GBPm
-------------------- ------------- ------------- -------------
Services 0.7 / 71.1% 2.5 / 87.0% 3.0 / 77.3%
Material sales 0.3 / 24.1% 0.1 / 3.6% 0.5 / 11.6%
Licence & royalties 0.0 / 4.8% 0.3 / 9.4% 0.4 / 11.1%
Total revenue 1.0 / 100.0% 2.9 / 100.0% 3.9/ 100.0%
==================== ============= ============= =============
The table continues to show the importance of services income,
generated primarily from one important electronics customer in the
current year (and the US Customer in the prior year). Material
sales represents continued shipments of nano-materials to supply
chain partners in sensing and display markets.
Other operating income was GBP0.1m (H1 FY20: GBP0.1m) which, as
in the prior year, was generated from grant income earned by our
Life Sciences team.
Operating expenses
Operating expenses comprise R&D and administrative expenses.
Gross investment in R&D to support the ongoing development of
our nano-materials was GBP1.2m in the Period (H1 FY20: GBP1.7m).
Administrative expenses were GBP2.4m (H1 FY20: GBP3.6m) and
decreased through a combination of:
-- salary reductions of 20% for those earning over GBP2,500 per month (ended 31 October 2020);
-- salary reductions of 35% for the Chairman and Non-Executive Directors (ongoing);
-- salary reductions of 20% for the Executive Directors (to cease 31 March 2021);
-- headcount reductions from restructuring completed during the Period and prior year;
-- access to the Government's Employment Support scheme; and
-- cost savings agreed with a number of suppliers.
Operating loss and Adjusted LBITDA
As a result of the cost control measures above, despite a
GBP1.9m (65%) fall in year on year revenue, our operating loss in
the Period only increased by GBP0.2m (8%) to GBP2.6m. Adjusted
LBITDA in the Period increased by GBP0.4m (36%). The mitigation of
the impact of the fall in revenue reflects the benefits of the
restructuring completed in the prior year and the additional cost
savings implemented in the period.
H1 FY21 H1 FY20 FY20
GBPm GBPm GBPm
---------------------------- -------- -------- ------
Operating loss (2.6) (2.4) (5.9)
Share-based payment charge 0.3 0.2 0.4
Exceptional costs - 0.1 0.7
---------------------------- -------- -------- ------
Adjusted operating loss (2.3) (2.1) (4.8)
Depreciation 0.3 0.7 1.1
Amortisation 0.3 0.3 0.8
Impairment 0.2 - -
---------------------------- -------- -------- ------
Adjusted(*) LBITDA (1.5) (1.1) (2.9)
============================ ======== ======== ======
Management monitor Adjusted (*) LBITDA as it is a close
approximation for operating cash flow which is considered a KPI at
a time when the Group is closely managing its cash resources. Share
based payments, depreciation and amortisation - all non-cash
charges - are added back to the operating result to arrive at
Adjusted LBTIDA. The exceptional charge in the prior period is in
respect of costs incurred as part of the Formal Sale Process and
are clearly not part of the Group's normal activities. These are
therefore excluded to provide users of the accounts with a clearer
understanding of underlying business performance.
We remain mindful of the Group's restricted cash resources and
continue to scrutinise all categories of cost with new savings
opportunities being identified and captured on a regular basis.
Monthly gross cash costs have been reduced from GBP0.8m to a
current rate of just over GBP0.4m.
Taxation
The Group continues to make R&D tax credit claims on its
qualifying expenditure by surrendering losses for cash credits. The
tax credit for the Period is estimated at GBP0.4m (H1 2020:
GBP0.6m). The amount receivable at 31 January 2021 was GBP0.4m (H1
FY20: GBP0.6m), which is the accrual for the current year. The
prior year tax credit of GBP0.9m was received in January 2021.
Net result
The loss after tax for H1 FY21 was GBP2.3m (H1 FY20: loss of
GBP1.9m).
Earnings per share
The basic loss per share was 0.74 pence per share (H1 FY20: loss
of 0.66 pence per share). As at 31 January 2021 there were
305,699,102 ordinary shares in issue (31 July 2020: 305,699,102)
including shares held in treasury.
Cash position and liquidity
During H1 FY21, the Group generated an improved net cash outflow
of GBP2.3m (H1 FY20: GBP2.8m) with the prior year being adversely
impacted by the unwinding of deferred income.
Expenditure on fixed assets represents a normal level of
maintenance type capital expenditure.
Intangibles expenditure was GBP0.2m (H1 FY20: GBP0.3m) and
related to patent costs.
Working capital
As previously announced, the lawsuit against Samsung is not
having any adverse impact on the Group's cash flows as the costs of
the case are being funded by a third party funder in return for an
upside that is contingent on a successful outcome to the
litigation.
Brexit
The UK's Brexit deal with the European Union removes the threat
of tariffs on chemicals exports (our primary export). There are
some additional administrative tasks required for our activities
for customers in the European Union but these are not expected to
lead to significant additional costs.
Principal risks
The Directors have considered the principal risks which may have
a material impact on the Group's performance. The risks remain as
disclosed in pages 25 to 27 of the 2020 Annual Report and
Accounts.
The principal over-arching strategic risk to the Group remains
that it exhausts its financial resources before it can achieve a
self-financing level of commercial production and service
revenue.
The sustainable impact of the cost reductions described above is
to cut the Group's monthly cash overhead costs in half to
approximately GBP0.4m. This revised monthly gross cash burn rate,
in combination with the Board's expectations for revenue and the
benefits of the equity raised in July 2020, extends the Group's
cash runway into the second half of 2022.
The Group remains actively engaged in negotiating a number of
commercial opportunities with existing customers. If contracts are
agreed, these opportunities will allow Nanoco to retain its core
operational capabilities for the remainder of FY21 and into FY22.
Since the contracts are not yet signed, these opportunities
therefore remain subject to the risk of delay or non-completion. In
addition, our current pipeline of existing work and future
opportunities is focused on R&D activities that need to be
completed successfully and then be followed by customer decisions
to adopt the technology in order for Nanoco to move into the
production phase. On entering any such production phase, Nanoco
would rapidly become self-financing at relatively low levels of
plant utilisation.
In the event that the Group does not deliver new sources of
commercial revenue in the short term or achieve other sources of
funding, a more significant restructuring will be required that
removes the Group's R&D, production and scale up capabilities
with the remaining business focussed on protecting the IP portfolio
and the lawsuit against Samsung. In this scenario, the cash runway
extends to the middle of 2022.
Going concern
The interim condensed consolidated financial statements have
been prepared on a going concern basis. In determining the
appropriate basis of preparation of the financial statements, the
Directors are required to consider whether the Group can continue
in operational existence for the foreseeable future.
For the purposes of assessing whether 'going concern' is an
appropriate basis for preparing the interim condensed consolidated
financial statements, the Directors have used their detailed
forecasts for the period to 31 July 2021 and summary forecasts for
the following financial year (the 'forecast period'). These reflect
current and expected business activities, including a successful
outcome to current advanced commercial negotiations, the cash
balance of GBP2.9m as shown in the Group consolidated balance sheet
at 31 January 2021, as well as the matters set out in the section
above on Principal risks.
The key assumptions underpinning the base case assessment during
the forecast period include:
-- A successful outcome to commercial negotiations currently underway at an advanced stage;
-- Subsequent phases to the projects described above;
-- No other revenue streams have been assumed;
-- No settlement or damages award from the Samsung litigation;
This base case scenario should deliver adequate financial
resources for the Group to trade until the second half of 2022.
Sensitivity analysis has been performed to reflect a possible
downside scenario that includes only contracted revenues for the
forecast period. In this downside scenario, management would be
required to undertake a significant restructuring exercise before
the end of FY21 to reflect the lower revenue expectations. In the
downside scenario, the Group effectively becomes an IP Shell with
the Samsung lawsuit continuing. The Board's immediate efforts aim
to avoid this scenario and to protect the operational and R&D
capabilities to support the commercial efforts of the Company.
Going concern conclusion and basis of preparation
On the basis of the information above and having made
appropriate enquiries, at the time of approving the interim
condensed consolidated financial statements, the Directors have a
reasonable expectation that the Company has access to adequate
resources to continue in operational existence for the foreseeable
future, that is, at least 12 months from the date of the issue of
these interim condensed consolidated financial statements.
Accordingly, they continue to adopt the going concern basis in
preparing the interim condensed consolidated financial
statements.
Brian Tenner
Chief Executive Officer
30 March 2021
Responsibility statement
The Directors of Nanoco Group plc, as listed on pages 36 and 37
of the 2020 Annual Report and Accounts, confirm to the best of
their knowledge:
a) the condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34 Interim
Financial Reporting, as required by paragraph 4.2.4 of the
Disclosure and Transparency Rules ("DTR");
b) the condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.10;
c) the interim management report includes a fair review of the
information required by DTR 4.2.7 - an indication of important
events which have occurred during the first six months of the year
and a description of the principal risks and uncertainties for the
remaining six months of the year; and
d) the interim management report includes a fair review of the
information required by DTR 4.2.8 - the disclosure of related party
transactions occurring during the first six months of the year and
any changes in related party transactions disclosed in the 2018
Annual Report and Accounts.
By order of the Board
Brian Tenner
Chief Executive Officer
30 March 2021
Condensed consolidated statement of comprehensive income
For the six months ended 31 January 2021
H1 FY21 H1 FY20 FY20
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------- ------ ------------ ------------ ----------
Revenue 3 1,004 2,858 3,856
Cost of sales (104) (47) (345)
Gross profit 900 2,811 3,511
Other operating income (grants) 50 77 101
Research and development expenses (1,221) (1,654) (3,143)
Administrative expenses (2,369) (3,643) (6,350)
Operating loss (2,640) (2,409) (5,881)
* Before share-based payments (2,351) (2,133) (4,783)
* Share-based payments (289) (181) (376)
* Net exceptional costs - (95) (722)
-------------------------------------------- ------ ------------ ------------ ----------
* Operating loss as shown above (2,640) (2,409) (5,881)
-------------------------------------------- ------ ------------ ------------ ----------
Net finance (expense) / income 4 (36) (40) (79)
Loss before taxation (2,676) (2,449) (5,960)
Taxation 5 407 552 893
Loss after tax (2,269) (1,897) (5,067)
-------------------------------------------- ------ ------------ ------------ ----------
Other comprehensive income
(Loss)/profit on exchange
rate translations - (3) 3
-------------------------------------------- ------ ------------ ------------ ----------
Loss after taxation for the
year and total comprehensive
loss for the year (2,269) (1,900) (5,064)
-------------------------------------------- ------ ------------ ------------ ----------
Loss per share:
Basic and diluted loss for
the period 6 (0.74)p (0.66)p (1.76)
-------------------------------------------- ------ ------------ ------------ ----------
The loss for the current and preceding 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.
Condensed consolidated statement of changes in equity
For the six months ended 31 January 2021
Issued Reverse Share-based
equity Acquisition payment Merger Accumulated
capital Reserve reserve reserve loss Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------------ ------------ -------- ------------ --------
At 31 July 2019 (audited) 144,453 (77,868) 3,419 (1,242) (60,239) 8,523
Loss for the six months
to 31 January 2020 - - - - (1,900) (1,900)
Share-based payments - - 181 - - 181
At 31 January 2020 (unaudited) 144,453 (77,868) 3,600 (1,242) (62,139) 6,804
Loss for the six months
to 31 July 2020 - - - - (3,164) (3,164)
New equity shares issued 3,409 - - - - 3,409
Share-based payments - - 195 - - 195
At 31 July 2020 (audited) 147,862 (77,868) 3,795 (1,242) (65,303) 7,244
Loss for the six months
to 31 January 2021 - - - - (2,269) (2,269)
Share-based payments - - 289 - - 289
At 31 January 2021 (unaudited) 144,453 (77,868) 4,084 (1,242) (67,572) (5,264)
-------------------------------- -------- ------------ ------------ -------- ------------ --------
Condensed consolidated statement of financial position
As at 31 January 2021
31 January 31 January 31 July
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
----------------------------- ------ ------------ ------------ ----------
Assets
Non-current assets
Property, plant and
equipment 160 353 263
Right of use assets 408 729 612
Intangible assets 3,428 3,904 3,742
3,996 4,986 4,617
----------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 169 109 140
Trade and other receivables 572 871 1,018
Income tax asset 409 569 910
Cash and cash equivalents 2,906 4,184 5,170
4,056 5,733 7,238
----------------------------- ------ ------------ ------------ ----------
Total assets 8,052 10,719 11,855
----------------------------- ------ ------------ ------------ ----------
Liabilities
Current liabilities
Trade and other payables (1,144) (1,651) (2,113)
Lease liabilities 6 (584) (364) (642)
Deferred revenue 5 (103) (102) (603)
(1,831) (2,117) (3,358)
----------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Deferred revenue 5 (198) (303) (249)
Lease liabilities 6 (282) (1,048) (542)
Financial liabilities (477) (447) (462)
(957) (1,798) (1,253)
----------------------------- ------ ------------ ------------ ----------
Total liabilities (2,788) (3,915) (4,611)
----------------------------- ------ ------------ ------------ ----------
Net assets 5,264 6,804 7,244
----------------------------- ------ ------------ ------------ ----------
Capital and reserves
Issued equity capital 147,862 144,453 147,862
Reverse Acquisition
Reserve (77,868) (77,868) (77,868)
Share-based payment
reserve 4,084 3,600 3,795
Merger reserve (1,242) (1,242) (1,242)
Accumulated loss (67,572) (62,139) (65,303)
----------------------------- ------ ------------ ------------ ----------
Total equity 5,264 6,804 7,244
----------------------------- ------ ------------ ------------ ----------
Approved by the Board and authorised for issue on 30 March
2021.
Dr Christopher Richards Brian Tenner
Chairman Chief Executive Officer
Condensed consolidated cash flow statement
For the six months ended 31 January 2021
Six months Six months Year to
to to
31 January 31 January 31 July
2021 2020 2020
(Unaudited) (Unaudited) Audited
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------ ------------ --------
Loss before tax (2,676) (2,449) (5,960)
Adjustments for:
Net finance expense (36) (40) (79)
(Profit) / Loss on exchange rate
translations 44 3 (87)
Depreciation of tangible fixed
assets 111 468 590
Depreciation of right of use
asset 205 252 505
Amortisation of intangible assets 312 309 633
Impairment of intangible assets 236 - 120
Share-based payments 289 181 376
Exceptional items - 95 722
Changes in working capital:
Decrease/(increase) in inventories (29) 187 221
Decrease in trade and other receivables 398 246 99
(Decrease) in trade and other
payables (780) (202) (30)
(Decrease)/increase in provisions - (797) (797)
(Decrease)/increase in deferred
revenue (551) (1,410) (963)
------------------------------------------- ------------ ------------ --------
Cash outflow from operating activities (2,477) (3,157) (4,650)
Research and development tax
credit received 909 1,112 1,111
Net cash outflow from operating
activities (1,568) (2,045) (3,539)
------------------------------------------- ------------ ------------ --------
Cash flows from investing activities
Purchases of tangible fixed assets (8) (74) (106)
Purchases of intangible fixed
assets (235) (316) (598)
Interest received - - 8
------------------------------------------- ------------ ------------ --------
Net cash outflow from investing
activities (243) (390) (696)
------------------------------------------- ------------ ------------ --------
Cash flows from financing activities
Proceeds from placing of ordinary
share capital - - 3,409
Costs of placing - - (237)
Payment of IFRS 16 lease liabilities (453) (386) (772)
Net cash outflow from investing
activities (453) (386) 2,400
------------------------------------------- ------------ ------------ --------
Decrease in cash and cash equivalents (2,264) (2,821) (1,835)
Cash and cash equivalents at
the start of the period 5,170 7,005 7,005
------------------------------------------- ------------ ------------ --------
Cash and cash equivalents at
the end of the period 2,906 4,184 5,170
------------------------------------------- ------------ ------------ --------
Notes to the interim condensed consolidated financial
statements
For the six months ended 31 January 2021
1. Corporate information
Nanoco Group plc (the "Company") has a premium listing on the
Main Market of the London Stock Exchange and is incorporated and
domiciled in the UK. The Group Interim Report and Accounts for the
six months ended 31 January 2021 was authorised for issue in
accordance with a resolution by the Directors on 29 March 2021.
These interim condensed consolidated financial statements
include the financial statements of Nanoco Group plc and the
entities it controls (its subsidiaries).
These interim condensed consolidated financial statements are
unaudited and do not constitute statutory accounts of the Group as
defined in section 434 of the Companies Act 2006.
2. Accounting policies
a. Basis of preparation
These interim condensed consolidated financial statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority, IAS 34 Interim Financial
Reporting as adopted by the European Union, using the recognition
and measurement principles of IFRSs as adopted by the European
Union and have been prepared under the historical cost convention.
As required by the Disclosure Guidance and Transparency Rules of
the Financial Services Authority the accounting policies adopted in
these condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's Annual Report
and Accounts for the year to 31 July 2020.
These interim condensed consolidated financial statements
include audited comparatives for the year to 31 July 2020. The 2020
Annual Report and Accounts, which was prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union, received an unqualified audit opinion and has
been filed with the Registrar of Companies. The financial
statements of the Group for the year ended 31 July 2020 are
available from the Company's registered office, or from the website
www.nanocotechnologies.com.
b. Presentation of figures
Certain figures contained in this announcement, including
financial information, have been subject to rounding adjustments.
Accordingly, in some cases, the sum or percentage change of the
numbers contained in this announcement may not conform exactly to
the total figure given.
c. Going concern
The interim condensed consolidated financial statements have
been prepared on a going concern basis. In determining the
appropriate basis of preparation of the financial statements, the
Directors are required to consider whether the Group can continue
in operational existence for the foreseeable future.
For the purposes of assessing whether 'going concern' is an
appropriate basis for preparing the interim condensed consolidated
financial statements, the Directors have used their detailed
forecasts for the period to 31 July 2021 and summary forecasts for
the following financial year (the 'forecast period'). These reflect
current and expected business activities, including a successful
outcome to current advanced commercial negotiations, the cash
balance of GBP2.9m as shown in the Group consolidated balance sheet
at 31 January 2021, as well as the matters set out in the section
above on Principal risks.
The key assumptions underpinning the base case assessment during
the forecast period include:
-- A successful outcome to commercial negotiations currently underway at an advanced stage;
-- Subsequent phases to the projects described above;
-- No other revenue streams have been assumed;
-- No settlement or damages award from the Samsung litigation;
-- In the event of a failure of the current commercial
negotiations noted above, or if the Group fails to secure an
alternative source of medium term financing for the Group, then a
major restructuring of the Group's cost base will be implemented
before the end of FY21;
-- In the event of a major restructuring, the Group will aim to
preserve only its core IP, the ongoing lawsuit against Samsung, and
associated support costs.
This base case scenario should deliver adequate financial
resources for the Group to trade until the second half of 2022.
Sensitivity analysis has been performed to reflect a possible
downside scenario that includes only contracted revenues for the
forecast period. In this downside scenario, management would be
required to undertake a significant restructuring exercise before
the end of FY21 to reflect the lower revenue expectations. In the
downside scenario, the Group effectively becomes an IP Shell with
the Samsung lawsuit continuing. The Board's immediate efforts aim
to avoid this scenario and to protect the operational and R&D
capabilities to support the commercial efforts of the Company.
On the basis of the information above and having made
appropriate enquiries, at the time of approving the interim
condensed consolidated financial statements, the Directors have a
reasonable expectation that the Company has access to adequate
resources to continue in operational existence for the foreseeable
future, that is, at least 12 months from the date of the issue of
these interim condensed consolidated financial statements.
Accordingly, they continue to adopt the going concern basis in
preparing the interim condensed consolidated financial
statements.
d. Use of estimates and judgements
Preparation of the interim condensed consolidated financial
statements requires management to make judgements, estimates and
assumptions affecting the application of accounting policies and
the reporting of assets, liabilities, income and expenses. Actual
results may differ from these estimates. The significant judgements
made by management in applying the Group's accounting policies and
key sources of estimated uncertainty were the same as those applied
to the consolidated financial statements for the year ended 31 July
2020. These are summarised below:
Estimates Judgements
Equity-settled share-based payments Capitalisation (or not) of research
and development expenditure
------------------------------------
Impairment of intellectual property Revenue recognition
and tangible fixed assets
------------------------------------
Taxation Going concern
------------------------------------
3. Segmental information
Operating segments
At 31 January 2021 and 2020, the Group operated as one segment,
being the research, development and manufacture of products and
services based on high performance nanoparticles. This is the level
at which operating results are reviewed by the chief operating
decision maker (i.e. the Board) to make decisions about resources,
and for which financial information is available. All revenues have
been generated from continuing operations and are from external
customers.
Six months Six months Year to
to to 31 July
31 January 31 January 2020
2021 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ ----------
Analysis of revenue - by type
Products sold 242 103 448
Rendering of services 714 2,485 2,981
Royalties and licences 48 270 427
-------------------------------- ------------ ------------ ----------
1,004 2,858 3,856
------------------------------- ------------ ------------ ----------
There was a material customer who generated revenue of
GBP771,000 (2020: one material customer amounting to
GBP2,475,000).
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:
Six months Six months Year to
to to 31 July
31 January 31 January 2020
2021 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ----------
Analysis of revenue - by geography
UK - 103 17
Europe (excluding UK) 807 2,485 1,111
Asia 189 - 228
USA 8 270 2,500
------------------------------------- ------------ ------------ ----------
1,004 2,858 3,856
------------------------------------ ------------ ------------ ----------
All the Group's assets are held in the UK and all of its capital
expenditure arises in the UK. The loss before taxation and
attributable to the single segment was GBP2,676,000 (2020:
GBP2,449,000).
4. Loss per share
Six months Six months Year to
to to 31 July
31 January 31 January 2020
2021 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ------------
Loss for the period attributable
to equity shareholders (2,269) (1,900) (5,064)
Share-based payments 289 181 376
------------------------------------ ------------ ------------ ------------
Adjusted loss for the period (1,980) (1,719) (4,688)
------------------------------------ ------------ ------------ ------------
Weighted average number of shares No. No. No.
----------------------------------- ------------ ------------ ------------
Ordinary shares in issue 305,699,102 286,219,246 287,070,824
------------------------------------ ------------ ------------ ------------
Adjusted loss per share (pence) (0.65) (0.60) (1.63)
------------------------------------ ------------ ------------ ------------
Basic loss per share (pence) (0.74) (0.66) (1.76)
------------------------------------ ------------ ------------ ------------
Diluted loss per share is not presented as the effect of share
options issued is anti-dilutive. The adjusted loss is presented as
the Board measures underlying business performance which excludes
non-cash IFRS2 charges.
5. Deferred revenue
31 January 31 January 31 July
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------ ------------ ------------ ----------
Current
Upfront licence fees 103 102 103
Milestone payments - - 500
------------------------- ------------ ------------ ----------
Total current 103 102 603
------------------------- ------------ ------------ ----------
Non-current
Upfront licence fees 198 303 249
Total non-current 198 303 249
------------------------- ------------ ------------ ----------
Total deferred revenue 301 405 852
------------------------- ------------ ------------ ----------
Deferred revenue arises under IFRS where upfront licence fees
are accounted for on a straight-line basis over the initial term of
the contract or where performance criteria have not been satisfied
in the accounting period.
6. Lease liabilities
Six months Six months Year to
to to 31 July
31 January 31 January 2020
2021 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------- ------------ ------------ ----------
Current
Property Leases 584 621 642
Non-current
Property Leases 282 791 542
-------------------------- ------------ ------------ ----------
Total lease liabilities 866 1,412 1,184
-------------------------- ------------ ------------ ----------
- Ends -
[1] Adjusted LBITDA excludes the non-cash impact share based
payments as these are not deemed to be indicative of the underlying
performance of the business.
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END
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