TIDMNANO
RNS Number : 0293I
Nanoco Group PLC
12 April 2022
12 April 2022
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 2022
("the Period" or "H1 FY22").
Operational Summary
-- Two additional work packages for the delivery of an enhanced
and scaled up version of Nanoco's technology with our significant
European electronics customer (one post Period end)
-- Technical and commercial milestones delivered in full on
important sensing project for Asian chemicals customer
-- Consolidating activity in Runcorn in anticipation of
commercial production whilst also delivering sustainable cost
savings
Samsung Litigation
-- Our litigation against Samsung continues in line with
expectations and our confidence in a positive outcome for the
company has increased
-- Decision from Patent Trial and Appeal Board on validity of five patents due by May 2022
-- Expected trial date in H2 CY22 for the alleged wilful
infringement of the Group's IP by Samsung
Financial Summary
-- Revenue and other operating income increased 21% to GBP1.3m (H1 FY21: GBP1.1m)
-- Cost savings and additional gross profit improve Adjusted
LBITDA to GBP1.1m (H1 FY21: loss GBP1.5m)
-- Average net monthly cash burn reduced to GBP0.3m (H1 FY21: GBP0.4m)
-- Period end net cash of GBP1.8m, increased to GBP2.6m at
February 2022 month end with receipt of tax credit and major
customer payment in February
-- Cash runway extended to H1 CY23 as commercial milestones
achieved. Anticipated commercial production and pipeline conversion
could extend cash visibility.
Brian Tenner, Chief Executive Officer of Nanoco Group plc,
said:
"Good progress has continued on a number of fronts throughout
the Period, with extremely encouraging progress on manufacturing
scale-up which has the potential to lead to our first commercial
production orders. Our operational efforts therefore now focus
primarily on scale up activities and re-commissioning our Runcorn
production facilities. In parallel, we continue to provide an
expanding range of materials to a number of customers for multiple
potential use cases.
"Given the progress towards commercialisation, we have taken the
decision to consolidate all of our activities onto our Runcorn
production site. This will bring our excellent R&D and process
scale-up activities alongside commercial production, reflecting the
change in emphasis from research to commercial production. This
also has the benefit of reducing our cost base by around GBP0.7m
per annum, once the Manchester site is fully vacated.
"The litigation against Samsung for the alleged wilful
infringement of Nanoco's IP and the Inter Partes Reviews (IPRs) of
our patents continues to progress well. We look forward to a
confirmation of the validity of our patents by the PTAB in May 2022
and expect the Texas trial to be re-scheduled shortly thereafter
for a date in the second half of CY22.
"The Board is convinced of the significant value that can be
generated in the short to medium term by our strengthening
commercial prospects and further positive momentum in our IP
litigation against Samsung. In co-locating all of our activities
into a re-commissioned Runcorn site we are building the strongest
possible foundation to support a transformation in shareholder
value in the short to medium term."
Analyst meeting and webcast details
A conference call and webcast for analysts will be held at
10:00am (UK time) this morning (12 April 2022):
Dial in: +44 (0)330 165 4012
Link:
https://webcasting.brrmedia.co.uk/broadcast/6246f81be1d0d456b32a17b3
PIN: 5542733
For further details please contact MHP Communications on 0203
128 8990 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
Peel Hunt: +44 (0) 20 7418 8900
Edward Knight
James Smith
MHP Communications : +44 (0) 203 128 8990
Reg Hoare
Pete Lambie
Charlie Protheroe
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
Good progress has continued on a number of fronts throughout the
Period. Critically we have met all technical milestones for our
important European electronics customer. These successes led to
further extensions of the development programme into its next
stages both during and shortly after the Period. As a result, we
anticipate revenue in H2 being at least in line with H1, with scope
for further upside from existing opportunities that can be captured
during the second half.
We continue to balance the delivery of technical and commercial
deliverables with close oversight of our cost base. Shortly after
the Period end, we concluded our exit from one floor of our
Manchester facility and initiated a project to re-locate our
R&D and scale up activities to our Runcorn facility. Bringing
together R&D, scale up and production on one site will
facilitate the transfer of new materials to the production phase as
we prepare Runcorn for potential production order visibility in H2
of calendar year 2022. Once the Manchester site has been fully
exited, annualised savings will amount to around GBP0.7m, reducing
our recurring cost base to around GBP4.0m per annum.
Our litigation against Samsung continues in line with
expectations and our confidence has increased further following the
oral hearings conducted as part of the IPR process. The Board looks
forward to a successful outcome to the IPRs in May 2022, and
relishes the opportunity to put our case to a Texas jury later this
year. A successful outcome to the litigation process will
significantly enhance shareholder value in the short to medium
term.
Sensing materials
We achieved all of the development milestones in the Period
relating to our European customer project for sensing materials.
Shortly after the end of the Period, we agreed a further extension
to the collaboration that includes scaling up the latest version of
the technology. This is further welcome progress towards our medium
term strategic goal of re-balancing our revenue towards recurring
commercial production rather than services revenues. We look
forward to potential visibility of commercial production orders in
the second half of calendar year 2022 with a number of different
materials being ready for production at that time.
We have also successfully developed a new material for a very
significant Asian chemical company. We are now working with the
customer to evaluate the material, its performance, and the system
necessary to be able to move the product into the next phase of
development. The Asian company participates in a number of very
large global electronics supply chains that have the capacity to
significantly increase our channels to market.
Other smaller relationships also continue to be formed in
parallel as interest grows in the application of value adding
nano-materials to sensors, in response to mega-trends seen in
electronics, automotive applications, 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
and have added a new material during the Period.
Display materials (CFQD(R) Quantum Dots)
The current market for displays using quantum dots remains
dominated by Samsung who have an estimated 90% share. The 10% held
by other market participants which includes cadmium based systems
is likely to grow in the short term and should see a move to
cadmium free quantum dots as more countries limit the use of
cadmium. Nanoco believe that anyone wishing to manufacture cadmium
free quantum dots at scale will require a licence to our IP. The
demand for material or licences from Nanoco is therefore closely
linked to the outcome of the litigation against Samsung.
We continue to pursue small scale development projects with a
number of customers in display opportunities and also in adjacent
markets such as horticultural applications where cadmium free
quantum dots lack of toxicity provides a clear commercial
advantage.
We retain our core capabilities to deliver R&D services,
scale up and commercial production of cadmium free quantum dots'
from our Runcorn facility. We are therefore well positioned to take
advantage of any broadening in the adoption of non-toxic quantum
dots.
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 focussed specifically on
anti-bodies for Covid-19.
The project has achieved all of its technical milestones and we
have delivered a working prototype and further demonstrated the
applicability of quantum dots in the diagnostic market. However,
given the crowded space in the Covid-19 diagnostics market, and the
diminishing demand, we think it is unlikely to lead to commercial
orders. The project is due to be completed by May 2022. If we are
unable to find additional funding for the project, the IP will be
protected and further development activities will be paused while
we continue to seek partners to collaborate with in commercialising
the technology.
Operations and staff
We completed the exit from the first floor of our Manchester
facility shortly after the Period end. We have also now started a
project to exit the remainder of the Manchester facility and to
co-locate our R&D, scale up and production capabilities on our
Runcorn site. Locating all of our staff and activities in one site
in preparation for potential commercial production in the short
term will also bring a number of operational and organisational
benefits as well as reducing our cost base. The net benefit of
exiting both floors of Manchester will be annualised savings of
approximately GBP0.7m and, importantly, will be delivered without
any loss of capability. We do not intend any headcount reductions
as part of the site consolidation project.
During the Covid-19 crisis, we continued 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 and these
will continue as necessary following the site consolidation
project. The Runcorn facility has enough space for all of our
activities and the CFQD side of the plant will be taken out of
mothball to support R&D and scale up of both CFQD(R) Quantum
Dots (display) and IRQD (sensing) materials.
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 on 14
February 2021. Subsequently, the Patent Trail and Appeal Board
(PTAB) initiated Inter Partes Review (IPRs) of the validity of the
five patents in the lawsuit in May 2021. The lawsuit and IPR
processes are both funded by a third party who will receive a
multiple of their invested capital if the law suit is
successful.
We have already had a successful outcome to the claim
construction hearing (also known as a 'Markman' hearing) which was
held on 26 March 2021. We won the argument on four of the five
patents in the case and the fifth had each side win one
construction each. 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 result of the IPRs is expected in May 2022. The Board is
very pleased with the progress of the IPR process, including the
recent oral hearing, and is confident that the outcome will confirm
the validity of Nanoco's patents in the case. Following a
successful outcome to the IPRs, we expect the judge in Texas to
promptly lift the stay on the case and reschedule the trial,
potentially for later in the second half of 2022.
Nanoco will need to win both the trial and relevant IPRs to be
successful overall. A successful outcome to the IPRs will be a
significant confirmation of the validity of Nanoco's patents (even
if Samsung lodge an appeal). To win at trial Nanoco has to overcome
three hurdles: firstly to prove the validity of the patents;
secondly, to prove the infringement of the patents by Samsung; and
then thirdly, to prove the most appropriate economic model for any
damages award. Winning the IPRs will effectively overcome the first
hurdle (validity) and allow the trial and jury to focus on
infringement and damages.
If Nanoco is successful at trial and in any IPRs, normal
judicial appeals processes are available to the losing party. It
could therefore take longer for any successful verdict and damages
award to be enforced while the judicial and PTAB appeals processes
are exhausted. However, a favourable trial verdict would enhance
Nanoco's options to start further litigation in other territories
covered by our IP and potentially in territories where the legal
process is faster, costs would be lower and where injunctions are
more commonly granted in addition to damages (in the USA
injunctions are much harder to win following the Supreme Court
ruling in eBay Inc. v. MercExchange, LLC , 547 U.S. 388
(2006)).
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 continues to monitor other market participants who may
be infringing our IP and, subject to the outcome of the Samsung
litigation, they will be pursued vigorously.
Outlook
Given the history of the Company and the false dawns we have
faced, we are naturally cautious but increasingly optimistic. We
continue to make strong and steady progress in developing new
nanomaterials for use in a wide range of potential sensing
applications. Our major customers have extensive market reach which
creates potentially significant 'pull' on demand for our materials,
once the end users have confirmed adoption of the technology. We
continue to engage with a number of other potential customers for
sensing, display and lighting applications.
The lawsuit against Samsung is progressing well and two key
value inflection points are expected during 2022: the outcome of
the IPRs in May 2022 and the jury trial in Texas in the second half
of 2022. The Board is confident both events will vindicate the
defence of our IP. To preserve this value it is critical that we
protect the financial position of the Company and our cash runway
is currently adequate to pass both inflection points, subject to
new customer orders with contingency plans available if needed.
The macro-economic environment and global trends in electronics,
automotive applications, automation and the Internet of Things
remains very promising for our value enhancing nanomaterials. The
potential proximity to our first commercial production orders is
extremely encouraging. The Board is confident that significant
shareholder value can be delivered from both the organic commercial
business and a successful outcome to the Samsung litigation.
Dr Christopher Richards Brian Tenner
Chairman Chief Executive Officer
12 April 2022 12 April 2022
Financial review
Revenue
Revenue and Other Operating Income in the Period increased 21%
to GBP1.3m (H1 2021: GBP1.1m). Revenue was GBP1.1m (H1 2021:
GBP1.0m), the majority of which relates to the important
development work on sensing materials throughout the Period.
Sources of revenue H1 FY22 H1 FY21 FY21
GBPm GBPm GBPm
--------------------- -------------- -------------- ------------
Services 0.7 / 63.1% 0.7 / 71.1% 1.3 / 62.3%
Material sales 0.3 / 32.0% 0.3 / 24.1% 0.7 / 32.8%
Licence & royalties 0.1 / 4.9% 0.0 / 4.8% 0.1 / 4.9%
Total revenue 1.1 / 100.0% 1.0 / 100.0% 2.1 / 100%
===================== ============== ============== ============
The table continues to show the importance of services income,
generated primarily from one important electronics customer in the
current and prior year. Material sales represents continued
shipments of nano-materials to supply chain partners in sensing and
display markets.
Other operating income was GBP0.2m (H1 FY21: 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 GBP1.0m in the Period (H1 FY21: GBP1.2m) and
administrative expenses were GBP2.3m (H1 FY21: GBP2.4m). Our costs
reduced through a combination of:
-- incremental headcount reductions delivered during the prior year;
-- reduction in patent maintenance costs from active management of the IP portfolio; and
-- general cost control across a range of expense types.
With the exit from the first floor of our Manchester facility in
April 2022 and the expected exit from the Ground floor during FY23,
we estimate that our annual cost base will fall from its current
GBP4.8m p.a. to just over GBP4.0m p.a. with a direct beneficial
impact on lowering our breakeven point for revenue.
Operating loss and Adjusted LBITDA
The combination of higher revenue and the continued focus on
cost control led to a 19% reduction in our operating loss in the
Period to GBP2.1m, an improvement of GBP0.5m. Adjusted LBITDA in
the Period also improved by GBP0.4m (27%).
H1 FY22 H1 FY21 FY21
GBPm GBPm GBPm
---------------------------- -------- -------- ------
Operating loss (2.1) (2.6) (5.0)
Share-based payment charge 0.4 0.3 0.4
---------------------------- -------- -------- ------
Adjusted operating loss (1.7) (2.3) (4.6)
Depreciation 0.3 0.3 0.5
Amortisation 0.2 0.3 0.6
Impairment 0.1 0.2 0.6
---------------------------- -------- -------- ------
Adjusted(*) LBITDA (1.1) (1.5) (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. The
non-cash charges for share based payments, depreciation and
amortisation are added back to the operating result to arrive at
Adjusted LBTIDA. 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.
Current initiatives underway are aimed at reducing the Group's
monthly cash costs to around GBP0.35m.
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 GBP0.3m (H1 2021:
GBP0.4m). The amount receivable at 31 January 2022 was GBP1.0m (H1
FY21: GBP0.4m), which is the accrual for the Period and the prior
year tax credit of GBP0.7m which was received shortly after the
Period end in February 2022.
Net result
The loss after tax for H1 FY22 was GBP2.1m (H1 FY21: loss of
GBP2.3m).
Earnings per share
The basic loss per share was 0.67 pence per share (H1 FY21: loss
of 0.74 pence per share). As at 31 January 2022 there were
307,161,404 ordinary shares in issue (31 July 2021: 305,699,102)
including shares held in treasury.
Cash position and liquidity
During H1 FY22, the Group generated an improved net cash outflow
of GBP2.0m (H1 FY21: GBP2.3m) to leave a cash balance of GBP1.8m.
This was despite the slightly delayed receipt of the Group's
R&D tax credit in February 2022 (FY21 received in January 2021)
and a similarly short delay in the receipt of a major customer
payment (together just over GBP1.0m). This is reflected by the
February month end cash balance having risen to GBP2.6m.
Expenditure on fixed assets represents a normal level of
maintenance type capital expenditure.
Intangibles expenditure was GBP0.1m (H1 FY21: GBP0.2m) 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. The Group's working capital can be adversely impacted
by delays in customer payments as was the case at the Period end
when a relatively large receipt arrived past its due date and after
the Period end (GBP0.35m). Raw material supply chains are
lengthening and the Group is reviewing options to increase the
amount of raw materials on hand to ensure continuous supply for our
customers.
Brexit
The UK's Brexit deal with the European Union removes the threat
of tariffs on chemicals exports (our primary export) and other
impacts on additional administrative tasks have continued to be
minimal.
Covid Pandemic
Through proactive and flexible management of our work force the
Group continued to deliver services to our customers with little or
no disruption. Our staff remain committed to these efforts and we
were able to maintain Covid-19 secure customer-focused output in
both of our facilities, meeting all technical milestones and
material deliveries on time.
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 27 to 29 of the 2021 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 Group is actively engaged in negotiating a number of
commercial opportunities with new and existing customers. If
contracts are agreed, these opportunities will allow Nanoco to
retain its core operational capabilities for the remainder of FY22
and into FY23. Since the contracts are not yet signed, these
opportunities are subject to delay or non-completion. In addition,
our current pipeline of existing work and future opportunities is
focused on R&D and scale up 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 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 Group would
also need to find additional sources of funding and the Board is
confident this could be achieved.
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 2022 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 GBP1.8m as shown in the Group consolidated balance sheet
at 31 January 2022, 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;
-- Cost reductions underway reduce the Group's monthly cash
overhead costs from around GBP400,000 to around GBP350,000 with
full effect from H2 FY23.
This base case scenario should deliver adequate financial
resources for the Group to trade until the second half of calendar
year 2023.
Sensitivity analysis has been performed to reflect a possible
downside scenario that only includes already contracted revenues
for the forecast period. In this downside scenario, management
would be required to start a significant restructuring exercise
before the end of FY22 to reflect the lower revenue expectations
and also seek alternative sources of funding. 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.
IAS 1 Presentation of Financial Statements requires the
Directors to disclose "material uncertainties related to events or
conditions that may cast significant doubt upon the Group's ability
to continue as a going concern". The Directors consider that the
timing of adequate commercial production orders and the
implementation of any necessary restructuring plans if those
revenues are delayed is a material uncertainty which may cast
significant doubt about the Group's and the Parent Company's
ability to continue as a going concern.
Nevertheless, considering the mitigating actions that are within
management's control and can be taken and after making enquiries
and considering the uncertainty described above, the Directors have
a reasonable expectation that the Group has access to adequate
resources to continue in operational existence for the foreseeable
future.
Accordingly, they continue to adopt the going concern basis in
preparing the interim condensed consolidated financial statements.
The financial statements do not reflect any adjustments that would
be required to be made if they were prepared on a basis other than
the going concern basis.
Liam Gray
Chief Financial Officer
12 April 2022
Responsibility statement
The Directors of Nanoco Group plc, as listed on pages 38 and 39
of the 2021 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
Liam Gray
Chief Financial Officer
12 April 2022
Condensed consolidated statement of comprehensive income
For the six months ended 31 January 2022
H1 FY22 H1 FY21 FY21
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------- ------ ------------ ------------ ----------
Revenue 3 1,099 1,004 2,091
Cost of sales (109) (104) (209)
Gross profit 990 900 1,882
Other operating income (grants) 179 50 183
Research and development expenses (990) (1,221) (2,150)
Administrative expenses (2,321) (2,369) (4,924)
Operating loss (2,142) (2,640) (5,009)
* Before share-based payments (1,790) (2,351) (4,592)
* Share-based payments (352) (289) (417)
* Operating loss as shown above (2,142) (2,640) (5,009)
------ ------------ ------------
Net finance (expense) / income (205) (36) (71)
Loss before taxation (2,347) (2,676) (5,080)
Taxation 286 407 685
Loss after tax (2,061) (2,269) (4,395)
-------------------------------------------- ------ ------------ ------------ ----------
Other comprehensive income
(Loss)/profit on exchange
rate translations - - -
-------------------------------------------- ------ ------------ ------------ ----------
Loss after taxation for the
year and total comprehensive
loss for the year (2,061) (2,269) (4,395)
-------------------------------------------- ------ ------------ ------------ ----------
Loss per share:
Basic and diluted loss for
the period 4 (0.67)p (0.74)p (1.44)p
-------------------------------------------- ------ ------------ ------------ ----------
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 2022
Issued Reverse Share-based
equity Acquisition payment Merger Accumulated
capital Reserve reserve reserve loss Total
Restated(1) Restated(1) Restated(1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------------ ------------ -------- ------------ ------------
At 31 July 2020 (audited) 147,862 (77,868) 3,901 (1,242) (65,623) 7,030
Loss for the six months
to 31 January 2021 - - - - (2,269) (2,269)
Share-based payments - - 289 - - 289
At 31 January 2021 (unaudited) 147,862 (77,868) 4,190 (1,242) (67,892) 5,050
Loss for the six months
to 31 July 2021 - - - - (2,126) (2,126)
Share-based payments - - 128 - - 128
At 31 July 2021 (audited) 147,862 (77,868) 4,318 (1,242) (70,018) 3,052
Loss for the six months
to 31 January 2022 - - - - (2,061) (2,061)
Share-based payments - - 352 - - 352
New equity shares issued 146 - (146) - - -
At 31 January 2022 (unaudited) 148,008 (77,868) 4,524 (1,242) (72,079) 1,343
-------------------------------- -------- ------------ ------------ -------- ------------ ------------
(1) Details of the restatement are included in Note 2 to these
interim condensed consolidated financial statements
Condensed consolidated statement of financial position
As at 31 January 2022
31 January 31 January 31 July
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
----------------------------- ------ ------------ ------------ ----------
Assets
Non-current assets
Property, plant and
equipment 115 160 199
Right of use assets 136 408 340
Intangible assets 2,610 3,428 2,858
2,861 3,996 3,397
----------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 66 169 110
Trade and other receivables 1,009 572 1,227
Income tax asset 972 409 686
Cash and cash equivalents 1,776 2,906 3,813
3,823 4,056 5,836
----------------------------- ------ ------------ ------------ ----------
Total assets 6,684 8,052 9,233
----------------------------- ------ ------------ ------------ ----------
Liabilities
Current liabilities
Trade and other payables (1,113) (1,144) (1,617)
Lease liabilities 6 (331) (584) (545)
Deferred revenue 5 (103) (103) (253)
(1,547) (1,831) (2,415)
----------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Lease liabilities 6 (19) (282) (133)
Deferred revenue 5 (95) (198) (146)
Financial liabilities (3,680) (477) (3,487)
(3,794) (957) (3,766)
----------------------------- ------ ------------ ------------ ----------
Total liabilities (5,341) (2,788) (6,181)
----------------------------- ------ ------------ ------------ ----------
Net assets 1,343 5,264 3,052
----------------------------- ------ ------------ ------------ ----------
Capital and reserves
Issued equity capital 148,008 147,862 147,862
Reverse Acquisition
Reserve (77,868) (77,868) (77,868)
Share-based payment
reserve 4,524 4,084 4,318
Merger reserve (1,242) (1,242) (1,242)
Accumulated loss (72,079) (67,572) (70,018)
----------------------------- ------ ------------ ------------ ----------
Total equity 1,343 5,264 3,052
----------------------------- ------ ------------ ------------ ----------
Approved by the Board and authorised for issue on 12 April
2022.
Brian Tenner Liam Gray
Chief Executive Officer Chief Financial Officer
Condensed consolidated cash flow statement
For the six months ended 31 January 2022
Six months Six months Year to
to to
31 January 31 January 31 July
2022 2021 2021
Restated(1)
(Unaudited) (Unaudited) Audited
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------ ------------ --------
Loss before tax (2,347) (2,676) (5,080)
Adjustments for:
Net finance expense 195 (36) 71
(Profit) / Loss on exchange rate
translations 54 17 17
Depreciation of tangible fixed
assets 84 111 99
Depreciation of right of use
asset 204 205 408
Amortisation of intangible assets 245 312 618
Impairment of intangible assets 71 236 623
Share-based payments 352 289 417
Gain on disposal of tangible
fixed assets (26) - (48)
Interest paid (1) - (4)
Changes in working capital:
Decrease/(increase) in inventories 44 (29) 30
Decrease in trade and other receivables 218 398 (209)
(Decrease) in trade and other
payables (548) (780) (757)
(Decrease)/increase in provisions - - -
(Decrease)/increase in deferred
revenue (201) (551) (453)
------------------------------------------- ------------ ------------ --------
Cash outflow from operating activities (1,656) (2,504) (4,268)
Research and development tax
credit received - 909 908
Net cash outflow from operating
activities (1,656) (1,595) (3,360)
------------------------------------------- ------------ ------------ --------
Cash flows from investing activities
Purchases of tangible fixed assets - (8) (35)
Purchases of intangible fixed
assets (68) (235) (357)
Proceeds from sale of tangible
fixed assets 26 - 48
Net cash outflow from investing
activities (42) (243) (344)
------------------------------------------- ------------ ------------ --------
Cash flows from financing activities
Proceeds from issue of loan notes - - 3,150
Costs of debt issuance - - (161)
Payment of lease liabilities
(capital) (318) (435) (642)
Payment of lease liabilities
(interest) (10) (18) (30)
Net cash outflow from investing
activities (328) (453) 2,317
------------------------------------------- ------------ ------------ --------
Decrease in cash and cash equivalents (2,026) (2,291) (1,387)
Cash and cash equivalents at
the start of the period 3,813 5,170 5,170
Effects of exchange rate changes (11) 27 30
------------------------------------------- ------------ ------------ --------
Cash and cash equivalents at
the end of the period 1,776 2,906 3,813
------------------------------------------- ------------ ------------ --------
1 Details of the restatement are included in Note 2 to these
interim condensed consolidated financial statements
Notes to the interim condensed consolidated financial
statements
For the six months ended 31 January 2022
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 2022 was authorised for issue in
accordance with a resolution by the Directors on 12 April 2022.
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 2021.
These interim condensed consolidated financial statements
include audited comparatives for the year to 31 July 2021. The 2021
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 2021 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 2022 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 GBP1.8m as shown in the Group consolidated balance sheet
at 31 January 2022, 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;
-- Cost reductions underway reduce the Group's monthly cash
overhead costs from around GBP400,000 to around GBP350,000 with
full effect from H2 FY23.
This base case scenario should deliver adequate financial
resources for the Group to trade until the second half of calendar
year 2023.
Sensitivity analysis has been performed to reflect a possible
downside scenario that only includes already contracted revenues
for the forecast period. In this downside scenario, management
would be required to start a significant restructuring exercise
before the end of FY22 to reflect the lower revenue expectations
and also seek alternative sources of funding. 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.
IAS 1 Presentation of Financial Statements requires the
Directors to disclose "material uncertainties related to events or
conditions that may cast significant doubt upon the Group's ability
to continue as a going concern". The Directors consider that the
timing of adequate commercial production orders and the
implementation of any necessary restructuring plans if those
revenues are delayed is a material uncertainty which may cast
significant doubt about the Group's and the Parent Company's
ability to continue as a going concern.
Nevertheless, considering the mitigating actions that are within
management's control and can be taken and after making enquiries
and considering the uncertainty described above, the Directors have
a reasonable expectation that the Group has access to adequate
resources to continue in operational existence for the foreseeable
future.
Accordingly, they continue to adopt the going concern basis in
preparing the consolidated financial statements. The financial
statements do not reflect any adjustments that would be required to
be made if they were prepared on a basis other than the going
concern basis.
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
2021. 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
------------------------------------
e. Prior year restatement
Please refer to note 30 of the consolidated financial statements
for the year ended 31 July 2021 for further information.
3. Segmental information
Operating segments
At 31 January 2022 and 2021, 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 2021
2022 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ ----------
Analysis of revenue - by type
Products sold 352 242 685
Rendering of services 693 714 1,303
Royalties and licences 54 48 103
-------------------------------- ------------ ------------ ----------
1,099 1,004 2,091
------------------------------- ------------ ------------ ----------
There was a material customer who generated revenue of
GBP899,000 (2021: one material customer amounting to
GBP771,000).
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 2021
2022 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ----------
Analysis of revenue - by geography
UK - - 28
Europe (excluding UK) 910 807 1,618
Asia 180 189 411
USA 9 8 34
------------------------------------- ------------ ------------ ----------
1,099 1,004 2,091
------------------------------------ ------------ ------------ ----------
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 GBP2,061,000 (2021:
GBP2,269,000).
4. Loss per share
Six months Six months Year to
to to 31 July
31 January 31 January 2021
2022 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ------------
Loss for the period attributable
to equity shareholders (2,061) (2,269) (4,395)
Share-based payments 352 289 417
------------------------------------ ------------ ------------ ------------
Adjusted loss for the period (1,709) (1,980) (3,978)
------------------------------------ ------------ ------------ ------------
Weighted average number of shares No. No. No.
----------------------------------- ------------ ------------ ------------
Ordinary shares in issue 306,167,992 305,699,102 305,699,102
------------------------------------ ------------ ------------ ------------
Adjusted loss per share (pence) (0.56) (0.65) (1.30)
------------------------------------ ------------ ------------ ------------
Basic loss per share (pence) (0.67) (0.74) (1.44)
------------------------------------ ------------ ------------ ------------
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
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------ ------------ ------------ ----------
Current
Upfront licence fees 103 103 103
Milestone payments - - 150
------------------------- ------------ ------------ ----------
Total current 103 103 253
------------------------- ------------ ------------ ----------
Non-current
Upfront licence fees 95 198 146
Total non-current 95 198 146
------------------------- ------------ ------------ ----------
Total deferred revenue 198 301 399
------------------------- ------------ ------------ ----------
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 2021
2022 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------- ------------ ------------ ----------
Current
Property Leases 331 584 545
Non-current
Property Leases 19 282 133
-------------------------- ------------ ------------ ----------
Total lease liabilities 350 866 678
-------------------------- ------------ ------------ ----------
- Ends -
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END
IR UAUBRUSUSAAR
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April 12, 2022 02:00 ET (06:00 GMT)
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