TIDMNANO
RNS Number : 5058V
Nanoco Group PLC
09 April 2019
9 April 2019
NANOCO GROUP PLC
("Nanoco", the "Company" or the "Group")
2019 Interim Results, half year ended 31 January 2019
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 2019
("the Period" or "H1 FY19").
Operational highlights
-- Final milestones completed on schedule under original
agreements with the US Customer; significant new extension agreed
for 12 months to December 2019, as announced 25 January 2019
-- Capital investment at Runcorn production plant substantially
complete; US Customer now funding stress testing and
optimisation
-- Production capability now in place for Electronics and
Display sectors with no increase in cost base
-- Major improvements in CFQD(R) Quantum Dots(1) performance;
Nanoco is heavily involved in all stages of quantum dot display
evolution
Financial highlights
-- Significantly improved revenue and billings lead to reduced losses
-- Revenue of GBP3.2m, substantially higher than H1 FY18
(GBP0.2m), similar to total revenue in FY18
-- Billings of GBP4.3m (including deferred revenue) also far in
excess of prior year (H1 FY18: GBP0.1m)
-- Adjusted EBITDA loss in H1 FY19 significantly reduced to
GBP2.5m (H1 FY18: EBITDA loss GBP4.2m)
-- Contracted orders for delivery in H2 FY19 of GBP3.4m and subsequent years of GBP4.8m
-- Cash at Period end of GBP6.2m (31 January 2018 GBP8.7m, 31
July 2018: GBP10.7m). Cash flow for the 12 months to 31 December
2019 expected to be broadly neutral
Dr Michael Edelman, Chief Executive Officer of Nanoco Group plc,
said:
"Significant progress was made in the first half of the
financial year, during which we hit all key milestones for our US
Customer, launched a major re-allocation of resources to focus on
near term revenue opportunities, and increased our R&D
resources directed at further enhancing the performance of our
CFQD's for commercial applications.
"Towards the end of the period, we agreed a significant contract
extension with the US Customer that covers the provision of
commissioning and stress testing services to December 2019. The new
extension reflects Nanoco's improving capabilities as an operating
partner.
"The Group's contracted orders fully underpin the Board's
expectations for the full year. We are also pursuing potential
upsides from material sales and other potential commercial
engagements.
"These significantly improved financial results are a welcome
step forward. At the same time, we also continue to carefully
manage our cost base and cash resources. The Group is gaining
improved visibility of future cash flows which increases our scope
to deliver further improvements in financial performance going
forward."
[1] Cadmium Free Quantum Dots
Analyst meeting and webcast details
A briefing for analysts will be held at 08.30 a.m. this morning
(9 April 2019) at the offices of Peel Hunt, Moor House, 120 London
Wall, London, EC2Y 5ET. For further details please contact MHP
Communications on 0203 128 8570 or at nanoco@mhpc.com
To listen to a live webcast of the analyst briefing, please log
on to the following web address approximately five minutes before
8:30am on 9 April 2019:
http://webcasting.brrmedia.co.uk/broadcast/5ca1c2cedd35a71771299890
A recording of the webcast will also be made available on
Nanoco's website, www.nanocogroup.com, later today.
For further information, please contact:
Nanoco Group PLC:
Michael Edelman, CEO +44 (0) 161 603 7900
Brian Tenner, COO & CFO +44 (0) 161 603 7900
Caroline Watson, Investor Relations Manager +44 (0) 7799 897
357
cwatson@nanocotechnologies.com
Peel Hunt
Adrian Trimmings +44 (0) 20 7418 8900
George Sellar
MHP Communications: +44 (0) 203 128 8570
Reg Hoare
Giles Robinson
Pete Lambie
nanoco@mhpc.com
Notes for editors:
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. 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 and Electronics markets. One of the interesting properties
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
The Group's improved performance in the first half of the year
clearly demonstrates the success that can be achieved through our
proprietary platform technology. This is built around the design,
development, and scale-up of unique nano-materials that exploit the
performance characteristics of the materials. It is this platform
technology that enables us to access a wide range of potential
applications, from electronic devices, displays and specialist
lighting to healthcare and solar, to name but a few. This range of
potential applications for Nanoco's platform technology proves the
Group has many valuable opportunities outside the display
industry.
Nanoco's ability to develop novel nano-materials for specific
applications and produce them cost effectively on an industrial
scale is unique. We manipulate the materials' different optical and
electronic properties, to obtain a desired output for a specific
application whether it be red and green fluorescence for the
display, lighting and life science industries or infrared
absorption for next generation sensor technology.
The practical implications of our unique platform capabilities
are clearly evidenced in the R&D, scale-up and production
support the Company has been able to provide to its US Customer on
a very short time-scale. Nanoco's ability to flex its talented
development scientists and production engineers to support a wide
array of nano-materials in different applications is a key strength
of the business. Recently we began adding to the skills and
capabilities of our engineering staff in the Runcorn production
facility so that they are able to operate effectively in both the
Display (CFQD(R)) and Electronics production facilities.
We have also recently made a number of changes to our Board and
senior management team that bring new skills and perspectives to
the Group. These new appointments support our transition from the
operating processes and systems of an R&D focussed business to
those of a commercial production company. Our leadership group now
includes a newly appointed HR Business Partner and Group Financial
Controller as well as an internal promotion for the Head of our
Runcorn manufacturing facility. These changes were made in parallel
with the rolling implementation of a new IT system that will
enhance the quality of our management information, speed of
decision making, and effectiveness of our business processes.
Business performance
As set out in the Annual Report for the year ended 31 July 2018,
we expect that the next two financial years are likely to be
dominated by activity and revenue generated by our US Customer. The
first half of the current financial year confirms this position,
with total revenue of GBP3.2m made up of GBP2.9m of revenues from
the US Customer and the balance from royalty payments and licence
fee income from the display business.
Contract milestones and expanded Runcorn production facility
During the Period, we successfully achieved a number of key
milestones for our US Customer, earning the contracted milestone
revenues in full. We also delivered a number of additional R&D
milestones under a separate contract for the same customer,
examining a range of different materials for use in electronics
applications.
The period also saw the start of commissioning and testing of
the newly expanded Runcorn production facility, dedicated to the
production of nano-materials for use in the electronics sector. The
substantial completion of the facility by December 2018 allowed us
to sign a new contract extension in January 2019 that follows on to
the next phase of commissioning and stress testing for the US
Customer.
The table below sets out a summary of the historical financial
information and current status of each contract and associated
extensions with our US Customer.
Contract Time frame and key deliverables Financial implications
First Signed February 2018 covering
contract the period to 31 December * Funding of GBP3.4m used to pay for Runcorn facility,
2018. entitles customer to discounted material price for
* Milestone 1: Achieved in full commercial production materials; plus
* Milestone 2: Achieved in full * GBP4.2m earned for delivery of the milestones.
* Milestone 3: Achieved in full
* Extension valued at just under GBP8.0m, GBP1.2m
* Complete construction of expanded Runcorn production revenue deferred until production and the balance
facility. split almost evenly between FY19 and FY20. Focus on
stress testing and optimising the Runcorn facility.
Any sales of material would be in addition to these
Contract extension signed sums.
January 2019 covering period
to December 2019.
----------------------------------------------------------- -----------------------------------------------------------
Second Signed April 2018 covering
contract the period to 30 November * Total contract value of GBP1.1m earned in full in
2018. FY18 and FY19 including all 4 technical milestones.
R&D services contract with
four additional technical
milestones.
----------------------------------------------------------- -----------------------------------------------------------
A key focus for H2 FY19 is to prepare Runcorn for commercial
production, with the facility expected to be ready for commercial
production in H1 FY20 (the second half of calendar 2019). However,
it must be noted that Nanoco's materials are just one part of a
complex supply chain and so we are not able to state with certainty
an expected date for full scale commercial production until we
receive a firm demand signal from the US Customer.
Display (CFQD(R) Quantum Dots)
Display remains an important target market for Nanoco. To
improve our competitive proposition, the Company's focus has
shifted over recent months from providing downstream display
products, to providing the highest performing CFQD(R) quantum dots
to multiple film coating, photo-resist and ink companies. Our
mission is to work with the companies who are considered by the
display industry to be best in class.
We measure CFQD(R) material performance using a number of key
metrics including, but not limited to, Full Width Half Maximum
"FWHM" (the width in nanometres of the emission peak halfway up its
height, narrower is better), quantum yield percentage (a measure of
how efficiently the quantum dots absorb blue light and convert it
to red or green light) and stability (how durable the quantum dot
is in any specific application). An example of our improved
performance in the period is a 15% reduction of the CFQD(R) quantum
dots' FWHM while retaining very high quantum yield and
stability.
The integration of quantum dots into TVs is evolving. The first
generation of QD displays use red and green quantum dots in a
resin, which is then coated onto a film and integrated into the
backlight of an LCD display. This dramatically enhances colour
performance and reduces power consumption. The second generation of
QD based displays integrate red and green quantum dots onto a blue
OLED panel or blue micro-LEDs using ink jet printing or
photo-resist patterning technology. Major display OEMs are
currently converting existing LCD production lines to accommodate
this new hybrid QD-OLED device structure. We anticipate that
displays using second generation technology will enter the market
as early as 2021. The third generation of quantum dot display is
electroluminescent red, green and blue quantum dots fabricated into
a display. Nanoco is heavily involved in all three stages of this
quantum dot display evolution.
Within display we continue to work closely with our licensee
partners DuPont (formerly Dow) and Merck as well as our film
coating partner Wah Hong.
Other sectors including life sciences, lighting and
healthcare
Substantial progress was achieved in the period by our Life
Sciences team. Major gene and animal toxicology studies on our red
biocompatible CFQD(R) quantum dots (Vivodots(TM) nanoparticles)
were concluded with no significant signs of adverse effects even at
high doses. These Good Laboratory Practice ("GLP") compliant
studies will lay the ground for further clinical development and
potential regulatory approvals across a variety of medical
applications that the Nanoco Life Sciences team is pursuing. Our
short-term goal is to maximize the performance of targeted
Vivodots(TM) which would allow high quality visualisation of
tumours for enhanced imaged guided surgery and enhanced specificity
in cancer diagnostics.
We continue to explore early stage opportunities in
horticultural lighting, working with potential partners in both the
lighting device and horticultural stages of the supply chain. We
also continue our commercial sales relationship with CareWear, a
US-based supplier of therapeutic light patches that accelerate
trauma recovery.
Intellectual property
We continue to grow our Intellectual Property ("IP") portfolio.
The Group now benefits from c.730 patents and patent applications.
Our IP strongly underpins the Group's valuation while also
operating as a challenging barrier to entry to potential
competitors. Our 'know how' in composition of matter and process
methodologies also continues to grow and adds to the already
challenging IP barrier to entry for potential competitors.
Environment / Restriction of Hazardous Substances ("RoHS")
Nanoco is committed to protecting the environment in which our
activities are conducted. This commitment has driven us to develop
our CFQD(R) quantum dot products to be free of toxic cadmium, which
is still widely used by our competitors. The European Commission
("EC") has revised the RoHS exemption so that it has immediately
ceased for lighting and will end on 31 October 2019 for display
products, after which the normal RoHS limit for cadmium of 100ppm
will apply. Nanoco expects that regulations in other key markets,
including China, will fall in line with RoHS in future.
Our contacts with leading display companies continue to indicate
that most already accept the need for new display products to be
cadmium-free. The current exemption is still subject to review by
the EC following further extension requests but this review has not
yet been launched. The EC is also yet to consider a new request for
cadmium based QDs to be used in 'on-chip' LED lighting
applications. Nanoco actively participates in reviews of any
proposed RoHS changes.
Financial performance
The Group continued on its path to deliver strong year on year
revenue growth. Revenue for the period was GBP3.2m, substantially
higher than the same period in the prior year (H1 FY18: GBP0.2m)
almost equalling the revenue reported for the whole of the prior
year. This additional revenue converted strongly through to the
operating result with gross margins of approximately 85% partly
offset by small managed increases in overheads. The net result was
a significant reduction in the Adjusted EBITDA loss to GBP2.5m (H1
FY18: GBP4.2m loss).
Careful cost control was maintained during the period. In
combination with the flexibility of our staff and their
transferable skills sets, we were able to pivot our internal
resources to support new nano-materials opportunities without the
need for a costly restructuring exercise.
Cash at 31 January 2019 was GBP6.2m (31 July 2018: GBP10.7m; 31
January 2018: GBP8.7m). The Board expects the Group's net cash flow
for the twelve months to the end of December 2019 to broadly break
even (with some monthly variations linked to working capital
changes and capital investments). This is supported by the receipt
of the FY18 R&D tax credit in March 2019 (GBP1.4m) and
underpinned by the contract extension with the US Customer.
The need to preserve the Group's cash resources and to invest in
selective opportunities continues and therefore no dividend is
proposed for the year (2018: GBPnil).
Outlook
The first half of the financial year saw the successful delivery
of a number of key milestones and deliverables for the US Customer.
Those successes led to a new contract extension signed at the end
of the period. The Group therefore remains focussed on delivering
first class technical services to the US Customer as we prepare for
commercial production. Commissioning of the plant is in hand and we
are confident that the facility will be fully prepared for
commercial production in the second half of calendar year 2019.
However, as noted previously, we cannot state when the new Runcorn
facility will enter full scale production until we receive a firm
purchase commitment from the US Customer.
In CFQD(R) quantum dots for display, by re-focussing our R&D
efforts on the performance of our dots (as opposed to resins or
films), we have delivered significantly improved performance across
the key quality metrics of full width half max and quantum yield.
We firmly believe that the best technology will win and hence we
have set ourselves the goal of being the producer of the best
CFQD(R) quantum dots for the display industry.
Market interest in the use of quantum dots across a range of
applications appears to be increasing. A number of approaches have
been made to Nanoco with a view to working together on existing and
emerging applications for quantum dots. The Board is therefore
confident in the growing relevance of our IP and technical
capabilities.
The Board's expectations for the current financial year are
firmly underpinned and the growing order book for FY20 adds
confidence for the year ahead as we focus on exceeding the
expectations of our key US Customer while further improving the
performance of our CFQD's to take advantage of increasing market
interest in quantum dots.
Dr Christopher Richards Dr Michael Edelman
Chairman Chief Executive Officer
9 April 2019 9 April 2019
Financial review
Revenue
Revenue in the period was GBP3.2m (H1 2018: GBP0.2m). The
significant increase primarily reflects the completion of
commercial contracts signed at the start of H2 FY18, with revenue
in the period dominated by the US Customer (just over 90% of the
total).
Sources of revenue H1 FY19 H1 FY18 FY18
GBPm GBPm GBPm
------------------- ------------- ------------- -------------
Services 2.9 / 90.8% 0.0 / 0.5% 3.0 / 90.5%
Material sales 0.1 / 2.2% 0.1 / 66.3% 0.2 / 5.1%
Licence fees 0.0 / 1.6% 0.1 / 25.5% 0.0 / 1.4%
Royalties 0.2 / 5.4% 0.0 / 7.7% 0.1 / 3.0%
------------------- ------------- ------------- -------------
Total revenue 3.2 / 100.0% 0.2 / 100.0% 3.3 / 100.0%
=================== ============= ============= =============
The table clearly shows the importance of the service income
being generated, primarily from the US Customer (currently and in
the prior year). As noted previously, this service income will
continue to represent the majority of the Group's revenue until
such time as the US Customer places an order for production
material or demand emerges in other market sectors such as
display.
Other operating income was GBP0.1m (H1 FY18: GBP0.1m) which, as
in the prior year, was generated by grant income earned by our Life
Sciences research team.
Movements in deferred income H1 FY19 H1 FY18 FY18
GBPm GBPm GBPm
--------------------------------------------- -------- -------- ------
Value of sales invoices ("billings") raised
during the period 4.2 0.1 6.3
Movement in deferred income during the
period 0.3 0.1 0.1
Less revenue deferred to future reporting
periods (1.3) - (3.1)
--------------------------------------------- -------- -------- ------
Total revenue 3.2 0.2 3.3
============================================= ======== ======== ======
The total balance of revenue deferred until future reporting
periods now stands at GBP4.8m (H1 FY18: GBP0.6m, FY18: GBP3.7m).
Following the adoption of IFRS15, Revenue Recognition, GBP4.2m of
this deferred revenue has now been re-classified as a contract
liability (H1 FY18: GBPnil, FY18: GBP2.9m as restated) with the
balance disclosed as deferred revenue. Both categories are still
expected to be recognised as revenue in future periods and, in the
case of the contract liability sums, when commercial production
begins for the US Customer. There was no material impact on revenue
recognised in the period or in the prior year as a result of the
transition to IFRS15.
Operating expenses
Operating expenses comprise R&D and administrative expenses.
Gross investment in R&D in the period was GBP1.6m (H1 FY18:
GBP1.9m) to support the ongoing development of CFQD(R) and other
nano-particles. Administrative expenses were GBP4.3m (H1 FY18:
GBP3.1m) and increased as a result of a managed growth in headcount
to meet the needs of the US Customer and the additional occupancy
costs of the significantly expanded Runcorn facility. Lastly, bonus
provisions have been made at this stage based on expectations of
improved business performance in line with stretching targets set
for the Group. Mindful of the Group's restricted cash resources, we
maintain close scrutiny on all categories of cost.
Operating loss and LBITDA
The table shows a sharp narrowing of the operating loss and
Adjusted LBITDA in the period compared to the prior year. The 36%
(GBP1.8m) reduction in operating loss to GBP3.1m and the 40%
(GBP1.7m) reduction in Adjusted LBITDA to GBP2.5m both reflect the
significant increase in revenue in the period at relatively
attractive gross margins (around 85%). This was then partly offset
by the changes in overheads noted above.
H1 FY19 H1 FY18 FY18
GBPm GBPm GBPm
--------------------- -------- -------- ------
Operating loss (3.1) (4.8) (7.4)
Share-based payment
charge 0.1 0.1 0.2
--------------------- -------- -------- ------
Adjusted operating
loss* (3.0) (4.7) (7.2)
Depreciation 0.2 0.2 0.5
Amortisation 0.3 0.3 0.5
--------------------- -------- -------- ------
Adjusted LBITDA (2.5) (4.2) (6.2)
===================== ======== ======== ======
Management monitor the 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 are added back to the
operating result to arrive at LBTIDA as they are all non-cash
charges.
Taxation
The Group continues to make research and development tax credit
claims on its qualifying expenditure. We also take advantage of the
provision whereby losses generated are surrendered for cash
credits. The tax credit for the period is estimated at GBP0.6m (H1
2018: GBP0.6m). The amount receivable at 31 January 2019 was
GBP2.0m (H1 FY18: GBP2.5m), which reflects the prior year submitted
claim for GBP1.4m plus the estimated credit in the period. The
GBP1.4m claimed in respect of the prior year was received in full
after the period end in March 2019.
Net result
The loss after tax for H1 FY19 was GBP2.5m (H1 FY18: loss of
GBP4.2m).
Earnings per share
The basic loss per share was 0.88 pence per share (H1 FY18: loss
of 1.63 pence per share). As at 31 January 2019 there were
286,089,351 ordinary shares in issue (31 January 2018: 285,947,149)
including shares held in treasury.
Cash position and liquidity
During H1 FY19, the Group generated a net cash outflow of
GBP4.6m (H1 FY18: GBP3.0m cash inflow).
Cash flow summary H1 FY19 H1 FY18 FY18
GBPm GBPm GBPm
--------------------------------------- -------- -------- ------
Operating losses (3.1) (4.8) (7.4)
Depreciation and amortisation 0.5 0.5 1.0
Share based payments 0.1 0.1 0.2
Changes in working capital (0.8) (0.2) 0.9
Changes in deferred income / contract
liabilities 1.0 (0.1) 3.1
--------------------------------------- -------- -------- ------
Cash flow from operating activities (2.3) (4.5) (2.2)
Interest and tax - - 1.8
--------------------------------------- -------- -------- ------
Operating cash flow (2.3) (4.5) (0.3)
Purchases of tangible fixed assets (1.7) - (2.2)
Purchases of intangible fixed assets (0.6) (0.4) (0.8)
Net proceeds from placing of ordinary
share capital - 7.9 7.9
Issue of convertible loan note - - 0.4
Other net cash flows
--------------------------------------- -------- -------- ------
Net cash (outflow) / inflow (4.6) 3.0 5.0
======================================= ======== ======== ======
Expenditure on fixed asset additions in the period was GBP1.7m
compared to GBPnil in the prior year. This reflects the completion
of the Runcorn facility expansion in the period (the project
started in H2 FY18). These costs were funded by the US Customer
with GBP2.8m received in the prior financial year, GBP1.4m received
in the period, and a further GBP0.4m to be received at a future
date linked to the start of commercial production. The advance
funding of the Runcorn facility expansion (GBP4.2m in total to
date) is now classified as a contract liability that will unwind as
cash free revenue in future years with a discount against each unit
of commercial production material despatched. The rate of unwind
has been agreed at a level that does not put undue stress on the
Group's working capital cash flows.
Expenditure in respect of intangible fixed assets was GBP0.6m
(H1 FY18: GBP0.4m) and related to patent costs. The increase
reflects a re-focus of our R&D efforts onto new materials and
applications.
Movement in net cash H1 FY19 H1 FY18 FY18
GBPm GBPm GBPm
---------------------- -------- -------- ------
Opening net cash 10.7 5.7 5.7
Net cash flow (4.5) 3.0 5.0
---------------------- -------- -------- ------
Closing net cash 6.2 8.7 10.7
====================== ======== ======== ======
As at 31 January 2019 the Group had cash and cash equivalents of
GBP6.2m (31 January 2018: GBP8.7m). This has remained broadly
unchanged since the period end, supported by the receipt of the
FY18 R&D tax credit (GBP1.4m) and further payments under the
contract extension with the US Customer (GBP1.1m).
The Directors continue to adopt the going concern basis of
accounting in preparing the financial statements.
Fixed assets
The Group increased its capital spend in tangible assets in the
period to a total of GBP1.7m (H1 FY18: GBPnil). Expenditure
incurred in registering patents totalled GBP0.6m (H1 FY18: GBP0.4m)
during the period reflecting the Group's continued focus on
developing and registering intellectual property.
The period saw the completion of the build and fit out of the
expanded Runcorn production facility that is dedicated to
production of nano-materials for the US Company. The estimated
total cost of expanding the facility is approximately GBP4.6m with
GBP4.2m incurred to date with the balance of spend to be incurred
once the final stages of the supply chain are put in place for
commercial production and shipping. Funding for the expansion
project was provided as part of the collaboration agreements with
the US Company. The end result will be a doubling of the production
footprint at Runcorn and the new facility will have new production
equipment, more than capable of meeting the demanding
specifications for our nano-materials in an electronics supply
chain.
Stock
Stock in the period increased to GBP0.3m compared to the
position at 31 July 2018 (GBP0.2m). This was primarily the result
of advance purchases of materials to be used in the stress testing
of the Runcorn facility and also represents the fact that some
materials are specialised in nature and to acquire them
economically required the purchase of a number of months' worth of
supplies. The supplies will also potentially be used in the
manufacture of test batches of varying volumes during the stress
testing period that will be shipped to the end customer and also to
the next company in the supply chain.
Contract liabilities
Following the adoption of IFRS15, certain items that were
previously classified as Deferred Income are now classified as a
'Contract Liability' (see cash position above and Note 2e). Once
commercial production commences, the contract liability is expected
to reduce over a two to three year period, depending on the volumes
of material shipped each month.
Brexit
The main impact from Brexit and the continuing uncertainty
around the post Brexit arrangements depends on whether or not it
has a potential negative effect on the existing relationships with
customers, the majority of whom are based outside of the UK, and
the supply chain upon which we rely. The Group has undertaken a
review of potential actions that it would take in the event that
mitigation was required.
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 101 to 104 of the 2018 Annual Report and
Accounts although the risk regarding the adequacy of financial
resources has reduced somewhat following the contract extensions
signed with the US Customer which are material in scale and last
until December 2019.
In common with all businesses at Nanoco's stage of development,
the Group is exposed to a range of risks, some of which are not
wholly within its control or capable of complete mitigation or
protection through insurance. Specifically, a number of the Group's
products and potential applications are at a research stage and
hence it is not possible to be certain that a particular project or
product will lead to a commercial application. Other products
require further development work to confirm a commercially viable
application. Finally, a number of products are considered
commercially viable but have yet to see demand for full scale
production quantities.
As noted above, the principal over-arching strategic risk faced
by the business is that the Group exhausts its available funding
before achieving adequate levels of commercial revenues that
generate cash flows to be able to be self-funding.
For the purposes of assessing whether 'going concern' is an
appropriate basis for preparing the financial statements, the
Directors have used their detailed forecasts for the period to 31
July 2019 and summary forecasts for the following financial year
(both years combined to represent the 'forecast period'). The key
assumptions underpinning the assessment during the forecast period
cover the following areas:
-- Major contract extension with the US Customer covering
service revenues to be generated in the period to 31 December 2019
(with no contingent payments);
-- Minimum royalty and licence fee income from channel partners in respect of CFQD(R) products;
-- Modest sales of CFQD(R) products and other nano-particles
through existing contractual arrangements;
-- Continued investment in research and development; and
-- Continued tight control of costs within the business.
The new agreement (February 2018) with a US Company, and
subsequent contract extensions, provide attractive cash generating
opportunities. However, the natural consequence of having this
attractive commercial relationship is that the Group is now
inevitably exposed to a new risk in the short term of 'key customer
reliance'. The Group is exposed to the risk of any delays in the
future supply of commercial quantities of products to this new
customer in the same way that the Group is exposed to delays in the
widespread adoption of quantum dots in display markets. These
factors both increase the risk of not becoming self-funding before
existing cash resources are exhausted. The original contract
deliverables included significant contingent milestones and
associated payments which have now all been achieved. The recent
extensions have much lower contingent elements. The risks around
the agreements have therefore reduced accordingly. Commercial
negotiations are ongoing to secure additional revenues to mitigate
the exposure in this area.
Brian Tenner
Chief Operating Officer and Chief Financial Officer
9 April 2019
Responsibility statement
The Directors of Nanoco Group plc, as listed on pages 34 and 35
of the 2018 Annual Report and Accounts, with the addition of Chris
Batterham who was announced as a new Non-Executive Director on 12
March 2019 and joined the Board on 1 April 2019, 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.
Condensed consolidated statement of comprehensive income
For the six months ended 31 January 2019
H1 FY19 H1 FY18 FY18
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------- ------ ------------ ------------ ----------
Revenue 3 3,192 196 3,315
Cost of sales (485) (59) (432)
Gross profit 2,707 137 2,883
Other operating income 4 79 59 136
Operating expenses
Research and development expenses (1,562) (1,888) (3,960)
Administrative expenses (4,285) (3,143) (6,468)
Operating loss (3,061) (4,835) (7,409)
* Before share-based payments (2,935) (4,710) (7,152)
* Share-based payments (126) (125) (257)
-------------------------------------------- ------ ------------ ------------ ----------
* Operating loss as shown above (3,061) (4,835) (7,409)
-------------------------------------------- ------ ------------ ------------ ----------
Net finance (expense) / income 5 (13) - 4
Loss before taxation (3,074) (4,835) (7,405)
Taxation 6 563 630 1,400
Loss after tax 3 (2,511) (4,205) (6,005)
Other comprehensive income
Loss on exchange rate translations - - (13)
Loss after taxation for the
year and total comprehensive
loss for the year (2,511) (4,205) (6,018)
Loss per share:
Basic and diluted loss for
the period 7 (0.88)p (1.63)p (2.21)p
-------------------------------------------- ------ ------------ ------------ ----------
Condensed consolidated statement of changes in equity
For the six months ended 31 January 2019
Issued Share-based
equity payment Merger Revenue
capital reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------------ -------- --------- --------
At 31 July 2017 (audited) 58,609 2,957 (1,242) (49,877) 10,447
Loss for the six months
to 31 January 2018 - - - (4,205) (4,205)
Shares issued on placing 8,578 - - - 8,578
Less: costs of placing (629) - - - (629)
Share-based payments - 125 - - 125
At 31 January 2018 (unaudited) 66,558 3,082 (1,242) (54,082) 14,316
Loss for the six months
to 31 July 2018 - - - (1,800) (1,800)
Other comprehensive income - - - (13) (13)
Share-based payments - 132 - - 132
At 31 July 2018 (audited) 66,558 3,214 (1,242) (55,895) 12,635
Loss for the six months
to 31 January 2019 - - - (2,511) (2,511)
Shares issued on exercise
of options 14 - - - 14
Share-based payments - 112 - - 112
At 31 January 2019 (unaudited) 66,572 3,326 (1,242) (58,406) 10,250
-------------------------------- -------- ------------ -------- --------- --------
Condensed consolidated statement of financial position
As at 31 January 2019
31 January 31 January 31 July
2019 2018 2018
(Unaudited) (Restated)* (Restated)*
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ------------ ------------ ------------
Assets
Non-current assets
Property, plant and equipment 4,155 634 2,604
Intangible assets 8 3,731 3,234 3,432
7,886 3,868 6,036
------------------------------- ------ ------------ ------------ ------------
Current assets
Inventories 9 278 132 217
Trade and other receivables 10 1,314 925 1,415
Income tax asset 11 1,963 2,467 1,400
Cash and cash equivalents 6,157 8,744 10,729
9,712 12,268 13,761
------------------------------- ------ ------------ ------------ ------------
Total assets 17,598 16,136 19,797
------------------------------- ------ ------------ ------------ ------------
Liabilities
Current liabilities
Trade and other payables (2,135) (1,217) (3,020)
Deferred revenue 12 (149) (102) (400)
(2,284) (1,319) (3,420)
------------------------------- ------ ------------ ------------ ------------
Non-current liabilities
Deferred revenue 12 (399) (501) (450)
Contract liabilities 13 (4,245) - (2,885)
Convertible loan 14 (420) - (407)
(5,064) (501) (3,742)
------------------------------- ------ ------------ ------------ ------------
Total liabilities (7,348) (1,820) (7,162)
------------------------------- ------ ------------ ------------ ------------
Net assets 10,250 14,316 12,635
------------------------------- ------ ------------ ------------ ------------
Capital and reserves
Issued equity capital 15 66,572 66,558 66,558
Share-based payment reserve 3,326 3,082 3,214
Merger reserve (1,242) (1,242) (1,242)
Accumulated loss (58,406) (54,082) (55,895)
------------------------------- ------ ------------ ------------ ------------
Total equity 10,250 14,316 12,635
------------------------------- ------ ------------ ------------ ------------
*Restated for the impact of IFRS9 and IFRS15, see Note 2e.
Approved by the Board and authorised for issue on 9 April
2019.
Dr Michael Edelman Brian Tenner
Chief Executive Officer Chief Operating Officer and Chief
Financial Officer
Condensed consolidated cash flow statement
For the six months ended 31 January 2019
Six months Six months Year to
to to
31 January 31 January 31 July
2019 2018 2018
(Unaudited) Restated* Restated*
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ----------- ----------
Loss before tax (3,074) (4,835) (7,405)
Adjustments for:
Net finance costs / (income) 13 - (4)
Loss on exchange rate translations (13)
Depreciation of tangible fixed
assets 191 266 504
Amortisation of intangible assets 254 268 476
Share-based payments 126 125 257
Changes in working capital:
(Increase) / decrease in inventories (61) 56 (29)
Decrease / (increase) in trade
and other receivables 101 (256) (746)
Decrease in trade and other payables (885) (101) 1,702
Increase / (decrease) in deferred
revenue & contract liabilities 1,058 (51) 3,081
----------------------------------------- ------------ ----------- ----------
Cash outflow from operating activities (2,277) (4,528) (2,177)
Research and development tax
credit received - - 1,837
Net cash outflow from operating
activities (2,277) (4,528) (340)
----------------------------------------- ------------ ----------- ----------
Cash flows from investing activities
Purchases of tangible fixed assets (1,742) (7) (2,215)
Purchases of intangible fixed
assets (553) (376) (782)
Interest received - - 11
----------------------------------------- ------------ ----------- ----------
Net cash outflow from investing
activities (2,295) (383) (2,986)
----------------------------------------- ------------ ----------- ----------
Cash flows from financing activities
Proceeds from issues of ordinary
share capital - 8,578 8,578
Less: costs of placing - (629) (629)
Issue of convertible loan note - - 400
Net cash inflow from financing
activities - 7,949 8,349
----------------------------------------- ------------ ----------- ----------
(Decrease)/increase in cash and
cash equivalents (4,572) 3,038 5,023
Cash and cash equivalents at
the start of the period 10,729 5,706 5,706
----------------------------------------- ------------ ----------- ----------
Cash and cash equivalents at
the end of the period 6,157 8,744 10,729
----------------------------------------- ------------ ----------- ----------
*Restated for the impact of IFRS9 and IFRS15, see Note 2e.
Notes to the condensed consolidated financial statements
For the six months ended 31 January 2019
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 2019 Interim Results for the six months
ended 31 January 2019 was authorised for issue in accordance with a
resolution by the Directors on 9 April 2019.
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. The auditor, PwC
LLP, has carried out a review of the financial information in
accordance with the guidance contained in International Standard on
Review Engagements (UK and Ireland) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity, and its review report is set out at the end of this
report.
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 2018, with the exception of
the impact of adopting of IFRS 9 and IFRS 15 (has adopted with
effect from 1 August 2018). The impact of the adoption of new
accounting standards is set out below.
These interim condensed consolidated financial statements
include audited comparatives for the year to 31 July 2018, with the
exception of comparative balances impacted by the adoption of IFRS
15. The 2018 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
2018 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
In assessing whether 'going concern' is an appropriate basis for
preparing the financial statements, the Directors have used their
detailed forecasts for the period to 31 July 2019 and summary
forecasts for the following financial year (the 'forecast period').
These reflect current and expected business activities including
the impact of the partnership with the US Customer, the cash
balance of GBP6.2m as shown in the Group consolidated balance sheet
at 31 January 2019, and significant cash receipts soon after the
period end in respect of the FY18 R&D tax credit and receipts
from the US Customer. The principal risks and uncertainties faced
(as set out on page 10) are also considered as are other factors
potentially impacting future performance.
Sensitivity analysis has been performed to reflect a possible
downside scenario which includes only contracted revenues for the
forecast period up to 31 July 2020 as well as the receipt of
R&D tax credits. In this scenario management would be required
to undertake a restructuring exercise to reflect the lower revenue
expectations and such an exercise would create new risks regarding
its effectiveness and time to deliver the expected benefits.
However, even if the restructuring plan did not deliver all of the
expected benefits in the downside scenario, the Company and Group
have sufficient resources to continue in operational existence for
the foreseeable future, being at least 12 months from the date of
issue of these interim financial statements.
At the time of approving the interim condensed consolidated
financial statements, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the 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 reported 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 year ended 31 July
2018. 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. New accounting standards
The IASB has published three new accounting standards relevant
to the Group. Two (IFRS9 and IFRS15) have been adopted as outlined
below in these interim condensed consolidated financial statements
and the third (IFRS 16) will be mandatory in future periods.
IFRS 9 Financial Instruments (effective for periods beginning on
or after 1 January 2018)
IFRS 9 has been applied since 1 August 2018 and there has been
no significant impact resulting from its adoption. The Group's only
material financial assets that are impacted by IFRS9 are trade
receivables. IFRS9 allows companies that have no material financing
element included in their trade receivables (and this can be
presumed if their payment terms are typically less than one year)
to use a practical expedient whereby a lifetime expected credit
loss can be used. The Group have had no bad debts in the past 3
years, and based on this experience, after considering expected
credit losses, the Group has made no adjustment for the impact of
IFRS9.
IFRS 15 Revenue from Contracts with Customers (effective for
periods beginning on or after 1 January 2018)
IFRS 15 establishes a framework for determining whether, how
much and when revenue is recognised. It replaced IAS18 Revenue, and
IAS 11 Construction contracts, as well as their related
interpretations. The Group has adopted IFRS 15 using the full
retrospective method and has taken advantage of a number of
practical expedients, as noted below.
The full retrospective method means that the prior year
comparatives and half year comparatives have all been re-stated as
if IFRS15 had been in force throughout the comparative periods. The
full retrospective approach also enables the Group to use a number
of 'practical expedients' which mean that:
-- For completed contracts, there is no need to re-state
contracts in the prior financial year ending 31 July 2018 ('FY18')
that started and ended in that year;
-- For completed contracts, there is no need to re-state for any
contracts completed at the start of FY18 (so no re-statement of the
opening balances as at 1 August 2017);
-- For completed contracts, there is no need to re-consider
potentially variable consideration and the periods in which it
should be recognised (such as revenue recognised against contingent
milestones in our contracts with the US Customer); and
-- For FY18, there is no need to state the amount of any
transaction price allocated to remaining performance obligations or
when that revenue is expected to be recognised.
In summary, there has been no quantitative impact on the
statement of comprehensive income from the adoption of IFRS15 in
the current or comparative periods. An amount of GBP4,245,000 that
previously would have been classified on the balance sheet as
deferred income has now been re-classified as a "contract
liability" (31 July 2018: GBP2,885,000, 31 January 2018: GBPnil).
Its future realisation as revenue in the income statement in future
periods is however unchanged and will match the shipment of
commercial production orders to the US Customer.
The Group's revised IFRS15 summary policies for revenue
recognition for different income types are:
-- Products sold: recognised when control of the asset passes to the customer
-- Rendering of services: recognised over the periods that the
customer receives the benefits of the performance obligations in
each contract, typically on an elapsed time basis
-- Licences: typically recognised over the period of the agreement
-- Royalties: linked to the licensees own sales of products (and
the passing of control of their products to their customers)
IFRS 16 Leases (effective for annual periods beginning on or
after 1 January 2019)
The impact of adopting IFRS 16 is likely to be material on the
financial statements of Nanoco Group plc, particularly from a
balance sheet perspective. IFRS 16 requires lessees to recognise a
lease liability reflecting future lease payments and a right-of-use
asset for all leases. The Group has three property related
operating lease commitments, which, while of relatively short
duration, will be brought on to the balance sheet and amortised and
depreciated separately. There will be no impact on cash flows
although the presentation of the cash flow statement will also
change. Management is still quantifying the impact of this new
standard. At 31 January 2019, the future aggregate minimum lease
payments under non-cancellable operating leases was GBP2.5m (31
January 2018: GBP2.4m) with the expiration of a further year of
pre-existing leases offset by the new expanded Runcorn lease.
3. Segmental information
Operating segments
The Board has identified that it has one reportable operating
segment being the provision of high-performance nano-particles.
These are applicable to a wide range of end markets and
applications which have similar activities, economic
characteristics and future prospects and hence are treated as one
reporting segment.
All revenue has been generated Six months Six months Year to
from continuing operations and to to 31 July
is from external customers. 31 January 31 January 2018
2019 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ ----------
Analysis of revenue
Products sold 71 130 168
Rendering of services 2,899 1 3,000
Royalties and licences 222 65 147
---------------------------------- ------------ ------------ ----------
3,192 196 3,315
--------------------------------- ------------ ------------ ----------
The timing of the annual submission and subsequent receipt of
the R&D tax credit has a material effect on the cash flow of
the Group. There are no other factors of a seasonal or cyclical
nature affecting the results of the Group. The R&D tax credit
of GBP1.4m for the financial year ending 31 July 2018 was received
in March 2019. All assets are held in the UK and all of its capital
expenditure arises in the UK.
4. Other operating income
Six months Six months Year to
to to 31 July
31 January 31 January 2018
2019 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------- ------------ ------------ ----------
Grant income 79 59 136
--------------- ------------ ------------ ----------
5. Finance income and expense
Six months Six months Year to
to to 31 July
31 January 31 January 2018
2019 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ ----------
Finance income
Bank interest receivable - - 11
Loan note interest payable (13) - (7)
(13) - 4
---------------------------- ------------ ------------ ----------
6. Taxation
The tax credit is made up as follows:
Six months Six months Year to
to to 31 July
31 January 31 January 2018
2019 2018
(Unaudited) (Unaudited) (Audited)
Current income tax GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ----------
Research and development income tax
credit receivable (521) (630) (1,400)
Adjustment in respect of prior years (42) - -
Income tax credit (563) (630) (1,400)
--------------------------------------- ------------ ------------ ----------
Accumulated losses available to carry forward against future
trading profits were GBP33.9m (2018: GBP31.7m).
Deferred tax liabilities / (assets) provided / (recognised) are
as follows:
Six months Six months Year to
to to 31 July
31 January 31 January 2018
2019 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ----------
Accelerated capital allowances 674 54 407
Tax losses (674) (54) (407)
-------------------------------------- ------------ ------------ ----------
Deferred tax liabilities / (assets) - - -
-------------------------------------- ------------ ------------ ----------
The Group also has deferred tax assets, measured at a standard
rate of 17% (2018: 17%) in respect of share-based payments of
GBP34,000 (2018: GBP178,000) and tax losses of GBP5,769,000 (2018:
GBP5,386,000) which have not been recognised as an asset as it is
not probable that future taxable profits will be available against
which the assets can be utilised.
7. Loss per share
Six months Six months Year to
to to 31 July
31 January 31 January 2018
2019 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ------------
Loss for period attributable to
equity shareholders (2,511) (4,205) (6,005)
Share-based payments 126 125 257
----------------------------------- ------------ ------------ ------------
Adjusted loss for the period (2,385) (4,080) (5,748)
----------------------------------- ------------ ------------ ------------
Weighted average number of shares No. No. No.
----------------------------------- ------------ ------------ ------------
Ordinary shares in issue 285,974,557 258,331,009 271,964,590
----------------------------------- ------------ ------------ ------------
Adjusted loss per share (pence) (0.83) (1.58) (2.11)
----------------------------------- ------------ ------------ ------------
Basic loss per share (pence) (0.88) (1.63) (2.21)
----------------------------------- ------------ ------------ ------------
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.
8. Intangible assets
31 January 31 January 31 July
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
Cost GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ ----------
At the beginning of the period 5,670 4,291 4,291
Additions in the period 553 376 782
Reclassified from/(to) assets held
for sale - 597 597
------------------------------------- ------------ ------------ ----------
At the end of the period 6,223 5,264 5,670
------------------------------------- ------------ ------------ ----------
Amortisation
------------------------------------- ------------ ------------ ----------
At the beginning of the period (2,238) (1,672) (1,672)
Provided in the period (254) (268) (476)
Reclassified from/(to) assets held
for sale - (90) (90)
------------------------------------- ------------ ------------ ----------
At the end of the period (2,492) (2,030) (2,238)
------------------------------------- ------------ ------------ ----------
Net book value 3,731 3,234 3,432
------------------------------------- ------------ ------------ ----------
The expenditure recorded above all relates to patents and is
amortised on a straight-line basis over ten years. Ten years is
considered an appropriate basis for amortisation as an average of
the expected useful economic life of the Group's patents if no
additional enhancing expenditure occurred (which could potentially
extend the life of the patents). Amortisation is recognised in
administrative expenses. No individual patents are deemed material
to the Group.
To date the Group has not capitalised any of its development
costs and all such costs are written off as incurred. Careful
judgement by the Directors is applied when deciding whether the
capitalisation requirements for development costs have been met.
This is necessary as the economic success of any product
development is uncertain until such time as technical viability has
been proven and commercial supply agreements are likely to be
achieved. All R&D activities related to new products are
continuously monitored by the Directors.
The aggregate original cost of intangible assets now fully
depreciated but considered to be still in use is GBP421,000 (2018:
GBP471,000).
During the year ended 31 July 2018 a review was undertaken to
identify which patents are of no further value to Nanoco and should
be allowed to lapse. No such patents were identified. This is an
annual activity that will be repeated at the end of the current
financial year.
9. Inventories
31 January 31 January 31 July
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ ----------
Raw materials, finished goods
and consumables 278 132 217
-------------------------------- ------------ ------------ ----------
Inventories primarily relate to raw materials used in the
production of the Group's nano-materials and in R&D activities
within the laboratories. Inventories are reviewed and rotated on a
regular basis and the Directors do not consider that any impairment
is required for age, technological obsolescence or deterioration in
performance of the raw materials.
10. Trade and other receivables
31 January 31 January 31 July
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ ----------
Trade receivables 293 101 290
Prepayments and accrued income 493 492 435
Other receivables 528 332 690
--------------------------------- ------------ ------------ ----------
Trade and other receivables 1,314 925 1,415
--------------------------------- ------------ ------------ ----------
Trade receivables are non-interest bearing and are generally due
and paid within 30 to 60 days. The Directors have adopted the
practical expedient available in IFRS9 which allows the assumption
that there is no significant financing charge on receivables with a
maturity less than one year, given the Group's experience of no bad
debts in the past 3 years. This in turn allows the receivables to
be stated at their invoice value less any provision for impairment
(instead of calculating an expected credit loss required by IFRS9
if the expedient is not available). The prior periods have been
considered on the same basis and in all cases there is no
requirement for an impairment provision at any of the balance sheet
dates.
11. Income tax asset
31 January 31 January 31 July
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
------------------ ------------ ------------ ----------
Income tax asset 1,963 2,467 1,400
------------------- ------------ ------------ ----------
The income tax asset is in respect of R&D tax credits. The
balance represents the prior year claim of GBP1,441,000 which was
received in March 2019 and an estimated accrual in respect of the
Group's activities in the first half of the current financial
year.
12. Deferred revenue
31 January 31 January 31 July
2019 2018 2018
(Unaudited) Re-stated* Re-stated*
GBP'000 GBP'000 GBP'000
------------------------ ------------ ----------- -----------
Current
Upfront licence fees 149 102 102
Milestone payments - - 298
------------------------- ------------ ----------- -----------
Total current 149 102 400
------------------------- ------------ ----------- -----------
Non-current
Upfront licence fees 399 501 450
Total non-current 399 501 450
------------------------- ------------ ----------- -----------
Total deferred revenue 548 603 850
------------------------- ------------ ----------- -----------
Deferred revenue arises under IFRS where upfront licence fees
have been invoiced (and often paid) in advance of the associated
service provision. Historically the revenue was recognised on a
straight-line basis over the initial term of the contract which led
to a portion of the advance payments being deferred at the period
ends. The re-statement as a result of the adoption of IFRS15
relates to the advance payments made by the US customer, to obtain
a discounted purchase price for production materials at a future
date. The cash receipts were dedicated to fund the expansion of the
Runcorn production facility. The advance payments have been
re-classified from Deferred Revenue to Contract Liabilities (see
below) in accordance with the requirements of IFRS15.
Whether classified as Deferred Revenue or as Contract
Liabilities, it is expected that the sums will be recognised as
revenue as and when the US customer receives deliveries of
production material.
13. Contract liabilities
31 January 31 January 31 July
2019 2018 2018
(Unaudited) Restated* Restated*
GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ----------- ----------
Non-current
Balance at the start of the period - -
prior to IFRS15 -
Re-statement for IFRS15 2,885 - -
------------------------------------ ------------ ----------- ----------
Revised opening balance on IFRS15 2,885 -
basis -
Cash advanced from customers 1,360 - 2,885
------------------------------------- ------------ ----------- ----------
Contract liabilities 4,245 - 2,885
------------------------------------- ------------ ----------- ----------
As explained above in Note 12, following the adoption of IFRS15,
certain advance payments from the US customer have been
reclassified from deferred revenue to contract liabilities. The
total sum is classified as non-current as the US Customer has not
yet placed any purchase orders for production material and hence
there is no certainty on the timing of delivery of any such
orders.
14. Convertible loan
31 January 31 January 31 July
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ ----------
Convertible Series A loan note
2028 400 - 400
Accrued interest 20 - 7
--------------------------------- ------------ ------------ ----------
Convertible loan 420 - 407
--------------------------------- ------------ ------------ ----------
The loan note issued by Nanoco 2D Materials Limited is
unsecured, bears a fixed interest rate of 6.5% p.a. and is fully
repayable with accrued interest in 2028 unless options to convert
into shares of that company have been exercised. Other details are
as set out in the 2018 Annual Report and Accounts.
15. Issued equity capital (Unaudited)
Allotted, Share Share Reverse Total
called-up capital premium Acquisition
and fully reserve
paid ordinary
shares of
10p
Number GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- --------- --------- ------------- --------
At 31 July 2017 (audited) 238,291,328 23,829 112,648 (77,868) 58,609
Shares issued on equity
placing 47,655,821 4,766 3,812 - 8,578
Less: costs of placing - - (629) - (629)
---------------------------- ------------ --------- --------- ------------- --------
At 31 January 2018
(unaudited) 285,947,149 28,595 115,831 (77,868) 66,558
Shares issued on exercise - - - - -
of options
At 31 July 2018 (audited) 285,947,149 28,595 115,831 (77,868) 66,558
Shares issued on exercise
of options 142,202 14 - - 14
At 31 January 2019 286,089,351 28,609 115,831 (77,868) 66,572
---------------------------- ------------ --------- --------- ------------- --------
The equity structure appearing in the Group's financial
statements reflects the equity structure of Nanoco plc (the legal
parent) which includes the equity instruments issued under the
share for share exchange used to effect the reverse take-over
transaction in 2009. The effect of using the equity structure of
the legal parent gives rise to an adjustment to the Group's issued
equity capital in the form of a reverse acquisition reserve.
Following shareholder approval at a general meeting held on 14
November 2017, 47,655,821 shares were issued on 15 November 2017 as
a result of a placing of shares at 18 pence each raising cash of
GBP8.0m net of expenses.
16. Post-balance sheet events
The R&D tax credit for the financial year ending 31 July
2018 of GBP1.4m was received in March 2019. This item has had no
financial impact on the results and position disclosed as at 31
January 2019.
Independent review report to Nanoco Group Plc
Report on the interim condensed consolidated financial
statements
Our conclusion
We have reviewed Nanoco Group Plc's interim condensed
consolidated financial statements (the "interim financial
statements") in the 2019 Interim Results and Accounts of Nanoco
Group Plc for the 6 month period ended 31 January 2019. Based on
our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 31 January 2019;
-- the condensed consolidated statement of comprehensive income for the period then ended;
-- the condensed consolidated cash flow statement for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the 2019 Interim
Results have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The 2019 Interim Results, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the 2019
Interim Results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the 2019 Interim Results based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the 2019 Interim
Results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Manchester
9 April 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UWOKRKAASRAR
(END) Dow Jones Newswires
April 09, 2019 02:00 ET (06:00 GMT)
Grafico Azioni Nanoco (AQSE:NANO.GB)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Nanoco (AQSE:NANO.GB)
Storico
Da Lug 2023 a Lug 2024
