Preliminary Results
|
For immediate release |
15 October 2012 |
NANOCO GROUP PLC
("Nanoco" or "the Company")
Preliminary results for the year ended 31 July 2012
Nanoco Group plc (AIM: NANO), the world leader in the development and manufacture of cadmium-free quantum dots and other nanomaterials, is pleased to announce its preliminary results for the year ended 31 July 2012.
Highlights
· Joint development agreement for general lighting applications signed with one of the world's largest lighting companies in August 2011 and a follow-on agreement was announced on 5 October 2012. Wider interest in utilising Nanoco's quantum dots in general lighting has accelerated during the year
· Achieved final two milestones for green quantum dots for a major Japanese corporation including a US$1 million milestone for achieving performance requirements and a US$2 million milestone for delivery of 1kg of green quantum dots
· Joint development agreement signed in Asia in February 2012 with a world leading electronics corporation in connection with the backlighting of LCD displays
· Tokyo Electron Phase 2 solar joint development agreement signed, with significant technical progress achieved during the year
· New solar proof of principle joint development agreement signed with a Japanese corporation worth US$1.2 million over 7 months
· Production scale-up plans on track with the design capacity of the planned Kilo Lab facility increased to 400kg a year, reflecting an anticipated increase in requirement for Nanoco quantum dots
· Cash, cash equivalents, deposits and short term investments of £15.47 million (2011: £17.10 million)
Commenting on the results, Dr Peter Rowley, Nanoco's Chairman, said:
"We made significant progress with our commercial and development agreements during the year and our transition from a research-based company to a commercially focused, high-tech manufacturing business continues apace. We were particularly pleased to sign our first agreement in general lighting, a potentially high volume application in which we are seeing growing interest.
"We enter the current year with increasing momentum in our business development activities and look forward to the future with confidence."
For further information please contact:
Nanoco |
+ 44 (0) 161 603 7900 |
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Michael Edelman, Chief Executive Officer |
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Colin White, Chief Financial Officer |
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Bank of America Merrill Lynch - Joint Broker |
+ 44 (0) 20 79957555 |
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Matthew Blawat |
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Canaccord Genuity - Nomad and Joint Broker |
+44 (0) 20 7523 8000 |
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Simon Bridges |
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Cameron Duncan |
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Buchanan |
+ 44 (0) 20 7466 5000 |
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Mark Court / Fiona Henson / Sophie Cowles |
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Notes for editors:
About Nanoco Group plc
Nanoco is a world leader in the development and manufacture of commercial quantities of quantum dots for use in multiple applications including lighting, solar cells and biological imaging. Nanoco's quantum dots, which are free of heavy metals and comply with RoHS legislation, can be combined into a wide range of materials including liquids, polymers and glass. Nanoco forms strategic partnerships with major end users across a range of applications.
Nanoco was founded in 2001 and is based in Manchester, UK. Nanoco began trading on the AIM market of the London Stock Exchange in May 2009 under the ticker symbol NANO.
Chairman's and Chief Executive Officer's Joint Review
Overview
The year to 31 July 2012 was a period of rapid progress at Nanoco in which our transition from a research-based company to a high-tech manufacturing business continued apace. We made significant progress in all of the key areas of our business, broadening our commercial relationships and achieving key technical and commercial milestones.
A particular highlight of the year was signing our first agreement for the use of our quantum dots in general lighting. This agreement was signed with one of the world's largest lighting companies. In addition to being our first agreement in general lighting, it was significant because it marked our first agreement to be signed in the USA. We currently have commercial development relationships in Japan, Korea, and the USA and discussions on-going in other territories.
In the second half of the year we were pleased to deliver our first 1kg batch of green heavy metal free quantum dots to a major Japanese corporation, triggering a US$2 million payment to Nanoco. This was a major technical achievement because green quantum dots are extremely small and hence potentially challenging to produce.
During the year, our commercial focus has remained on our three key applications - LED backlighting for LCD displays, LED general lighting and solar power. We continue to evaluate other applications, and our early stage work with University College London in cancer imaging is progressing well.
There was an acceleration in our business development discussions, reflecting the rapidly growing and worldwide interest in our cadmium-free quantum dot (CFQD™) technology. We recently appointed a business development executive in China whose remit is to progress discussions in mainland China and Taiwan.
We gained greater visibility during the year on our commercial partners' preferred technical approach to integrating our red and green quantum dots with blue LEDs for the next generation of LCD displays. There are a number of ways that this can be achieved and initial work has been focused on combining a small number of quantum dots with an individual LED to produce a packaged unit. Whilst a number of approaches might be adopted, in large displays there is an emerging trend towards the use of our quantum dots in a film, which would be built into the backlight component of the LCD display. Using quantum dots in this way requires a far greater number of dots than incorporating them directly on an LED. This is positive for Nanoco in terms of demonstrating an effective means of engineering CFQD™ into large displays which meets customer, technical and manufacturing requirements. There most likely will be an implication on the price per gram of dots incorporated into LCD displays and we are reviewing our strategic manufacturing options in light of the larger quantities of CFQD™ projected.
We have been working closely with major LCD panel manufacturers and film manufacturers to develop a CFQDTM film. This work, which is proceeding well, is part funded by a potential commercial partner.
As we now anticipate that we may be required to produce a substantially increased quantity of quantum dots, we have doubled the capacity of the design of the Kilo Lab stage of our production scale up facility. The Kilo Lab design, which has been increased to a capacity of 400kg a year, is now close to completion with anticipated costs broadly in line with the original 200kg per annum design. The start of construction of the Kilo Lab plant, on the same site as our Semi-Tech lines in Runcorn, will be timed to reflect our order book.
The two cornerstones of our business are our people and our intellectual property. By the year end, the Nanoco team had grown to 69 people compared with 63 a year earlier. Our intellectual property has also grown during the year, with a large number of patents filed or granted. We continue to look for opportunities to acquire patents to supplement our core technology.
Commercial applications - displays
The use of our quantum dots in the backlighting of LCD displays illuminated by LEDs has the benefit of improved colour performance offered by our quantum dots. This colour performance has the potential to equal that of organic light-emitting diode (OLED) technology but with the key advantage that display makers could manufacture quantum dot LCD displays on their existing LCD production lines.
Our commercial development contracts in LCD displays have progressed well and, in February 2012, we were delighted to announce a new relationship in Asia with a major electronics company.
We made significant progress during the year with our supply and licence agreement with a major Japanese LED corporation. In January 2012 we received a US$1 million payment from the corporation for achieving the specified performance criteria for green quantum dots and in May 2012 we received a US$2 million payment for the delivery of 1kg of the green quantum dots. These payments follow similar payments achieved for the successful development and delivery of red quantum dots. This Japanese corporation is now working to incorporate the Company's CFQD™ directly onto LEDs for small size LCD displays.
Our joint development agreement with a major Japanese electronics company, using our quantum dots in next-generation LCD TVs, has achieved all of its technical milestones. The Japanese company's most recent work was focused on identifying the optimal method for integrating our quantum dots into the company's existing manufacturing processes. The company has yet to confirm how it intends to do this, which may impact the timing and scale of orders. We had previously expected that the supply of quantum dots under this relationship might commence in the year ending July 2013. We expect further clarity to emerge in the current year on preferences for integrating our quantum dots into the LCD manufacturing process.
The business is now working with a number of the leading Asian display makers.
In terms of additional business development, we are in early stage discussions with a significant number of global electronics companies and look forward to being able to announce further agreements in due course.
Commercial applications - general lighting
LEDs have key advantages over traditional lighting including long service life, reduced power consumption, compact size and shock resistance - but the adoption of LEDs in home and office environments has been slowed by, amongst other issues, the current colour performance of LEDs. Nanoco's quantum dots, when combined with a blue LED, have been shown to overcome this limitation, creating a major and exciting opportunity for the Company.
Current methods for producing white light from a blue LED tend to be weak in red wavelengths, creating the two problems that the light lacks warmth and fails to show true colours. Nanoco's quantum dots can transform blue LEDs so that they produce warm white light with a high colour rendering index, thereby showing true colours. In addition, as Nanoco quantum dots are tunable to any specific wavelength, any shade of light can be produced.
Nanoco signed its first joint development agreement in general lighting with a world leading lighting company in August 2011, at the start of the financial year under review. We have met all of the targets under this contract and recently signed a follow on agreement to continue the work to produce a high quality, competitively priced product for the general lighting market.
Interest in general lighting applications has expanded rapidly at Nanoco during the year. We are now working with several other major lighting companies on a number of different technical solutions and anticipate signing further commercial agreements.
Commercial applications - solar
Cadmium free nanomaterials developed and manufactured by Nanoco have been used by the Company to develop a solar ink. This photovoltaic ink has been designed to maximise its ability to absorb solar energy and is capable of being printed by low cost methods and annealed into a solar active film. The objective is for the ink to be used by the solar industry to produce low cost, high efficiency solar panels.
Our development work with Tokyo Electron, the major Japanese equipment supplier, to create a bespoke solar ink using cadmium-free nanoparticles is proceeding well. In October 2011, we were delighted to sign a further agreement with Tokyo Electron under which the focus was on further improving the performance of the photovoltaic ink in terms of its efficiency of electrical conversion, its cost and its ease of printing. We have made significant technical progress during the year and look forward to the next stage of the development work.
In July 2012, we were delighted to announce the signing of a second partner in this field. This seven month, US$1.2 million agreement with a major Japanese company is focused on creating a bespoke Nanoco nanomaterial for use in a solar panel.
Commercial applications - other
In last year's preliminary results statement we mentioned work being carried out with University College London in which our quantum dots are being investigated for use in in-vivo imaging of cancer. This work, which has so far looked at imaging cancers based in lymph nodes, is making encouraging progress.
We are careful to remain focused on our core areas whilst being alert to new opportunities and are in discussions in relation to new uses of our quantum dots in a variety of applications.
Production scale-up
Our production facility at The Heath Business and Technical Park in Runcorn comprises two fully commissioned Semi-Tech lines with the capacity to produce around 25kg of quantum dots annually. We are using the two lines for trial work in the further development of our red and green quantum dots to ensure that their performance is optimised at larger production scales.
The next stage of production scale-up is the installation of Kilo Lab lines at Runcorn. We received outline planning permission for the Kilo Lab lines in December 2011 and are well advanced in the detailed design work. Owing to increased anticipated demand for our quantum dots we have doubled the production capacity in the design of the Kilo Lab to around 400kg annually. The projected cost remains broadly in line with original forecasts. Construction and commissioning of the Kilo Lab is expected to take 18 months and construction will commence when justified by the visibility and timing of our order book.
People
By the year-end the Nanoco team had grown to 69 people (year-end 2011: 63 people), most of whom are highly qualified scientists based at our Manchester head office. A small number of staff is based at our Runcorn production facility and we also have business development executives in Japan, Korea, the USA, and most recently China and Taiwan.
We would like to offer our sincere thanks to all at Nanoco for their enthusiasm and commitment throughout the year.
Financial results
Our revenues in the year to 31 July 2012 were £2.95 million (2011: £2.64 million). Our loss before tax was £4.35 million (2011: loss of £3.22 million) this increase primarily reflecting costs associated with completing the Company's Kilo Lab design together with higher staffing costs as a result of the increase in the technical team. Cash and short term investments and deposits at the year-end were £15.47 million (31 July 2011: £17.10 million).
Outlook
Our transition from a research-based company to a commercially focused, high-tech manufacturing business continues apace. Our existing commercial agreements are proceeding well and we are delighted by the momentum in our business development activities.
It remains difficult to predict the exact timing and scale of orders particularly as we are seeing an emerging preference in the display industry towards our quantum dots being used in films. We look forward to continued progress and view the future with confidence.
|
Peter Rowley |
Michael Edelman |
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Non-Executive Chairman |
Chief Executive Officer |
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12 October 2012 |
12 October 2012 |
Financial Review
Results
Revenue increased by £306,000 to £2,948,000 (2011: £2,642,000). The Group's revenue is earned primarily through joint development agreements and a material supply and licence agreement, with revenue being recognised as agreed performance milestones are achieved. The year on year increase in revenue reflects both the phasing of milestone payments on the material supply and licence agreement, as well as the increased revenues arising from the Group's new joint development agreements. Almost all revenues in both the current and prior year were denominated in US Dollars and mostly originated from customers in the Far East.
Costs of sales, which includes raw material costs, consumable items and sub-contract testing and analysis, increased by £80,000 to £1,165,000 (2011: £1,085,000). This increase reflected the incremental costs associated with the on-going development of cadmium free quantum dots ("CFQD™") to meet specific customer milestones as well as the production of customer samples.
Total staffing costs (before the charge for share-based payments) increased by £394,000 to £2,805,000 (2011: £2,411,000) and average staffing numbers increased by 8 heads from an average of 56 heads in 2011 to 64 heads in 2012. The majority of the increases in staffing were technical roles associated with the on-going joint development programmes. Total research and development spend, which primarily includes the employment costs of technical staff, increased by £306,000 to £2,887,000 (2011: £2,581,000).
Other significant cost increases during the year included the costs of planning and designing the Kilo Lab facility, which is designed to produce ca. 400kg per annum of material, with total costs expensed during the year of £460,000 (2011: £164,000). Rental and property running costs also increased by £198,000, a consequence of the new 12,500 square feet laboratory and office lease that commenced from March 2012 and which has provided the space and facilities to help accelerate the design, development and testing work on Nanoco's materials.
After deducting operating costs the adjusted operating loss* for the year ending 31 July 2012 was £4,294,000 (2011: adjusted operating loss* of £3,232,000).
The Group aims to incentivise and retain key staff through the use of equity-settled share awards. The IFRS2 (share-based payment) charge in respect of share schemes totalled £365,000 (2011: £153,000). The total number of share options in issue as at 31 July 2012 were 8.7m (31 July 2011: 7.1m). Of these 2.3m (2011: 3.8m) have met their performance criteria and are therefore capable of being exercised at any point until 31 August 2016. In addition a further 4.2m (31 July 2011: 4.2m) of shares are jointly owned by the Group's Employee Benefit Trust ("EBT") and certain senior management through a Jointly Owned Agreement ("JOA"). Under the JOA the employee beneficiaries have the option to acquire the trustees' shares at an agreed option price subject to meeting certain performance criteria. At 31 July 2012 3.8m of JOA shares had met their performance criteria and were capable of being acquired from the trustees. During the year 1.5m options were exercised and 1.7m options lapsed or were forfeited. Details on the various share schemes are provided in note 19 to the accounts.
With interest income of £317,000 (2011: £180,000), an increase of £137,000, the loss before tax was £4,350,000 (2011: loss of £3,215,000).
Taxation
The tax credit for the year is £710,000 (2011: £723,000). The R&D tax credit to be claimed in respect of 2011/12 R&D spend is £654,000 (2011: £600,000). There was no deferred tax credit or charge (2011: deferred tax credit of £129,000). There was also a £56,000 credit in respect of the prior year R&D tax claim (2011: £6,000 charge).
Adjusted basic loss per share* was 1.62 pence (2011: adjusted loss* of 1.22 pence). Basic loss per share was 1.80 pence (2011: loss of 1.30 pence).
No dividend has been proposed (2011: nil).
Cash flow and balance sheet
During the year cash, cash equivalents, deposits and short term investments reduced by £1,625,000 to £15,474,000 (2011: £17,099,000).
The Group's cash flow benefitted from an increase in advanced revenues received during the year of £1,216,000, (2011: £180,000) all of which will be recognised in revenue during the 2012/13 financial year as performance milestones are achieved.
Following the completion of the Runcorn facility in the prior year, purchases of capital equipment in the current year fell to just £292,000 (2011: £1,605,000). Expenditure incurred in registering patents totalled £336,000 (2011: £299,000) during the year and included the purchase of certain third party patents so as to strengthen further the patent portfolio. Capitalised patent spend is amortised over ten years in line with the Group's accounting policy.
Treasury activities and policies
The Group managed its cash deposits prudently and invests its funds across a number of financial institutions which have investment grade credit ratings. The deposits range from instant access to 400 day term deposits and are regularly reviewed by the Board. Cash forecasts are updated monthly to ensure that there is sufficient cash available for foreseeable requirements. More details on the Group's treasury policies are provided in note 23 to the financial statements.
Credit risk
The Group only trades with recognised, creditworthy third parties. Receivable balances are monitored on an on-going basis and any late payments are promptly investigated to ensure that the Group's exposure to bad debts is not significant.
Foreign exchange management
The Group invoices most of its revenues in US Dollars. The Group is therefore exposed to movements in the US Dollar relative to Sterling. The Group uses forward currency contracts to fix the exchange rate on invoiced or confirmed foreign currency receipts. The Group does not take out forward contracts against uncertain or forecast income. There were no open forward contracts as at 31 July 2012 (2011: none).
At the year end the Group had a net asset position of £450,000 (2011: net liability £11,000) in US Dollar cash, debtor, less creditor balances. The Group's net profit and its equity are exposed to movements in the value of Sterling relative to the US Dollar. The indicative impact of movements in the Sterling exchange rate on profits and equity based on the re-translation of the closing balance sheet are summarised in note 23 to the financial statements. Based on the balances at the year end, a 10% strengthening in Sterling against the US Dollar would reduce Group pre-tax profit and equity by £41,000 (2011: increase profits and equity by £1,000) and a 10% strengthening in the US Dollar relative to Sterling would increase pre-tax profit and equity by £50,000 (2011: reduce profits and equity by £1,000). As US Dollar revenues increase so the exposure of the Group's profit and loss and equity to movements in the Sterling/US Dollar exchange rate will increase as well.
Colin White
Chief Financial Officer
* adjusted figures are stated before the share-based payment charge
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2012
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Notes |
2012 |
2011 |
|
|
|
£000 |
£000 |
|
Revenue |
4 |
2,948 |
2,642 |
|
Cost of sales |
|
(1,165) |
(1,085) |
|
Gross profit |
|
1,783 |
1,557 |
|
Administrative expenses |
|
(6,442) |
(4,942) |
|
Operating loss |
|
|
|
|
- before share-based payments |
|
(4,294) |
(3,232) |
|
- share-based payments |
19 |
(365) |
(153) |
|
|
5 |
(4,659) |
(3,385) |
|
Finance income |
7 |
317 |
180 |
|
Finance costs |
7 |
(8) |
(10) |
|
Loss on ordinary activities before taxation |
|
(4,350) |
(3,215) |
|
Taxation |
8 |
710 |
723 |
|
Loss for the year and total comprehensive loss for the year |
|
(3,640) |
(2,492) |
|
Loss per share |
|
|
|
|
Basic and diluted loss for the year |
9 |
(1.80)p |
(1.30)p |
The loss for the year arises from the Group's continuing operations.
There were no other items of comprehensive income for the year (2011: £nil) and therefore the loss for the year is also the total comprehensive loss for the year.
The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.
The attached notes form an integral part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 July 2012
|
|
|
Share |
|
|
|
|
|
Issued |
based |
|
|
|
|
|
equity |
payment |
Merger |
Revenue |
|
|
|
capital |
reserve |
reserve |
reserve |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
At 31 July 2010 |
12,351 |
333 |
(1,242) |
(3,588) |
7,854 |
|
Loss for the year and total comprehensive loss for the year |
- |
- |
- |
(2,492) |
(2,492) |
|
Issue of share capital |
15,595 |
- |
- |
(432) |
15,163 |
|
Expenses of placing |
(519) |
- |
- |
- |
(519) |
|
Share-based payments |
- |
153 |
- |
- |
153 |
|
At 31 July 2011 |
27,427 |
486 |
(1,242) |
(6,512) |
20,159 |
|
Loss for the year and total comprehensive loss for the year |
- |
- |
- |
(3,640) |
(3,640) |
|
Issue of share capital |
58 |
- |
- |
- |
58 |
|
Expenses of 2011 placing |
(10) |
- |
- |
- |
(10) |
|
Share-based payments |
- |
365 |
- |
- |
365 |
|
At 31 July 2012 |
27,475 |
851 |
(1,242) |
(10,152) |
16,932 |
Company Statement of Changes in Equity
for the year ended 31 July 2012
|
|
Issued equity capital |
Share based payment reserve |
Capital redemption reserve |
Revenue reserve |
Total |
|
|||||
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|||||
|
At 31 July 2010 |
89,817 |
333 |
4,804 |
(25,675) |
69,279 |
|
|||||
|
Profit for the year and total comprehensive profit for the year |
- |
- |
- |
130 |
130 |
|
|||||
|
Recognition of treasury shares acquired on reverse acquisition |
- |
- |
- |
(20) |
(20) |
|
|||||
|
Issue of share capital |
15,805 |
- |
(210) |
(432) |
15,163 |
|
|||||
|
Treasury shares transferred from Nanoco Tech Limited |
- |
- |
- |
(545) |
(545) |
|
|||||
|
Expenses of placing |
(519) |
- |
- |
- |
(519) |
|
|||||
|
Share-based payments |
- |
153 |
- |
- |
153 |
|
|||||
|
At 31 July 2011 |
105,103 |
486 |
4,594 |
(26,542) |
83,641 |
|
|||||
|
Profit for the year and total comprehensive profit for the year |
- |
- |
- |
133 |
133 |
||||||
|
Issue of share capital |
154 |
- |
(96) |
- |
58 |
||||||
|
Expenses of 2011 placing |
(10) |
- |
- |
- |
(10) |
||||||
|
Share-based payments |
- |
365 |
- |
- |
365 |
||||||
|
At 31 July 2012 |
105,247 |
851 |
4,498 |
(26,409) |
84,187 |
||||||
Statements of Financial Position
at 31 July 2012
|
|
|
31 July |
31 July |
31 July |
31 July |
|
|
|
2012 |
2012 |
2011 |
2011 |
|
|
|
Group |
Company |
Group |
Company |
|
|
Notes |
£000 |
£000 |
£000 |
£000 |
|
Assets |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Tangible fixed assets |
10 |
2,596 |
- |
3,153 |
- |
|
Intangible assets |
11 |
1,042 |
- |
828 |
- |
|
Investment in subsidiaries |
12 |
- |
63,990 |
- |
63,625 |
|
|
|
3,638 |
63,990 |
3,981 |
63,625 |
|
Current assets |
|
|
|
|
|
|
Inventories |
13 |
79 |
- |
80 |
- |
|
Trade and other receivables |
14 |
762 |
16,951 |
407 |
13,596 |
|
Income tax asset |
|
654 |
- |
581 |
- |
|
Short-term investments and cash on deposit |
15 |
11,119 |
2,000 |
12,015 |
3,500 |
|
Cash and cash equivalents |
15 |
4,355 |
1,696 |
5,084 |
3,369 |
|
|
|
16,969 |
20,647 |
18,167 |
20,465 |
|
Total assets |
|
20,607 |
84,637 |
22,148 |
84,090 |
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
16 |
3,390 |
- |
1,641 |
- |
|
Financial liabilities |
17 |
63 |
- |
63 |
- |
|
|
|
3,453 |
- |
1,704 |
- |
|
Non-current liabilities |
|
|
|
|
|
|
Financial liabilities |
17 |
222 |
- |
285 |
- |
|
Other payables |
16 |
- |
450 |
- |
449 |
|
|
|
|
|
|
|
|
|
|
222 |
450 |
285 |
449 |
|
Total liabilities |
|
3,675 |
450 |
1,989 |
449 |
|
Net assets |
|
16,932 |
84,187 |
20,159 |
83,641 |
|
Capital and reserves |
|
|
|
|
|
|
Issued equity capital |
18 |
27,475 |
105,247 |
27,427 |
105,103 |
|
Share-based payment reserve |
19 |
851 |
851 |
486 |
486 |
|
Merger reserve |
20 |
(1,242) |
- |
(1,242) |
- |
|
Capital redemption reserve |
20 |
- |
4,498 |
- |
4,594 |
|
Revenue reserve |
21 |
(10,152) |
(26,409) |
(6,512) |
(26,542) |
|
Total equity |
|
16,932 |
84,187 |
20,159 |
83,641 |
Approved by the Board and authorised for issue on 12 October 2012.
The attached notes form an integral part of these financial statements.
Colin White
Director
12 October 2012
Cash Flow Statements
For the year ended 31 July 2012
|
|
|
31 July |
31 July |
31 July |
31 July |
|
|
|
|
2012 |
2012 |
2011 |
2011 |
|
|
|
|
Group |
Company |
Group |
Company |
|
|
|
Notes |
£000 |
£000 |
£000 |
£000 |
|
|
(Loss)/profit before interest and tax |
|
(4,659) |
16 |
(3,385) |
67 |
|
|
Adjustments for: |
|
|
|
|
|
|
|
Depreciation of tangible fixed assets |
10 |
849 |
- |
734 |
- |
|
|
Amortisation of intangible assets |
11 |
122 |
- |
87 |
- |
|
|
Share-based payments |
19 |
365 |
- |
153 |
- |
|
|
Changes in working capital: |
|
|
|
|
|
|
|
Decrease/(increase) in inventories |
|
1 |
- |
(62) |
- |
|
|
(Increase)/decrease in trade and other receivables |
|
(429) |
- |
279 |
- |
|
|
Increase in trade and other payables |
|
533 |
- |
172 |
- |
|
|
Increase in deferred revenue |
|
1,216 |
- |
180 |
- |
|
|
Cash (outflow)/inflow from operating activities |
|
(2,002) |
16 |
(1,842) |
67 |
|
|
Interest paid |
7 |
(8) |
- |
(10) |
- |
|
|
Research and development tax credit received |
|
637 |
- |
514 |
- |
|
|
Net cash (outflow)/inflow from operating activities |
|
(1,373) |
16 |
(1,338) |
67 |
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Purchases of tangible fixed assets |
|
(292) |
- |
(1,605) |
- |
|
|
Purchases of intangible fixed assets |
11 |
(336) |
- |
(299) |
- |
|
|
Cash advance to subsidiary |
|
- |
(3,354) |
|
(8,421) |
|
|
Decrease/(increase) in cash placed on deposit |
15 |
896 |
1,500 |
(10,015) |
(3,500) |
|
|
Interest received |
7 |
391 |
117 |
78 |
63 |
|
|
Net cash inflow/(outflow) from investing activities |
|
659 |
(1,737) |
(11,841) |
(11,858) |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from issues of ordinary share capital |
|
58 |
58 |
15,163 |
15,163 |
|
|
Expenses on issue of shares |
18 |
(10) |
(10) |
(519) |
(519) |
|
|
Loan repayment |
|
(63) |
- |
(63) |
- |
|
|
Net cash (outflow)/inflow from financing activities |
|
(15) |
48 |
14,581 |
14,644 |
|
|
(Decrease)/increase in cash and cash equivalents |
|
(729) |
(1,673) |
1,402 |
2,853 |
|
|
Cash and cash equivalents at the start of the year |
|
5,084 |
3,369 |
3,682 |
516 |
|
|
Cash and cash equivalents at the end of the year |
|
4,355 |
1,696 |
5,084 |
3,369 |
|
|
Monies placed on deposit at the end of the year |
|
11,119 |
2,000 |
12,015 |
3,500 |
|
|
Cash, cash equivalents and deposits at the end of the year |
15 |
15,474 |
3,696 |
17,099 |
6,869 |
|
The attached notes form an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 31 July 2012
1. Reporting entity
Nanoco Group PLC ("the Company") is an AIM listed company incorporated and domiciled in the UK.
These Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group' and individually as 'Group entities') for the year ended 31 July 2012.
The preliminary results including these financial statements of Nanoco Group PLC and its subsidiaries (the "Group") for the year ended 31July 2012 were authorised for issue by the Board of Directors on 12October 2012 and the Statement of Financial Position was signed on the Board's behalf by Mr Colin White.
These financial statements do not constitute statutory financial statements within the meaning of section 435 of the Companies Act 2006. A copy of the statutory financial statements for the year ended 31 July 2012 has not been delivered to the Registrar of Companies. The Auditors' opinion on those financial statements was unqualified, did not draw attention to any matters by way of an emphasis of matter paragraph, and it contained no statement under section 498(2) or section 498(3) of the Companies Act 2006.
The significant accounting policies adopted by the Group are set out in note 3.
2. Basis of preparation
(a) Statement of compliance
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and International Financial Reporting Committee ("IFRIC") interpretations as they apply to the financial statements of the Group for the period ended 31 July 2012.
(b) Basis of measurement
The parent company and Group financial statements have been prepared on the historical cost basis except for all derivative contracts being carried at their fair value.
The methods used to measure fair values of assets and liabilities are discussed in the respective notes in note 3 below.
(c) Going concern
On the basis of the cash balances in place as at 31 July 2012 and management's forecasts, there are sufficient funds available for the Group to operate comfortably for the foreseeable future. Accordingly the directors have continued to adopt the going concern basis in preparing the Company and Group financial statements.
(d) Functional and presentational currency
These financial statements are presented in pounds sterling, which is the Group's functional currency. All financial information presented has been rounded to the nearest thousand.
(e) Use of estimates and judgements
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual amounts could differ from those estimates. Estimates and assumptions used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain and, as such, changes in estimates and assumptions may have a material impact on the financial statements.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
· Revenue recognition
Revenue is recognised in line with the methodology described in note 3. If any of the key assumptions used in allocating revenue were to be subsequently revised this could alter revenue recognition between periods.
· Equity-settled share-based payments
The estimation of share-based payment costs requires: the selection of an appropriate valuation method; consideration as to the inputs necessary for the valuation model chosen; assumptions regarding when and if performance conditions will be met; and the estimation of the number of awards that will ultimately vest. Inputs required for this arise from judgements relating to the future volatility of the share price of comparable companies, the Company's expected dividend yields, risk free interest rates and expected lives of the options. The directors draw on a variety of sources to aid in the determination of the appropriate data to use in such calculations.
· Taxation
Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised tax losses at 31 July 2012 was £2,004,000 (2011: £1,691,000). The value of tax asset (net of deferred tax liability) not recognised at the year-end is £1,751,000 (2011: £1,190,000), as measured at a standard tax rate of 24% (2011: 26%).
Further information on critical judgements made in applying accounting policies, including details of significant methods and assumptions used, is included in note 3 and also in notes 8, income tax, and 19, share based payments.
3. Significant accounting policies
The accounting policies set out below are consistent with those of the previous financial year and are applied consistently by Group entities.
The Group financial statements are presented in sterling and all values are rounded to the nearest thousand pounds except where otherwise indicated.
(a) Basis of consolidation
The Group financial statements consolidate the financial statements of Nanoco Group PLC and the entities it controls (its subsidiaries) drawn up to 31 July each year.
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies. All Nanoco Group plc's subsidiaries are 100% owned. Subsidiaries are fully consolidated from the date control passes.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The costs of an acquisition are measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at acquisition date irrespective of the extent of any minority interest. The difference between the cost of acquisition of shares in subsidiaries and the fair value of the identifiable net assets acquired is capitalised as goodwill and reviewed annually for impairment. Any deficiency in the cost of acquisition below the fair value of identifiable net assets acquired (ie, discount on acquisition) is recognised directly in the Consolidated Statement of Comprehensive Income.
All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Subsidiaries' accounting policies are amended where necessary to ensure consistency with the policies adopted by the Group. All financial statements are made up to 31 July 2012.
(b) Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the Consolidated Statement of Comprehensive Income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
(c) Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. As at the reporting date the Company operated with only a single segment.
(d) Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties.
The Group's revenues to date comprise amounts earned under joint development agreements and individual project development programmes, material supply and licence agreements and revenue from the sale of quantum dot products.
Revenues received in advance of work performed, from development programmes, are recognised on a straight line basis over the period that the development work is being performed as measured by contractual milestones. Revenue is not recognised where there is uncertainty regarding the achievement of such milestones and where, either revenue has not been paid, or where the customer has the right to recoup advance payments.
Royalties received in advance under material supply and licence agreements are recognised as revenue when goods are supplied or when contractual rights for the customer to recoup such payments have lapsed.
Revenue from the sale of products is recognised at the point of transfer of risks and rewards of ownership which is generally on shipment of product.
(e) Government grants
Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment.
Government grants of a revenue nature are recognised in the Consolidated Statement of Comprehensive Income in line with the terms of the underlying grant agreement.
Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset.
(f) Research and development
Research costs are charged against the Consolidated Statement of Comprehensive Income as they are incurred. Development costs could be capitalised as intangible assets when it is probable that future economic benefits will flow to the Company. Such intangible assets will be amortised on a straight-line basis from the point at which the assets are ready for use over the period of the expected benefit, and will be reviewed for impairment at each reporting date.
The criteria for recognising expenditure as an asset are:
· it is technically feasible to complete the product;
· management intends to complete the product and use or sell it;
· there is an ability to use or sell the product;
· it can be demonstrated how the product will generate probable future economic benefits;
· adequate technical, financial and other resources are available to complete the development, use and sale of the product; and
· expenditure attributable to the product can be reliably measured.
Development costs are currently charged against income as incurred since the criteria for their recognition as an asset are not met.
Careful judgement by the directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each reporting date which includes the progress with testing and certification and progress on, for example, establishment of commercial arrangements with third parties. In addition, all internal activities related to research and development of new products are continuously monitored by the directors.
(g) Lease payments
Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the risks and rewards of the underlying asset, are charged in the Consolidated Statement of Comprehensive Income on a straight-line basis over the expected lease term.
Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
(h) Finance income and expenses
Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through the Consolidated Statement of Comprehensive Income. Interest income is recognised as interest accrues using the effective interest rate method
Finance expenses comprise interest expense on borrowings, changes in the fair value of financial assets at fair value through the Consolidated Statement of Comprehensive Income, impairment losses recognised on financial assets and losses on hedging instruments that are recognised in the Consolidated Statement of Comprehensive Income. All borrowing costs are recognised using the effective interest method.
(i) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Consolidated Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:
· where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss; and
· in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantially enacted by the date and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.
(j) Tangible fixed assets
Tangible fixed assets are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.
The following bases and rates are used to depreciate classes of assets:
Laboratory infrastructure - straight line over remainder of lease period
Fixtures and fittings - straight line over five years
Office equipment - straight line over three years
Plant and machinery - straight line over five years
The carrying values of tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
A tangible fixed asset item is de-recognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Consolidated Statement of Comprehensive Income in the period of de-recognition.
(k) Intangible assets
Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill provided they are separable and their fair value can be measured reliably. This includes the costs associated with acquiring and registering patents in respect of intellectual property rights.
Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight line basis over those lives. The nature of those intangibles recognised and their estimated useful lives are as follows:
Patents - straight line over ten years
(l) Impairment of assets
At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an assessment of the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the Consolidated Statement of Comprehensive Income in those expense categories consistent with the function of the impaired assets.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Consolidated Statement of Comprehensive Income unless the asset is carried at re-valued amount, in which case the reversal is treated as a valuation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
The carrying values of plant, equipment and intangible assets as at the reporting date have not been subjected to impairment charges.
(m) Investments in subsidiaries
Investments in subsidiaries are stated in the Company Statement of Financial Position at cost less provision for any impairment.
(n) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items.
(o) Trade and other receivables
Trade receivables, which generally have 30 to 60 day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount. The time value of money is not material.
Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Significant financial difficulties faced by the customer, probability that the customer will enter bankruptcy or financial reorganisation and default in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income within administrative expenses.
When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
(p) Cash, cash equivalents and short term investments
Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short term investments comprise deposits with maturities of more than three months, but no greater than twelve months.
(q) Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.
(r) Borrowings
Borrowings are recognised when the Group becomes party to related contracts and are measured initially at fair value, net of directly attributable transaction costs incurred. After initial recognition, borrowings are stated at amortised cost.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
Costs of borrowing funds are expensed in the period in which they occur.
(s) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The expense relating to any provision is presented in the Consolidated Statement of Comprehensive Income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(t) Financial assets and liabilities
Financial assets and liabilities are recognised when the Group becomes party to the contracts that give rise to them and are classified as financial assets at fair value through the Consolidated Statement of Comprehensive Income. The Group determines the classification of its financial assets and liabilities at initial recognition and re-evaluates this designation at each financial year end.
A financial asset or liability is generally de-recognised when the contract that gives rise to it is settled, sold, cancelled or expires.
At the year end, the Group had no financial assets or liabilities designated at fair value through the Consolidated Statement of Comprehensive Income (2011: £nil).
(u) Share capital
Proceeds on issue of shares are included in shareholders' equity, net of transaction costs. The carrying amount is not re-measured in subsequent years.
(v) Shares held by the Employee Benefit Trust
The Employee Benefit Trust is consolidated in the financial statements and the shares are reported as treasury shares in the Group's Statement of Financial Position. Shares are treated as though they had been cancelled when calculating earnings per share until such time that the shares are exercised. The Employee Benefit Trust is treated similarly in the financial statements of the parent company.
(w) Share based payments
Equity settled share-based payment transactions are measured with reference to the fair value at the date of grant, recognised on a straight line basis over the vesting period, based on the Company's estimate of shares that will eventually vest. Fair value is measured using a suitable option pricing model.
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the Consolidated Statement of Comprehensive Income, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
Where awards are granted to the employees of the subsidiary company, the fair value of the awards at grant date is recorded in the Company's financial statements as an increase in the value of the investment with a corresponding increase in equity via the share-based payment reserve.
(x) Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.
(y) New standards and interpretations not yet adopted
The following new and amended IFRS and IFRIC interpretations were mandatory for accounting periods beginning on or after 1 August 2011, but have no material effect on the Group's financial statements.
· Amendments to IFRS 7, clarification of the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments
· IAS 1, Presentation of financial statements, clarification as to the presentation of the components of other comprehensive income
· IFRIC 14, Prepayments of a minimum funding requirement, guidance as how reductions in minimum funding requirement might affect the availability of reductions in future contributions
· Amendments to IAS 12 - Deferred tax: recovery of underlying assets, guidance as to the treatment of deferred tax in respect of investment property
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 August 2012 and have not been applied in preparing these consolidated financial statements and are summarised below. None of these is expected to have a significant effect on the consolidated financial statements of the Group.
The effective dates stated here are those given in the original IASB standards and interpretations. As the Group prepares its financial statements in accordance with IFRS, the application of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.
The following standards and interpretations have an effective date after the date of these financial statements:
|
|
|
Effective date |
|
|
IFRS 1 |
Government Loans |
1 January 2013 |
|
|
IFRS 7 |
Financial Instruments - Disclosures - Offsetting Financial Assets and Financial Liabilities |
1 January 2013 |
|
|
IFRS 7 & IFRS 9 |
Mandatory Effective Date and Transition Disclosures |
1 January 2015 |
|
|
IFRS 9 |
Financial Instruments - Classification and Measurement |
1 January 2015 |
|
|
IFRS 10 |
Consolidated Financial Statements |
1 January 2013 |
|
|
IFRS 11 |
Joint Arrangements |
1 January 2013 |
|
|
IFRS 12 |
Disclosure of Interests in Other Entities |
1 January 2013 |
|
|
IFRS 13 |
Fair Value Measurement |
1 January 2013 |
|
|
IFRIC 20 |
Stripping Costs in the Production Phase of a Surface Mine |
1 January 2013 |
|
|
IAS 32 |
Offsetting Financial Assets and Financial Liabilities |
1 January 2014 |
|
|
IAS 19 |
Employee Benefits - Amended standard resulting from the Post-Employment Benefits and Termination Benefits projects |
1 January 2013 |
|
|
IAS 27 |
Consolidated and Separate Financial Statements - Reissued as IAS 27 Separate Financial Statements (as amended in 2011) |
1 January 2013 |
|
|
IAS 28 |
Investments in Associates - Reissued as IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) |
1 January 2013 |
|
4. Segmental information
Operating segments
At 31 July 2012 the Group operated as one segment, being the provision of high performance nano particles for research and development purposes. This is the level at which operating results are reviewed by the chief operating decision maker (i.e. the CEO) 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.
|
|
31 July 2012 |
31 July 2011 |
|
|
£000 |
£000 |
|
Analysis of revenue |
|
|
|
Products sold |
134 |
194 |
|
Rendering of services |
1,557 |
1,351 |
|
Royalties and licences |
1,257 |
1,097 |
|
|
2,948 |
2,642 |
Included within rendering of services is revenue from one material customer amounting to £937,000 (2011: two material customers amounting to £697,000 and £603,000) and included within royalties and licences is revenue from one material customer amounting to £1,257,000 (2011: one material customer amounting to £1,097,000).
Geographical information
The Group operates in four main geographic areas, although all are managed in the UK. The Group's revenue per geographical segment is as follows:
|
|
31 July 2012 |
31 July 2011 |
|
|
£000 |
£000 |
|
Revenue |
|
|
|
UK |
182 |
- |
|
Europe (excluding UK) |
124 |
200 |
|
Asia |
2,542 |
2,397 |
|
USA |
100 |
45 |
|
|
2,948 |
2,642 |
All the Group's assets are held in the UK and all of its capital expenditure arises in the UK.
5. Operating loss
|
|
31 July 2012 |
31 July 2011 |
|
The Group |
£000 |
£000 |
|
Operating loss is stated after charging /(crediting): |
|
|
|
Depreciation of tangible fixed assets (see note 10) |
849 |
734 |
|
Amortisation of intangible assets (see note 11) |
122 |
87 |
|
Staff costs (see note 6) |
3,170 |
2,564 |
|
Foreign exchange losses |
3 |
41 |
|
Research and development expense** |
2,887 |
2,581 |
|
Cost of inventories recognised as an expense (included in cost of sales) |
1,044 |
531 |
|
Operating lease rentals (see note 22): |
|
|
|
Land and buildings |
357 |
195 |
|
Auditor's remuneration: |
|
|
|
Audit services: |
|
|
|
- Fees payable to Company auditor for the audit of the parent and the consolidated accounts |
10 |
10 |
|
Fees payable to Company auditor for other services: |
|
|
|
- Auditing the accounts of subsidiaries pursuant to legislation |
14 |
14 |
|
- Other services |
3 |
8 |
|
Total auditor's remuneration |
27 |
32 |
** Included within research and development expense are staff costs totalling £1,808,000 (2011: £1,695,000) also included in note 6.
6. Staff costs
|
|
31 July 2012 |
31 July 2011 |
|
|
£000 |
£000 |
|
Wages and salaries |
2,414 |
2,087 |
|
Social security costs |
249 |
216 |
|
Pension contributions |
142 |
108 |
|
Share-based payments |
365 |
153 |
|
|
3,170 |
2,564 |
|
|
|
|
|
Directors' remuneration included in the aggregate remuneration above comprised: |
|
|
|
Emoluments for qualifying services |
646 |
528 |
Directors' emoluments (excluding social security costs) disclosed above include £208,000 paid to the highest paid director (2011: £164,000).
An analysis of the highest paid director's remuneration is included in the Directors' Remuneration Report.
The average number of employees during the year (including directors), was as follows:
|
|
31 July 2012 |
31 July 2011 |
|
The Group |
Number |
Number |
|
Directors |
7 |
7 |
|
Laboratory and administrative staff |
57 |
49 |
|
|
64 |
56 |
7. Finance income and expense
|
|
31 July 2012 |
31 July 2011 |
|
The Group |
£000 |
£000 |
|
Finance income: |
|
|
|
Bank interest receivable |
317 |
180 |
|
Finance expense: |
|
|
|
Loan interest payable |
(8) |
(10) |
|
|
309 |
170 |
Bank interest receivable includes £28,000 (2011: £102,000) which is receivable after the year end.
8. Income tax
The tax credit is made up as follows:
|
|
31 July 2012 |
31 July 2011 |
|
The Group |
£000 |
£000 |
|
Current income tax: |
|
|
|
UK corporation tax losses in the year |
- |
- |
|
Research and development income tax credit receivable |
(654) |
(600) |
|
Adjustment in respect of prior years |
(56) |
6 |
|
Total current income tax |
(710) |
(594) |
|
Deferred tax: Origination and reversal of temporary differences |
- |
(129) |
|
Total deferred tax |
- |
(129) |
|
Total tax credit in the income statement |
(710) |
(723) |
|
The tax assessed for the year varies from the standard rate of corporation tax as explained below:
|
31 July 2012 |
31 July 2011 |
|
The Group |
£000 |
£000 |
|
Loss on ordinary activities before taxation |
(4,350) |
(3,215) |
|
Tax at standard rate of 25.33% (2011 : 27.33%) |
(1,102) |
(878) |
|
|
|
|
|
Effects of: |
|
|
|
Expenses not deductible for tax purposes |
96 |
42 |
|
Movement in unprovided deferred tax |
99 |
(279) |
|
Additional reduction for research and development expenditure |
(758) |
(587) |
|
Surrender of research and development relief for repayable tax credit |
1,432 |
1,292 |
|
Research and development tax credit receivable |
(654) |
(600) |
|
Share options exercised (CTA 2009 Pt 12 deduction) |
(179) |
(1,132) |
|
Tax losses carried forward |
412 |
1,413 |
|
Adjustment in respect of prior years |
(56) |
6 |
|
Tax credit in income statement |
(710) |
(723) |
Deferred tax has been calculated at the rate of 24% being the rate based on Budget announcements and which had been substantively enacted by law at the date of these accounts. The change in tax rate is not considered to have had a material impact.
The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset, measured at a standard rate of 24% (2011: 26%) is £2,004,000 (2011: £1,691,000). The amount recognised as a deferred tax asset is £253,000 (2011: £501,000). Remaining tax losses have not been recognised as an asset as the transfer of economic benefits in the future is uncertain (2011: nil).
The Group also has a deferred tax liability being accelerated capital allowances less the deferred tax on share based payments for which the tax, measured at a standard rate of 24% (2011: 26%) is £253,000 (2011: £501,000).
The deferred tax asset and liability have been offset and consequently the net deferred asset/(liability) recognised at 31 July 2012 is £nil (2011: £nil).
The Chancellor has proposed changes to further reduce the main rate of corporation tax by one per cent per annum to 22% by 1 April 2014, but these changes have not yet been substantively enacted and therefore are not included in the figures above. The overall effect of the further reduction from 24% to 22%, if these are applied to the net unprovided deferred tax asset of 31 July 2012, would be to further reduce the deferred tax asset by £168,000.
9. Earnings per share
|
|
31 July 2012 |
31 July 2011 |
|
The Group |
£000 |
£000 |
|
Loss for the financial year attributable to equity shareholders |
(3,640) |
(2,492) |
|
|
Share-based payments |
365 |
153 |
|
|
Loss for the financial year before share-based payments |
(3,275) |
(2,339) |
|
|
Weighted average number of shares: |
|
|
|
|
Ordinary shares in issue |
202,661,900 |
192,142,536 |
|
|
Adjusted loss per share before share-based payments (pence) |
(1.62) |
(1.22) |
|
|
Basic loss per share (pence) |
(1.80) |
(1.30) |
|
Diluted loss per share has not been presented above as the effect of share options issued is anti-dilutive.
10. Tangible fixed assets
|
|
Laboratory infrastructure |
Office equipment, fixtures and fittings |
Plant and machinery |
Total |
|
The Group |
£000 |
£000 |
£000 |
£000 |
|
Cost: |
|
|
|
|
|
At 31 July 2010 |
1,652 |
189 |
1,844 |
3,685 |
|
Additions |
367 |
116 |
601 |
1,084 |
|
At 31 July 2011 |
2,019 |
305 |
2,445 |
4,769 |
|
Additions |
10 |
38 |
244 |
292 |
|
At 31 July 2012 |
2,029 |
343 |
2,689 |
5,061 |
|
Depreciation: |
|
|
|
|
|
At 31 July 2010 |
399 |
115 |
368 |
882 |
|
Provided during the year |
268 |
52 |
414 |
734 |
|
At 31 July 2011 |
667 |
167 |
782 |
1,616 |
|
Provided during the year |
298 |
67 |
484 |
849 |
|
At 31 July 2012 |
965 |
234 |
1,266 |
2,465 |
|
Net book value: |
|
|
|
|
|
At 31 July 2012 |
1,064 |
109 |
1,423 |
2,596 |
|
At 31 July 2011 |
1,352 |
138 |
1,663 |
3,153 |
11. Intangible assets
|
|
Patents |
|
The Group |
£000 |
|
Cost: |
|
|
At 31 July 2010 |
759 |
|
Additions |
299 |
|
At 31 July 2011 |
1,058 |
|
Additions |
336 |
|
At 31 July 2012 |
1,394 |
|
Amortisation: |
|
|
At 31 July 2010 |
143 |
|
Provided during the year |
87 |
|
At 31 July 2011 |
230 |
|
Provided during the year |
122 |
|
At 31 July 2012 |
352 |
|
Net book value: |
|
|
At 31 July 2012 |
1,042 |
|
At 31 July 2011 |
828 |
|
Amortisation provided during the period is recognised in administrative expenses. |
|
12. Investment in subsidiaries
|
|
Shares |
Loans |
Loan impairment |
Total |
|
The Company |
£000 |
£000 |
£000 |
£000 |
|
At 31 July 2010 |
63,255 |
20,619 |
(20,286) |
63,588 |
|
Increase in respect of share-based payments |
- |
153 |
- |
153 |
|
Transfer of treasury shares |
- |
(96) |
- |
(96) |
|
Recognition of treasury shares acquired on reverse acquisition |
(20) |
- |
- |
(20) |
|
At 31 July 2011 |
63,235 |
20,676 |
(20,286) |
63,625 |
|
Increase in respect of share-based payments |
- |
365 |
- |
365 |
|
At 31 July 2012 |
63,235 |
21,041 |
(20,286) |
63,990 |
The impairment of the loan relates to the Company's investment in Nanoco Life Sciences Limited. The directors have concluded that the investment's recoverable amount is £nil.
The accounting for the reverse acquisition that took place in 2009 is described in note 18. The treasury shares were initially written off at the time of the reverse acquisition and have subsequently been re-recognised.
Loans to subsidiary undertakings carry no interest and are repayable on demand. Further information in relation to these loans is given in note 24.
|
|
|
|
Share of issued ordinary share capital |
|
|
Subsidiary undertakings |
Country of incorporation |
Principal activity |
31 July 2012 |
31 July 2011 |
|
Nanoco Life Sciences Limited (formerly Evolutec Limited) |
England and Wales |
Research and development |
100% |
100% |
|
Nanoco Tech Limited |
England and Wales |
Holding company |
100% |
100% |
|
Nanoco Technologies Limited* |
England and Wales |
Research and develop nano particles |
100% |
100% |
*Share capital is owned by Nanoco Tech Limited. All other shareholdings are owned by Nanoco Group PLC.
13. Inventories
|
|
31 July 2012 |
31 July 2012 |
31 July 2011 |
31 July |
|
|
Group |
Company |
Group |
Company |
|
|
£000 |
£000 |
£000 |
£000 |
|
Raw materials and consumables |
79 |
- |
80 |
- |
14. Trade and other receivables
|
|
31 July 2012 |
31 July 2012 |
31 July 2011 |
31 July |
|
|
Group |
Company |
Group |
Company |
|
|
£000 |
£000 |
£000 |
£000 |
|
Trade receivables |
66 |
- |
29 |
- |
|
Prepayments |
538 |
- |
247 |
- |
|
Inter-company short-term loan to subsidiary |
- |
16,951 |
- |
13,596 |
|
Other receivables |
158 |
- |
131 |
- |
|
|
762 |
16,951 |
407 |
13,596 |
The directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Trade receivables are denominated in the following currency:
|
|
31 July 2012 |
31 July 2012 |
31 July 2011 |
31 July |
|
|
Group |
Company |
Group |
Company |
|
|
£000 |
£000 |
£000 |
£000 |
|
US Dollars |
66 |
- |
29 |
- |
At 31 July the analysis of trade receivables that were past due but not impaired was as follows:
|
|
Total |
Neither past due nor impaired |
<30 days |
Past due but not impaired 30 to 60 days |
|
|
£000 |
£000 |
£000 |
£000 |
|
2012 |
66 |
66 |
- |
- |
|
2011 |
29 |
29 |
- |
- |
15 Cash, cash equivalents and deposits
|
|
31 July 2012 |
31 July 2012 |
31 July 2011 |
31 July 2011 |
|
|
Group |
Company |
Group |
Company |
|
|
£000 |
£000 |
£000 |
£000 |
|
Short-term investments and cash on deposit |
11,119 |
2,000 |
12,015 |
3,500 |
|
Cash and cash equivalents |
4,355 |
1,696 |
5,084 |
3,369 |
|
|
15,474 |
3,696 |
17,099 |
6,869 |
Under IAS 7, cash held on long term deposits (being deposits with maturity of greater than three months and no more than twelve months) that cannot readily be converted into cash has been classified as a short term investment. The maturity on this investment was less than twelve months at the reporting date.
Cash and cash equivalents at 31 July 2012 include deposits with original maturity of 3 months or less of £3,464,000 (2011: £4,962,000).
An analysis of cash, cash equivalents and deposits by denominated currency is given in note 23.
16. Trade and other payables
|
|
31 July 2012 |
31 July 2012 |
31 July 2011 |
31 July 2011 |
|
|
Group |
Company |
Group |
Company |
|
|
£000 |
£000 |
£000 |
£000 |
|
Current |
|
|
|
|
|
Current payables |
887 |
- |
600 |
- |
|
Other payables |
76 |
- |
83 |
- |
|
Deferred revenue |
1,935 |
- |
719 |
- |
|
Accruals |
492 |
- |
239 |
- |
|
|
3,390 |
- |
1,641 |
- |
|
Non current Non-current
|
|
|
|
|
|
Long-term loan from subsidiary
|
- |
450 |
- |
449 |
|
|
- |
450 |
- |
449 |
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
17. Financial liabilities
|
|
31 July 2012 |
31 July 2012 |
31 July 2011 |
31 July |
|
|
Group |
Company |
Group |
Company |
|
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
Other loan: |
|
|
|
|
|
Current |
63 |
- |
63 |
- |
|
Non–current |
222 |
- |
285 |
- |
|
|
285 |
- |
348 |
- |
The directors consider that the carrying amount of financial liabilities approximate to their fair value, in so far as this is an arm's length transaction taken out at a market rate of interest.
The other loan is unsecured, bears interest at 2 per cent above base rate and is repayable in quarterly instalments and will be fully repaid in 2017.
18. Issued equity capital
|
|
|
Share capital |
Share premium |
Reverse acquisition reserve |
Total |
|
The Group |
Number |
£000 |
£000 |
£000 |
£000 |
|
Authorised ordinary shares of 10p: |
|
|
|
|
|
|
At 31 July 2010, 31 July 2011 and 31 July 2012 |
250,000,000 |
25,000 |
- |
- |
25,000 |
|
Allotted, called up and fully paid ordinary shares of 10p: |
|
|
|
|
|
|
As at 31 July 2010 |
184,156,282 |
18,416 |
71,400 |
(77,465) |
12,351 |
|
Shares issued on exercise of options |
4,522,900 |
452 |
59 |
(211) |
300 |
|
Shares issued in placing |
16,700,000 |
1,670 |
13,193 |
- |
14,863 |
|
EBT shares issued on 30 June 2011 |
479,235 |
48 |
384 |
- |
432 |
|
Expenses of placing |
- |
- |
(519) |
- |
(519) |
|
As at 31 July 2011 |
205,858,417 |
20,586 |
84,517 |
(77,676) |
27,427 |
|
Shares issued on exercise of options |
1,525,750 |
152 |
2 |
(96) |
58 |
|
Expenses of 2011 placing |
- |
- |
(10) |
- |
(10) |
|
As at 31 July 2012 |
207,384,167 |
20,738 |
84,509 |
(77,772) |
27,475 |
The balances classified as share capital and share premium include the total net proceeds (nominal value and share premium respectively) on issue of the Company's equity share capital, comprising 10 pence ordinary shares.
The retained loss and other equity balances recognised in the Group financial statements reflect the consolidated retained loss and other equity balances of Nanoco Tech Limited immediately before the business combination which was reported in the year ended 31 July 2009. The consolidated results for the period from 1 August 2008 to the date of the acquisition by Nanoco Group PLC are those of Nanoco Tech Limited. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the transaction. The effect of using the equity structure of the legal parent gives rise to an adjustment to the Group's issued equity capital in the form of a reverse acquisition reserve.
On 21 November 2011 options over 1,493,750 shares were exercised at 3.5 pence per share, with total proceeds of £52,520. On 27 March 2012 options over 20,000 shares were exercised at 14.5 pence per share, with total proceeds of £2,900. On 26 July 2012 options over 12,000 shares were exercised at 14.5 pence per share, with total proceeds of £1,740. Options exercised include certain options which had an exercise price that was less than the nominal value of shares issued (see note 20).
|
|
|
Share capital |
Share premium |
Total |
|
The Company |
Number |
£000 |
£000 |
£000 |
|
Authorised ordinary shares of 10p: |
|
|
|
|
|
At 31 July 2010, 31 July 2011 and 31 July 2012 |
250,000,000 |
25,000 |
- |
25,000 |
|
Allotted, called up and fully paid ordinary shares of 10p: |
|
|
|
|
|
As at 31 July 2010 |
184,156,282 |
18,416 |
71,401 |
89,817 |
|
Shares issued on exercise of options |
4,522,900 |
452 |
58 |
510 |
|
Shares issued in placing |
16,700,000 |
1,670 |
13,193 |
14,863 |
|
EBT shares issued on 30 June 2011 |
479,235 |
48 |
384 |
432 |
|
Expenses of placing |
- |
- |
(519) |
(519) |
|
As at 31 July 2011 |
205,858,417 |
20,586 |
84,517 |
105,103 |
|
Shares issued on exercise of options |
1,525,750 |
152 |
2 |
154 |
|
Expenses of 2011 placing |
- |
- |
(10) |
(10) |
|
As at 31 July 2012 |
207,384,167 |
20,738 |
84,509 |
105,247 |
19. Share-based payments
The share-based payment reserve accumulates the corresponding credit entry in respect of share-based payment charges. Movements in the reserve are disclosed in the Consolidated Statement of Changes in Equity.
A charge of £365,000 has been recognised in the Statement of Comprehensive Income for the year (2011: £153,000).
Share option schemes
The Group operates the following share option schemes all of which are operated as Enterprise Management Incentive ("EMI") schemes in so far as the share options being issued meet the EMI criteria as defined by HM Revenue & Customs. Share options issued that do not meet EMI criteria are issued as unapproved share options, but are subject to the same exercise performance conditions.
Nanoco Tech Share Incentive Plan
Share options issued under the Nanoco Tech Share Incentive Plan had been issued to staff who were employed by Nanoco Tech Limited in the period from 1 September 2006 up to the date of the reverse take-over on 1 May 2009. These options were conditional on achievement of share price performance criteria and either a sale or listing of the Company. All of the relevant vesting conditions have been successfully met and options are capable of being exercised at any time from 1 August 2010 to 31 August 2016. Following the reverse take-over the number of share options in issue were increased in line with the terms of the reverse acquisition by a factor of 4.55 times and the exercise price decreased by 4.55 times. This was reflected as a reverse acquisition adjustment in the 2009 accounts.
Nanoco Group PLC Long Term Incentive Plan ("LTIP")
- Grant in November 2009
Share options were granted to management and staff on 27 November 2009 under the terms of the Nanoco Group PLC long term incentive plan and will be exercisable subject to performance conditions being met based on: share price following publication of the 2012 results and EPS targets relating to financial year ending 31 July 2012. The exercise price was set at 40 pence for all staff apart from Michael Edelman and Nigel Pickett, for whom the exercise price was set at 78 pence. The average market price of the Company's shares on the date of issue of the LTIP award was 69 pence. The fair value benefit is measured using binomial and Monte Carlo models, taking into account the terms and conditions upon which the share options were issued.
The key performance target criteria governing the exercise of the share options are summarised as follows:
|
% of award |
Performance conditions |
Targets |
% shares vesting |
|
||
|
|
|
Min. |
Stretch |
Min. |
Stretch |
Notes |
|
50% |
EPS |
2p |
4p |
0% |
100% |
(1) |
|
50% |
Share price |
£1.20 |
£1.60 |
50% |
100% |
(2) |
(1) The target has not been achieved and these have therefore lapsed.
(2) To the extent that the share price is greater than the minimum target but less than the stretch target, the number of options that will become exercisable will be calculated pro-rata on a straight line basis. The reference date for the share price is the date following the publication of the 2012 results. If the share price does not fall within the targets then these options will not be exercisable and will lapse.
- Grant in June 2011
Share options were granted to management on 2 June 2011 and were subject to performance conditions being achieved, based on sales targets for the financial year ended 31 July 2012. As the sales target has not been achieved these options are not exercisable and have lapsed.
- Grant in November 2011
Share options were granted to staff and executive directors on 25 November 2011. The options granted to executive directors were subject to commercial revenue targets being achieved over a three year period from the date of grant. The exercise price was set at 50 pence, being the average closing share price on the day preceding issue of the share options. The fair value benefit is measured using a binomial model, taking into account the terms and conditions upon which the share options were issued. Share options issued to staff vest over a three year period from the date of grant but are not subject to performance conditions.
- Other awards
Share options are awarded to management and key staff as a mechanism for attracting and retaining key members of staff. The options are issued at either market price on the day preceding grant or in the event of abnormal price movements at an average market price for the week preceding grant date. These options are exercisable any time after the third anniversary of the award and prior to the tenth anniversary of the award. Exercise of the award is subject to the employee remaining a full time member of staff at the point of exercise. The fair value benefit is measured using a binomial valuation model, taking into account the terms and conditions upon which the share options were issued.
Shares held in the Employee Benefit Trust ("EBT")
The Group operates a jointly owned EBT share scheme for senior management under which the trustee of the Group-sponsored EBT has acquired shares in the Company jointly with a number of employees. The shares were acquired pursuant to certain conditions set out in jointly owned agreements ("JOE"). Subject to meeting the performance criteria conditions set out in the JOE, the employees are able to exercise an option to acquire the trustee's interests in the jointly owned EBT shares at the option price. The jointly owned EBT shares issued on 1 September 2006 had met the option conditions on 1 August 2010 and are capable of being exercised at any time until 31 August 2016.
The fair value benefit is measured using a binomial valuation model, taking into account the terms and conditions upon which the jointly owned shares were issued.
The following tables illustrate the number and weighted average exercise prices of, and movements in, share options and jointly owned EBT shares during the year.
|
|
Share options |
EBT |
2012 total |
2011 total |
|
The Group and Company |
number |
number |
number |
number |
|
Outstanding at 1 August |
7,056,401 |
4,238,486 |
11,294,887 |
14,788,086 |
|
Granted during the year |
4,820,000 |
- |
4,820,000 |
1,721,989 |
|
Exercised during the year |
(1,513,750) |
- |
(1,513,750) |
(4,522,900) |
|
Lapsed/cancelled |
(1,701,953) |
- |
(1,701,953) |
(692,288) |
|
Outstanding at 31 July |
8,660,698 |
4,238,486 |
12,899,184 |
11,294,887 |
|
Exercisable at 31 July |
2,280,750 |
3,759,251 |
6,040,001 |
7,667,502 |
Weighted average exercise price of options
|
|
2012 |
2011 |
|
The Group and Company |
pence |
pence |
|
Outstanding at 1 August |
26.0 |
14.0 |
|
Granted during the year |
50.3 |
80.8 |
|
Exercised during the year |
3.5 |
6.6 |
|
Forfeited/cancelled |
68.5 |
37.2 |
|
Outstanding at 31 July |
34.3 |
26.0 |
The weighted average fair value of options granted during the year to 31 July 2012 was 50pence (2011 : 89pence). The range of exercise prices for options and jointly owned EBT shares outstanding at the end of the year was 3.5pence -100.75pence, (2011: 3.5pence - 100.75pence).
For the share options outstanding as at 31 July 2012, the weighted average remaining contractual life is 7.2 years (2011: 6.4 years).
The weighted average share price at the date of exercise for those share options exercised in the year ended 31 July 2012 was 50.2 pence (2011 : 100.9 pence).
The following table lists the inputs to the models used for the years ended 31 July 2012 and 31 July 2011
|
The Group and Company |
Performance linked grants |
Non-performance linked grants |
||
|
|
2012 |
2011 |
2012 |
2011 |
|
Expected volatility (%) |
50% |
44% |
50% |
44% |
|
Risk-free interest rate (%) |
1.28% |
2.20% |
0.96%-1.6% |
1.8%-2.3% |
|
Expected life of options (years average) |
3 years |
1.2 years |
3 years |
3 years |
|
Weighted average exercise price (pence) |
50p |
79p |
50p |
95p |
|
Weighted average share price at date of grant (pence) |
50p |
79p |
50p |
95p |
|
Model used |
Binomial |
Binomial |
Binomial |
Binomial |
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
No other features of options granted were incorporated into the measurement of fair value.
20. Merger reserve and capital redemption reserve
Merger reserve
|
The Group |
£000 |
|
At 31 July 2010, 31 July 2011 and 31 July 2012 |
(1,242) |
The merger reserve arises under section 612 of the Companies Act 2006 on the shares issued by Nanoco Tech Limited to acquire Nanoco Technologies Limited as part of a simple Group re-organisation on 27 June 2007.
|
Capital redemption reserve The Company |
£000 |
|
At 31 July 2010 |
4,804 |
|
Share options exercised at a discount to nominal value |
(210) |
|
At 31 July 2011 |
4,594 |
|
Share options exercised at a discount to nominal value |
(96) |
|
At 31 July 2012 |
4,498 |
The capital redemption reserve arises from the off-market purchase of deferred shares on 4 May 2005 and their subsequent cancellation.
Certain share options exercised during the year had an exercise price less than nominal value. The aggregate discount to nominal value on these options of £96,000 (2011 : £210,000) has been charged to the Company's capital redemption reserve and, on consolidation, to the Group's reverse acquisition reserve. The discount arose as a result of the formula agreed, at the time of the acquisition of Nanoco Tech Limited by the Company on 1 May 2009, for converting share options in Nanoco Tech Limited into equivalent share options in the Company. This accounting treatment was authorised at the AGM held on 16 December 2011.
21. Movement in revenue reserve and treasury shares
|
The Group |
Retained deficit |
Treasury shares |
Total revenue reserve |
|
|
£000 |
£000 |
£000 |
|
As at 31 July 2010 |
(3,023) |
(565) |
(3,588) |
|
Jointly owned shares granted to EBT* |
- |
(432) |
(432) |
|
Loss for the year |
(2,492) |
- |
(2,492) |
|
As at 31 July 2011 |
(5,515) |
(997) |
(6,512) |
|
Loss for the year |
(3,640) |
- |
(3,640) |
|
As at 31 July 2012 |
(9,155) |
(997) |
(10,152) |
* No jointly owned EBT shares were granted during the year (2011: 479,235 shares).
Retained deficit represents the cumulative loss attributable to the equity holders of the parent company.
Treasury shares include the value of Nanoco Group PLC shares issued as jointly owned equity shares and held by the Nanoco Group sponsored Employee Benefit Trust ("EBT") jointly with a number of the Group's employees. At 31 July 2012 4,238,486 shares in the Company were held by the EBT (2011: 4,238,486). In addition there are 12,222 (2011: 12,222) treasury shares not held by the EBT.
|
|
Retained deficit |
Treasury shares |
Total Revenue reserve |
|
The Company |
£000 |
£000 |
£000 |
|
At 31 July 2010 |
(25,675) |
- |
(25,675) |
|
Recognition of treasury shares acquired on reverse acquisition |
- |
(20) |
(20) |
|
Jointly owned shares granted to EBT |
- |
(432) |
(432) |
|
Treasury shares transferred from Nanoco Tech Ltd * |
- |
(545) |
(545) |
|
Profit for the year |
130 |
- |
130 |
|
At 31 July 2011 |
(25,545) |
(997) |
(26,542) |
|
Profit for the year |
133 |
- |
133 |
|
At 31 July 2012 |
(25,412) |
(997) |
(26,409) |
* Shares issued to EBT previously reported by Nanoco Tech Limited.
22. Commitments
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge payments under non-cancellable operating leases are as follows:
|
|
31 July 2012 |
31 July 2011 |
|
|
Group |
Group |
|
|
£000 |
£000 |
|
Land and buildings: |
|
|
|
Not later than one year |
524 |
192 |
|
After one year but not more than five years |
1,918 |
420 |
|
After five years |
1,777 |
67 |
|
|
4,219 |
679 |
23. Financial risk management
Overview
This note presents information about the Group's exposure to various kinds of financial risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The executive directors report regularly to the Board on Group risk management.
Capital risk management
The Company reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in notes 18, 20 and 21 and in the Group Statement of Changes in Equity. Total equity was £16,932,000 at 31 July 2012 (£20,159,000 at 31 July 2011).
The Company is not subject to externally imposed capital requirements.
Liquidity risk
The Group's approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
The Group manages all of its external bank relationships centrally in accordance with defined treasury policies. The policies include the minimum acceptable credit rating of relationship banks and financial transaction authority limits. Any material change to the Group's principal banking facility requires Board approval. The Group seeks to mitigate the risk of bank failure by ensuring that it maintains relationships with a number of investment grade banks.
At the reporting date the Group was cash positive with no outstanding borrowings, apart from a long term loan which is being repaid on a quarterly basis in line with the terms of the loan agreement.
Categorisation of financial instruments
|
|
Loans and receivables |
Financial liabilities at amortised cost |
Group |
Company |
|
Financial assets/liabilities |
£000 |
£000 |
£000 |
£000 |
|
31 July 2012 |
|
|
|
|
|
Trade and other receivables |
66 |
- |
66 |
- |
|
Cash, cash equivalents and deposits |
16,969 |
- |
16,969 |
3,696 |
|
Trade and other payables * |
- |
(1,455) |
(1,455) |
- |
|
Financial liabilities |
- |
(285) |
(285) |
- |
|
|
17,035 |
(1,740) |
(15,295) |
3,696 |
|
31 July 2011 |
|
|
|
|
|
Trade and other receivables |
29 |
- |
29 |
- |
|
Cash, cash equivalents and deposits |
17,099 |
- |
17,099 |
6,869 |
|
Trade and other payables * |
- |
(922) |
(922) |
- |
|
Financial liabilities |
- |
(348) |
(348) |
- |
|
|
17,128 |
(1,270) |
15,858 |
6,869 |
*Excluding deferred revenue.
The values disclosed in the above table are carrying values. The Board considers that the carrying amount of financial assets and liabilities approximates to their fair value.
The main risks arising from the Group's financial instruments are credit risk and foreign currency risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.
Other loans (note 17) are subject to interest at base rate plus 2%, however as the Group's cash deposits which attract interest at rates set for the period of the respective deposit, are of a greater amount, any increase in base rate and thus interest payable are more than offset by higher interest income.
Credit risk
The Group's principal financial assets are cash, cash equivalents and deposits. The Group seeks to limit the level of credit risk on the cash balances by only depositing surplus liquid funds with multiple counterparty banks that have investment grade credit ratings.
The Group trades only with recognised, creditworthy third parties. Receivable balances are monitored on an on-going basis with the result that the Group's exposure to bad debts is not significant. The Group's maximum exposure is the carrying amount as disclosed in note 14, which was neither past due nor impaired. All trade receivables are ultimately overseen by the Chief Financial Officer and are managed on a day-to-day basis by the UK credit control team. Credit limits are set as deemed appropriate for the customer.
The maximum exposure to credit risk in relation to cash, cash equivalents and deposits is the carrying value at the balance sheet date.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Company. These are primarily US Dollars (USD) and Euros. Transactions outside of these currencies are limited.
Almost all of the Company's revenue is denominated in USD. The Group purchases some raw materials, certain services and some assets in USD which partly offsets its USD revenue, thereby reducing net foreign exchange exposure.
The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain. There were no open forward contracts as at 31 July 2012 or at 31 July 2011.
The split of Group assets between Sterling and other currencies at the year end is analysed as follows:
|
|
31 July 2012 |
31 July 2011 |
||||
|
|
GBP |
USD |
Total |
GBP |
USD |
Total |
|
The Group |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cash, cash equivalents and deposits |
16,427 |
542 |
16,969 |
17,042 |
57 |
17,099 |
|
Trade receivables |
- |
66 |
66 |
- |
29 |
29 |
|
Trade payables |
(729) |
(158) |
(887) |
(503) |
(97) |
(600) |
|
|
15,698 |
450 |
16,148 |
16,539 |
(11) |
16,528 |
Sensitivity analysis to movement in exchange rates
The following table demonstrates the sensitivity to a reasonably possible change in Sterling against the US Dollar exchange rate with all other variables held constant, on the Group's loss before tax (due to foreign exchange translation of monetary assets and liabilities) and the Group's equity.
|
Increase/(decrease) in Sterling vs. US Dollar rate |
Impact on loss before tax and Group equity |
Impact on loss before tax and Group equity |
|
% |
2012 £000 |
2011 £000 |
|
10% |
(41) |
1 |
|
5% |
(21) |
1 |
|
(5)% |
24 |
(1) |
|
(10)% |
50 |
(1) |
Interest rate risk
As the Group has no significant borrowings the risk is limited to the reduction of interest received on cash surpluses held at bank which receive a floating rate of interest. The principal impact to the Group is the result of interest-bearing cash and cash equivalent balances held as set out below:
|
|
31 July 2012 |
31 July 2011 |
||||
|
|
Fixed rate |
Floating rate |
Total |
Fixed rate |
Floating rate |
Total |
|
The Group |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cash, cash equivalents and deposits |
12,813 |
2,661 |
15,474 |
16,244 |
855 |
17,099 |
|
The Company |
|
|
|
|
|
|
|
Cash, cash equivalents and deposits |
3,696 |
- |
3,696 |
6,519 |
350 |
6,869 |
As the majority of cash and cash equivalents are held on fixed deposit the exposure to interest rate movements is immaterial.
Maturity profile
Set out below is the maturity profile of the Group's financial liabilities at 31 July 2012 based on contractual undiscounted payments including contractual interest.
|
|
Less than 1 year |
1 to 5 years |
Greater than 5 years |
Total |
|||||
|
2012 |
£000 |
£000 |
£000 |
£000 |
|||||
|
Financial liabilities |
|
|
|
|
|||||
|
Trade and other payables * |
1,455 |
- |
- |
1,455 |
|||||
|
Other loans ( including contractual interest ) |
65 |
227 |
- |
292 |
|||||
|
|
1,520 |
227 |
- |
1,747 |
|||||
|
|
Less than 1 year |
1 to 5 years |
Greater than 5 years |
Total |
|
||||
|
2011 |
£000 |
£000 |
£000 |
£000 |
|
||||
|
Financial liabilities |
|
|
|
|
|
||||
|
Trade and other payables * |
922 |
- |
- |
922 |
|
||||
|
Other loans ( including contractual interest ) |
65 |
259 |
33 |
357 |
|
||||
|
|
987 |
259 |
33 |
1,279 |
|
||||
*Excluding deferred revenue.
The Directors consider that the carrying amount of the financial liabilities approximates to their fair value.
As all financial assets are expected to mature within the next twelve months an aged analysis of financial assets has not been presented.
24. Related party transactions
The Group:
There were no sales to, purchases from, or at the year-end, balances with any related party.
The Company:
The following table summarises inter-company balances at the year-end between Nanoco Group PLC and subsidiary entities:
|
|
Notes |
31 July 2012 |
31 July 2011 |
|
|
|
£000 |
£000 |
|
Long term loans owed to Nanoco Group PLC by: |
|
|
|
|
Nanoco Life Sciences Limited |
|
20,286 |
20,286 |
|
Nanoco Technologies Limited* |
|
755 |
390 |
|
|
12 |
21,041 |
20,676 |
|
Less provision against debt owed by Nanoco Life Sciences Limited |
12 |
(20,286) |
(20,286) |
|
|
|
755 |
390 |
|
Short-term loan owed to Nanoco Group PLC by: |
|
|
|
|
Nanoco Technologies Limited** |
14 |
16,951 |
13,596 |
|
Long-term loan owed by Nanoco Group PLC to: |
|
|
|
|
Nanoco Tech Limited |
16 |
(450) |
(449) |
* The movement in the long term loan due from Nanoco Technologies Limited relates to the recharge in respect of the expense for share-based payments for staff working for Nanoco Technologies Limited and is included in investments.
** The movement in the short term loan due from Nanoco Technologies Limited relates to transfers of cash balances between the entities for the purposes of investing short term funds.
There are no formal terms of repayment in place for these loans and it has been confirmed by the directors that the long term loans will not be recalled within the next twelve months.
None of the loans are interest bearing.
25. Compensation of key management personnel (including directors)
|
|
2012 |
2011 |
|
|
£000 |
£000 |
|
Short-term employee benefits |
560 |
475 |
|
Pension costs |
48 |
40 |
|
Share-based payments |
128 |
90 |
|
|
736 |
605 |
This information is provided by RNS
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