Conclusions of Strategic Review

Nanoco Group PLC

03 October 2024

 

FOR IMMEDIATE RELEASE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (596/2014/EU) AS THE SAME HAS BEEN RETAINED IN UK LAW AS AMENDED BY THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI 2019/310) ("UK MAR").

3 October 2024

Nanoco Group PLC

("Nanoco", the "Group", or the "Company")

Conclusions of Board's strategic review

Intention to return surplus cash to shareholders

Nanoco, a world leader in the development and manufacture of cadmium-free quantum dots and other specific nanomaterials emanating from its technology platform, announces the conclusions of a strategic review undertaken by the Board following the European customer's decision to change its strategic focus away from QD enabled infra-red sensors. The Board has considered the Company's position, strategic direction and capital allocation policy, balancing the twin objectives of preserving existing value and maximising future potential returns.

The key points of the review and the Board's conclusions are set out below:

1.   The Company has commercial potential and inherent value

The Board is strongly of the view that there are significant organic commercial applications for Nanoco's technology across a range of markets that will generate value for the business over time. Initial applications are likely to be in various niche markets that can deliver meaningful revenue for Nanoco in the short to medium term growing into mass market applications over time. The current collaboration with the Asian customer specifically targets mass market applications for a leading global sensing company. This assessment is based on growing market interest and participation in quantum dot ("QD") technology in display and sensing markets. It also draws on direct customer feedback, independent expert technical analysis and the Company's own extensive knowledge.

The potential value in Nanoco's technology and intellectual property ("IP") is also growing strongly in line with previous independent market forecasts. There are now more market participants using QD display applications, the absolute number of QD enabled units is growing, and significant investments are being made by global players in micro-LED and electro-luminescent devices enabled by QDs. This market environment is now sufficiently meaningful to enable Nanoco to bring forward plans to seek commercial licence revenue over the Company's robust and validated IP portfolio.

After further investigation, Nanoco is confident that a growing number of third parties are using the Company's IP. As a business actually using its IP in its own operations, Nanoco is much more strongly placed to both successfully enforce that IP and also to achieve a better outcome than other non-practising entities. With our financial resources and experience in protecting our IP, the Company is now in a stronger position to take advantage of the growing market for QD displays.

Pursuing these commercial and licence opportunities will require investment and the maintenance of our unique team and asset base. The Board is confident that the Group can succeed in pursuing these commercial objectives with the appropriate investment of money and time.

2.   Appointment of Financial Adviser to review options for achieving the best financial outcome

The Group's trading business clearly remains in the scale-up phase of business growth with a number of proven materials and validated IP. The Board believes that it is now prudent to consider if this growth and investment would be best led in a different ownership setting than allowed for as the sole business of a listed company. The Board is highly confident in the potential of the business. A balance needs to be struck, in the interests of all of its shareholders, between supporting this growth and prudence with regard to risk, to preserve cash and to take a highly disciplined approach to investment.

The Board has therefore concluded that it is in the Company's best interests to appoint advisers to review the options for the Company's business and assets, including the potential for a sale of the trading business (including IP). The Board has appointed CDX Advisors LLC ("CDX") as its financial adviser. Work with CDX has commenced with a view to achieving the best possible financial outcome and to secure the long term future of the Group's IP and operations. The Board reasserts that whilst this process will be undertaken at pace, the Group's considerable financial resources mean that the trading business will continue to be supported to grow and not compromise its potential.

With this in mind, steps are already being taken to rationalise the Company's cost base. This includes reducing headcount, reducing the size of the Board during FY25 without compromising appropriate corporate governance standards, and by reducing non-critical operating costs across the Group.

Furthermore, immediately following the release of the Company's FY24 preliminary results, each of the non-executive directors will enter into agreements with the Company under which they will agree to defer payment of at least 50% of their director fees until the earlier of the end of the financial year (31 July 2025) or a potential sale of the trading business, with the accrued liability being satisfied at such time by ordinary shares of 10.0 pence each ("Ordinary Shares") to be issued by the Company or transferred out of the Company's employee benefit trust.

Once complete, these measures will reduce the Group's annualised cash cost base by £2.6m (or 34%) on a like for like basis compared to the Q4 FY24 run-rate, with an associated, one-off, cash restructuring cost of just over £0.1m.

3.   The Board will adopt a progressive return of surplus cash during FY25

The Board is determined to deliver shareholder value as rapidly as possible. In light of the plans set out above, the Board believes that it is now appropriate to commit to a return of surplus cash to shareholders during the course of FY25, and intends to return an initial sum of cash via a capital return following the release of the FY24 report and accounts.  

The timing and size of further returns of surplus cash will be contingent on the completion of the right-sizing noted above, working capital needs, and progress on the execution of a potential sale process.

Chris Richards, Non-Executive Chairman of Nanoco, said:

"Following our review, the Board continues to believe in the inherent value and commercial potential of our technology, IP and trading business. We have concluded that it is in the Company's best interests to appoint CDX Advisors to review the options for the Company's trading business, IP and other assets, including the potential for a sale of the trading business and assets.

"The Board is determined to deliver shareholder value as rapidly as possible. The Board is therefore committed to a return of surplus cash to shareholders over the current financial year as and when it is prudent and advisable to do so."

For further information, please contact:

Nanoco Group plc:

Christopher Richards, Chairman                                                                             [phone]

Brian Tenner, CEO

Liam Gray, CFO & Company Secretary

Cavendish Capital Markets Limited (Financial Adviser and Corporate Broker):

Ed Frisby / George Lawson (Corporate Finance)                                                       [phone]

Tim Redfern / Charlie Combe (Corporate Broking)

Jasper Berry (Sales)

CDX Advisors (Financial Adviser):

Steven Foland                                                                                                     [phone]

Steve Month

Patrick Foley 

Sodali & Co (Public Relations)                                                                              [phone]

Elly Williamson

Pete Lambie

[e-mail]

The person responsible for arranging for the release of this announcement on behalf of Nanoco is Liam Gray, Chief Financial Officer.

FORWARD LOOKING STATEMENTS

This announcement (including information incorporated by reference in this announcement) and other information published by Nanoco may contain statements about Nanoco that are or may be deemed to be forward looking statements.  Such statements are prospective in nature.  All statements other than historical statements of facts may be forward looking statements.  Without limitation, statements containing the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or "considers" or other similar words may be forward looking statements.

Forward looking statements inherently contain risks and uncertainties as they relate to events or circumstances in the future.  Important factors such as business or economic cycles, the terms and conditions of Nanoco's financing arrangements, tax rates, or increased competition may cause Nanoco's actual financial results, performance or achievements to differ materially from any forward looking statements.  Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof.  Nanoco disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law.

About Nanoco

Nanoco (LSE: NANO) is a nanomaterial production and licensing company, specialising in the production of its patented cadmium free quantum dots (CFQD®) and other patented nanomaterials for use in the electronics industries.

Founded in 2001 and headquartered in Runcorn, UK, Nanoco continues to build out a world-class, patent-protected IP portfolio alongside its existing scaled up production facilities for commercial orders.

Nanomaterials are materials with dimensions typically in the range 1 - 100 nm. Nanomaterials have a range of useful properties, including optical and electronic. Quantum dots are a subclass of nanomaterial that have size-dependent optical and electronic properties. Within the sphere of quantum dots, the Group exploits different characteristics of the quantum dots to target different performance criteria that are attractive to specific markets or end-user applications such as the Sensor, Electronics and Display markets. Nanoco's CFQD® quantum dots are free of cadmium and other toxic heavy metals, and can be tuned to emit light at different wavelengths across the visible and infrared spectrum, rendering them useful for a wide range of display applications. Nanoco's HEATWAVE™ quantum dots can be tuned to absorb light at different wavelengths across the near-infrared spectrum, rendering them useful for applications including cameras and image sensors.

Nanoco is listed on the Main Market of the London Stock Exchange, holds the LSE's Green Economy Mark, and trades under the ticker symbol NANO. For further information please visit: www.nanocotechnologies.com

 

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