Annual Report
and Accounts 2023
Our
inflection
point
N
a
n
o
c
o
G
r
o
u
p
p
l
c
–
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
3
About us
Nanoco is a market leader in the
research, development, licensing and
large scale manufacture of novel
nanomaterials for use in a wide range
of commercial applications
Our platform technology can be used to design
and manufacture bespoke materials. This means
that they can be custom made for our customers
and end use applications.
Our leading edge R&D team exploits both the
emissive and absorptive properties of the materials
we design. These are critical properties in electronics
markets for sensing, imaging and display uses.
Our CFQD® quantum dots are free of the toxic
cadmium which many of our competitors and display
manufacturers still use today despite the expected
ban in RoHS legislation.
Strategic report
Our year in brief
2023 was a significant year for Nanoco; the business is now financially underpinned with transition to production
status likely in the short term
| Final validation underway for two commercial production
| Litigation validated the group’s core IP, with further
materials, with an order anticipated by end of CY23
monetisation initiatives ongoing
| Major works package for European electronics customer
| Firm commitment to return capital to shareholders upon
completed, two materials in final validation
receipt of second tranche of litigation proceeds
| Five work packages successfully completed for Asian
chemical customer, sixth work package ongoing
| Ongoing discussions with major strategic players in the
electronics sector for longer and deeper collaborations
| Forecast growth in core markets, with increasing end user
applications in sensing and increasing QD market share
in display
| Consolidation of operations in Runcorn, now expanding
in anticipation of commercial production
| Capital reduction completed to facilitate the return of
| Licence agreement and sale of IP to Samsung brought
capital to shareholders
about a successful conclusion to the litigation, netting $90
million after fees
Revenue
Adjusted LBITDA1
Billings2
Cash
(£0.4m)
+83%
£63.0m
+2,233%
£8.2m
+21%
1 See page 31 for reconciliation.
2 See page 32 for reconciliation.
Corporate governance
Financial statements
Board of Directors
046
Corporate governance statement 048
Independent auditors’ report to
the members of Nanoco Group plc 090
001
002
005
Nominations Committee report
Chief Executive Officer’s statement 009
Audit Committee report
Remuneration Committee report
Directors’ remuneration report
Directors’ report
Statement of Directors’
responsibilities in respect
of the financial statements
Our markets
IP monetisation
Revenue streams
Section 172(1) statement
Our business model
Our strategy
Our key performance indicators
Financial review
Principal risks and uncertainties
Viability statement
TCFD disclosure 2023
Sustainability
016
018
020
021
024
026
028
030
033
036
038
040
058
061
067
070
086
089
Consolidated statement
of comprehensive income
095
Consolidated statement of changes
in equity
096
Company statement of changes
in equity
Group and Company statements
of financial position
Group and Company
cash flow statements
Notes to the financial statements
Investor information
096
097
098
099
IBC
£5.6m
+128%
Contents
Strategic report
Our year in brief
Nanoco at a glance
Chairman’s statement
For more on Nanoco, visit our new website:
www.nanocotechnologies.com
Nanoco Group plc – Annual Report and Accounts 2023 001
Nanoco at a glance
We design, develop, scale
up and manufacture novel
nanomaterials for use in a wide
range of potential applications
Our core competencies
| We custom design bespoke
nanomaterials to exploit
emission, absorption and
other properties
| Our materials can be
used in a wide variety of
commercial applications
| Continuous expansion of
our portfolio of materials
World-class talent
Respected globally
| Scale up capability to
move from laboratory
to industrial scale
| ISO certified, low-cost
in-house production
facilities in Runcorn, UK
| At 31 July 2023, 46
employees, of whom
7 are inventors
| 13 staff with PhDs
| 5 nationalities of staff:
British, German, Indian,
Italian and Portuguese
| International partnerships
with global players from
US to Europe to Asia
| R&D, scale up and twin
production facilities all
located in Runcorn, UK
| Customers operate in
$multi-billion markets with
wide range of applications
Why invest in Nanoco?
Platform technology gives access to a wide range of large and rapidly growing end markets with our focus currently on
consumer electronics, Internet of Things, automotive and multiple display devices.
Large and defensible
IP portfolio
QD materials market
valued at
375patents granted or pending
$10.5bn1
by 2030
Significant
manufacturing scale
2,000
kgs per annum
production capacity
New Licence
Display
SWIR imaging
World’s leading display
company has taken a
licence over Nanoco IP
$13.1bn
addressable market by c.20301
| CFQD® film
| QD on microLED
| Electro-luminescence
$2.9bn
addressable market by c.20301
| Consumer electronics
| Automotive applications
1 Source – Infinity Business Insights Global Quantum Dot Market, Forecast to 2030.
002
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Infinite possibilities
What are nanomaterials
and what is a quantum dot?
Nanomaterials are any material that has a dimension or structure measured at the
nanoscale, typically 10,000 to 100,000 times narrower than human hair (1–100 nm).
Nanomaterials have unique optical, electrical and mechanical properties often not
accessible in the bulk material. This can enhance properties such as light absorption,
emission, strength, reactivity and conductivity.
Quantum dots are a subclass of nanomaterials whose optical and electronic
properties depend on their size, shape and composition.
10-12 m
10-9 m
1 nm
10-6 m
1,000 nm
10-3 m
1 mm
1 m
1 m
103 m
1 km
Cosmic rays
Gamma rays
X-rays
UV
IR
Microwaves
Radar
Radio
Broadcast
Short wavelengths
Visible light
Long wavelengths
Infra-red
400 nm
600 nm
800 nm
1,000 nm
1,200 nm
1,400 nm
1,600 nm
1,800 nm
Display applications
(400 – 800 nm)
NIR
(900 – 1200 nm)
SWIR
(1200 – 1800 nm)
In the visible region, the
emissive properties of QDs
have revolutionised the display
industry. The efficiency and
nature of quantum dots leads
to ultra-pure colour emission.
This leads to enhanced display
and lighting applications.
Quantum dots can both emit and
absorb very pure light, the latter of
which can be exploited for sensors.
Traditionally, very expensive InGaAs
sensors have been used. QDs can
be combined with cheap silicon
CMOS image sensors to extend the
spectral range of silicon. In the NIR,
applications include facial
recognition and night vision.
Beyond the NIR, by selecting the correct
size of quantum dots, the spectral range
of CMOS image sensors can be extended
into the SWIR, at a much lower cost than
InGaAs detectors. Potential applications
in this region are wide-ranging, with the
ability to see through water vapour and
fog enabling LiDAR, while skin penetration
in the SWIR is being explored for security
applications such as anti-spoofing, as
well as the development of novel optical
diagnostic techniques.
Nanoco Group plc – Annual Report and Accounts 2023 003
Infinite possibilities
Our core markets of sensing
and display are forecast to
experience rapid growth.
Sensing
Yole Intelligence forecast growth in SWIR imaging
from $322 million in 2022 to $2,899 million in 2030.
This is due to emerging markets in consumer
electronics and automotive.
The CMOS imaging sensor market is forecast to
increase from revenues of $21.3 billion in 2022
to $28.8 billion in 2028.
$2.9bn
SWIR imaging market
forecast for 2030
$28.8bn
CMOS imaging sensor
market forecast for 2028
004
Nanoco Group plc – Annual Report and Accounts 2023
Display
Infinity business insights estimates the
Quantum Dot and Quantum Dot display
market was valued at $3.2 billion in 2022
and is projected to reach $13.1 billion by
2030, at a CAGR of 19.9%.
$13.1bn
Quantum Dot and Quantum
Dot display market forecast
for 2030
Chairman’s statement
Dr Christopher Richards
Chairman
Nanoco’s commercial
business is now
financially underpinned,
enabling the Company
to pursue exciting
mid-term opportunities
Summary
Overview
| Settlement in the Samsung
litigation delivered a gross
$150 million for the Company,
and $90 million after litigation costs
| Very large “blue ocean”
opportuntity in sensors, with
Nanoco technology in forefront;
embedded with European
electronics customer, with first
production order expected in CY23
| Five sensing development projects
with Asian chemical customer
completed in full, a sixth in progress
| Validated IP in display presents
mid-term potential
| Consolidation of operations
in Runcorn, investing to accelerate
product development and create
device capability
| Firm commitment to return
significant capital to shareholders
in Q1 CY24
This has been an incredibly important
year for Nanoco. The $150 million
settlement agreement with Samsung
(structured as a sale of IP for $85 million
and an ongoing licence agreement for
$65 million) vindicated our decision to
litigate. Our IP in display has now been
emphatically validated. The net $90
million proceeds underpin Nanoco’s
commercial potential, and allows the
business to plan for growth on a more
secure financial footing.
We believe there is still value to be
unlocked in our IP - though this will
take time. We do not believe anyone can
make Cadmium-free Quantum Dots at
scale without using our IP. We have
identified potential infringers and have
now engaged with the most likely
candidates to pursue monetisation
through licencing or litigation.
In sensing, devices are now being trialled
which incorporate Nanoco’s QDs. The
market opportunity is clearly very large,
when and if adoption gains traction.
During the year, we successfully delivered
all milestones on time in our major
development agreement for the
European electronics customer, sending
two first generation sensing products
for final validation for potential use in
commercial applications. We are now
focusing on building our supply chain
capabilities in preparation for a
commercial production order expected
by the end of 2023.
We have also successfully delivered
all challenging milestones in a series
of short-term development projects for
our Asian chemical customer. This work
continues and we are now discussing
a much longer-term collaboration which
will signal a significant investment in the
future of this technology. The Executive
team continues to seek further customer
engagements in both sensing and
display markets.
Strategy
Nanoco has a clear vision for the future.
Underpinned by our IP, we intend to be
the “go-to” manufacturer of quantum
dots for a variety of applications and
markets. Our ultimate aim is to advance
technology through making the small
things matter. By focusing on our core
competencies (our “dot only strategy”)
we play to our key strengths and continue
to build on and extend our foundational
intellectual property. Our sensing
Nanoco Group plc – Annual Report and Accounts 2023 005
Chairman’s statement continued
We are discussing
longer term, deeper
collaborations with
key customers.”
Strategy continued
Board and General Meeting
can provide significant improvements
over existing technologies at a
competitive price point while our display
materials offer performance and clear
environmental benefits over highly toxic,
cadmium-based quantum dots.
Our people
Our staff have shown great fortitude in
coping with the stresses and challenges
of the uncertain working environment
at Nanoco over the last four years.
A number of staff have also relocated
as part of the consolidation of our
operations to our Runcorn production
facility. Our employees have continued
to work hard throughout this period,
and deserve special recognition for
where we are today. We are now able
to increase our investment in our staff,
including expanding their training and
career development, and thereby
providing them with the opportunities
to achieve their individual potential.
As the majority of stakeholders will be
aware, during the year a small group of
activist shareholders called a general
meeting in August 2023 with the aim of
removing the entire Board and
appointing their own six nominees
instead. All of the activists’ resolutions
were emphatically voted down. Voting in
favour of the Board ranged from 80.8% to
89.1% of votes cast. I strongly believe that
these votes reflect shareholders’
confidence in the current Board and
its strategy.
We have taken on board the constructive
criticism received during the last six
months. In particular, we are working
to improve our communications and to
bolster the Board’s current breadth of
experience by recruiting an additional
Non-Executive Director with a
background in commercialising
technology in consumer electronics
markets. We expect to update the
market on an appointment in the
short term.
Sustainability and ESG strategy
Dividends
The Board is committed to the promotion
and achievement of environmental, social
and governance objectives within the
context of a small, listed company. To that
end, we have set ourselves the target of
achieving ISO 14001 accreditation
(Environmental Management) in the
financial year ending 31 July 2024.
We are also pursuing accreditation to
ISO 45001 (Occupational Health and
Safety). Post year end, we have
appointed an ESG steering committee
with a wide remit to support the
Company to achieve its ESG goals. This is
represented at Board level by Liam Gray,
our CFO.
Governance
We remain committed to the highest
standards of corporate governance and
we comply with all of the provisions of
the UK Corporate Governance Code
as outlined on page 53.
No dividend is proposed for the year
(2022: none).
Return of Capital
As announced in February 2023 at the
time of the litigation settlement,
the Board stated, that when considering
the allocation of the net proceeds its
intention was to balance any investment
needs of Nanoco’s growing commercial
business with delivery of a material
return of capital to shareholders.
Accordingly, the Board resolved to
return between £33-40 million (or
approximately 10-12 pence per share)
to shareholders, using some of the
second tranche of the proceeds of
the litigation (net $71.75 million), which
is expected to be received during
February 2024.
In July 2023 a capital reduction was
effected to create the sufficient
distributable reserves to facilitate the
return of capital. No decision has yet
been taken as to the method of any
such return of capital and further
announcements will be made in
due course.
006
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Outlook
Our near-term goal remains to achieve
the transition to commercial production.
We expect our technology to gain
traction in a number of different
electronics applications after an
expected initial low volume use case.
Ultimately, our medium-term goal is to
achieve adoption in high volume use
cases such as premium and mass market
mobile phones.
The funds that we intend to retain from
the settlement of the Samsung litigation
will allow us to plan with confidence for
the future and to accelerate the
development of higher performing
second generation materials. Our
industrial production capacity positions
us well to benefit from any widespread
adoption of quantum dots in commercial
applications, whilst our validated IP
creates a strong barrier to entry to
the industry.
By leveraging our validated IP portfolio
and successfully delivering near-term
commercial opportunities, we hope
to deliver an increase in value for
all stakeholders.
Dr Christopher Richards
Chairman
19 October 2023
Nanoco Group plc – Annual Report and Accounts 2023 007
Our industrial capacity positions us
well to benefit from any widespread
adoption of quantum dots in
commercial applications whilst our
validated IP creates a strong barrier
to entry to the industry.”
Infinite possibilities
We are leveraging our
experience to generate
further value from our IP
Monetisation of IP
During the litigation against Samsung, the
Company continued monitoring potential
infringement of our IP. Once our IP was
validated and the litigation settled, this created
a robust platform to engage with those other
potential infringers.
| Our team of expert advisers and experienced
staff from the Samsung litigation process are
driving these efforts forward
| The litigation proceeds have allowed us to
change the funding model for this initial work
to reduce the level of contingent third party
costs and funding
Patents
At year-end, Nanoco had 352 patents granted
and 23 patents pending. Four of these patent
families, totalling 46 patents worldwide, were
part of the litigation against Samsung and have
a number of years before they expire (see page
18 for more detail).
Nanoco continues to invest in its IP portfolio
to protect the potential commercial advantages
which our scientific progress can provide.
In addition to IP, there is a significant level
of trade secrets and know-how which is not
patented, but is important to the processes.
008
Nanoco Group plc – Annual Report and Accounts 2023
Chief Executive Officer’s statement
We are at an exciting
inflection point: the litigation
proceeds fully underpin our
transition from an R&D first
mover to a leading
producer of QD materials
in the short term
levels across the business and
preparations for commercial production.
After the year end, we signed an
agreement to hedge the second tranche
of proceeds from the Samsung
settlement due to be received in
February 2024. The hedge means
Nanoco will receive £58.8 million in return
for selling $71.75 million, which is the net
receipt after deducting withholding tax.
Business performance
Electronics
We continued our on-time delivery
of all development milestones for our
major European electronics customer.
Our processes for two sensing materials
have been successfully scaled up to
industrial production levels for consumer
electronics and additional raw material
suppliers have been qualified to secure
the supply chain as part of the full year
contract that ran until the end of April
2023. Two materials are now in final
production validation with our customer
and a new second generation material
has passed the “proof of concept” stage.
As previously announced, the size of any
first production order for the materials in
final validation is likely to be modest in
scale, potentially a few million devices,
with consequently low associated
revenue. This is typical of many new
technologies initial use cases.
The critical point is that for the first time
in our 20 year history, we will have a
product in commercial production with
a world leading customer operating in
electronics markets. A significant
validation of our technology and
production capacity. There is then clear
scope for growth to other use cases.
We also made progress throughout the
year on a number of sequential short
term development projects for our major
Asian chemical customer. Material
performance has exceeded challenging
expectations, and we continue
discussions around further collaboration.
Both the European and Asian customers
operate in large global markets wherein
final customer adoption of QD sensing
technology could lead to significant
revenue growth for Nanoco.
Following the validation of our IP in
the Samsung litigation process, we have
received inbound enquiries not just for
display applications but also for sensing
applications. This reflects the fact that
our scale up IP is equally applicable to
a range of sensing materials.
Enquiries have ranged in size from
customers of a similar scale to the
European and Asian customers to
startups. We are working to add further
customers and development work to
our commercial pipeline.
Nanoco Group plc – Annual Report and Accounts 2023 009
Brian Tenner
Chief Executive Officer
The Nanoco team continues to deliver
outstanding service and results for key
customers. We have successfully
achieved all of the challenging technical
milestones set for our high performing
nanomaterials. As a result, our customers
are now seeking longer and deeper
collaborations for the development, scale
up and commercial production of
nano-materials for use in sensing devices.
In parallel with organic progress, we
achieved a successful conclusion to
the IP litigation against Samsung.
Nanoco is now on a firm financial footing
to transition from being an R&D first
mover to being a leading producer
of QD materials in the short term.
We have also completed a number of
critical first steps for further potential
monetisation of our IP: these steps
include identifying potential infringers
and associated devices, analysing those
devices, and shortly after year end,
engaging with companies who may want
or need to take a license over Nanoco IP.
This will take time to deliver but as the
market grows, so does the opportunity.
We continue to strengthen our
operational capabilities to assure our
critical place in complex global supply
chains for electronics devices. We expect
to achieve certification to ISO 14001
(the environmental standard) and ISO
45001 (the health and safety standard)
during FY24.
We increased our headcount in
the second half of the year by one third
(11 people) to reflect increasing activity
Chief Executive Officer’s statement continued
The development cycles tend to be long
because the whole supply chain often
needs to be re-engineered on top of
developing QD material. One of the
advantages of the QD enhanced
CMOS sensors that Nanoco specialises
in is that the material represents an extra
layer in a pre-existing material stack.
Reaching final product validation testing
within six years demonstrates Nanoco’s
clear ability to develop and scale novel
materials to the exacting standards of
consumer electronics applications in
a relatively short time frame.
As shown in the infographic on page 13,
our offering of nanomaterials for use in
sensing applications continues to
progress from a single customer/single
product offering in early 2018 to a
position today where we are engaged
with multiple customers and are working
with many distinct materials and
wavelength combinations. The
infographic also shows the advancing
position of a number of materials as they
move through the steps from
development towards final validation –
the last step before commercial
production orders are placed.
As previously announced, already
published customer plans for a product
launch in 2024 support our goal of a
commercial production order by the
end of calendar year 2023, though,
as always, the final decision to adopt
the technology lies with the customers
of our customer and this cannot be
taken for granted. Our task is to ensure
that our materials consistently perform
as required by our customer so that
we are scaled up and ready for
a potential production order.
Our small scale allows us to be much
more agile and responsive to our
customers’ when compared to our
competitors. The in-depth nature of our
technological insight also means that we
do tend to “punch above our weight” in
terms of direct engagement with very
large end customers and their
technology teams. Conversely, given our
small scale, we work proactively to agree
commercial solutions of our customers to
the issue of supply chain risk.
Business performance continued
Electronics continued
We started FY24 with a limited short term
order book for development work due to
the successful completion of the large
contract with the European customer
in April 2023. Discussions are ongoing
with our European customer on the
development of next generation material
and on commercial supply terms for
production orders. Any production
orders will run in parallel with any new
development agreement.
If the negotiations are successful with
the European customer, in combination
with other revenues, we expect our order
book to rise to deliver similar services
and material revenue to that seen
in FY23.
The Board recognises that the adoption
of nano-material technology has taken
longer than expected for both Nanoco
and its competitors, creating commercial
challenges. Shareholders will be aware
that development cycles for new
advanced materials for use in consumer
electronics can be very long:
For example, Samsung was working with
quantum dots for over ten years before
commercialising the technology, and QD
Vision worked for almost ten years to
commercialise a technology that was
withdrawn after only one year.
Consumer device use of
cameras and imagers
$322m
Consumer device
use of imagers
$97m
$2,900m
Consumer device
use of imagers
$650m
2022
2028
010
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report The graphics below show a sample of the wide range of potential
applications for NIR and SWIR technologies in electronics supply chains.
Quality control
Fog/smog
Agriculture
ADAS
Iris recognition
Surveillance
We delivered all of the
challenging technical
milestones set by our
customers for our
high performing
nanomaterials.”
Display (CFQD® quantum dots)
Display materials remain a key focus
for Nanoco. Independent market
research supports a growing share of
quantum dot technology in the flat
panel display market where consumer
and environmental concerns mean that
cadmium free solutions are much
preferred (source: Omdia, TDR).
The forecast combination of cadmium
free systems taking a larger share of
the overall market, together with a fall
in Samsung’s relative share, is expected
to create two opportunities for Nanoco:
| Firstly, as a manufacturer of cadmium
free quantum dots (in our own facility
which can be readily expanded); and
| Secondly, as the owner of a validated
IP portfolio and process know how
which is fundamental to the
manufacture of cadmium free
quantum dots on an industrial scale.
The licence taken by Samsung on our
IP clearly demonstrates the broader
need to access our IP and technology.
This demand will grow over time, in line
with the number of cadmium free display
products sold in the market. With a firm
financial underpin, we now have the
option to self-finance the pursuit of those
who chose to incorporate our patented
IP without entering into either a licence
or material supply agreement with us.
As noted above, activity and new inbound
enquiries about display materials have
continued following our success with our
patents at the Patent Trial and Appeal
Board (“PTAB”) and the final outcome to
the litigation.
Applying quantum dots to micro-LEDs
for small screen devices, such as smart
watches or phones, is becoming an
important focus for a number of industry
participants. In such applications, the
volume of quantum dots, as a ratio to
the area covered, is significantly higher
than in a film for a television. So, while
the end devices may be smaller, this is
partly compensated for by the higher
concentration required.
While legislative progress around the
Restriction of Hazardous Substances
(“RoHS”) in Europe continues to be
frustratingly slow, a number of display
makers appear to be pre-empting the
legislative enforcement by exploring
a move to cadmium free solutions.
We have maintained our focus on our
“dot only” strategy where we aim to
provide the highest performing CFQD®
quantum dots. We retain our core
capabilities to deliver display R&D
services, scale up and commercial
production of material from our Runcorn
facility. We will continue to adopt a dual
approach to commercial exploitation of
our display materials, whether through
licencing or material supply from our
own manufacturing capability.
We remain well positioned to take
advantage of any broadening in the
adoption of non-toxic quantum dots
by global display manufacturers when
the opportunity arises.
Nanoco Group plc – Annual Report and Accounts 2023 011
Chief Executive Officer’s statement continued
Addressable display market for Nanoco CFQD and IP
set to rise from ~6% to ~34% of the total TV market
Millions of TVs
400
350
300
250
200
150
100
50
0
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
l Non-QD l Samsung QD TVs l Other QD TVs
Operations
The first half of 2023 saw further
consolidation and re-organisation of
equipment and processes in our
Runcorn production facility, having
completed the exit from our Manchester
facility at the end of CY22. The display
facility in Runcorn was taken out of
“mothball” and now hosts the R&D teams
as well as our production capability for
CFQD® quantum dots. We are seeing
the operational benefits of R&D, scale up
and production teams all working in the
same location. The financial benefits of
the Manchester exit have helped offset
inflationary increases in salaries and
other input costs.
The proceeds from the Samsung litigation
have allowed us to expand our team in
the second half of FY23. At the end of the
year we had 46 staff (FY22: 39). The
additional staff are largely in customer
facing or customer support roles which
were added in preparation for a
commercial production order. We also
added staff in key positions where we had
been operating on a lean basis while
tightly managing our cash resources over
the last three years. Our estimated
recurring cash cost base for FY24 is
approximately £6.4 million which is just
over half of the £11.0 million seen in FY19.
This reduction was achieved without losing
any of our core “dot only” capabilities.
We expect to deploy some of the
retained proceeds from the Samsung
litigation to further reinforce and
upgrade our production processes and
systems. As part of our quality
management system we are
implementing electronic batch recording
and line side systems to match our
position in important electronics supply
chains. As with our staffing profile,
we expect to increase our capital
expenditure from the absolute minimum
levels of the last three years of
extremely tight cash management.
This will proceed in parallel with projects
to deliver accreditation to ISO 14001
(the environmental standard) and ISO
45001 (the health and safety standard).
Both certifications are often expected
fundamental requirements of our
customers in electronics supply chains.
After the year end we signed a new rolling
one-year licence to occupy additional
space in our Runcorn facility. That space
is being used to create a small-scale
facility for device fabrication and a
dedicated analytical laboratory. Both will
significantly increase the speed of new
product development as we will be able
to generate our own device performance
data on our new materials without having
to wait on third party feedback. The new
device facility will also support business
development by allowing us to
demonstrate proven ‘in device’
performance to potential customers.
Leveraging intellectual property
We continue to proactively manage
our IP portfolio to maximise value and
protect our core competencies.
We finished the year with 375 patents
and patents pending (2022: 503). The
Group has retained its most strategic IP,
including both of the patents that had
been scheduled to go to trial and two
others included in earlier stages of the
litigation (the ”patent families” of these
four patents number 46 patents in total
covering various territories around
the world). Only one of the five patents
involved at the start of the litigation
was sold as part of the settlement
(representing just one PTAB validated
claim from the total of 47). This patent
had an unfavourable outcome in the
Markman hearing. As a film patent,
it was also outside the scope of our
“dot only” strategy.
The remainder of the patents sold to
Samsung (excluding the film family
which had 23 patents), made up of 95
individual patents, included patents for
applications such as Animal Husbandry,
which is not considered a high value
market for Nanoco in the medium term.
In summary, the sale of the IP is expected
to have minimal impact on Nanoco’s
current or planned commercial activities.
In any case, the sale agreement also
includes a licence back to Nanoco so
that it retains the right to utilise the IP in
those same patents if so required. The IP
licence granted to Samsung is a non-
exclusive licence and hence does not
impede Nanoco’s current or planned
commercial activities.
012
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Infinite possibilities
Investment in new material sets this
year has increased our customer
reach for new applications leading
to new R&D service income
Sensing goals: one material in production, a second validated
Continued development of our sensing portfolio
NIR
< 1.0 µm
NIR
C
B
2
A
1
July 2023
Wavelength
Material
A
Development
Optimisation
Scale up
Validation
1
Production
SWIR
1.0-1.3 µm
1.3-1.5 µm
> 1.5 µm
C
1
A
1
B
C
1
SWIR
B
1
1
C
B
1
1
A
1
1
Nanoco Group plc – Annual Report and Accounts 2023 013
Chief Executive Officer’s statement continued
Leveraging intellectual property
continued
We continue to preserve trade secrets
and have targeted our financial
resources on strategic areas such as
infra-red sensing where there is a strong
overlap with our core IP. These are also
areas with clear future commercial
opportunities and benefits to be had
from holding high quality patents.
We have created a heat map of
potential infringers. That heat map then
guided our analysis towards a sample of
devices from the more promising
opportunities. We have now engaged
with a number of potential infringers to
explore options for commercial
engagement. Further information is set
out on pages 18 to 19. If significant and
costly litigation is eventually required, the
Group will have the option to self-finance
any legal action for a higher return or
once again use third party financing for
a lower return but with lower risk.
We continue to
strengthen our
operational capabilities
to assure our critical
place in complex global
supply chains for
electronic devices.”
Investing retained litigation proceeds
People
Given the promising opportunities facing
the Group, as outlined in the Reduction of
Capital Circular issued on 20 June 2023,
the Board intends to invest as follows:
| funding the Group’s commercial
business activities until they become
self-financing (expected in CY25);
| pursuing a number of promising
investments in R&D to accelerate the
development of new generation
sensing materials;
| capital investments to improve
production efficiency;
| capital investment to expand our
footprint at Runcorn by creating
in-house device capability;
| self-financing the IP licencing
programme while retaining ownership
and control of the Group’s core IP
which also includes significant
know-how and trade secrets;
| paying off the Group’s entire current
borrowings (approximately £5.0
million) to become debt-free; and
| the Group will also maintain a cash
buffer for working capital and to
mitigate the risk of unforeseen events.
Environment/Restriction of
Hazardous Substances (“RoHS”)
We previously reported that the
European Commission (“EC”) received
a recommendation that the exemption
to allow cadmium (>100 ppm) in QD films
for display is no longer justified and
should be phased out by 31 October
2021. Progress in implementing legislation
to enforce this recommendation has
been slow. It therefore seems likely that
European consumers will continue to
be exposed for some time to the known
hazards of cadmium in televisions that
exceed the limits shown above.
In December 2022, the EC received
further recommendations that:
| a request to allow cadmium
(> 100 ppm) in solid-state lighting
should be denied; and
| a new exemption should be granted
for on-chip QD applications until
30th November 2027.
Ahead of nations passing the required
legislation, a number of display
manufacturers appear to be anticipating
the phasing out of cadmium from
QD displays and Nanoco has received
inbound enquiries in this field.
Our employees continue to provide
great service to our customers in
delivering high quality materials on
time and achieving challenging
milestones and deliverables. As noted
above, we have increased the number
of staff in the second half of FY23 to
reinforce our capabilities and to ensure
that the workload for staff
is manageable.
Our Employee Voice Committee (“EVC”)
has been very active throughout the year
to support the Group and all staff on
matters of stress, mental health and
general well-being at a time of
significant change and uncertainty.
During the year the majority of staff
have been trained on LEAN techniques
to improve problem solving and quality
control processes. All staff are also
actively engaged on health and safety
initiatives to improve our working
environment and reduce the overall risk
environment. We will continue to invest in
further training and development for all
staff as part of their career development
and our staff retention aims. This includes
general management training that feeds
into succession planning.
Retaining and incentivising our highly
skilled team is key to delivering organic
value and growth from the business. We
have awarded a general cost of living
increase for all staff for FY24 of 5% of
salary (excluding the Executive Directors
who are receiving 3%). We are also in the
process of arranging a workplace health
programme for all staff that has an
equivalent cost of 1% of salary. In
combination with the review of
comparative salaries against national
benchmarks (excluding London) in FY22,
we believe that all staff are now paid
around median salaries or higher. Upside
potential comes from bonuses linked to
Company-wide performance objectives
covering revenue, health and safety,
quality, and LEAN improvement
initiatives. All staff are also eligible to
participate in the Group’s Deferred
Bonus Plan and Long Term Incentive Plan.
We will review other benefits options
and further potential improvements
to pension contributions as our financial
situation improves and when the
Company becomes self-financing
in its organic operations.
014
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Outlook
Over the last five years, Nanoco
has grown from a “one customer,
one product” position for sensing
materials to multiple first and second
generation materials for two global
electronics supply chain companies,
with reach to thousands of their own
customers. The focus of R&D activity
has been narrowed to near-term
commercial opportunities and our fixed
cash cost base has been carefully
managed. The successful completion of
the Samsung litigation will deliver a net
$90 million of proceeds by February 2024.
We are also seeing growing interest
in CFQD® quantum dots for use in
the display industry and are engaging
cautiously with market players other
than Samsung who already participate
in or are seeking to enter the QD display
market. This extends to interest in Gen 2
QD displays as well as displays utilising
micro-LEDs.
At this time, the Board expects Nanoco’s
first commercial production order before
the end of CY23 and expects the first
order to be for a low volume application
(measured in millions of sensor units;
mid-volume would be tens of millions
and high volume would be hundreds
of millions).
Once the material has been adopted
in the technology ecosystem for one
application by one end customer,
our expectation is that customers
and applications will increase towards
the goal of a high volume mobile
phone application.
The significant investment by our
customers in Nanoco materials as part
of their their production and marketing
efforts strongly support this view. In any
event, Nanoco already has the flexibility,
capability and capacity to meet low
and high volume demand and everything
in between.
The Board is confident that near-term
opportunities for commercial production
of sensing materials, growing interest in
the Group’s display materials and the
potential for leveraging the Group’s IP
portfolio will deliver increases in
shareholder value in the short to medium
term. We remain focused on our goal
of becoming a self-financing producer
of high performing nano-materials.
Brian Tenner
Chief Executive Officer
19 October 2023
Nanoco Group plc – Annual Report and Accounts 2023 015
Our markets
Significant potential for revenue
generation from multiple
commercial markets
0 m
0
2028 $ 2,9
$395m
+28.3%
CAGR 22-28
$2,074m
+86%
CAGR 26-28
$405m
+10.1%
CAGR 22-28
$19m
+41%
CAGR 26-28
$7m
+5%
CAGR 22-28
Sensing markets
Market forecast
Cameras and modules
Key
l Defence, aerospace
and research
l Industry
l Medical
l Consumer
l Automotive
Source: Yole
Applications
2 m
2 $ 3 2
2
0
2
$89m
$228m
$5m
Face / Iris
recognition
Agricultural
drones
ADAS
Quality control
systems
Wearable
diagnostics
Security &
surveillance
Yole predict the adoption of SWIR technologies in high
end mobile phones during 2026 and penetration to higher
volume phones in 2028, helped by under-display capability
(equivalent to 86% CAGR between 2026 and 2028 to reach
$2.1 billion for 3D sensing modules). This research is consistent
with Nanoco’s view that initial use cases in 2024 will be for low
volume applications outside mobile phones. Nanoco’s existing
Runcorn production facility has capacity to produce sensing
materials for hundreds of millions of CMOS sensors. The Group’s
position in the supply chain has contractual protection to
mitigate the risk of a competitor becoming a major supplier
to our European customer.
Independent market researchers Yole Group estimate 6.1%
compound annual growth rate for CMOS (complementary
metal oxide semiconductor) Image Sensors in the six years
to 2028 to reach approximately $30 billion1. During the same
period, they forecast an increasing share of that market
for 3D sensors and multi-spectral cameras where the
performance of these devices can be significantly
enhanced by the integration of quantum dots.
QD enhanced CMOS sensors operating at SWIR (“Short Wave
Infra Red”) wavelengths are the most viable alternative to
extremely expensive Indium Gallium Arsenide (“InGaAs”) sensors
for use in consumer electronics. According to Yole2,
“Quantum dots appear to be the most well-positioned
technology for potential integration in consumer devices”.
1
“Yole” – Image Sensors Europe 2023.
2 “Yole” – SWIR Imaging 2023, Market Technology Report.
016
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Display markets
Evolution of the flat panel TV market
Other QD display devices
Millions of TVs
Millions of units
400
350
300
250
200
150
100
50
0
800
700
600
500
400
300
200
100
0
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
l Non-QD l Samsung QD TVs l Other QD TVs
l Monitor l Laptop l Tablet/Phablet l Other
Applications
TV
Tablets
Phones
Headsets
Monitors
Smart watch
The current market for flat panel TVs is approximately
250 million units per annum and is forecast to grow to over
300 million units by 2030.
suggests that number of cadmium based units is expected to
fall significantly, reflecting toxicity and environmental concerns
(“RoHS”) in various territories.
During the same period, the market share for displays
containing quantum dots is forecast to grow from over 15
million TVs (6% of the market in 2022) to over 100 million TVs by
2030 (35% of the forecast market). Based on market research,
the Company estimates that approximately 90% of the QD TVs
sold today are cadmium free, reflecting Samsung’s market
dominance. Within the QD TV market, the market research
Samsung’s relative share of the market is also forecast to
decline over the same period.
Nanoco Group plc – Annual Report and Accounts 2023 017
IP monetisation
Delivering value from our
IP requires two things:
1. Commanding patent portfolio
PTAB validated four
retained patents
Retained litigation claims
Remaining patent lives
Key: l Lawsuit l Lawsuit reserve l Other
1
Number of
claims
46
y
r
i
p
x
e
o
t
e
m
T
i
25
20
15
10
5
0
Retained
Sold
1
53
106
159
212
265
318
375
Settlement
$150m
Strong case for enforcement
Leveraging Samsung litigation
Expert working group
As a UK-based business specialising in
the design, scale up and manufacture
of novel nanomaterials, we will continue
to take steps to protect our platform
technology and our IP portfolio.
Following the validation of all 46 claims
in the four retained patents by the
Patent Trial and Appeal Board and the
subsequent licensing of our remaining
patent portfolio by Samsung, the group
is confident in the applicability of our IP
to other participants in the cadmium-
free quantum dot display market.
The experience gained by the Nanoco
team during the Samsung litigation,
combined with our retained experts,
is a strong platform for delivering further
value from our IP portfolio and ensuring
that income is for the benefit of Nanoco
and its shareholders.
The $150 million agreement with
Samsung to settle the litigation also sets
a precedent for future discussions with
potential infringers.
Nanoco continues to monitor the market
for potential infringement of our IP.
Our expert team is made up of internal
staff and external advisers.
We have identified a number of
potential infringers as shown in the
heatmap opposite.
We have analysed a range of consumer
devices available in the market to focus
on devices and manufacturers most likely
to be infringing our IP.
018
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report
2. Deep and impacted market
Forecast QD TV market
Millions of TVs
Analysis of potentially
infringing products
Value chain analysis
Gross ‘value’ to each player
80
70
60
50
40
30
20
10
0
16
14
12
10
8
6
4
2
0
100%
80%
60%
40%
20%
0%
20 21 22 23 24 25 26 27 28 29 30
Year
s
t
c
e
p
s
u
S
s
n
w
o
d
r
a
e
T
i
m
u
m
d
a
C
s
D
Q
o
N
o
d
o
T
e
e
r
f
-
m
u
m
d
a
C
i
o
C
D
Q
o
C
m
l
i
F
o
C
l
e
n
a
P
d
n
a
r
B
r
e
l
i
a
t
e
R
Infringement heat map
Initial engagement,
seek collaboration
Direct engagement
in near term
Summary
Nanoco is focused on maximising
value from our IP portfolio. Whilst we
have already settled with the largest
manufacturer of cadmium-free quantum
dot televisions, as the market develops
there will be more opportunity for
licensing or potential litigation.
We will also continue to build our IP
portfolio to ensure future technological
developments are protected.
As QD TVs capture a larger share of
the total flat panel TV market and as
more market participants build market
presence, we see a significant
opportunity to generate income
by aggressively enforcing our IP.
)
y
a
d
o
t
(
e
u
s
r
u
p
o
t
e
u
a
V
l
Monitor activity
Initial engagement,
await volume growth
Probability
Nanoco Group plc – Annual Report and Accounts 2023 019
Revenue streams
All revenue streams can contribute
to our growth
Products
Services
Licences
Our Runcorn facility has the capacity to
make high volumes of CFQD® quantum
dots and HEATWAVE™ nanomaterials for
IR sensing applications. The revenue
generation capacity can be easily
scaled by adding additional shifts with
the overall potential return on the asset
base being attractive, and benefiting
strongly from operational leverage if
extra shifts and volumes are added.
Revenue potential: HIGH.
Royalties
As well as the ability to make and sell
materials directly to our customers,
the agreements with our channel
partners allow them to manufacture
or distribute our materials themselves
and then pay a royalty on the value
of their sales to their customers.
This revenue stream has the potential
for high leverage since it is not
constrained by manufacturing scale
and also has minimal costs associated
with incremental sales via this channel.
Success in the Samsung litigation has
increased the potential of this income
stream. Revenue potential: MEDIUM.
Our highly skilled R&D and scale up
teams are able to design, develop
and scale new materials for customer-
specific applications. We are able to
charge customers for professional
services when we carry out these
sorts of development activities for
them with rewards often linked to
achieving technical milestones or
outcomes. The last two financial
years have seen significant revenue
generated in this area. Revenue
potential: LOW.
When a channel partner initially acquires
a right of access to or use of Nanoco
technology and IP, it typically pays a
one-off licence fee. These fees reflect
the costs already previously incurred
by Nanoco in developing our technology
and IP and hence represent a return on
those historical investments. Success in
the Samsung litigation has increased
the potential of this income stream.
Revenue potential: LOW.
Products
Key
l Low - < £5m per annum
l Medium - < £10m per annum
l High - > £10m per annum
Services
Our
revenue
Royalties
Licences
020
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Section 172(1) statement
How we engage with
our stakeholders
Section 172(1) report
In line with section 172(1) of the Companies Act 2006, the
Directors of the Company must act in a way which they
consider, in good faith, would most likely promote the success
of the Company for the benefit of its members as a whole, and
in doing so must have regard to a number of other key matters.
Likely long-term consequences of decisions (s.172(1)(a))
Given the nature of the business, the Board takes a medium-
term approach to its decision making to ensure that the
Company is able to deliver its strategy of creating value
for all of our stakeholders. Risk management is also key to
understanding the likely consequences of actions.
The Board plays a key role in reviewing the Company’s
approach to risk, including an assessment of its emerging
and principal risks. See pages 33 to 35 of the Strategic report
for a description of the identified risks and how these are
being controlled or mitigated.
Given the group’s finances, the Board has been continually
reviewing the Company’s current and forecast financial position.
This year the Directors selected a four-year timeframe over which
to assess the viability of the Company. The Viability statement
can be found on pages 36 and 37 of the Strategic report.
Maintaining a reputation for high standards of business
conduct (s.172(1)(e))
The Company has in place a Code of Conduct which acts as
a guide for employees to do the right thing. The Company also
has well-embedded policies in place which assist with ensuring
high standards of conduct, including with respect to the
following key areas: health, safety and environment;
whistleblowing; anti-bribery and corruption; human rights;
and modern slavery. The environmental, social and governance
(“ESG”) disclosures section of the Directors’ report, from pages
38 to 45, provides further insight into measures put in place by
the Board to assist with maintaining a reputation for high
business conduct standards.
Acting fairly between members of the Company (s.172(1)(f))
The Directors also have regard to the need to act fairly
between members of the Company, aiming to understand
their views and act in their best interests. The ownership of
the Company follows a “one share, one vote” structure, which
assists with promoting parity in shareholder rights. The Board
ensures that there is fair and equal dissemination of information
to all shareholders and has a dedicated Investors section on
the Company’s website which is available to all shareholders.
This provides easy access to RNS announcements and reports
and publications. All members are invited to attend the Annual
General Meetings of the Company, offering an opportunity for
members of any size shareholding to have a conversation with,
and ask questions to, each of the Directors. For any Annual
General Meetings where in-person attendance is prohibited
due to the Government’s regulations, all shareholders will be
offered the opportunity to submit questions to the Board ahead
of the meeting with answers being made available to them.
Having regard to specific stakeholder groups (s.172(1)(b)
to s.172(1)(d))
The table which follows on the next page seeks to
provide insight into how the Board carries out its duty
under this section.
Case study
Case study
Samsung settlement
Background
Move to Runcorn and investment in Runcorn infrastructure
Background
The Company agreed a settlement with Samsung
Management decision to consolidate operations in Runcorn
s.172 factors considered:
s.172 factors considered:
| Long-term consequences: The cash resources underpin
| Long-term consequences: The new facility has been
the Company’s future commercial prospects
updated to provide better facilities for staff
| Interests of shareholders: The cash removes uncertainty
around the future of the company, with no further equity
fundraises required, and provides a return of capital
| Interests of the Company employees: The cash resources
received and to be received significantly mitigates the
risk of further redundancies
| Impact on customers: Customers have increased faith
| Interests of the Company employees: Staff were
consulted on what they wanted in the facility.
The expanded facility preserves R&D, scale up
and production capability to generate value
| Impact on customers: The improved meeting rooms
and offices provide Nanoco with somewhere to
facilitate customer visits
in Nanoco as a supplier
| Impact on community: Increased jobs in the local area
| Impact on suppliers: Suppliers can offer improved terms
to Nanoco
Nanoco Group plc – Annual Report and Accounts 2023 021
Strategic report
Section 172(1) statement continued
Having regard to specific stakeholder groups (s.172(1)(b) to s.172(1)(d)) continued
Why we engage
How we engage and respond
Impact of engagement
Engagement during the year
Shareholders
| To enable shareholders to understand
Nanoco’s strategic aims and results
| We build relationships with our investors
through our investor relations activities
| To help shareholders to understand
| In our Annual Reports, we update all
management’s aims, responsibilities and
incentive structures
stakeholders on our strategic progress,
and explain any financial implications
| To help shareholders to understand our
commitment to our staff, communities
and the wider environment
| We consider investor feedback, and what
impact this may have on the business
| To ensure employees feel valued for
| We communicate key decisions and
Employees
their contribution
| To empower our employees
| To enhance our employees through
training and progression
collaborate through our Employee Voice
Committee, which includes a Director
| We give them the tools to work effectively
| We encourage our employees to provide
solutions to problems
| To ensure we can provide the best service
and products possible, to meet the
customers’ needs
| We ensure open and constant communication
with customers, to ensure our products and
services are world leading
Customers
| To protect our customers’ technology
| To ensure we are complying with
regulatory requirements
| We welcome feedback from customers,
and work collaboratively to achieve our
customers’ goals
| We aim to create long-term investor value,
| We engaged openly with shareholders through analyst briefings and
through growing from an R&D services
subsequent Q&A sessions
business to a commercially viable niche
production company
| The successful conclusion to the
Samsung litigation provides a means
to return capital to shareholders in the
short term
| We expanded engagement in Investor Meet Company presentations
| We ensured an open forum at the general meetings held during the year
| Following the requisitioning of a general meeting, we met with a number
of shareholders to listen to their concerns and we will look to address
these going forward
| Our employees feel empowered to achieve
| We ran our third successive annual engagement survey to solicit
solutions to problems
employee feedback. We continue to build on this feedback
| Our employees feel more valued and
| We held a number of all-Company days to explain our Company strategy
aligned to the business
to employees
| We improve as our employees improve
| We set our employee targets in line with corporate goals
| We consulted on further remuneration proposals through the EVC
| We build strong relationships with
| Through the year, we actively engaged in weekly technical updates to aid
customers, who believe in the capabilities
development and collaboration
| We discussed openly any logistical challenges due to import/export
regulations, helping customers with their own compliance goals
of our platform technology and our
employee expertise
| Our customers trust us to be able to
meet their requirements to create
world-leading products
| To develop long-term, collaborative
| We create close collaborative working
| This helps us to attain best value from
| We performed audits on suppliers to ensure their compliance with legislation
Suppliers
partnerships for key, difficult to source
materials
| To mitigate the risk of not being able to
succeed commercially
| To comply with regulatory requirements
relationships with key suppliers, to ensure clear
communication, active issue resolution and
effective qualification of products
| We encourage open engagement,
to ensure compliance with the relevant
regulatory requirements
our supply chain, and mitigates the risk
of a breakdown in process negatively
impacting the business
| Through regulatory checks, we ensure our
suppliers are complying with regulatory
requirements, e.g. payment of minimum wage
| We engaged with a number of suppliers on the qualities of our raw
materials, and considered their impact on our products for our customers
| We maintained dialogue on the availability of raw materials, and took
action when there was a risk this could be compromised
| Some supply chain issues have been experienced, but the impact of
these has been mitigated through close collaboration with suppliers
| To ensure compliance with regulatory
| We review our operations periodically to
| Compliance with regulatory requirements
| Post year end, we completed our ISO 9001 recertification
requirements
ensure compliance with regulations
Regulators
| To ensure best practice
external reviews (e.g. ISO 9001 accreditation)
| To protect our staff and communities
| We actively maintain standards through
enables the business to operate in a safe
manner, protecting our employees and the
wider communities
| We constantly reviewed operating procedures to ensure best practice
| We continued engagement with European RoHS regulators to remove
exposure to toxic cadmium from EU customers
| To make a meaningful contribution
to the community
| Our Employee Voice Committee (“EVC”) looks
at ways in which we can help the community
| Our EVC look at ways in which we can have
| We held a number of Company events, organised by the EVC,
a positive impact on the local community
which benefitted the communities
Community
| To attract and retain talent
ask questions at our general meetings
| Allowed employees to donate blood during work time
| To create a positive working culture
| We invite both members and non-members to
| Being involved with the local community
| Provided matched fundraising
improves morale across the employees,
and improves external perceptions of
Nanoco as a company
| To improve our ESG credentials
| We have engaged an external party to review
| To reduce carbon emissions as a result of
| We have looked at purchasing raw materials in bulk to reduce
| To mitigate environmental damage
from business activities
Environment
our materiality assessment
| We are reviewing our ESG strategy
| Looking at ways of reducing our
environmental footprint
| Ensuring we recycle as much waste as possible
| Engaging with our landlord to make facilities
more environmentally friendly
022
Nanoco Group plc – Annual Report and Accounts 2023
business activity
emissions from deliveries
| To ensure waste is recycled where possible
| We discussed a number of ESG projects with landlords (such as installation
| To improve our impact on the environment
of electric car charging points)
| We have implemented a process to consolidate waste to reduce emissions
from deliveries and excess packaging
Strategic report Having regard to specific stakeholder groups (s.172(1)(b) to s.172(1)(d)) continued
Why we engage
How we engage and respond
Impact of engagement
Engagement during the year
Shareholders
| To enable shareholders to understand
| We build relationships with our investors
Nanoco’s strategic aims and results
through our investor relations activities
| To help shareholders to understand
| In our Annual Reports, we update all
management’s aims, responsibilities and
stakeholders on our strategic progress,
incentive structures
and explain any financial implications
| To help shareholders to understand our
| We consider investor feedback, and what
commitment to our staff, communities
impact this may have on the business
and the wider environment
| To ensure employees feel valued for
| We communicate key decisions and
Employees
their contribution
| To empower our employees
| To enhance our employees through
training and progression
collaborate through our Employee Voice
Committee, which includes a Director
| We give them the tools to work effectively
| We encourage our employees to provide
solutions to problems
and products possible, to meet the
with customers, to ensure our products and
customers’ needs
services are world leading
Customers
| To protect our customers’ technology
| To ensure we are complying with
regulatory requirements
| We welcome feedback from customers,
and work collaboratively to achieve our
customers’ goals
| To develop long-term, collaborative
| We create close collaborative working
partnerships for key, difficult to source
relationships with key suppliers, to ensure clear
materials
Suppliers
| To mitigate the risk of not being able to
succeed commercially
| To comply with regulatory requirements
communication, active issue resolution and
effective qualification of products
| We encourage open engagement,
to ensure compliance with the relevant
regulatory requirements
| We aim to create long-term investor value,
through growing from an R&D services
business to a commercially viable niche
production company
| The successful conclusion to the
Samsung litigation provides a means
to return capital to shareholders in the
short term
| We engaged openly with shareholders through analyst briefings and
subsequent Q&A sessions
| We expanded engagement in Investor Meet Company presentations
| We ensured an open forum at the general meetings held during the year
| Following the requisitioning of a general meeting, we met with a number
of shareholders to listen to their concerns and we will look to address
these going forward
| Our employees feel empowered to achieve
| We ran our third successive annual engagement survey to solicit
solutions to problems
employee feedback. We continue to build on this feedback
| Our employees feel more valued and
| We held a number of all-Company days to explain our Company strategy
aligned to the business
to employees
| We improve as our employees improve
| We set our employee targets in line with corporate goals
| We consulted on further remuneration proposals through the EVC
| To ensure we can provide the best service
| We ensure open and constant communication
| We build strong relationships with
| Through the year, we actively engaged in weekly technical updates to aid
customers, who believe in the capabilities
of our platform technology and our
employee expertise
| Our customers trust us to be able to
meet their requirements to create
world-leading products
development and collaboration
| We discussed openly any logistical challenges due to import/export
regulations, helping customers with their own compliance goals
| This helps us to attain best value from
| We performed audits on suppliers to ensure their compliance with legislation
our supply chain, and mitigates the risk
of a breakdown in process negatively
impacting the business
| Through regulatory checks, we ensure our
suppliers are complying with regulatory
requirements, e.g. payment of minimum wage
| We engaged with a number of suppliers on the qualities of our raw
materials, and considered their impact on our products for our customers
| We maintained dialogue on the availability of raw materials, and took
action when there was a risk this could be compromised
| Some supply chain issues have been experienced, but the impact of
these has been mitigated through close collaboration with suppliers
| To ensure compliance with regulatory
| We review our operations periodically to
requirements
ensure compliance with regulations
| To protect our staff and communities
| We actively maintain standards through
Regulators
| To ensure best practice
external reviews (e.g. ISO 9001 accreditation)
| Compliance with regulatory requirements
enables the business to operate in a safe
manner, protecting our employees and the
wider communities
| Post year end, we completed our ISO 9001 recertification
| We constantly reviewed operating procedures to ensure best practice
| We continued engagement with European RoHS regulators to remove
exposure to toxic cadmium from EU customers
| To make a meaningful contribution
| Our Employee Voice Committee (“EVC”) looks
to the community
at ways in which we can help the community
Community
| To attract and retain talent
ask questions at our general meetings
| To create a positive working culture
| We invite both members and non-members to
| Our EVC look at ways in which we can have
a positive impact on the local community
| Being involved with the local community
improves morale across the employees,
and improves external perceptions of
Nanoco as a company
| We held a number of Company events, organised by the EVC,
which benefitted the communities
| Provided matched fundraising
| Allowed employees to donate blood during work time
| To improve our ESG credentials
| We have engaged an external party to review
| To reduce carbon emissions as a result of
| We have looked at purchasing raw materials in bulk to reduce
| To mitigate environmental damage
from business activities
Environment
our materiality assessment
| We are reviewing our ESG strategy
| Looking at ways of reducing our
environmental footprint
| Ensuring we recycle as much waste as possible
| Engaging with our landlord to make facilities
more environmentally friendly
business activity
emissions from deliveries
| To ensure waste is recycled where possible
| We discussed a number of ESG projects with landlords (such as installation
| To improve our impact on the environment
of electric car charging points)
| We have implemented a process to consolidate waste to reduce emissions
from deliveries and excess packaging
Nanoco Group plc – Annual Report and Accounts 2023 023
Our business model
Our platform technology
is the basis for our growth
and commercialisation
is the ultimate goal for
all stakeholders
EMPLO
Y
E
E
S
ERTIS E
P
X
E
ATF O
L
P
R M TECHN
O
L
O
G
Y
INTELLECTUAL
PROPERTY
A
GILITY
N S
T I O
A
R
E
O P
Intellectual
property
Deep IP portfolio,
a key investment
proposition
Platform
technology
High performing
nanomaterials
Expertise
Our platform and people
deliver novel solutions to
new application challenges
Agility
Broad skill set and agile
team structures enable rapid
resource pivot to alternative
commercial opportunities
Licence partners
Major channel partners
with global reach to multiple
markets and applications
Employees
Highly skilled staff with
extensive technical knowledge
and flexible skill set
Operations
Installed asset base capable
of generating significant
revenue in multiple markets
S
E
E
S
N
E
C
I
L
S
R
E
M
O
T
S
U
C
R
E
N
T
D
N
A
R
A
P
024
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report
Platform technology
Employees
About our business model
Our business model has a number of
key strengths. It also enjoys a diverse
range of potential income streams.
This was amply demonstrated over the
last two years where services income
featured strongly compared to previous
years. Our over-arching medium-term
goal is to maximise our revenue from
direct product sales.
Intellectual property (“IP”)
IP and process technology know-how
are foundational assets for the group
and a key strength. Our technology is
heavily patented to secure its use for the
group. New IP is continually generated
through our R&D activities and all
potential patents are reviewed by our
internal Patent Review Board for
commercial value before being filed.
We continue to strengthen our IP position
by patenting technology we believe will
have real commercial value in the future.
It is worth noting that on top of our
formal IP portfolio, we also have
significant know-how around our
methods and processes. We tend to
hold this information as commercial
secrets rather than as formally
registered IP.
Our nanomaterials have a wide range
of electronic properties, usually
opto-electrical in nature. These include
absorption of different forms of energy
and its emission and potentially its
conversion to a different form of energy
(electricity to light, for example) or a
different variety of the same energy
(blue light to green light, for example).
One specific class of our materials is our
CFQD® quantum dots that avoid the use
of toxic cadmium in display applications.
The same absence of toxic chemicals
means we can also develop dots that
can be applied in life sciences
applications for use in the human body,
although this is not currently something
the Group is working on.
Expertise and agility
We take advantage of our extensive
technical expertise and agile workforce
to be able to respond to complex and
challenging customer requirements.
We can also do this much faster than
many of our competitors. Whilst
development cycles may take a number
of years, we believe our expertise in
these areas mean we can solve technical
challenges quickly to develop and scale
up novel new nanomaterials.
Our staff are highly skilled in a
number of specialist areas. There are
13 employees with PhDs and other
postgraduate qualifications. In R&D
our expertise ranges from chemistry to
physics. Staff are also adept at taking
lab scale processes and scaling them
up to industrial production scale. We also
have strong process improvement and
yield optimisation skills that improve both
production volumes and our input costs.
We further invest in our employees
through training to ensure they are
developing their capabilities further.
Production capacity
Our Runcorn production facility has two
distinct production labs. One is focused
on CFQD® quantum dots for use in
display. The other facility is focused on
nanomaterials for use in infra-red sensing
applications. In combination they create
an extensive revenue-generating
capacity for the group through direct
product sales to our customers.
The nature of the facilities means they
also deliver strong operational leverage
if additional volumes are added with
additional shifts, and we continue to
identify ways to improve our efficiencies.
Operator assessing the performance of raw materials.
Nanoco Group plc – Annual Report and Accounts 2023 025
Our strategy
Our “dot only” strategy
delivers world-class
nanomaterials for
our customers
Our IP and staff
ensure we continue
to be at the forefront
of quantum dot
advancements
026
Nanoco Group plc – Annual Report and Accounts 2023
1
Growth
Objective
| To become a full service
production company
| To become self-sustaining
financially
How
| Own manufacture and direct
supply to customers
| Non-exclusive technology
licensing
| Professional services
| Royalty income
Future focus
| Converting current opportunities
into revenues with a strong
emphasis on nanomaterials
| Exploring opportunities with a
number of potential customers
KPIs
| Revenue
| EBITDA
| Billings
Risks
| Strategic
| Operational
| Financial
Strategic report 2
Investment
3
IP monetisation
Objective
Objective
| To maintain our competitive
advantage
| To continue investing for future
product pipeline
| To utilise our core IP to generate
future revenue streams
How
How
| Continuing to create and patent
new IP with clear short to
medium-term commercial
opportunities
| Continuing to develop in-house
manufacturing capabilities
| Assisting licensees in maximising
their manufacturing opportunities
| Potential litigation against
infringers of our IP
Future focus
Future focus
| Continuing to invest in R&D in
order to remain at the forefront
of this technology
| Exploring ways to open up new
market opportunities
| Giving partners the best
performing dots
| Identifying companies which
may be infringing our IP
KPIs
KPIs
| Year-end cash and cash burn rate
| Investment in R&D
| Investment in R&D
| Portfolio of patents
and patents pending
Risks
| Strategic
| Compliance
| Portfolio of patents and
patents pending
Risks
| Strategic
Nanoco Group plc – Annual Report and Accounts 2023 027
Our key performance indicators
We have made strong progress
in safeguarding the future of the
Company and delivering value to
shareholders in the medium term
Revenue
£ million
Adjusted LBITDA
£ million
Year-end cash
£ million
£5.6m
+128%
(£0.4m)1
+83%
£8.2m
+21%
2023
2022
2021
2020
2019
5.6
2.5
2.1
3.9
7.1
2023
2022
2021
2020
2019
(0.4)
(2.3)
(2.8)
(2.9)
(3.8)
2023
2022
2021
2020
2019
8.2
6.8
3.8
5.2
7.0
Measurement
Measurement
Measurement
The value of goods and services
recognised as income in accordance
with IFRS 15 Revenue Recognition.
Grant income is also important
and included under other
operating income.
Why it is important
Revenue (and its change year on
year) shows the speed with which the
business is growing or contracting.
What it means
In combination with gross margins
and overheads it shows whether
the group is getting closer to the
targeted breakeven position.
Impact of Samsung settlement
The IP licence income during
the year, relating to the Samsung
litigation, contributed £3.0 million
to revenue.
Operating profit excluding
exceptional items, share-based
payment charges, depreciation
and amortisation.
Why it is important
Reducing LBITDA is a critical
medium-term goal as it
demonstrates progress towards the
organic business being self-funding.
What it means
The group’s LBITDA is a very good
proxy for its organic cash flows and
shows how close the group is to
being self-financing.
Impact of Samsung settlement
The IP licence income during
the year, relating to the Samsung
litigation, contributed £3.0 million
to EBITDA.
1 Calculation provided on page 31.
Cash and cash equivalents.
This reflects current monthly gross
cash consumption before revenues
and other receipts.
Why it is important
The business operates on a cash
consuming basis and this blended
KPI indicates the duration of
funding visibility.
What it means
In combination with the group’s
operating plans and budgets,
the current balance underpins
the Directors’ going concern
and viability statements.
Impact of Samsung settlement
The Group retained £4.5 million from
the first Samsung payment.
Strategy link
1
3
Strategy link
1
Strategy link
1
2
3
028
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Key
Strategy link
1
2
3
Growth
Investment
IP monetisation
Billings
£ million
£63.0m
+2,233%
Investment in R&D
£ million
£1.8m2
2%
2023
2022
2021
2020
2019
63.0
2.7
1.7
2.5
9.6
2023
2022
2021
2020
2019
Portfolio of patents
and patents pending
Number of patents
375
(25%)
1.8
1.8
2.2
3.1
4.4
2023
2022
2021
2020
2019
375
503
559
731
745
Measurement
Measurement
Measurement
The value of invoices raised during
the year for goods and services
delivered or to be delivered to
customers including those relating
to the sale of IP (excluding VAT).
Why it is important
Billings are a useful indicator of both
current and future revenue.
What it means
Billings are a leading indicator of future
revenues and cash flows. This year, an
element of the billings to Samsung will
be deferred and the income
recognised over future periods.
Impact of Samsung settlement
Billings to Samsung in the year
totalled $75 million (£60.9 million).
The sum of all costs incurred in
research and development activities.
This includes salary costs and other
direct R&D costs.
The group’s IP lawyers report
monthly on patents granted
or filed in the respective patent
offices in various countries.
Why it is important
Why it is important
Nanoco prides itself on the scale
and quality of its R&D efforts –
which feed its IP portfolio and also
commercial opportunity pipeline as
it develops new materials for potential
new markets and applications.
What it means
R&D spend is a leading indicator of
new product development. It also
impacts potential customer pipelines.
Impact of Samsung settlement
No impact.
2 Includes £0.5 million in Cost of Sales due
to reallocation within Income Statement.
Our IP portfolio is a key strength
of Nanoco and a strong reason
to invest. It supports our efforts to
monetise our investments in R&D.
What it means
The overall quality of our IP portfolio
continues to improve. We continue
to proactively review the portfolio for
relevance and value. As our business
focus changes this can lead to a
decision to allow no longer relevant
IP to lapse.
Impact of Samsung settlement
The Group sold 118 non-core patents
to Samsung.
Strategy link
1
Strategy link
2
3
Strategy link
2
3
Nanoco Group plc – Annual Report and Accounts 2023 029
Financial review
Liam Gray
Chief Financial Officer
Financially underpinned
group with growth
opportunities
Summary
| Revenue increased by 128% to
£5.6 million (2022: £2.5 million),
driven by the licence income
from Samsung.
| The sale of non-core IP to Samsung
in the year generated a one-off
profit of £68.7 million
| Litigation related costs of
£49.3 million were recognised
in full in the year
| Adjusted LBITDA has reduced
to £0.4 million (2022: £2.3 million)
excluding the profit on disposal
of IP, reflecting the additional
revenue in the period
| Nanoco retained £4.5 million of
the first tranche of cash received
from Samsung after paying all
litigation related costs
Revenue increased by £3.1 million to
£5.6 million (2022: £2.5 million).
The increase is due to the licence
agreement signed with Samsung
which contributed £3.0 million, with the
remaining revenue largely related to
the ongoing project with the European
electronics customer.
The sale of products and services
rendered accounted for 45% (2022: 96%)
of revenue, with the balance being
licence income (including Samsung
income in FY23). Revenue from services
has increased from £1.6 million to £1.7
million due to the continued work with
the European electronics customer.
Revenue from the sale of development
products was £0.9 million (2022:
£0.8 million).
Billings including those to Samsung
increased by £60.3 million to £63.0 million
(2022: £2.7 million). Excluding the impact
of any Samsung related billings, billings
were £2.1 million which is lower than
revenue due to the invoicing profile
of the agreement with the European
electronics customer.
Other operating income generated
£0.2 million (2022: £0.4 million) and
related to two ongoing projects with
Innovate UK.
During the year, the group sold non-core
IP to Samsung which generated a profit
on disposal of £68.7 million (2022: £nil) as
part of the settlement of the Samsung
litigation. As part of the agreement,
Nanoco dismissed its litigation against
Samsung, and incurred litigation-related
costs of £49.3 million.
There were a number of significant one-off costs in the financial year ended 31 July
2023, shown below
R&D expense
Administrative expenses
Total operating expenses
Settled litigation costs
Foreign exchange on USD balance
Share-based payment charge
Employer’s NI on SBP
Requisitioned general meeting
Adjusted operating expenses
2023
£ million
2022
£ million
1.3
57.4
58.7
(49.3)
(1.7)
(1.0)
0.2
(0.5)
6.4
1.3
5.4
6.7
—
0.2
(0.6)
(0.3)
—
6.0
Total adjusted operating expenses increased on prior year to £6.4 million
(2022: £6.0 million). Savings from the completion of the exit from the Manchester
premises in November 2022 were offset by an increased headcount, which at year
end totalled 46 (2022: 39), and additional inflationary cost increases across the group.
030
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Highlights
Revenue
Other operating income
Adjusted LBITDA
Net profit/(loss)
Profit/(loss) per share (p)
Billings
Cash and cash equivalents
2023
£ million
2022
£ million
% change
Impact of the Samsung settlement in the year
5.6
0.2
(0.4)
11.1
3.44
63.0
8.2
2.5
0.4
(2.3)
(4.7)
(1.52)
2.7
6.8
128%
(36%)
83%
236%
226%
2,233%
21%
IP license revenue
£3.0m
(£49.3m)
Settled litigation costs
Profit on sale of IP
£68.7m
£60.9m
Billings
Non-GAAP measures
The non-GAAP measures of adjusted operating loss and adjusted loss before
interest, tax, depreciation, amortisation, share-based payment charges and
exceptional items (“LBITDA”) are provided in order to give a clearer understanding
of the underlying loss for the year that more closely reflects the recurring operational
cash flow of the business. The calculation of non-GAAP measures is shown in the
tables opposite and below:
Operating profit/(loss)
Settled litigation costs
Profit on sale of IP
Requisitioned general meeting
Foreign exchange
Share-based payment charge
Employer’s NI on SBP
Depreciation
Amortisation1
Adjusted LBITDA
2023
£ million
2022
£ million
15.0
49.3
(68.7)
0.5
1.7
1.0
(0.2)
0.6
0.4
(0.4)
(4.8)
—
—
—
(0.2)
0.6
0.3
0.5
1.3
(2.3)
1
Includes impairment of intangible assets.
The finance expense in the year of £5.5 million (2022: £0.5 million) included a one-off
contingent interest payment of £4.7 million against the outstanding loan notes in
relation to the successful conclusion of the Samsung litigation.
The profit before tax was £9.6 million (2022: £5.2 million loss), with the improvement
driven by the sale of IP during the year, contributing a profit of £68.7 million, offset by
the litigation costs of £49.3 million and contingent interest of £4.7 million.
Taxation
The tax credit for the year was £1.5 million (2022: £0.5 million). This comprises of a UK
corporation tax charge of £1.0 million (2022: £nil) and an overseas corporation tax
charge of £0.3m (2022: £nil), offset by a R&D tax credit of £0.3 million (2022: £0.5
million) and the recognition of a deferred tax asset of £2.5 million (2022: £nil). In
addition, the Group incurred withholding tax in Korea of £2.3 million in the year,
which has been recognised as an asset as it can be offset against future profits.
The Company has £30.8 million of
accumulated losses to offset against
future profits.
Cash flow and balance sheet
During the year cash, cash equivalents,
deposits and short-term investments
increased to £8.2 million (2022: £6.8 million).
The net cash outflow, excluding the net
cash flows related to the Samsung
settlement in February 2023 (£4.5 million
inflow after fees), was £3.1 million
(2022: £2.4 million outflow). The increase
in cash outflows reflects increases in the
cost base, with an increase in headcount
in the second half of the year, inflationary
pressures, one off costs including the
requisitioned general meeting,
and investment in capital expenditure
compared to FY22. Tax credits of
£0.5 million (2022: £0.7 million) were
received during the year.
Expenditure incurred in registering
patents totalled £0.1 million
(2022: £0.1 million). Capitalised patent
spend is amortised over ten years in line
with the established group accounting
policy. During the year, the group
disposed of patents with a net book
value of £0.3 million as part of the
Samsung settlement.
During the year, an IP impairment charge
of £0.1 million was recognised
(2022: £0.9 million). This reflects the
continued rationalisation of the patent
portfolio to ensure the remaining patents
are commercially viable in the short to
medium term.
Nanoco Group plc – Annual Report and Accounts 2023 031
Financial review continued
Billings reconciliation
Revenue
Movement in deferred income
Billings on sale of IP
FX movement between billing and recognition
Billings
2023
£ million
2022
£ million
5.6
23.3
34.5
(0.4)
63.0
2.5
0.2
—
—
2.7
Cash flow and balance sheet
continued
Expenditure on tangible fixed assets
increased to £0.3 million (2022: £nil)
as the Company improved its Runcorn
infrastructure.
Foreign exchange management
The group invoices most of its revenues
in US Dollars. The group is therefore
exposed to movements relative to
Sterling. The group will use forward
currency contracts to fix the exchange
rate on invoiced or confirmed foreign
currency receipts should the amount
become significant and more predictable.
The second tranche of litigation
proceeds is expected to be received in
February 2024 (gross $75 million, net
$71.75 million after $3.25 million
withholding tax paid at source). After the
year end, the group took out a one-off
hedge at a rate of GBP1:USD1.22, which
means the net cash receipt of $71.75
million will be converted to £58.8 million.
There were no open forward contracts as
at 31 July 2023 (2022: none). The group’s
net profit and 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 retranslation of the closing
balance sheet is summarised in note 27
to the financial statements and was
based on the year-end position.
Credit risk
Macroeconomic factors
We continue to see inflationary pressures
on raw materials. We attempt to mitigate
these by regularly reviewing suppliers
where possible, negotiating with new
suppliers and trying to achieve volume
breaks. We are also cognisant of the
impact of the cost of living crisis on our
staff and implemented a Company-wide
5% inflationary wage increase from
August 2023. We will continue to review
market conditions and assess the impact
on all stakeholders.
Summary
Nanoco is now financially underpinned
with a stable cost base, IP that has been
validated by the US PTAB, and we have
commercial opportunities in large and
growing markets. As we continue to
deliver against our strategic objectives,
we aim to achieve a value inflection
point in the short to medium term.
We look forward to updating
shareholders on our progress in
due course.
Liam Gray
Chief Financial Officer
19 October 2023
The group only trades with recognised,
creditworthy third parties. Receivable
balances are monitored on an ongoing
basis and any late payments are promptly
investigated to ensure that the group’s
exposure to bad debts is not significant.
Treasury activities and policies
The group manages its cash deposits
prudently. Cash balances are regularly
reviewed by the Board and 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 27 to
the financial statements.
Going concern
The settlement signed during the year
with Samsung will result in a significant
cash surplus for the business upon receipt
of the second tranche of cash in February
2024. The Company has committed to a
return of capital to shareholders, but will
retain enough cash for our business needs.
Given the remaining cash balance, our low
cost base, and the exciting commercial
opportunities, the Directors have a
reasonable expectation that the group
has access to adequate resources to
continue in operational existence for
the foreseeable future.
Accordingly, they continue to adopt the
going concern basis in preparing the
consolidated financial statements and the
Board concluded that it is appropriate to
utilise the going concern assumption.
Further detail is included in the going
concern statement on p37.
032
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Principal risks and uncertainties
Managing risk is key to the delivery
of the group’s strategic objectives
In common with all businesses at
Nanoco’s stage of development, the
group is exposed to a range of risks,
some of which are not wholly within our
control or capable of complete mitigation
or protection through insurance.
Specifically, a number of the group’s
products and potential applications are
at an early stage in their development,
or still being validated by customers,
and hence it is not possible to be certain
that a particular project or product will
lead to a commercial application.
Other products require further
development work to confirm a
commercially viable application.
The technology, particularly in the
Sensing division, is still in its infancy
and has yet to see market adoption.
Equally, a number of products are
considered commercially viable but
have yet to see demand for full scale
production. It is also the case that the
group is often only one part of a long
and complex supply chain for new
product applications.
The group therefore has little visibility
of demand other than from contracts
already in place. There are therefore a
range of risks that are associated with the
different stages of product development
as well as for the group as a whole.
Risk management process
The group has established a process for
carrying out a robust risk assessment
that evaluates and manages the
principal risks faced by the group. A
detailed review of individual risks was
undertaken initially by the leadership
team, and then reviewed by the Board
during the financial year ended 31 July
2023. This year, that review also
incorporated climate related risks, as
required by TCFD reporting. The Board
has also established an acceptable level
of risk (risk appetite) that informs the
scale and urgency of actions required.
Where risks are deemed to be outside
management control, efforts are focused
on mitigating any potential impact.
Where all practical measures to prevent
or mitigate risks have been taken and
a residual element of risk still remains,
these risks are accepted by the group.
Risks are evaluated with respect to
the probability of occurrence and the
potential impact if a risk crystallised.
Where the group has identified risks,
these are monitored with controls and
action plans to reduce the probability of
a risk crystallising and the impact of each
potential event if it did occur. The residual
risk score, after mitigating controls,
is then plotted on a “risk heat map”.
The group’s principal risks are shown on
the heat map below and are discussed
in further detail in the pages following.
Principal overarching risk
The historical principal overarching
strategic risk faced by the business was
that the group exhausted its available
funding before achieving adequate
levels of commercial revenues and cash
flows to be self-funding. This risk has
been largely mitigated by the settlement
with Samsung during the financial year
ended 31 July 2023. This mitigation has
shifted the focus of risk to market
adoption of the technology, which
is required for the business to be
commercially viable in the long term.
Other principal risks
Risks are broadly categorised as
strategic, operational, financial or
compliance. The table overleaf focuses
on those risks that the Directors believe
are the most important currently faced
by the business. Other risks may be
unknown at present and some that are
currently rated as low risk could become
more material risks in the future.
The group’s risk management process
tracks risks as they evolve and change.
Principal risk identified in FY20
– now expired
In February 2020, the group initiated
litigation against Samsung for wilful
infringement of its IP. In February 2023,
the group signed agreements with
Samsung which brought these
proceedings to an end. Therefore,
this risk no longer exists.
New risks identified in FY23
With the move towards
commercialisation, the group now
reports a number of extra risks which
largely relate to potentially competing
technologies in our target markets.
These are further detailed in the table
on pages 34 and 35.
Likelihood and impact of principal risks
FY22
FY23
10
t
c
a
p
m
I
9
8
7
6
5
4
3
2
1
A B
A
C
D
G
H
F
1
F
E
2
3
4
5
6
7
8
9
10
Probability
Nanoco Group plc – Annual Report and Accounts 2023 033
Principal risks and uncertainties continued
Likelihood and impact of principal risks continued
Risk description
Potential causes and impact
Mitigation
Change
Link to
strategy
Strategic
A
Lack of market
adoption of
technology
Responsibility:
CEO
B
Competing
technology in
sensing applications
Responsibility:
CEO/CTO
C
Competing
technology in
display applications
Responsibility:
CEO/CTO
D
Customer
concentration risk
Responsibility:
CEO/CTO
Market fails to commercially
adopt technology incorporating
the Group’s nanomaterials.
The Group targets a wide range
of potential applications in the
sensing industry.
Working with industry leaders
to differentiate products from
current offerings.
Making products
commercially competitive.
De-risking Nanoco as a supply
chain partner.
Maintaining capacity to scale
to meet demand from very
large customers.
The group works with a number
of market-leading companies in
this area.
The R&D leaders in the Company
stay abreast of advancements
to understand their implications.
Group’s technology enjoys a very
significant cost advantage over
competitor products.
The group licenses its technology
to the market leader in this area,
and will be discussing further
licensing opportunities.
The R&D leaders in the Company
stay abreast of advancements
to understand their implications.
Nanoco’s cadmium-free solutions
deliver clear environmental benefits.
A different competing technology
achieves commercialisation in sensors
ahead of Nanoco (whether QD or
another technology).
A different competing technology
(either QD or another) reduces the
quantum dot share of TVs in
the market.
Sensing projects moving
to commercialisation.
Expanded customer portfolio.
Expanded range of materials
addressing more potential
market applications.
NEW
NEW
Reliance on a small number of key
customers exposes the group to risk of
delays in the customers’ own supply
chains over which the group can exert
limited influence (one customer was
79% of revenue excluding licences in
FY23). These delays can then have a
knock-on adverse effect on the group’s
expected revenue streams.
Commercial strategy in the
medium term is to dilute customer
concentration risk by selling into
various markets, through various
channels and to a range
of customers.
Continuing to work with new
customers to develop
commercial offerings.
Same core significant
customers as in prior years.
1
1
1
3
1
3
Key
Risk change
Strategy
Up
1 Growth
Neutral
Down
2
3
Investment
IP monetisation
034
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report
Risk description
Potential causes and impact
Mitigation
Change
Link to
strategy
Operational
E
Loss of key
personnel
Responsibility:
CFO
Financial
F
Lack of adequate
resources to
sustain the group
until it becomes
self-sustaining
Responsibility:
CFO
Compliance
G
Major
environmental,
health and safety
(“EHS”) issue
Responsibility:
CEO
Governance
H
Shareholder
relations
Responsibility:
CEO
While the group maintains a high level
of protected documented IP, our staff
remain a critical asset with significant
levels of technical and sector know-how.
Loss of key personnel would have an
adverse impact on the group’s
development and commercialisation.
Revenues from own product sales,
services rendered and licensee
royalties do not materialise as planned.
The group is unable to carry out its
operations and hence cannot deliver
on medium-term or strategic goals.
Failure to follow existing procedures or
a new unforeseen risk could result in
injury to staff, equipment, reputation
and finances and potential loss of
operating licences.
The group offers rewarding
careers that allow staff to develop
new skills while pursuing interesting
research ideas.
The group reviews remuneration
to ensure that appropriate reward
packages accompany the fulfilling
work environment.
Post-employment obligations and
protected IP expose potential
competitors to the threat of litigation.
Cash will continue to be
prudently managed.
Focus on revenue-generating
activities without abandoning
worthwhile and focused R&D work.
Cost reduction actions identified
if necessary.
Retention of a portion of the
litigation proceeds.
Extensive and ongoing efforts to
continuously improve procedures.
Renewed leadership focus on
the “tone at the top” and
cultural change.
Continuous training of staff in
risks and how to mitigate risks.
All staff now relocated to one
site. Increased investment in
infrastructure and focus on
remuneration and benefits.
The agreements signed with
Samsung in the year, and the
corresponding cash receipts
give the business a significant
cash runway.
Continued focus on EHS
including incentivisation of staff.
Shareholder activism has an impact
on a number of stakeholders, including
but not limited to customers, suppliers
and employees, and also has significant
financial and non-financial implications.
Continued engagement
with shareholders.
Focus on the commercial
business being successful.
NEW
Open and transparent
communication with stakeholders.
1
2
1
2
1
2
1
2
The Executive team manages a greater number of more detailed risks on an ongoing basis, none of which are considered of
strategic importance to the group. The Board reviews the detailed risk register annually to ensure that all strategic risks are being
appropriately considered at the Board level while business as usual (“BAU”) risks are actively managed by the Executives.
Nanoco Group plc – Annual Report and Accounts 2023 035
Viability statement
The litigation settlement provided
Nanoco with sufficient resources to
continue to deliver on its strategy
for the foreseeable future
The assumptions above were then
flexed to create a “severe but plausible”
downside stress test. This includes the
assumption that commercial production
is delayed by a year and that a number
of current active development
engagements end with no further service
work or material demand. The group
remains viable in this scenario.
Modelling of an extreme downside for
the going concern assessment still
shows the group remains viable even if
no further commercial wins are achieved
beyond those which are already
contracted. Given the cash resources of
the group, in all scenarios, all outstanding
liabilities are settled.
Conclusion
As a result of the assessment outlined
above, the Directors have confirmed that
they have a reasonable expectation that
the group will remain viable and able to
continue in operation and meet liabilities
as they fall due over the four-year period
of their assessment.
In accordance with the provisions in
the UK Corporate Governance Code
(C.2.2 of the 2018 revision), the Directors
have assessed the viability of the group’s
business model and determined that a
four-year period is a suitable period to
be utilised. This is an increase on the
two-year period used in prior years and
reflects both the progress towards full
commercialisation and the strong
financial underpinning of the group.
A four-year period is considered
appropriate given the increased stability
of the group, however, the evolving
nature of the markets for the group’s
products and the group’s stage of
commercial development means
forecasting time horizons remain
relatively short.
The Directors’ assessment has been
made with reference to the current
position of the group and the group’s
current strategy and principal risks as
described in this Strategic report.
Inflationary pressures are mitigated
by reviewing suppliers and achieving
volume breaks. In addition, given the
ongoing cost of living crisis, we continue
to review market conditions and assess
the impact on all stakeholders.
Changes during the year
In the third quarter of FY23, we
announced an agreement had been
reached with Samsung to settle the
ongoing lawsuit relating to IP infringement
for $150 million. After legal costs,
this resulted in a net balance to the
group of $90 million ($75 million still to
be received in Feb 24). Given the group’s
cost base is circa £6 million per year,
and the group is targeting to be cash
flow break-even in CY25 due to the
commercialisation of its products,
the $90 million net cash receipt,
in addition to the cash which already
existed in the business, is more than
sufficient to support the group for
the foreseeable future.
On a commercial basis, we continue
to see progress with our customers in
Sensing. Both the European electronics
customer and the Asian chemical
customer are discussing further R&D
collaboration agreements to continue
development work in this area, and the
ongoing validation of two of our
materials in final products is nearing
completion. We continue to anticipate
commercial production orders in
calendar year 2023, although we
believe these will be relatively low
volumes initially.
We have continued to add other
customers in the year in both Sensing
and Display, and continue to progress
other IP monetisation opportunities.
The viability assessment process
In assessing the viability of the group,
the Directors have utilised their forecasts
for the period to 31 October 2027 which
take into account the group’s current
and expected business activities and
commercial opportunity pipeline,
the current cash resources (£8.2 million
as at 31 July 2023), the contracted
receivables (including the $75 million
second tranche from Samsung), the
contracted revenue and prospects
for FY24, the return of capital to
shareholders, and any liabilities as they
fall due. These inputs form the basis of
a conservative base case with the main
assumptions shown below in the section
on going concern.
036
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Going concern
All of the following matters are taken into
account by the Directors in forming their
assessment of going concern:
| the group’s business activities and
market conditions are set out on
pages 9 to 27;
| the principal risks and uncertainties
are shown on pages 33 to 35;
| the group’s financial position is
described in the Financial review
on pages 30 to 32; and
| note 27 to the accounts summarises
the group’s financial risk management
objectives, policies and processes.
For the purposes of their going concern
assessment and the basis for the
preparation of the 2023 Annual Report,
the Directors have reviewed the same
trading and cash flow forecasts and
sensitivity analyses that were used by
the group in the viability assessment
as noted above, with the going concern
assessment covering the period to
November 2024. The same base case
and downside sensitivities were also
used with the addition of an extreme
downside where no uncontracted
revenue was included and the group
contracted to become an IP shell.
The base case represents the Board’s
current expectations. Assumptions in
the base case are:
| commercial services contracts are
based on the existing pipeline of
opportunities or agreements already
in place;
| modest demand for commercial
production materials in CY24 with a
subsequent slow ramp-up in demand;
The extreme downside case then flexes
those assumptions further as follows:
| all commercial agreements come to
| a further extension to the services
an end;
contract with the European
electronics customer and the
Asian chemical customer;
| no revenue is assumed from other
business lines though some small
scale commercial deals are currently
under discussion;
| other companies pay to access
Nanoco’s technology in the future;
| small expansion of our self-funded
research activities and continued
maintenance costs to support our
IP portfolio;
| costs associated with being a listed
entity and other costs reflect the
current inflationary environment; and
| the installed cost base is capable of
supporting significant increases in
revenue above those assumed in the
base case so there is no immediate
requirement for short-term increases
or new capital expenditure.
The downside case then flexes those
assumptions as follows:
| a full-year delay in small scale
commercial production revenues
(into CY25); and
| no new business from other
customers once existing active
engagements end.
| no revenues other than those already
contracted; and
| the group ceases all operations.
All three cases above produce cash flow
statements that demonstrate that the
group has sufficient cash throughout the
period of the going concern forecast.
Going concern conclusion
Considering the current financial
resources and monthly cash costs
of the group, and after making
appropriate enquiries, the Directors have
a reasonable expectation that the group
has access to adequate resources to
continue in operational existence for
the foreseeable future.
Accordingly, the Directors continue
to adopt the going concern basis in
preparing the consolidated financial
statements. The financial statements
do not reflect any adjustments that
would be required to be made if they
were prepared on a basis other than
the going concern basis.
Nanoco Group plc – Annual Report and Accounts 2023 037
TCFD disclosure 2023
Introduction
Nanoco recognises and acknowledges
the serious challenges presented by the
climate crisis to governments, businesses
and communities around the globe.
Our direct exposure to climate-related
risks is limited, but the group is
nonetheless committed to playing its
part to mitigate the environmental
impacts of our activities and to enhance
our resilience to the uncertainties posed
by climate change.
As a premium-listed organisation,
Nanoco is obliged to make climate-
related financial disclosures consistent
with the TCFD framework in line with
Listing Rule 9.8.6R(8). Despite being a
small organisation with only 43
employees at year end (excluding
Non-Executive Directors) and turnover
of c.£5.6 million, the business has made
progress towards meeting its TCFD
obligations. Limited resources and our
obvious current strategic focus on
protecting the group’s operational
and R&D capabilities mean that the
disclosures that follow are therefore
not yet fully aligned with the TCFD
recommendations at this time. The group
is compliant in seven areas out of eleven
(as shown in the table overleaf), with
a strategy and metrics yet to be fully
developed. These are detailed in the
table overleaf. Where not yet compliant,
the group will incorporate target
compliance dates into the ESG strategy,
which will be reported on in FY24.
The group is taking progressive steps
towards building climate knowledge
and capacity, as outlined by the 2024
planned actions described in this
statement which we will endeavour to
complete within the next reporting cycle.
Governance
The Board takes responsibility for the
oversight of all strategic risks facing
the business. ESG issues, including the
risks associated with climate change,
currently fall within the remit of the ESG
Steering Committee which was
established post year end. The ESG
Steering Committee is a cross-functional
group with representation at Board level
from the CFO. The CFO ultimately takes
responsibility for reporting any relevant
environmental or climate-related risks
to the Board and its Committees,
and keeps the Board abreast of
developments in reporting and
performance requirements. ESG matters
are currently discussed ad hoc, but will
be included on the Board agenda every
six months going forward.
the world transitions to a low carbon
economy. In effect, the group’s climate-
related risks are indirect.
Board’s members have relevant
capabilities related to climate risks
and opportunities, including significant
experience navigating energy markets.
The Board acknowledges it can improve
upon its broader ESG skill set and
knowledge base, which will be
considered by the Nominations
Committee as part of any future
appointments. Training is also occurring
at Board level on ESG matters to improve
the existing skill set. Read more about
the Board’s roles and responsibilities on
pages 39 to 40.
The leadership team is responsible
for the day-to-day management of
operational risks. To support oversight
of operational risks, the leadership team
maintains a risk register of identifiable
risks to the business. Within this register,
the potential impact of climate change
is currently highlighted as a
macroeconomic risk factor. However, no
specific significant risks were identified
relating to climate related factors. If any
risks are identified in the future, these will
be added to the risk register. Read more
about our approach to governing and
managing risks on page 33.
Improvements to date:
| post year end, established an ESG
steering committee with Board
representation who meet every two
weeks and assess any identified risks;
Strategy
Nanoco acknowledges the need to
conduct more comprehensive
identification and assessment of
climate-related risks and opportunities,
as well as the potential impacts of those
risks and opportunities on the business
model and the organisation’s strategic
resilience over various timeframes.
We outline our initial consideration of
climate-related risks within this section,
with a focus on transition risks as
the area where Nanoco has the
most exposure.
Nanoco’s products are inputs into
consumer goods, and macroeconomic
pressures driven by climate-related
hazards could impact the future
revenues of the business. The group also
acknowledges the potential reputational
consequences of failing to meet the
climate expectations of stakeholders as
In addition to enhancing our
understanding of the climate-related
risks that could impact our business,
the Group actively seeks to mitigate
its impacts on the climate. During the
financial year, we had a number of LEAN
projects ongoing which all carried
objectives of reducing waste or
inefficiencies. All staff are LEAN trained,
and we will continue a focus on this in
FY24. The group promotes low carbon
working patterns, including car sharing
and cycle-to-work schemes, as well as
an electric vehicle (“EV”) salary sacrifice
scheme. Where possible, we use video
conferencing instead of face-to-face
meetings, reducing travel-related costs
and emissions.
During the year, Nanoco have performed
an assessment of the risks and
opportunities related to climate change,
and have not identified any which are
significant or could have a significant
financial impact on the Company.
In consideration of climate-related
opportunities, Nanoco’s product portfolio
has potential to support the energy
transition. The Group’s technologies can
support the energy efficiency objectives
of our customers. Nanoco’s products are
also notably free of toxic cadmium,
which reduces emissions associated with
managing the disposal of toxic waste.
Read more about the group’s initiatives
to promote low carbon practices in its
operations on page 41.
2024 planned actions to enhance
alignment:
| embed climate-related issues into
updates provided on staff days and
within employee surveys to enhance
engagement across the business on
the topic of climate risk;
| the ESG Steering Committee will
explore opportunities to further
mitigate Nanoco’s impact on the
climate and conduct a deeper
assessment of climate-related risks,
including the potential impact of risks
on capital expenditure plans, future
strategy and financial planning; and
| engage a third party to conduct
qualitative climate scenario analysis
in FY24.
038
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Risk management
As part of the risk management process,
all potential risks are assessed according
to the probability of the risk occurring
and the potential impact should the risk
be realised. These include risks related to
current and emerging regulations. In
respect to climate change, the group
has concluded through initial qualitative
assessment and discussion that the
business has relatively low exposure to
climate-related risks.
However, the group acknowledges that
the growing attention on ESG and the
widespread consequences of the climate
crisis will leave no business untouched.
In light of these transformations and
following an annual review of the group
risk register, Nanoco incorporated
potential ESG risks to the register in the
financial year, which included a more
robust assessment of the group’s
exposure to climate-related risks. The
integration of these risks into the register
will lead to a review of the controls and
action plans associated with the
management process. Read more
about the group’s approach to risk
management on page 33.
Improvements to date:
| incorporated ESG risks into the risk
register review process, including
potential mitigating actions.
2024 planned actions to enhance
alignment:
| continue to monitor and identify new
ESG risks with the support and input
of the new ESG steering committee;
| embed consideration of potential
climate impacts in the controls and
action plans related to the
management of risk; and
| implement ISO 14001 (Environmental
Management).
Metrics and targets
Nanoco monitors and reports
environmental performance indicators
including waste and energy efficiency
metrics. The Group’s greenhouse gas
emissions, including its scope 3 emissions
related to business travel, can be viewed
on page 41.
The Group does not currently monitor
any additional climate-related metrics,
and therefore has not set any climate-
related targets. As the Group continues
to assess the materiality of climate-
related risks and opportunities, we will
consider whether new data should be
collected and whether relevant targets
should be set.
2024 planned actions to enhance
alignment:
| revisit the materiality of scope 3
categories to determine whether
additional data is needed to
understand the full climate impacts
and exposure of the Group;
| evaluate whether meaningful metrics
and targets can be introduced to
communicate the energy saving
potential of our products to
customers;
| establish long-term targets for
ESG; and
| work with our landlords to devise
strategies to reduce our on-site
energy consumption.
4 TCFD pillars
11 TCFD recommended disclosures
Governance
| Describe the Board’s oversight of climate-related risks
and opportunities
| Describe management’s role in assessing and managing climate
related risks and opportunities
Description and reference
To be further developed in FY24
Key risks and responsibilities - P38,
Corporate Governance - P48
To be further developed in FY24
Key risks and responsibilities - P38
Strategy
| Describe the climate-related risks and opportunities the
organisation has identified over the short, medium, and long term
To be further developed in FY24
| Describe the impact of climate-related risks and opportunities
on the organisation’s business, strategy, and financial planning
| Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a
2°C or lower scenario
To be further developed in FY24
To be further developed in FY24
Risk
management
| Describe the organisation’s processes for identifying and
assessing climate-related risks
| Describe the organisation’s processes for managing climate-
related risks
| Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation’s overall
risk management
Key risks and responsibilities - P38
Key risks and responsibilities - P38
Key risks and responsibilities - P38
C
Metrics and
targets
| Disclose the metrics used by the organisation to assess climate
related risks and opportunities in line with its strategy and risk
management process
To be developed further in FY24
- current metrics disclosed on P41
| Disclose Scope 1, Scope 2, and, if appropriate, Scope 3
greenhouse gas ("GHG") emissions and the related risks
To be developed further in FY24
- current metrics disclosed on P41
| Describe the targets used by the organisation to manage climate
related risks and opportunities and performance against targets
To be further developed in FY24
C
C
C – Compliant with TCFD recommendation
Nanoco Group plc – Annual Report and Accounts 2023 039
C
C
C
C
Sustainability
Our focus on the safety, security and
health of our people is key to delivering
productivity and improved performance
The group recognises that, although its
primary responsibility under UK corporate
law is to its shareholders, it also has
responsibilities towards its employees,
customers, suppliers and also, ultimately,
those consumers who benefit from its
products, the broader public and
the environment.
Health and safety
Nanoco recognises that providing a safe,
secure and healthy working environment
is essential and contributes to
productivity and improved performance.
The health, safety and welfare of all of
our employees, contractors and visitors is
taken seriously across the entire
organisation, with ultimate responsibility
lying with the CEO. Health and safety
performance is a standing item on each
Board and Executive team agenda, and
is also discussed within departmental
meetings. The group’s health and safety
policy is reviewed annually. In addition,
there is an Environmental, Health and
Safety (“EHS”) Committee to oversee the
implementation of policy and involve
staff in generating improvement plans.
There are various improvement and
reporting systems in place to monitor the
performance of the group’s health and
safety management system. These
initiatives include:
i)
ii)
reporting all incidents (including near
misses) with appropriate ownership,
root cause analysis and action
tracking systems;
communication of relevant topics
and incidents via weekly toolbox talks
to all departments;
iii) monthly and quarterly leadership
safety and observation audits with
the focus on immediate action
resolution by the Executive or senior
manager leading the audit;
iv) monthly departmental audits with
assigned action tracking processes
in place to address issues;
v)
monthly health and safety reports
issued across the organisation to
communicate performance against
annual metrics and progress on key
improvement initiatives and projects;
vi) annual health checks for staff,
including tests for chemical exposure
where required; and
vii) annual occupational chemical
exposure tests using fixed and
personal monitors.
A risk assessment programme is in place
to identify and mitigate the risks from our
operations. These assessments include
but are not limited to:
i)
the storage, handling and processing
of hazardous substances;
ii)
fire safety and emergency evacuation;
iii) use of mechanical and electrical
equipment; and
iv) other workplace operations involving
manual handling and ergonomic
risks, working at height and other
hazards identified as part of the
EHS improvement programme.
All risk assessments are documented and
actions assigned and reviewed according
to the defined frequency. All research
and development functions are actively
encouraged to, wherever possible,
eliminate or reduce the levels of hazardous
substances used in our products and
processes. All relevant chemical legislation
and regulatory frameworks are used to
assess the suitability of a substance prior
to use as part of the risk assessment
process. Standard operating procedures
are documented and regularly reviewed.
The group’s robust EHS control
environment is evidenced by there being
only one externally reportable incident in
any category in the last six years.
040
Nanoco Group plc – Annual Report and Accounts 2023
All controlled documents are reviewed
and approved via the electronic
document management system. A health
and safety induction programme is in
place for all new staff and visitors/
contractors performing work on our
premises. Staff are trained in standard
operating procedures, hazard awareness,
generic workplace health and safety risks
and behavioural safety expectations
applicable to their role within the group.
A cross-functional employee health and
safety team meets on a monthly basis
with representation from all areas of the
group, including the Executive team.
Effective inputs and outputs from the
team are designed to facilitate a greater
focus on health and safety and to
actively encourage discussions within
respective groups.
The group has an excellent safety record
and there has only been one reportable
incident to the respective UK authorities
across all our operations. Nanoco is
committed to the continuous
improvement of the health and safety
management system.
Each stakeholder has different interests,
some of which are listed below:
Employees
Nanoco acknowledges its responsibilities
for the health and safety of its employees,
for their training and development and
for treating them fairly. Further information
about its employment policies is
outlined overleaf.
Customers
Nanoco is responsible for the quality
and safety of its products and for the
performance of its research and
development projects.
Shareholders
Nanoco seeks to increase shareholder
value over the long term.
A serious H&S incident could jeopardise
our “licence to operate” and threaten
shareholder value.
Strategic report Whole portfolio carbon generation (energy use)
2023 tCO2e
2022 tCO2e
Change
Intensity (tCO2e/average number
of employees)
2023
2022
Change
Scope 2
Electricity
75
Heating (gas)
8
276
(73)%
3
12
(75)%
220
(96)%
Scope 3
Air travel
46
0
2023 tCO2e
2022 tCO2e
Change
100%
Energy consumption used
to calculate emissions (MWh)
2023
2022
Change
Total
129
496
(74)%
398
2,500
(84)%
Data notes
Reporting period
Boundary
Reporting method
1 August 2022 to 31 July 2023
Operational control
The Greenhouse Gas (“GHG”) Protocol Corporate Accounting and Reporting Standard
Emissions factor source
Department for Business, Energy & Industrial Strategy, Standard Set 2017
Data changes and restatements
None
Environment
Nanoco is committed to protecting the
environment in which its activities are
conducted. This commitment is directly
expressed in our decision to develop our
CFQD® quantum dot products to be free
of toxic cadmium, which is still widely
used by our competitors in their quantum
dot products.
Nanoco has participated actively with
regulators on the use of cadmium-based
quantum dots in displays and LED light
products. The European Commission
(“EC”) has made a ruling on the appeal
submitted by three companies that the
exemption allowing the use of cadmium-
based quantum dots in display films
should continue. The EC was also
considering an appeal for a five-year
exemption to allow cadmium-based QDs
to be applied directly onto LED chips for
displays and lighting.
The EC has received a recommendation
that:
| the exemption to allow cadmium
(>100ppm) in QD films for display is
no longer justified and should be
phased out by 31 October 2021; and
| a new exemption is granted to allow
cadmium-based QDs applied directly
onto LED chips for displays and high
CRI lighting for a period of five years.
Both of the above recommendations
remain subject to the EC adopting the
delegated act. It should also be noted
that for film-based displays there is not
an outright ban, which could allow
displays with cadmium content below
the limits above to continue to be sold.
As at the time of writing, the EC has not
yet passed the legislation to implement
the decisions as recommended and the
legal status of the exemption which was
due to expire in October 2021 is unclear.
responsible, including the combustion
of fuel and the operation of its facilities,
and resulting from the purchase of
electricity, heat, steam or cooling by
the business for its own use.
As the group’s UK facility is in a multi-
occupancy site, we place reliance upon
the landlord to provide the data needed
to determine emissions. Our laboratories
require continuous negative pressure
environments and, consequently, it is not
possible to set realistic reduction targets
in the consumption of electricity.
The completion of the exit from the
ground floor of the Manchester site has
effectively eliminated it as a source of
emissions for Nanoco with only a small
increase in Runcorn emissions from the
co-location of our activities to one site.
Our gas consumption is used for heating
the facility and site costs are shared
between tenants on the basis of area of
occupancy. In the absence of significant
amounts of revenue from the sale of
commercial products, the emissions of
the business primarily arise from the
activities of its research and
administration facilities rather than from
revenue related production operations.
Our emissions, based on appropriate
conversion factors published by the
Department for Business, Energy &
Industrial Strategy, for the current year
are shown in the charts above.
The group’s environmental policy aims to
foster a positive attitude towards the
environment and to raise the awareness
of employees towards responsible
environmental practices on its site. The
group endeavours to ensure compliance
with all relevant legislation and
regulatory requirements and, where
practical and economically viable,
standards are developed in excess of
such requirements.
The CEO has responsibility for reporting
on relevant environmental matters to the
Board. There have been no environmental
incidents to report to the authorities
across all our operations. Shareholders
and other interested parties are
encouraged to use the online version of
the Annual Report and Accounts rather
than requesting hard copies. Interested
parties are encouraged to visit the
group’s website or use the regulatory
news services instead of a hard copy.
Employees are also encouraged to
recycle paper, plastic, glass, cardboard
and cans wherever possible – through
engagement with our landlord, we
understand the vast majority of our
waste is recycled.
Greenhouse gas (“GHG”) reporting
Under the Companies Act 2006
(Strategic and Directors’ Reports)
Regulations 2013, the group is required to
state the annual quantity of emissions in
tonnes of carbon dioxide equivalent from
activities for which the business is
Nanoco Group plc – Annual Report and Accounts 2023 041
Sustainability continued
Environment continued
Waste
During the year, the group generated
10.8 tonnes of waste (2022: 9.3 tonnes)
and recycled 5.0 tonnes of this (2022:
3.8 tonnes). Net unrecycled was 5.8
tonnes (2022: 5.5 tonnes), however it’s
important to note this unrecycled is
incinerated with waste recovery, and
therefore doesn’t go direct to landfill.
The group engages a specialist
contractor to incinerate batches of
chemicals and dispose of other materials
no longer required. All waste contractors
are assessed to ensure the waste
hierarchy approach is applied to all of
our materials handled, and that their
operations and systems are compliant
with the relevant legislation. Audits are
performed every three years in line with
our duty of care as a waste producer.
Other environmental matters
Consideration of the benefits to the
environment is a significant factor in
decisions regarding investments to
upgrade the group’s research and
development facilities in Runcorn.
Video conferencing is used where
possible instead of physical travel
in order to reduce the group’s
environmental footprint through fewer
flights and other means of travel.
Lessons learned from continuing
operations during the Covid-19
pandemic have continued to
be adopted.
The group’s display technology removes
a dangerous chemical from the supply
chain for QD televisions, and the
HEATWAVE QDs sit in the energy
efficiency and low environmental impact
arena and, as such, will enable customer
companies to increase the uptake of
their products while reducing their
impact on the environment.
Attraction and retention
Recruiting technical specialists has
always been key to Nanoco’s success.
In a highly competitive market this means
that we strive to offer a competitive
benefits package and an attractive
workplace culture to ensure that we
attract and retain the best of the best.
The number of long-serving employees
demonstrates Nanoco’s ability to retain
top talent; out of 43 employees at 31 July
2023 (excluding Non-Executive Directors),
26% had over ten years’ length of service
and a further 26% had between five and
ten years’ service.
Nanoco operates an employee referral
scheme for recruiting new talent.
Referrals from existing employees are a
valued source of new recruits, typically
introducing high quality candidates with
a better cultural fit, and resulted in
Nanoco hiring a new technician
in the year.
Nanoco has a comprehensive onboarding
process for new joiners which includes
H&S, HR, intellectual property, IT, finance
and corporate induction sessions. The
aim of this is to get employees engaged
from their first day at Nanoco, and fully
equipped to work towards Nanoco goals
from the very beginning of their
Nanoco career.
26%
Employee
length
of service
48%
26%
Key
0-4 years
5-10 years
>10 years
Employees with disabilities
It is Nanoco’s policy that people with
disabilities, including job applicants and
employees, should be able to participate
in all of Nanoco’s activities fully on an
equal basis with people who are not
disabled. Nanoco strives to promote an
environment free from discrimination,
harassment and victimisation.
Nanoco has a disability inclusion policy
that states that Nanoco will not, on the
grounds of a person’s disability, or for a
reason relating to a person’s disability,
treat that person less favourably than it
treats, or would treat, others to whom the
same reason does not or would not
apply, unless genuinely justified.
| shielding for vulnerable workers;
| login system for staff, and supervision by management
which can be accessed remotely;
| liaising with the Employee Voice Committee to address
any concerns; and
| return to work assessments for all employees.
Covid-19
Whilst essential work carried on at Nanoco through the
lockdown period, staffing levels were reduced at various
times in line with Government guidance. Because of the EHS
training which all managers and staff undergo, EHS standards
were maintained and there was no impact on health and
safety due to the reduction in numbers during affected
periods. Measures were taken by the Company to address
the risk of Covid-19 on the Company and employees,
including but not limited to:
| risk assessments for both sites;
| PPE policies and protocols for prevention of infection;
| social distancing;
042
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Nanoco acknowledges
its responsibilities for
the health and safety
of its employees, for
their training and
development and for
treating them fairly.”
We believe that building a positive
partnership between strategic
management and the wider workforce is
crucial to Nanoco’s success. Our people
are our best problem solvers and possess
the insight on how we can make Nanoco
a top organisation to work for.
To improve our employee engagement,
in 2019 we established the Employee
Voice Committee, which gives employee
representatives a forum to raise concerns
and communicate directly with Board
members. During the year, the EVC has
organised a number of work-based
events, and we have had good
attendance at a variety of hikes,
beekeeping training and crafting,
and all staff were given gym passes
to use the local facilities.
In addition, we have run employee
wellbeing surveys, where staff can give
their views on a variety of topics
anonymously. The leadership team
reviews these comments and acts on
them to improve the working environment.
A meaningful employee voice will
support us as an organisation
undergoing change and responding to
industry changes. A direct link with the
Board also enables our Board members
to better understand the diverse nature
of the Company, allowing them to
execute their roles more effectively.
At the point of appointment, Nanoco
obtains occupational health advice as
to reasonable adjustments. For disabled
employees we put together a “Reasonable
Adjustment Action Plan” to support
employees with disabilities or health
conditions by removing or minimising
workplace barriers. These plans are
reviewed collaboratively between
managers and employees to ensure that
they remain relevant. Culturally, we
believe that it is important to offer
adjustments in a proactive manner
where appropriate rather than waiting
for our employees to request these.
Nanoco currently employs one person
with a disability with a series of
reasonable adjustments in place to
support this important member of staff.
Engagement and wellbeing
Communication channels at Nanoco
include all-Company meetings, leadership
meetings, and senior team meetings
which then cascade information down.
Communication media used includes the
group intranet, all-group email briefings
and online meeting software. Our line
managers hold regular team meetings,
cross-functional working group meetings
and management one-to-one updates
with their team members.
Nanoco is committed to a policy of
engaging employees in the activities
and growth of the group. Human
resources and senior management
review communication channels via
the use of employee surveys and plan
communication activities to ensure
employees are fully informed of current
business strategy and financial results
or corporate news.
Corporate communication is key to the
engagement of our workforce. We have
focused on improving the look, feel and
content of Company-wide electronic
communications in order to make these
more engaging to employees.
Aligning the entire Nanoco organisation
to ensure that we focus on what is
important to achieve our goals is critical
to our success. In order to help us
navigate the exciting opportunities in
front of us it is crucial that as Nanoco
employees and managers we make
conscious, careful and informed
choices about how we allocate our
time and energy – as individuals and
members of teams.
Nanoco Group plc – Annual Report and Accounts 2023 043
Sustainability continued
Gender diversity at Nanoco (at 31 July 2023)
Key
Female
Male
26%
14%
46%
All
employees
Board of
Directors
Senior
team
74%
86%
54%
Recognition
Equality and diversity
Nationalities represented
by our employees
Nanoco recognises that it has a duty to
ensure the health, safety and welfare of
its employees as far as reasonably
practicable. This includes physical,
mental and social wellbeing. It is also
required to have in place measures to
mitigate as far as practicable factors
that could harm employees’ physical
and mental wellbeing, which includes
work related stress.
Nanoco, as part of its wellbeing strategy,
puts particular focus on mental health.
It does so through a variety of means
including events such as Mental Health
Awareness Week, mindfulness sessions
and charity events to raise awareness of
the support available to those that suffer
from mental health issues. We encourage
an open door policy where employees
are able to disclose and receive support
for any mental health issues they may
face. Nanoco also has employees who
are trained in mental health first aid.
The employee assistance programme,
as part of the wellbeing policy, provides
caring and compassionate support to
help people cope and build resilience.
Both telephone counselling and face-to-
face counselling are available to all
employees through the programme.
This support aims to reduce absence and
improve wellbeing by addressing issues
head on and reducing their impact.
Post year end, Nanoco are looking to
implement a workplace health programme
for the benefit of all employees. This was
something which was raised through the
employee wellbeing survey and Nanoco
has acted on.
Racial and geographical diversity
The group’s employees are from many
different backgrounds, including five
different nationalities: British, German,
Indian, Italian and Portuguese.
5
In addition, group employees come from
a range of business backgrounds, not
purely research and development.
Indeed, of the Board members,
previous roles and responsibilities
include those in the supply of chemicals
and the engineering, electronics,
life sciences and fast-moving consumer
goods industries.
Nanoco will appoint, train, develop,
reward and promote on the basis of merit
and ability. Nanoco’s equal opportunities
policy states that employees will not
receive less favourable treatment or
consideration on the grounds of age;
disability; gender or gender reassignment;
marriage and civil partnership status;
pregnancy and maternity; race; religion or
belief; sex; sexual orientation; or part-time
status, nor will they be disadvantaged
by any conditions of employment that
cannot be justified as necessary on
operational grounds relevant to the
performance of the job.
The group’s equal opportunities policy
is reviewed annually and is available to
employees on the group intranet. A copy
can be obtained upon request from the
Company Secretary.
Nanoco is committed
to a policy of engaging
employees in the
activities and growth
of the group.”
044
Nanoco Group plc – Annual Report and Accounts 2023
Strategic report Proportion of males and females in each income quartile
Upper quartile
Gender pay gap
20%
27%
36%
18%
Key
Female
Male
Mean hourly
earnings
Median hourly
earnings
£22.86
Total1
£21.72
Male1
£25.88
Female1
£19.23
Total1
£23.30
Male1
£23.30
Female1
1 Excluding Directors.
80%
Upper middle quartile
73%
Lower middle quartile
64%
Lower quartile
82%
Ethics
Nanoco aims to demonstrate and
promote high standards of honest and
ethical conduct throughout the group.
Formal policies and procedures are
reviewed annually and the policies listed
below are available on the group intranet
or upon request from the Company
Secretary. All group employees are
required to adhere to specified codes
of conduct, policies and procedures,
including, but not limited to, the:
| anti-bribery and corruption policy;
| whistleblowing policy; and
| equal opportunities policy.
All Nanoco employees are required to
complete annual training in the areas
of cyber security, GDPR and information
security to ensure they remain up to
date and alert to the signs of fraud
and unethical practices.
Gender pay gap
Scientific research is a sector challenged
by a lack of gender diversity, but we feel
that we have an opportunity to
challenge this status quo. Nanoco
believes in being an inclusive and diverse
organisation where everyone is able to
reach their full potential. The challenge in
our organisation and across Great Britain
is to eliminate any gender pay gap;
we therefore voluntarily analysed gender
pay gap data as at 31 July 2023. We can
use these results to assess the levels of
gender equality in our workplace and the
balance of male and female employees
at different levels.
At the snapshot date of 31 July 2023,
Nanoco employed 43 employees
(2022: 36) in the UK, of whom 26% were
female (2022: 21%). Employees work
across a variety of roles in research
and production environments.
Overall, female representation across
the quartile pay bands corresponds
fairly closely to the percentage of
female to male employees overall.
The median gender pay gap for all
Nanoco employees excluding Directors
is (0%) (2022: 12%). This means that for
every £1.00 the median man earns at
Nanoco, the median woman earns £1.00.
The national average pay gap in 2023
for all UK employees is 8.3%1 in favour of
men compared to Nanoco’s parity.
In research and development, the
national average gender pay gap is
16.2%1 in favour of men, again compared
to Nanoco’s parity.
Strategic report approval
The Strategic report on pages 5 to 44
incorporates:
| Chairman’s statement
| Chief Executive Officer’s statement
| Our business model
| Our strategy
| Key performance indicators
| Principal risks and uncertainties
| Viability statement
| TCFD disclosure
| Sustainability
Brian Tenner
Chief Executive Officer
19 October 2023
On behalf of the Board
Dr Christopher Richards
Chairman
Brian Tenner
Chief Executive Officer
19 October 2023
1
Source – Gender pay gap in the UK: 2022
– Office for National Statistics.
Nanoco Group plc – Annual Report and Accounts 2023 045
Board of Directors
Our Board has a wide variety of skills
and experience to help the business
grow at a key point in its evolution
Dr Christopher Richards
Non-Executive Chairman
Brian Tenner
Chief Executive Officer
Dr Nigel Pickett
Chief Technology Officer
N R
Liam Gray
Chief Financial Officer and
Company Secretary
Dr Alison Fielding
Non-Executive Senior
Independent Director
A N R
Chris Batterham
Non-Executive
Director
A N R
Key
A Audit Committee
N Nominations Committee
R Remuneration Committee
Chair
046
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Dr Christopher Richards
Brian Tenner
Dr Nigel Pickett
Non-Executive Chairman
Chief Executive Officer
Chief Technology Officer
Chris was appointed Chairman of Nanoco Group
plc in May 2016, having joined the Board as a
Non-Executive Director in November 2015.
Skills and experience
Chris is the former Chief Executive Officer of
Arysta LifeScience, a Japan-based agrochemical
business which grew rapidly under his leadership,
with sales growing above $1.6 billion. After
stepping down as CEO in 2010, he became
Arysta LifeScience’s Non-Executive Chairman
until the sale of the business in 2015 to Platform
Specialty Products.
After gaining his DPhil from the University of
Oxford in Biological Science, Chris worked as a
research scientist for four years. He began his
executive career in 1983 in the Plant Protection
division at Imperial Chemical Industries plc,
which later became Syngenta. For 20 years,
he has lived in various countries including
Colombia and Japan and led international
marketing and commercial functions.
Other roles
Chris currently holds a number of non-executive
roles at quoted and private businesses. He is the
Non-Executive Chairman of Plant Health Care plc
(AIM: PHC) and a Non-Executive Director of
Origin Enterprises plc (AIM: OGN).
Brian was appointed Chief Executive Officer in
September 2020. He originally joined the Board
as Chief Operating Officer and Chief Financial
Officer in August 2018. He has had a significant
impact on the group’s performance in his time
with Nanoco, particularly in sharpening the
commercial focus, providing people leadership
in the UK and improving cost control. Brian also
previously served as the Company Secretary.
Skills and experience
Prior to joining Nanoco, Brian held a number of
senior executive positions with both publicly listed
and private multinational companies. His roles
have typically encompassed the full range of
commercial, operational and financial activities
with an emphasis on leading change and
transformation programmes. Brian’s previous
roles include Interim CEO and subsequently
CFO of NCC Group plc (LSE: NCC) from 2017 to
2018 (cyber security professional services) and
CFO of Renold plc (LSE: RNO) from 2010 to 2016
(engineering manufacturing), Scapa plc (AIM:
SCPA) from 2007 to 2010 (speciality chemicals)
and British Nuclear Group from 2003 to 2007
(hi-tech chemicals and large-scale
decommissioning projects). Brian qualified as
a Chartered Accountant with PwC in 1994.
He holds a Law degree (LLB Hons) from
Edinburgh University.
Other roles
None.
Nanoco’s technology team is led by Nigel, who is
a co-founder of Nanoco and inventor of Nanoco’s
key quantum dot scale up technology. In 2000 he
moved to Manchester where he co-founded
Nanoco Technologies in 2001.
Skills and experience
Nigel has co-authored over 70 academic papers
and is an inventor on 150 patents and pending
applications. He has a passion for and experience
in taking research work from the academic bench
through to full commercialisation. Nigel graduated
from Newcastle University in 1991 and chose to
remain at Newcastle to pursue a PhD in the field
of main group organometallics and is a Fellow of
the Royal Society of Chemistry. After graduation
in 1994 he undertook a postdoctoral fellowship at
St Andrews University, Scotland, in the field of
precursor design for metalorganic vapour phase
epitaxy (“MOVPE”) growth and synthesis of
nanoparticles using chemical vapour deposition
(“CVD”) techniques. In 1996 he won a Japan
Society for the Promotion of Science (“JSPS”)
fellowship and spent the following year working
at Tokyo University of Agriculture and Technology,
Japan. In 1998 he became a Research Fellow at
Georgia Institute of Technology, US, working on
the design and evaluation of precursors used
in MOVPE.
Other roles
None.
Liam Gray
Chief Financial Officer
and Company Secretary
Dr Alison Fielding
Non-Executive Senior
Independent Director
Chris Batterham
Non-Executive Director
Chris was appointed to the Board in April 2019.
Liam was appointed to the Board in November
2021. He originally joined the Company as Group
Financial Controller in March 2019, before
becoming Finance Director and then
subsequently joining the Board.
Skills and experience
Liam started his career at KPMG LLP, where he
qualified as a Chartered Accountant working
primarily in audit on both large and medium-
sized public and private companies. After six
years at KPMG LLP he moved to Renold plc
(LSE: RNO), initially as Group Financial Controller
before moving into the European division as
Commercial Finance Manager. He holds an
Accountancy degree from the University
of Liverpool.
Other roles
None.
Alison was appointed to the Board in April 2017.
Skills and experience
Skills and experience
Alison is an experienced entrepreneur and
Non-Executive Director, with significant expertise
in strategy development and implementation for
start-ups, AIM/main market listed and not-for-profit
organisations. Her early career included Zeneca
plc and McKinsey & Company. She co-founded
Techtran Group, which was acquired by IP Group
in 2005. Alison spent 13 years with IP Group plc as
Chief Technology Officer, Chief Operating Officer
and latterly as Director of Strategy and IP Impact.
Alison holds an MBA from Manchester Business
School, a PhD in Organic Chemistry and a
first-class degree in Chemistry from the University
of Glasgow and an MSc in Mindfulness from the
University of Aberdeen.
Other roles
Alison is currently a Non-Executive Director of Maven
Income and Growth VCT PLC and a Non-Executive
Director of Thomas Swan & Co. Limited.
Chris has considerable financial and operational
experience and became the Finance Director of
Unipalm Group plc, from 1996 to 2001. He then
went on to become CFO of Searchspace Group
Limited from 2001 until 2005. Chris then went on
to hold a number of non-executive roles across
a range of companies with a technology focus
in many cases.
Chris holds a Natural Sciences degree from
Cambridge University. He then qualified as a
Chartered Accountant with Arthur Andersen LLP
in 1979 where he spent his early career.
Other roles
Chris is currently a Non-Executive Director of
NCC Group plc.
Nanoco Group plc – Annual Report and Accounts 2023 047
Corporate governance statement
The group strives for best
practice to ensure it can
be flexible and responsive
to business change and
additional challenges
that arise
Dr Christopher Richards
Chairman
I am pleased to present the Corporate
governance report for the year ended
31 July 2023. This section of the Annual
Report describes our corporate
governance structures and processes
and their application throughout the
year ended 31 July 2023.
The Board’s view on
corporate governance
The UK Corporate Governance Code
embodies core principles of accountability,
transparency, probity and a focus on
long-term success. The Board firmly
believes that a company governed in
accordance with these principles is
more likely to be successful and that
this is all the more important in times
of significant uncertainty.
The Board and its Committees play a
central role in the group’s governance by
providing an external and independent
perspective on matters material to
Nanoco’s stakeholders, and by seeking
to ensure that effective internal controls
and risk management processes are
in place.
The Board also promotes a culture of
good governance throughout the group
by creating an environment of openness,
transparency and accountability.
The members of the Board bring a wide
range of skills and experience to the
group as set out on pages 46 and 47.
The diverse skill set allows the Board to
appropriately challenge and lead the
group’s strategy.
Board focus during the year
Agreeing strategic priorities with
the Executive Directors
The Board has devoted considerable
time to strategic discussion in the current
year. The group continues to expand its
commercial offering beyond CFQD®
(cadmium-free quantum dots) into a
range of dot-based nanomaterials for
sensing. Our customers continue to invest
in these areas with Nanoco, and have
reported pleasing results, with Nanoco’s
materials being described as “world
class”. The group continues to invest in
improvements in existing products and
expansion into other materials.
Conclusion of the lawsuit
against Samsung
The conclusion of the litigation against
Samsung allowed the management team
to return its focus to the opportunities
for the core organic business. The Board
formally disbanded the Litigation
Sub-Committee which comprised the
Board Chairman and the Senior
Independent Director, together with the
CEO, CTO and Litigation Special Adviser.
Shareholder requisition
It was disappointing to receive notice
from a small group of shareholders to
requisition a general meeting to propose
the termination of the existing Directors
and the appointment of their own team.
We firmly believe that the existing
Directors are best placed to deliver
shareholder value, and so it was incredibly
encouraging that all the proposals were
voted down so emphatically. However,
it is important to note that this process
was incredibly value destructive, in that
it cost a significant amount of time and
resources to ensure the outcome was in
the interests of all shareholders and not
a select few.
Appointment of new Non-Executive
Director
The Board remains committed to
continual improvement, and following
the conclusion of the Samsung litigation,
the decision was taken to look for an
additional Non-Executive Director to
complement the existing team.
This search is ongoing and we look
forward to updating all stakeholders
in due course.
Strong corporate governance
The Board is committed to ensuring
that a strong governance framework
operates throughout the group,
recognising that good corporate
governance is a vital component to
support management in its delivery of
our strategic objectives and to operate
a sustainable business for the benefit
of all stakeholders.
Strategic priorities
The Board reviewed the current strategy
with the Leadership team, and
considered how certain developments
should be prioritised to help the
Company achieve its short-term goals.
Monitor performance
The Board reviews performance of the
business on a monthly basis through
formal communications from the
Executive Directors. The Board provides
oversight and challenges to the
Executive Directors to ensure robust
decisions are made.
048
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Attendance
Number of meetings
Executive Directors
Brian Tenner
Dr Nigel Pickett
Liam Gray
Non-Executive Directors
Dr Christopher Richards
Dr Alison Fielding
Chris Batterham
Henry Turcan
Board
13
2
Audit
Committee
Nominations
Committee
Remuneration
Committee
7
—
—
1
1
1
2
—
—
—
1
5
—
—
—
The Non-Executive Directors met twice during the year without any Executive Directors present.
1 Executive Directors attended these meetings by invitation and are not members of these Committees.
2 Henry Turcan stepped down from the Board part way through the year.
Learn and improve
The Board is committed to continual
development. During the year, updates
on corporate governance and legal
developments were provided by
corporate lawyers. The Board intends to
carry out further training on accounting
developments and ESG issues.
Overall management of risk and change
within the group
The rapidly evolving challenges brought
about by Brexit, the Ukraine crisis and the
cost of living crisis, against a background
of other macroeconomic factors, have
required active real-time engagement
between all members of the Board.
These focus areas were in addition to
the normal ongoing responsibilities for
approving the annual operating and
capital expenditure budgets and any
material changes to them.
A typical Board agenda
Each full Board meeting is structured
around a standard agenda of standing
items that then includes a number of
additional specific focus items for that
month’s meeting. These focus items
are either recurring items (such as risk
management) or are in response to
emerging issues in our markets,
regulation, or the business itself.
An example of an agenda taken from
the July 2023 meeting is shown below:
| minutes and matters arising from
previous meetings (standing item);
3
| CEO report on business performance
(standing item);
| CEO report on progress and customer
deliverables (standing item);
| CFO report on financial performance
and rolling forecasts (standing item);
| CTO report on technical and IP
matters (standing item);
1
| Company Secretary report on
governance issues and any material
litigation (standing item);
| reports from Committee Chairs (Audit,
Nominations, Remuneration and EHS)
(standing item); and
| any other business (standing item).
3
Certain key senior management
members are invited to give
presentations at Board and Committee
meetings where appropriate.
Other areas, including the review of the
group risk register, the strategic plan, the
annual budget, contentious matters and
succession planning, etc. are reviewed by
the Board during each year at intervals
commensurate with their importance.
5
5
Board
composition
Executives
Non-Executives
3
2
Tenure
(years)
0-5
5-10
>10
Gender
1
1
Male
Female
Ethnicity
White
Ethnic minority
Nanoco Group plc – Annual Report and Accounts 2023 049
Corporate governance statement continued
Men
Women
White British
Other ethnic group
Number
of board
members
Percentage
of the board
Number
of senior
positions on
the board
Number
in executive
management
Percentage
of executive
management
5
1
83%
17%
4
1
3
0
100%
0%
Number
of board
members
Percentage
of the board
Number
of senior
positions on
the board
Number
in executive
management
Percentage
of executive
management
5
1
83%
17%
4
1
2
1
67%
33%
My role as Chairman
The structure of the Board, its
Committees and their respective
responsibilities are summarised on pages
51 and 52. My key focus is to ensure that
Nanoco has an effective Board which is
collectively responsible for the long-term
success of the group. One of my most
important jobs is to ensure that the
Board and its Committees have the right
balance of skills, experience and
knowledge suitable for Nanoco’s evolving
strategy and growth aspirations as we
progress through a new phase of
our development.
Board and Committee evaluation
Regular and appropriate Board and
Committee evaluation is vital to
improving Board effectiveness. This year,
given the various issues the Board was
dealing with, it was again felt that an
external performance review would not
be as value adding as it would be in
future with a more established Board.
Therefore, I once again conducted an
internal Board evaluation process, which
was discussed by the Board. Overall, it
was concluded that the Board and
Executive team performed well during
the year. The quality of information,
focus and discussion had improved
and Directors felt fully able to voice their
differing opinions. In addition, the review
identified areas of potential improvement,
such as composition and strategy, to
further enhance the Board’s performance.
Once again it was felt that the balance
of time allocated to strategy, operations
and functional areas and governance
was broadly correct. The Board displayed
great flexibility and nimbleness in
responding to rapidly emerging issues.
Throughout the year, the Board has
maintained good corporate governance
and challenged management to continue
to improve the processes and systems
that underpin the group’s normal
operating activities.
Each of the Audit Committee,
Remuneration Committee and
Nominations Committee carried out
an internal self-evaluation of its
effectiveness during the year.
The conclusion from the Committee
reviews is that, overall, the Committees
are working well.
Shareholder engagement activities
Engagement with shareholders remains
an important activity for the Board.
The group maintained its more formal
calendar of engagement with
shareholders and potential investors.
Longer-term Viability statement
The Board utilised the forecast for the
next four years to assess the group’s
long-term viability. This is an increase
on the two-year period used in the prior
year and reflects both the progress
towards full commercialisation and
the strong financial underpinning of the
group. Further details are provided on
pages 36 and 37.
Statement of compliance
with the Code
I am pleased to confirm that the Board
considers that it has been in compliance
with the Code throughout the year
ended 31 July 2023 in all material areas.
Dr Christopher Richards
Chairman
19 October 2023
050
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Governance framework
The different parts of the group’s
governance framework are shown below,
with a description of how they operate
and the linkages between them.
Board
The Board provides leadership
and is responsible for the overall
management of Nanoco, its strategy,
governance, long-term objectives
and risk management.
It ensures the right group structure is in
place to deliver long-term value to
shareholders and
other stakeholders.
Board Committees
Support the Board in its work with specific areas of review and oversight objectives
and risk management. They ensure the right group structure is in place to deliver
long-term value to shareholders and other stakeholders.
Audit
Committee
Primary function is to assist the
Board in fulfilling its financial and risk
responsibilities. It also reviews
financial reporting and the internal
controls in place and the
external audit process.
Nominations
Committee
Responsible for considering the
Board’s structure, size, composition
and succession planning.
Remuneration
Committee
Responsible for determining
the overall remuneration of
the Executive Directors and the
remuneration of senior managers
within the broader
institutional context of
remuneration practice.
Has responsibility for managing the business and overseeing the implementation
of the strategy agreed by the Board.
Chief Executive
Leadership team
The Leadership team currently represents the group’s most senior business and operational Executives. It is responsible for
assisting the Chief Executive in the performance of his duties including:
| developing the annual operating plan;
| reviewing the group’s policies and procedures;
| monitoring the performance of the different divisions
| prioritisation and allocation of resources; and
of the group against the plan;
| carrying out a formal risk review process;
| overseeing the day-to-day running of the Company.
Nanoco Group plc – Annual Report and Accounts 2023 051
Corporate governance statement continued
Board composition and division of responsibilities
Role profiles are in place for the Chairman, Chief Executive Officer and other Directors, which clearly set out the duties of
each role.
Role
Chairman of the Board
(Dr Christopher Richards)
Chief Executive Officer
(Brian Tenner)
Chief Financial Officer
(Liam Gray)
Chief Technical Officer
(Dr Nigel Pickett)
Senior Independent Director
(Dr Alison Fielding)
Other Non-Executive Directors
(Chris Batterham)
Company Secretary
(Liam Gray)
Responsibilities
Is responsible for the running of the Board and promoting a culture of openness and debate. The
Chairman, in conjunction with the CEO and other Board members, plans the agendas, which are issued
with the supporting Board papers in advance of the Board meetings. These supporting papers provide
appropriate information to enable the Board to discharge its duties which include monitoring,
assessing and challenging the Executive management of the group.
Together with the senior management team, is responsible for the day-to-day running of the group
and regularly provides performance reports to the Board. The role of CEO is separate from that of the
Chairman to ensure that no one individual has unfettered powers of decision making. The CEO works
directly through the Leadership team (CTO, CFO and Operations Director).
Works closely with the CEO and CTO to support them in the delivery of their roles. Key objectives are to
ensure the smooth running of many of the back office functions. Includes responsibility for all financial
matters including costings and plant efficiencies as well as commercial margins.
Responsible for all research and development activities of the group. Includes stewardship of the group’s
IP portfolio, new additions and maintenance. Takes leadership position on critical new research areas.
Provides a sounding board for the Chairman and serves as an intermediary for other Directors,
employees and shareholders when necessary. The main responsibility is to be available to the
shareholders should they have concerns that they have been unable to resolve through normal
channels or when such channels would be inappropriate.
Maintains an ongoing dialogue with the Executive Directors which includes constructive challenge
of performance and the group’s strategy.
Ensures good information flows within the Board and its Committees and between senior management
and Non-Executive Directors. The Company Secretary is responsible for facilitating the induction of new
Directors and assisting with their professional development as required. All Directors have access to the
advice and services of the Company Secretary to enable them to discharge their duties as Directors.
The Company Secretary is responsible for ensuring that Board procedures are complied with and for
advising the Board through the Chairman on governance matters. The appointment and removal
of the Company Secretary is a matter for the Board as a whole.
Experience of the Board
The members of the Board bring a wide range of skills and experience to the group. This diverse skill set allows the Board
to appropriately challenge and lead the group’s strategy.
The chart below summarises its key areas of significant experience.
Strategy
development
Chemical
Human
resources
Corporate
governance
Financial
management
M&A
ESG
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Name
Dr Christopher Richards
Dr Nigel Pickett
Brian Tenner
Liam Gray
Dr Alison Fielding
Chris Batterham
Dr Christopher Richards
Chairman
19 October 2023
052
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Compliance with the UK Corporate Governance Code 2018
The below provides a guide to the most relevant explanations for how the Company has complied with each Principle.
Board leadership and Company purpose
Page reference
A. An effective and entrepreneurial Board promotes the long-term sustainable success of the Company, generating
value for shareholders and contributing to wider society.
B. Purpose, values and strategy are set and align with culture, which is promoted by the Board.
C. Resources allow the Company to meet its objectives and measure performance. A framework of controls enables
assessment and management of risk.
D. Engagement with shareholders and stakeholders is effective and encourages their participation.
P40-52
P46-52
P28-37
P21-23
E. Oversight of workforce policies and practices ensures consistency with values and supports long-term sustainable
P21-23, P40-52
success. The workforce is able to raise matters of concern.
F. The diversity policy applied to the issuer’s administrative, management and supervisory bodies with regard to
P40-52
aspects such as, for instance, age, gender, or educational and professional backgrounds.
Division of responsibilities
G. The Chair is objective and leads an effective Board with constructive relations.
H. The Board comprises an appropriate combination of Non-Executive and Executive Directors, with a clear division
of responsibilities.
I. Non-Executive Directors commit appropriate time in line with their role.
J. The Company Secretary and the correct policies, processes, information, time and resources support
Board functioning.
Composition, succession and evaluation
K. There is a procedure for Board appointments and succession plans for Board and senior management which
recognise merit and promote diversity.
L. There is a combination of skills, experience and knowledge across the Board and its Committees. Tenure and
membership are regularly considered.
M. Annual evaluation of the Board and Directors considers overall composition, diversity, effectiveness and contribution.
Audit, risk and internal control
N. Policies and procedures ensure the independence and effectiveness of internal and external audit functions.
The Board satisfies itself of the integrity of financial and narrative statements.
O. A fair, balanced and understandable assessment of the Company’s position and prospects is presented.
P. Procedures manage and oversee risk, the internal control framework and the extent of principal risks the Company
is willing to take to achieve its long-term strategic objectives.
Remuneration
Q. Remuneration policies and practices are designed to support strategy and promote long-term sustainable success,
with Executive remuneration aligned to Company purpose, values and strategic delivery.
R. A transparent and formal procedure is used to develop policy and agree Executive and senior
management remuneration.
S. Independent judgement and discretion is exercised over remuneration outcomes taking account of the relevant
wider context.
Page reference
P46-56
P46-50
P46-85
P46-56
Page reference
P58-60
P46-50
P50
Page reference
P61-66
P5-37
P33-35
Page reference
P67-85
P67-85
P67-85
The Code is published by the Financial Reporting Council, a full copy of which can be viewed on its website, www.frc.org.uk.
Nanoco Group plc – Annual Report and Accounts 2023 053
Corporate governance statement continued
This section of the Corporate governance
report contains the group’s other reporting
disclosures on corporate governance
required by the Companies Act 2006,
the UK Corporate Governance Code
2018 (the “Code”) and the UKLA’s
Disclosure and Transparency Rule 7
including the required statement of
compliance. A copy of the Code is
publicly available at
https://www.frc.org.uk.
Disclosure and Transparency Rule 7
This statement complies with sub-sections
2.1, 2.2(i), 2.3(i), 2.5, 2.7 and 2.10 of Rule 7 of
the UK Listing Authority Disclosure Rules.
The information required to be disclosed
by sub-section 2.6 of Rule 7 is shown in
the Statement of Directors’ responsibilities
on page 89 and is incorporated in this
section by reference.
The Board
The group is controlled through its Board
of Directors. The Board’s main
responsibilities and those of its various
sub-committees are set out on pages 51
and 52.
To enable it to discharge its key
responsibilities as set out above, the
Board receives appropriate and timely
information prior to each meeting.
A formal agenda is set by each Chair
and Committee papers are distributed
several days before meetings take place.
Any Director may challenge group
proposals, and decisions are taken
democratically after discussion.
Any Director who feels that any concern
remains unresolved after discussion may
ask for that concern to be noted in the
minutes of the meeting. Specific actions
arising from meetings are agreed by
the Board and then appropriately
followed up.
The terms of reference of the
Committees are publicly available at
www.nanocotechnologies.com.
The same pages of the Annual Report
show the key officers and the division of
responsibilities and duties between each
role holder.
The Directors
There is a formal, rigorous and transparent
procedure for the appointment of new
Directors to the Board, which is led by the
Nominations Committee.
All Directors are then subject to election
by the shareholders at the next general
meeting following appointment to the
Board. In accordance with best practice,
they are then subject to annual
re-election thereafter. The contracts
of the Non-Executive Directors are
available for inspection by shareholders
at the AGM.
The Chairman has sufficient time to
devote to his duties as Chairman and
this has been demonstrated by his active
participation in the group’s activities.
The Non-Executive Directors
constructively challenge and help
develop proposals on strategy and
bring strong, independent judgement,
knowledge and experience to the
Board’s deliberations.
The Directors are given access to
independent professional advice at
the group’s expense when the Directors
deem it is necessary in order for them
to carry out their responsibilities.
The Board composition is partially
compliant with Listing Rules LR 9.8.6R(9)
and LR 14.3.33R(1), namely that at least
one of our senior Board positions is a
woman (Dr Alison Fielding is our Senior
Independent Director) and at least
one member of the Board is from a
minority ethnic background.
We are not currently compliant with the
requirement to have at least 40% female
representation at Board level. This is
something which we will consider when
looking at new appointments.
The group maintains, for its Directors
and officers, liability insurance for any
claims against them in that capacity.
Donations
During the year the group made no
political or charitable donations.
Independence and conflicts
of interest
The group has effective procedures in
place to deal with potential conflicts of
interest. The Board is aware of the other
commitments of its Directors and
changes to these commitments are
reported to the Board. The Companies
Act 2006 requires Directors to avoid
situations where they have, or could
have, a direct or indirect interest that
conflicts or potentially conflicts with
the interests of the group.
Directors are required to declare in
advance of a Board meeting whether
any of the business to be discussed in
that meeting gives rise to a conflict or
potential conflict. That Director will then
be excluded from the relevant discussions
unless agreed otherwise by the Directors
of the group in the limited circumstances
specified in the Articles of Association.
They will not be counted in the quorum
or permitted to vote on any issue in
which they have an interest.
The Board considers its independent
Non-Executive Directors to be
independent in character and
judgement. No Non-Executive Director
has been an employee of the group; has
had a material business relationship with
the group; receives remuneration other
than a Director’s fee; has close family
ties with any of the group’s advisers,
Directors or senior employees; or holds
cross-directorships.
Professional development
On appointment, each Director takes
part in an induction programme in which
they receive comprehensive information
about the group; the role of the Board
and the matters reserved for its decision;
the terms of reference and membership
of the Board and Committees and the
powers delegated to those Committees;
the group’s corporate governance
practices and procedures, including the
powers reserved to the group’s most
senior Executives; and the group’s
latest financial information. Throughout
their period in office the Directors are
updated on the group’s business, the
competitive environment in which it
054
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance The Chairman and
other Non-Executive
Directors are available
to shareholders to
discuss strategy and
governance issues at
a shareholder’s request.”
operates, corporate social responsibility
matters and other changes affecting
the group and the industry it operates
in as a whole.
The group acknowledges the importance
of developing the skills of the Directors to
run an effective Board. To assist in this,
Directors are given the opportunity to
attend relevant courses and seminars
to acquire additional skills and
experience to enhance their contribution
to the ongoing progress of the group.
All of the Directors are given briefings
on trends and developments in
corporate governance.
internet. All press releases are published
on the Company’s website shortly after
they are issued via the regulatory news
service in the United Kingdom.
In addition, a broad range of other
relevant information is available on
the group’s website.
The group also endeavours to ensure
that all published information is capable
of being readily understood on a
standalone basis without the need for a
one-to-one meeting. This is an extension
of the “fair, balanced, and
understandable” requirement inherent
in the Annual Report and Accounts.
Performance evaluation
Investor engagement
The Board has established a formal
process for the annual evaluation of
the performance of the Directors.
This evaluation is based on a
performance evaluation questionnaire
completed by each Director.
The Chairman’s performance is reviewed
annually by the Non-Executive Directors
and led by the Senior Independent
Director, Dr Alison Fielding. The
evaluation of the Chief Executive Officer
is performed by the Chairman and the
evaluation of the other Executive
Directors is performed by the Chief
Executive Officer.
Directors’ dealings in the
group’s shares
The group has adopted a model code
for Directors’ dealings in securities of the
group which is appropriate for a
company quoted on the premium list of
the London Stock Exchange. The
Directors comply with the rules relating to
Directors’ dealings and also take all
reasonable steps to ensure compliance
by the group’s “applicable employees” as
defined in the rules. The Directors’
interests in the ordinary share capital
and in options over such shares of the
Company are shown in the Directors’
remuneration report on pages 70 to 85.
Investor communications
Nanoco recognises the importance of
good and timely communication. Its
primary communication channel is the
Meetings with analysts and institutional
shareholders are held following the
interim and final results and on an ad hoc
basis. These are usually attended by the
Chief Executive Officer and Chief
Financial Officer. There are times when
other members of the Board, such as the
Chairman or CTO, also attend these
meetings. Following feedback from
shareholders, the Group plans for the
CTO to attend more shareholder
meetings going forward.
Engagement during the year
Number
One-to-one meetings
Conference calls
Group meetings
Investor conferences
10
22
4
4
The group takes care to ensure that
meetings with shareholders or potential
investors are structured around
information that is already available
to all shareholders on an equal footing.
Feedback from these meetings and
regular market updates are prepared by
the group’s broker and are shared with
the Board.
The Chairman and other Non-Executive
Directors are available to shareholders to
discuss strategy and governance issues
at a shareholder’s request, and attend
general meetings to meet shareholders
where possible.
Nanoco Group plc – Annual Report and Accounts 2023 055
Corporate governance statement continued
Shareholder analysis
Shareholders at 31 July 2023 are analysed as follows:
Territory
UK
Europe (ex. UK)
North America
Asia
Rest of World
Total
Type of holder
Retail investors
Hedge funds
Pension funds
Trading
Directors
Other
Total
Investment style
Retail
Hybrid
Trading
Directors
Corporate
Value and growth
Other
Total
Shares
293,046,877
8,020,495
18,733,865
4,455,241
162,250
324,418,728
Shares
206,541,180
31,224,746
25,159,390
22,790,238
14,293,480
24,409,694
10%
UK shares
(%)
36%
Retail
shares
(%)
%
90%
3%
6%
1%
—
100%
%
64%
10%
8%
7%
4%
7%
324,418,728
100%
4%
Shares
199,731,255
47,262,703
25,464,811
14,293,480
10,890,000
8,506,976
18,269,503
%
62%
15%
8%
4%
3%
3%
5%
324,418,728
100%
Directors’
shares
(%)
90%
64%
96%
056
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Annual General Meeting (“AGM”)
At the AGM, separate resolutions will be
proposed for each substantially different
issue. The outcome of the voting on
AGM resolutions is disclosed by means
of an announcement on the London
Stock Exchange.
All shareholders are encouraged to
attend the AGM and talk to the Directors
there. All Directors, including the Chairs of
the Audit, Remuneration and Nominations
Committees, are available at the meeting
to answer questions.
Shareholders not attending the AGM
can contact the group via email at
info@nanocotechnologies.com.
The table below shows the different
resolutions proposed at the 2022 AGM,
the proportions of possible votes that
were cast and the proportions in
favour of and against each resolution
(resolutions 1 to 12 were passed as
ordinary resolutions and resolutions 13
to 16 were passed as special resolutions).
The Board takes steps to ensure that
the views of major shareholders are
considered through regular contact.
As appropriate, the Board takes due
note of their views insofar as these are
relevant to the group’s overall approach
to corporate governance. This is
achieved, as noted previously, through
feedback from meetings with significant
shareholders and feedback from the
group’s brokers. Significant shareholders
were consulted regarding the changes
to the remuneration policy which were
proposed at the 2021 AGM and that
policy will be effective for three years
(until 31 July 2024).
Votes for
Votes against
Votes withheld
Votes
% of total
votes cast
% of total
voting rights 2
Votes
% of total
votes cast
% of total
voting rights 2
% of total
voting rights 2
Votes
5
6
7
8
9
No. Resolution
1
To receive the Annual Report
and Accounts
110,794,374
100.0%
34.4%
2,000
2
To appoint the auditors
110,737,657
100.0%
34.3%
21,800
3 Authority to agree the auditors’ fee 110,736,568
100.0%
34.3%
21,800
4 To re-elect Dr Christopher Richards 105,336,051
95.1%
32.7% 5,427,908
To re-elect Brian Tenner
110,756,759
100.0%
34.4%
To re-elect Dr Nigel Pickett
110,756,759
100.0%
34.4%
7,200
7,200
To re-elect Dr Alison Fielding
109,629,809
To re-elect Christopher Batterham 109,622,604
To re-elect Liam Gray
110,321,260
10 Approval of Directors’
remuneration report
106,380,116
11 Approval for political donations
110,377,948
12 Authority to issue and allot
new ordinary shares
110,717,185
131 Disapplication of pre-emption rights 110,661,390
99.0%
99.0%
99.6%
96.0%
99.6%
99.9%
99.9%
141 Disapplication of pre-emption
rights on acquisition or investment
110,677,215
99.9%
151 Authority to purchase its own shares 110,736,500
100.0%
161 Reduced notice of general meetings 110,558,701
99.8%
1 Proposed as special resolutions.
2 Excluding treasury shares.
34.0%
1,134,150
34.0%
1,141,895
34.2%
435,699
33.0% 4,378,386
34.2%
427,326
34.3%
65,904
34.3%
112,735
34.3%
34.3%
34.3%
62,641
52,840
231,138
0.0%
0.0%
0.0%
4.9%
0.0%
0.0%
1.0%
1.0%
0.4%
4.0%
0.4%
0.1%
0.1%
0.1%
0.0%
0.2%
0.0%
9,000
0.0%
45,917
0.0%
47,006
1.7%
0.0%
0.0%
0.4%
0.4%
41,415
41,415
41,415
41,415
41,415
0.1%
48,415
1.4%
46,872
0.1%
100
0.0%
22,285
0.0%
31,252
0.0%
0.0%
0.1%
65,518
16,034
15,535
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Nanoco Group plc – Annual Report and Accounts 2023 057
Nominations Committee report
Dr Christopher Richards
Nominations Committee Chair
The Board has a wide variety of skills
and experience that has served us well
in recent years. With a commercial
production order expected in the short
term, we have commenced a process
to add an additional Non-Executive
Director with deep experience in
consumer electronics supply chains
with a focus on commercialisation skills.
Where the talent pool permits, we also
remain committed to further enhancing
diversity and skills.
We are expanding the mix
of skills and experience on
the Board as Nanoco aims
to evolve to become a
supplier of commercial
production materials for
electronics supply chains
Roles and responsibilities
Members
The Committee is primarily responsible
for assisting the Board in ensuring the
appropriate composition of the Board
and any Committees of the Board to
match Nanoco’s stage of evolution. This
includes considering new appointments
and potential succession plans. The
Committee evaluates the balance of
skills, knowledge and experience and
the size, structure and composition of
the Board and Committees of the Board.
This extends to reviewing appointments
of additional and replacement Directors
and Committee members by making
appropriate recommendations to the
Board on such matters by reference
to the parameters set out below:
| Dr Christopher Richards (Chair)
| Dr Alison Fielding
| Chris Batterham
20%
10%
20%
Estimated
allocation of
time in FY23
30%
20%
Performance evaluation
Succession planning
Recruitment
Governance
Board and Committee composition
Supporting
value creation
Board mix
of skills and
experience
Recruitment
to Board and
Committees
Diverse Board
and employees
Strong
governance
058
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Governance
Committee membership
The responsibilities of the Committee
were expanded a number of years
ago to include a focus on continuous
improvement in governance.
The Committee’s terms of reference
therefore include:
| reviewing and considering the
Company’s procedures and controls
for ensuring compliance with:
| the UK Corporate Governance Code;
| the FCA Disclosure Guidance and
Transparency Rules, the Market
Abuse Regulation, and any other
applicable rules and regulations
that apply to the group; and
| the timely and accurate disclosure
of all information that is required to
be disclosed in order to satisfy the
Company’s legal and regulatory
obligations under the Corporate
Governance Requirements;
| recommending any proposed
changes in the management of
corporate governance to the Board;
| reporting on such compliance to
the Board;
| reviewing potential conflicts of interest
involving Directors and determining
whether such Director or Directors
may vote on any issue as to which
there may be a conflict; and
| reviewing all related party
transactions, with appropriate input
from advisers, determining whether
such transactions are appropriate
for the Company to undertake and
advising the Board accordingly.
In accordance with the UK Corporate
Governance Code the Nominations
Committee consists only of Non-Executive
Directors. I have chaired the Committee
since my appointment as a Non-Executive
Director in November 2015 and thereafter
having been made Chairman of the
Board in May 2016. The Board considers
it appropriate for me to chair the
Nominations Committee in order to
achieve a balance with the Audit
and Remuneration Committees,
which are each chaired by other
Non-Executive Directors.
The Committee’s other members are
Dr Alison Fielding and Chris Batterham.
All members of the Committee are
considered to have experience and
competence relevant to the duties
and responsibilities of the Committee.
Summary biographies of all members of
the Committee are detailed on pages 46
and 47.
Meeting frequency
and attendance
The terms of reference of the Committee
require at least two meetings per year.
When specific issues or changes need to
be addressed, such as the appointment
of a new Board member, the Committee
meets on additional occasions. The
Committee met two times during the
financial year and was attended as
shown in the table below:
Committee member
Dr Christopher Richards (Chair)
Chris Batterham
Dr Alison Fielding
Meetings/
attended
2/2
2/2
2/2
As well as the members of the Committee,
the Chief Executive Officer may be invited
to attend, where there are no perceived
conflicts of interest. On matters of
remuneration of new appointees,
the Chair works closely with the
Remuneration Committee.
Meetings of the Nominations Committee
are either scheduled around existing
Board meetings or on an ad hoc basis,
for example during a recruitment
process. The Committee Chair provides
the Board with a full briefing on all
relevant matters.
The Chairman would not chair this
Committee should it be considering the
appointment of a new Chairman. The
Senior Independent Director would chair
the Committee in this situation.
Board structure and activities during
the year
Following the successful conclusion of
the Samsung litigation, the Company’s
financial position has improved
significantly. In addition, the Company
has made good progress towards
achieving its goal of commercial
production. As a result of both positive
steps, the decision was taken during
the year to begin the search for a new
Non-Executive Director with deep
experience in consumer electronics supply
chains with a focus on commercialisation
skills. We have engaged a specialist
worldwide search company to this end,
and hope to make an appointment by
the end of calendar year 2023.
Succession planning
The Chairman will have been with the
Company for nine years in November
2024. In line with good corporate
governance, the Nominations Committee
will begin its search for a new Chairman
early in calendar year 2024 to ensure
appropriate time for an effective search
and a smooth transition.
Nanoco Group plc – Annual Report and Accounts 2023 059
The Committee is
primarily responsible for
assisting the Board in
ensuring the appropriate
composition of the Board
and any Committees
of the Board to match
Nanoco’s stage
of evolution.”
Nominations Committee report continued
Meeting frequency and
attendance continued
Employee engagement
The Employee Voice Committee (“EVC”)
was established in 2020 as an employee
representative body which would aim to
formally meet with a designated member
of the Board at least twice a year. Liam
Gray, the CFO, took responsibility for
formal engagement with the EVC, and
took part in two of its meetings during
the year. The EVC gave valuable
feedback on employee concerns and
issues, which has supported
management initiatives to improve
morale and employee engagement.
Examples included holding “all-Company
meetings”, giving more attention
to mental health awareness, and
considering alternative forms of
reward and recognition.
Diversity
The group has always aimed to employ
the right person for the right job,
irrespective of sex, gender, race or
disability. When recruiting at Board level,
the Nominations Committee requires that
any Executive search firms used by the
group have signed up to its industry’s
voluntary code of conduct (prepared in
response to the Davies Review of Women
on Boards). The group follows a policy of
appointing talented people on merit at
every level and does not have a specific
target for numbers of female Directors
or employees. This reflects a market for
industry skills that unfortunately still
attracts more male candidates than
female. The Board will also ensure that
its own development in this area is
consistent with its strategic objectives
and enhances Board effectiveness.
Other aspects of diversity in the group
are commented on in the Sustainability
section on pages 40 to 45.
Review of the Nominations Committee’s
effectiveness
The Committee has reviewed and
considered the effectiveness of its
performance during the year. The review
included the views of members of the
Committee and of regular attendees at
the various meetings. I am satisfied that
the degree of rigour and challenge
applied in performing the Committee’s
responsibilities is appropriate and
effective and continues to improve.
Dr Christopher Richards
Nominations Committee Chair
19 October 2023
060
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Audit Committee report
Chris Batterham
Audit Committee Chair
To provide oversight of
financial reporting and
disclosures and to ensure
an appropriate risk
management framework
is in place as the group
develops and grows
Overview
The Audit Committee provides oversight
of the group’s financial and narrative
reporting statements, monitors the
effectiveness of systems of internal
control and risk management processes,
and monitors the integrity of the group’s
external audit processes.
The Audit Committee monitors internal
and external risk factors on behalf of the
Board. These are maintained in the
group’s risk register. The status and
assessment of matters in the risk register
also informs the drafting of the Viability
statement. The Committee does not just
respond to external factors but also
supports and challenges management
to anticipate future risks and opportunities.
Committee membership
The composition of the Committee
currently comprises me, Chris Batterham
(Chair), and Dr Alison Fielding.
In accordance with the provisions of
the Code, the Committee is made up of
independent Non-Executive Directors.
The Board considers that I have recent
and relevant financial experience to act
as Chair of the Committee, by virtue of
being a qualified Chartered Accountant
with extensive relevant experience as a
former CFO and finance director of a
number of private and public companies.
All members of the Committee are
considered to have experience and
competence relevant to the material
science sector.
Summary biographies of all members of
the Committee are detailed on pages 46
and 47.
Meeting frequency
and attendance
The terms of reference of the Committee
require at least four meetings per year.
The Committee met seven times during
the financial year. As well as the members
of the Committee, the meetings are
usually attended on an invitational basis
by the Chairman, the Chief Executive
Officer and the Chief Financial Officer.
The external auditors attend each
meeting unless the business of the
meeting does not need them to be
present. The Committee also has
meetings with the external auditors
without the Executive Directors being
present. Attendance of each member
is set out below:
Committee member
Chris Batterham (Chair)
Dr Alison Fielding
Meetings/
attended
7/7
7/7
Meetings of the Audit Committee are
scheduled to occur in the run-up to key
events in the group’s reporting calendar.
Each meeting precedes a Board meeting
to allow the Committee Chair to fully
brief the Board on all relevant matters.
The Committee has a pre-determined
series of subjects and issues to be
reviewed each year. These are then
supplemented by additional review of
emerging issues or changes in the
financial reporting or governance regimes.
In this way, the Committee ensures that
key recurring themes are regularly
reviewed while maintaining the flexibility
to adapt to changing circumstances.
Members
| Chris Batterham (Chair)
| Dr Alison Fielding
20%
5%
5%
10%
Estimated
allocation
of time
40%
20%
Performance evaluation
Succession planning
Accounting matters
Risk management
Internal controls
Financial reporting
In addition to the scheduled Committee
meetings, the members of the Committee
meet and discuss emerging issues for
the business with the CEO and CFO to
ensure that the work of the Committee
remains appropriately focused on the
risks and needs of the business.
Continuous improvements in the quality,
relevance and timeliness of information
being provided to the Committee and
the Board as a whole ensure that similar
gains are also made in the quality review,
challenge and scrutiny by the Committee.
Nanoco Group plc – Annual Report and Accounts 2023 061
Audit Committee report continued
Audit Committee
responsibilities
The key areas of focus for the
Audit Committee are set out below.
This includes specific duties of the
Committee in each area, how it
operates and any changes and
improvements made over time.
The subjects referred to are a mix
of annually recurring areas and also
specific issues that have arisen or
been reviewed during the last year.
Financial reporting
The primary objective is to ensure
that internal and external financial
information is robust, relevant, reliable,
and a firm basis for decision making
by management and external
stakeholders alike. These activities are
typically carried on throughout the
year. They lend themselves to a
“continuous improvement” mindset
that means we are always looking to
do better.
Our responsibilities in this area include:
| reviewing and monitoring the
integrity of the group’s annual and
interim financial statements;
| ensuring the appropriateness of
accounting policies;
| reviewing and challenging the critical
judgements and estimates used in
financial reporting. This includes
assessing any potential impact
of accounting judgements and
estimates on Executive remuneration;
| ensuring that the financial
information being provided
internally to the Board and to
management is as robust as that
reported externally and evolves
to meet the changing needs of
the business;
| ensuring the group remains up to date
with developments in accounting and
reporting requirements; and
| advising the Board on whether or not
the financial statements, when taken
as a whole, are fair, balanced and
understandable. In simple terms,
this means that shareholders receive
adequate information to assess the
group’s strategy, business model, risks,
and performance.
External audit
The primary objective in this area is
to ensure that the group is subject to an
appropriately robust, risk-focused
external audit from a qualified and
independent firm of auditors.
Further responsibilities in this
area include:
| advising the Board on the
appointment of the external auditors;
| reviewing and monitoring the
performance of the external auditors,
which includes the planning and
effective execution of the external
audit process itself;
| setting the audit and non-audit fees
of the auditors to avoid any potential
conflicts of interest with Executive
management (non-audit fees are set
out in note 6 to the financial
statements); and
| controlling the award of non-audit
work to the external auditors to ensure
that there is no actual or perceived
threat to their independence.
Internal control and risk
management
Our internal control and risk
management processes are a
fundamental part of the overarching
framework used to safeguard the assets
of the business and to ensure that
investments represent an appropriate
balance of risk and return. We work to
ensure that these are as good as they
can be for our business’ scale.
Our responsibilities in this area include:
| continual monitoring of the
appropriateness and effectiveness
of internal controls (including
whether an internal audit function
is required);
| review of lessons learnt and
management remediation plans for
any shortcomings or improvement
plans to internal control processes;
| review of progress and commitment
to addressing control improvement
opportunities identified by the
external auditors;
| review and challenge of the
models and assumptions underlying
the going concern and viability
statements;
| continual focus on cash and
cash forecasting;
| oversight of whistleblowing and
fraud detection and prevention
mechanisms; and
| ongoing review of the group’s risk
management processes and
systems, including a substantive
review and challenge of
management’s assessment of
key risks.
The Audit Committee also assists the
Board in ensuring the overall corporate
governance framework is appropriate
by giving due consideration to laws
and regulations, the provisions of the
UK Corporate Governance Code and
the requirements of the Listing Rules.
Financial
reporting
External
audit
Internal control
and risk
management
Audit
Committee
062
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Financial reporting
Our approach to materiality
The financial statements must present
a true and fair view of the performance
and financial position of the group. They
must also present a fair, balanced and
understandable view. These are both
aimed at ensuring that a user of the
accounts can gain an accurate picture
of the underlying performance and
position of the business. To achieve this,
all material matters need to be addressed.
Material matters are those that are
considered by the Directors to be
sufficiently specific and have a large
enough real or potential impact that
they would be likely to influence the
decisions of a reader of the accounts.
The Directors take a range of
quantitative and qualitative matters into
account in assessing whether or not a
matter is deemed to be material. These
include the absolute size of a potential
adjustment by reference to the overall
income statement or the financial
position statement and also by reference
to an individual component of the
financial statements. Qualitative
judgements include whether an issue
would reverse or materially alter a trend
(such as turning a profit into a loss, or
growth into a decline).
In this way, the Directors aim to make sure
as wide a range of issues as possible are
considered without over-burdening the
reader of the financial statements with
insignificant or immaterial matters.
The Committee discharged its obligations
in response to the financial year as follows:
Significant issues considered during the
year in respect of the financial statements
The Committee assessed the following
matters in respect of financial reporting
and in the preparation of the Interim Report
and the Annual Report and Accounts:
| continuing appropriateness of the
group’s accounting policies;
| continuous development in the quality
and transparency of the group’s
external reporting;
During the year, the group entered
into a significant settlement transaction
with Samsung, which had two linked
components:
| Disposal of IP – The proceeds from
the settlement were netted off
against the remaining net book value.
This part of the settlement had no
impact on revenue or deferred income
and was accounted for as a “profit on
disposal of intellectual property” in
line with IAS 38.
| a review of key judgements and
| Licence revenue – In line with IFRS 15,
estimates made by management
(see table below); and
| considering if the financial statements,
when taken as a whole, are fair,
balanced and understandable.
Significant accounting matters
and areas of significant
management judgement
The Committee, together with the
Board, considered what the significant
accounting matters and areas of
management judgement in relation
to the financial statements were and
how these would be addressed.
Each item is considered in further
detail below.
Revenue recognition and deferred
income (recurring item)
The Committee reviewed the revenue
recognition policies and management
judgements made in the preparation of
the financial statements. Where revenue
relates to the sale of products, revenue is
recognised on the transfer of risks and
rewards of ownership. For services to
customers, revenue is recognised on a
time and material basis for delivery
of services.
the licence revenue from the
settlement is being recognised in the
income statement evenly over the
average remaining life of the patent
portfolio (being 8.8 years from the
signing of the agreement). The
unrecognised revenue is recorded as
deferred income in the statement of
financial position.
A major one-year work package that
commenced in May 2022 with the
European electronics customer was the
most material source of revenue in the
year from services and material sales,
and was completed at the end of April
2023. Deliverables were all accounted
for on the basis noted above regarding
sales of materials or service revenue in
line with the requirements of IFRS 15.
Other new sources of revenue earned in
the year were derived from the sale of
goods or the performance of short-term
professional services work. A low level of
judgement was required in assessing
these contracts under IFRS 15.
The Committee concluded that the
judgements and estimates made by
management in respect of revenue
recognition and, if relevant, the treatment
of deferred income and contract liabilities
were reasonable and appropriately
disclosed in the financial statements.
Key item
Revenue recognition
Carrying value of intangible assets
Judgement or estimate?
Materiality
Judgement
Estimate
High
Medium
Going concern
Judgement and estimate
Medium
Samsung litigation accounting
Capital reduction
Judgement
Judgement
High
Low
Uncertainty
Medium
Low
Low
Low
Low
Nanoco Group plc – Annual Report and Accounts 2023 063
Audit Committee report continued
Significant accounting matters
and areas of significant
management judgement
continued
Carrying value of intangible assets
(recurring item)
The group holds a number of intangible
assets, primarily relating to IP. At the end
of the year, these had a carrying value of
£0.9 million (2022: £1.6 million). During the
year, the group entered into a number
of transactions which support the net
book value of the portfolio; the profit on
disposal of IP during the year totalled
£68.7 million, in addition to the licensing
of the remaining portfolio which provided
revenue of £3.0 million during the year
and a further £49.9 million to be
recognised in future years.
Management continued their bi-annual
review of the portfolio to identify any
one-off patents which may require
impairment. The Committee challenged
and reviewed the results of the
assessment carried out by management.
The Committee agreed with
management that a £0.1 million
impairment of a number of individual
assets was required in the current year,
with the majority related to technology
areas that the group is no longer
pursuing or territories where prosecution
of IP rights is more difficult.
The gross book value of any assets which
have been lapsed are treated as being
disposed during the year. This totalled
£0.3 million in the current financial year
(net book value £0.0 million).
The group continues to recognise IP
assets at their external cost of
registration (typically, legal fees and
amounts payable to patent offices).
IAS 38 allows the measurement and
recording of intangible assets using
either a cost model or a revaluation
model. The group uses a cost model
approach as patents are specifically
excluded from the revaluation approach.
Going concern (recurring item)
The Committee considered the use of
the going concern basis for preparing
the financial statements. This is currently
an annual recurring activity given the
ongoing losses incurred by the business
in advance of generating full scale
production levels of commercial revenues.
The litigation settlement in the financial
year provides significant cash resources
for the group. Taking into account the
proposed return of capital, the remaining
cash resources and the group’s projected
cash cost base, and the assessment by
management and the Committee of the
material potential risks identified in the
group’s risk register and any mitigating
actions and controls as shown on pages
33 to 35, the Committee concluded that
the group has adequate financial
resources to adopt the going concern
basis for the preparation of the financial
statements. Given the nature of the risks
that the group faces while its activities
are at a pre-commercial stage, the
Committee continues to recommend
that the Annual Report and Accounts
maintains a relatively high level of
disclosure of these matters in the
financial statements – as set out in the
sections on risk, viability and going
concern on pages 36 to 37.
Litigation accounting
Management reviewed the various
adviser contracts linked to the litigation,
and concluded that as a result of these
all being payable following the
settlement, these should be recognised
in full as a one-off cost in the financial
year. The Committee agreed with
this treatment.
In addition, management reviewed the
recognition of revenue relating to the
agreements signed with Samsung, namely
the sale of IP and the licence agreement.
Both agreements are payable in two
tranches with 50% being received in the
year and 50% due in Feb 24.
The sale of IP is shown as a profit on
disposal of IP after netting off the
amortised cost of the IP being sold.
The licence income is recognised over
time. Management considered the time
period to which the licence income
should relate, and decided the most
relevant period would be the average
remaining life of the IP portfolio, which is
8.8 years.
external auditors. The Committee
challenged the assumption that the
settlement was one linked transaction
and also the identification of the
different performance obligations that
needed to be accounted for. In respect
of the deferred income arising, the
Committee reviewed the various options
for the calculation of the useful economic
life of the IP portfolio and agreed with
management’s conclusion that using the
average remaining life of the portfolio as
a whole was the most appropriate basis
for revenue recognition in future years.
Capital reduction
The Board has committed to returning
capital to shareholders upon receipt of
the second tranche of cash from
Samsung. In order to facilitate this, the
Parent Company is required to have
distributable reserves. Historical losses
meant a transfer from share premium
was required to create distributable
reserves. This was a court-approved
proposal which also received significant
shareholder approval and was
completed during the financial year.
Financial reporting on a fair,
balanced and understandable
(“FBU”) basis
The Committee reviewed the Interim and
Annual Report and Accounts. As part of
that review process, the members of the
Committee were provided with a draft of
the full Annual Report enabling them to
ensure that the performance reported
therein was consistent with the
Committee’s knowledge gained from
regular reviews of the monthly
management accounts and Board
discussions of issues arising and business
performance throughout the year.
The Committee also assessed whether
the narrative description of the group’s
activities and performance was
consistent with its own understanding
obtained through Board and Audit
Committee meetings and other
interactions it had with management.
The Committee reviewed in detail the
accounting and disclosures for the
litigation settlement. This reflects the very
significant materiality of the settlement.
The CFO produced an extensive
accounting and disclosure paper that
was submitted to the Committee
following additional review by the group’s
The CFO advised the Committee of the
findings of independent readers of the
draft Annual Report and Accounts.
These reviews are carried out by Nanoco
senior managers who have not been
closely involved in drafting the Annual
Report. Their knowledge of the business
allows them to form an opinion if the
064
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance The Board has overall
responsibility for the
group’s system of internal
controls as one critical
part of the overall
corporate governance
framework.”
document conveys a fair, balanced
and understandable view of business
performance in the current year. The
Committee members themselves also
perform this function by reference to
the matters discussed at the regular
Board meetings.
Drawing on this knowledge of the group’s
activities and its own industry knowledge
and experience, supplemented by
advice received from external advisers
during the drafting process, the
Committee determined that the Annual
Report and Accounts is fair, balanced
and understandable and this finding
was confirmed by the Board.
Audit Quality Review (“AQR”) by the
Financial Reporting Council (“FRC”)
The Committee also reviewed and
assessed the findings of the AQR carried
out by the FRC on the external auditors’
audit of the Annual Report and Accounts
for FY23 as part of the FRC’s rolling
programme of quality reviews. While
an AQR focuses on the performance of
the audit by the external auditors, the
Committee noted the two areas of
good practice and the two areas where
improvements were needed. The
Company has agreed to adopt the
recommendations highlighted by the
AQR for the year ended 31 July 2023,
namely recording employee costs in
Costs of sales in the Consolidated
Statement of Comprehensive Income.
The Committee was satisfied that there
were no material changes required to the
group’s reporting and that overall Mazars
had performed appropriately in the first
year as external auditors.
External audit
External audit plan
The Committee reviewed the proposed
audit plan. The Committee was satisfied
that the areas of audit risk highlighted by
Mazars were appropriate and included
all material matters. The Committee
subsequently reviewed the actual audit
report by Mazars to ensure that it aligned
closely with those risks and the planned
audit work.
Safeguarding auditors’ independence
The independence of the external
auditors is essential to the provision
of an objective opinion on the true
and fair view presented in the financial
statements. The Committee reviews the
policies and status of the independence
of the external auditors consistent with
the ethical standards published by the
Auditing Practices Board.
Auditors’ independence and objectivity
are also safeguarded by limiting the
nature and value of non-audit services
performed by the external auditors
(see later section). The group has a
policy of not recruiting senior employees
of the external auditors who have worked
on the audit in the past two years. The
group works with the external auditors
to achieve the rotation of the lead
engagement partner at least every
five years.
The current external audit firm and the
current lead engagement partner are in
their second year of providing external
audit services to the group.
The external auditors are also required
periodically to assess whether, in their
professional opinion, they are independent
and those views are shared with the
Audit Committee. The Committee has
authority to take independent advice as
it deems appropriate in order to resolve
issues on auditors’ independence. No
such advice has to date been required.
For the current year, the Committee has
concluded that the external auditors
remain independent and objective for
the purposes of their role.
Nanoco Group plc – Annual Report and Accounts 2023 065
well as protecting staff welfare.
The procedure is reviewed annually by the
Committee to ensure that it remains fit for
purpose. No reports of whistleblowing
were received during the year. Staff are
regularly reminded of the whistleblowing
process as part of ongoing engagement
with staff on compliance issues such as
anti-bribery training.
Internal accountability
The Board has overall responsibility for
the group’s system of risk management
and internal control. The Audit Committee
reviews the effectiveness of the system
at least annually on behalf of the Board
and, having carried out this review, the
Committee continues to believe that
the system is effective in safeguarding
shareholders’ interests and the group’s
assets. There are some improvement
areas, such as more regular reviews of
internal controls, in addition to reviewing
policies and procedures, and these will
be implemented in FY24. The Board
agreed with this conclusion.
Review of the Audit
Committee’s effectiveness
The Committee has reviewed and
considered the effectiveness of its
performance during the year. The review
included the views of members of the
Committee and of regular attendees at
the various meetings (including the
Executive Directors). I am satisfied that
the degree of rigour and challenge
applied in performing the Committee’s
responsibilities is appropriate and
effective and continues to improve.
Chris Batterham
Audit Committee Chair
19 October 2023
Audit Committee report continued
External audit continued
Non-audit services provided
by the external auditors
The Audit Committee will only approve
the provision of non-audit services by
the external auditors where they are
permissible and do not represent a
threat (by their nature or scale) to this
requirement for independence. The aim
is to ensure that no material risk is taken
of the auditors both advising on and
auditing the same information in the
financial statements.
The Audit Committee’s approval is
required for any fees for non-audit work
paid to the auditors in excess of £10,000
in any financial year. However, the group
recognises that it can receive particular
benefit from certain non-audit services
provided by the external auditors due
to their technical skills and detailed
understanding of the group’s business
and hence some non-audit work
is allowed.
No fees were paid for non-audit services
during the year. Separate external firms
are engaged for taxation and Directors’
remuneration advice.
Internal controls and risk
management
The Board has overall responsibility for
the group’s system of internal controls as
one critical part of the overall corporate
governance framework. This includes
reviewing the effectiveness of these
controls and the processes in place for
risk management. In accordance with
the Internal Control Guidance for
Directors issued by the Financial
Reporting Council, there is an ongoing
process for identifying, evaluating and
managing the significant risks faced by
the group. This process was introduced
during 2015 and is summarised on pages
33 to 35.
The role of the Executive Directors is to
implement the Board’s policies on risk
and control and to provide assurance
on compliance with these policies.
The processes and procedures in place
are designed to manage rather than
eliminate risk and operate within the
Board’s defined risk appetite.
They therefore can only provide a
reasonable and not absolute assurance
against material misstatement or loss.
Executive Directors have a close
involvement with all day-to-day
operations. They also meet with staff on
a regular basis to identify and review
business risks, the controls needed to
minimise those risks and the effectiveness
of controls in place. Business risks are
monitored and discussed on a regular
basis at meetings of the leadership and
senior management teams. The principal
risks faced by the group and other
aspects of how they are individually
assessed and managed are set out
below and on pages 33 to 35.
Internal controls
Key features of the internal control
system are summarised below:
(i)
annual budgets and rolling forecasts
are reviewed and approved by
the Board;
(ii) monthly management accounts are
reviewed and challenged by
comparison to the budget;
(iii) written operational, accounting and
employment policies are in place;
(iv) the Board actively identifies and
evaluates the risks inherent in the
business and ensures that
appropriate controls and procedures
are in place to manage these risks;
(v) expenditure approval limits and
approval processes are in place to
cover all major commitments;
(vi) quality assurance processes are
overseen and audited by the internal
quality assurance department, with
a particular focus on non-financial
processes and procedures which
drive financial performance; and
(vii) compliance with control procedures
is monitored by the Audit Committee
through its internal reviews and
external audit findings and its reviews
of exceptions.
The Committee considers that the need
for an internal audit function is not currently
warranted due to the size and complexity
of the business but will reconsider this
need not less than annually.
Whistleblowing and confidential
reporting procedures
The group operates a confidential
reporting and whistleblowing procedure.
The policy aims to support the
stewardship of the group’s assets and the
integrity of the financial statements as
066
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Remuneration Committee report
Our Executive team led the
successful litigation and
made significant progress
on our strategic objectives
Dr Alison Fielding
Remuneration Committee Chair
Dear shareholder
I am pleased to present our Directors’
remuneration report for the year ended
31 July 2023. The Committee’s report
seeks to deliver an appropriate balance
between the required regulatory
disclosures, commercial sensitivities
and the context for our approach
and decisions.
This report is presented in three parts:
(1)
Chair’s introduction setting out an
overview of FY23 and prospective
matters for FY24;
(2) the Directors’ remuneration policy
setting out the framework approved
by shareholders at the AGM in
November 2021; and
(3) the Annual report on remuneration,
which sets out the actual
remuneration earned by Directors
over the year ended 31 July 2023.
This Directors’ remuneration report for
the year ended 31 July 2023 complies
with the requirements of the Listing Rules
of the UK Listing Authority, Schedule 8 of
the Large and Medium-sized Companies
and Groups (Accounts and Reports)
Regulations 2008 and the provisions of
the UK Corporate Governance Code
(July 2018). The Regulations require the
auditors to report to the Company’s
members on certain parts of the
Directors’ remuneration report and to
state whether, in their opinion, those
parts of the report have been properly
prepared in accordance with the
accounting regulations. Items that
are audited throughout this report are
clearly marked as audited in the heading
of the section.
Introduction
The Executive team led Nanoco
effectively to a number of significant
successes throughout the year and the
Board remains convinced that retaining
and incentivising them is key to achieving
our strategic priorities. All milestones
were achieved for both major
commercial customers, with two
materials now in final production
validation and discussions ongoing
with both customers on new longer and
deeper collaborations. The successful
conclusion to the Samsung litigation
after a number of years of intense
activity has put the group in a strong
self-funded position to deliver further
commercial success, in addition enabling
the planned major return of capital to
shareholders in early 2024. The financial
results for the year and delivery of
personal objectives for the Executive
team were strong.
Members
| Dr Alison Fielding (Chair)
| Chris Batterham
| Dr Christopher Richards
5%
10%
55%
Estimated
allocation
of time
15%
5%
10%
Performance evaluation
Succession planning
Employee engagement
Diversity
Governance
Reward and targets
Nanoco Group plc – Annual Report and Accounts 2023 067
Our remuneration
packages aim to reflect
the calibre of our
Executives, maintain
close alignment to
shareholder value and
support the commitment
to our strategic priorities.“
Remuneration Committee report continued
2023 incentive outcomes
Annual bonus
Considering the performance delivered
in 2023 and reflecting that 80% of the
bonus is based on financial KPIs, the
Committee determined that 95%,
95% and 98% of the maximum bonus
should be paid to the CEO, CFO and
CTO respectively. A detailed description
of performance against the targets is
set out on page 79. Given the group’s
stronger financial position, a proportion
of the annual bonuses will be paid in
cash with the remainder in deferred
share options.
Long Term Incentive Plan: 2020 outcome
Regarding longer-term performance,
market disappointment in the value of
the final Samsung settlement has led to
a depressed share price since early in
2023. This has potentially been extended
and exacerbated by the distraction of
the requisitioned General Meeting that
sought to remove the Board. As a result
of the depressed share price, the
long-term options, granted to the
Executive team in 2020 as an incentive
linked to the Samsung litigation, lapsed
as at 31 July 2023 with nil value.
In assessing whether the outcomes
generated by the annual bonus and LTIP
scorecards were fair in the context of
broader performance, the Committee
took into account the transformational
litigation success, the underlying
financial performance of the group
and the wider stakeholder experience
(including, but not limited to, the
shareholder experience). After due
consideration, the Committee felt that
the formulaic outcome was an
appropriate reflection of performance
delivered. It has, therefore, not exercised
discretion in relation to incentive
outcomes during the year.
Wider workforce
Nanoco’s workforce is critical to its
success. As a responsible business, our
aim is to pay our staff at the median level
for comparable national roles, and we
performed a benchmarking exercise in
the prior year to review this. We are also
a living wage employer.
We have recognised the challenges
faced by our employees with rising
cost of living and have increased base
salaries by 5%. In addition, over the
past two years, we have increased the
employer’s direct contribution pension
percentage from 5% to 7.5% and this year
we will introduce a workplace health
programme for all staff that has an
equivalent cost of 1% of salary.
All staff participate in the Company
bonus scheme, which resulted in
payments of up to £4,000 per employee,
pro-rated for start of employment and
part-time hours.
Remuneration and its
strategic context
Our remuneration policy seeks to ensure
a clear link between Executive Directors’
pay, the delivery of the group’s strategy
to be a sustainable production company,
and enhancement of shareholder value.
The Remuneration Committee seeks to
ensure that the Directors’ remuneration
arrangements continue to be aligned to
the calibre of individuals, to the strategic
direction of the group and to our
stakeholder philosophy.
The Committee has always shown
leadership in restraint of Executive and
Board remuneration, reflecting the stage
of development of the business. Nanoco
Executives have relatively low base
salaries compared to benchmarks and
minimal benefits in kind. Short-term
incentives reflect challenging annual
targets and have typically preserved
Nanoco’s cash by being paid in Deferred
Bonus Plan Options that create further
clear alignment with shareholders’
interests. Long-term incentives are linked
directly to shareholder value in the form
of options with stretching share price and
revenue targets.
Remuneration commencing
1 August 2023
Remuneration commencing 1 August
2023 is detailed in the table on the
opposite page.
068
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Remuneration at a glance
Purpose and link to strategy
Key features
Planned for FY24
Actual in FY23
Reviewed annually.
Considers the role, responsibility
and experience of the individual,
corporate and individual
performance, and market
comparators by size and
complexity; and other Nanoco
salary increases.
Pension contributions equal to
those for all staff.
Executive Directors will receive
3% cost of living increase. The
rest of the workforce will
receive 5%.
CEO appointed September
2020, salary increase
completed 1 August 2022.
All three Executives had the
same cost of living increase as
all other Nanoco staff (6.0%).
Unchanged.
7.5% of salary.
Life assurance.
Unchanged.
Eight times salary for
Executives, four times salary for
other staff.
Workplace health programme.
Plan to introduce in FY24.
None.
Target opportunity is 75% of
salary and maximum is 125%
of salary.
Maximum opportunity remains
125% of salary for CEO, CTO
and CFO.
FY23 bonus earned:
| CEO 95% of maximum
| CTO 98% of maximum
| CFO 95% of maximum
Financial targets 80% of
maximum and personal
strategic targets 20% of
maximum.
Salary
Basis to recruit and retain
talent necessary to deliver
the business strategy.
Benefits and
pensions
Provide a market-competitive
benefits and pensions
package and promote the
wellbeing of employees.
Annual bonus
Incentivises delivery of
annual key financial and
strategic goals that support
the enhancement of
shareholder value.
LTIP
To reflect stakeholder
philosophy, provide a
long-term retention
mechanism and align with
shareholders.
Shareholding
requirement
To align Directors to
shareholder interests.
Post employment
To further align Directors to
shareholder interests.
Recovery
provisions
To ensure recovery of
Deferred Bonus Plan awards
if required.
Performance measures are a
mix of challenging financial and
personal strategic targets.
Up to 100% of earned bonus
can be paid in Deferred Bonus
Plan options.
Subject to malus and
clawback provisions.
Awards of 150% for
each Executive.
Up to 250% in exceptional
circumstances such as
recruitment.
Three-year performance period.
Performance measures
reviewed annually.
Subject to malus and
clawback provisions.
Minimum shareholding
requirement for all Executives
200% of salary.
To retain up to 200% of salary in
shareholdings for one year post
employment Reduces to 100% of
salary in second year.
Possible in the event of material
misstatement, material
misconduct or a material
corporate failure.
Performance measures for the
three-year period ending 31
July 2026 will be absolute TSR
(50%) and revenue (50%).
LTIP awards made in 2020
lapsed with nil value as
share price targets were
not achieved.
25% of the award will vest at
threshold, increasing on a
straight-line basis to 100% for
stretch. There is nil vesting
below the threshold level.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Unchanged.
Non-Executive Director fees will remain at their previous levels with no cost of living increase. The second increase in
the Chairman’s underlying fees that was agreed in 2019 to reflect comparative rates of pay will remain on hold.
Further information is set out on page 84.
As a Committee, we believe that ongoing dialogue with our major shareholders is of key importance. Should you have any
queries or feedback in relation to the Directors’ remuneration report, please contact me through the Company Secretary.
Dr Alison Fielding
Remuneration Committee Chair
19 October 2023
Nanoco Group plc – Annual Report and Accounts 2023 069
Directors’ remuneration report
Directors’ remuneration policy
This part of the report sets out the group’s forward-looking Directors’ remuneration policy that was subject to a binding vote at
the AGM on 30 November 2021 with 99% of votes cast in favour. The policy is scheduled to continue in operation for three years
including FY24 and will be subject to renewed shareholder approval at the AGM in 2024. The Directors’ remuneration policy is
not audited.
Element and purpose
Operation
Maximum opportunity
Performance measures
Base salary
Core element of fixed remuneration
that provides the basis to recruit
and retain talent necessary to
deliver the business strategy.
Normally reviewed annually and applied
from 1 August (can be varied).
Consideration is given to the following:
No maximum. Annual increase normally
in line with the wider workforce. Potential
further increases:
N/A
| the role, responsibility and
experience of the individual;
| corporate and individual
performance;
| market comparators by size and
| on promotion or changes in scope or
responsibility;
| an individual’s performance in a role;
| where there has been a change in
market practice; or
complexity; and
| if there is a change in the size and/or
Benefits
Provide a market-competitive
benefits package and promote
the wellbeing of employees.
Retirement benefits
Provide market-competitive
post-employment benefits to
recruit and retain Directors of the
calibre required for the business.
N/A
complexity of the business.
No absolute maximum. The value
of benefits is set at a level which
the Committee considers to be
appropriately positioned, taking
into account relevant market factors
based on the nature and location of
the role, the level of benefits provided
to other employees in the group
and individual circumstances.
Executive pension contributions are set
at the same percentage of salary as all
other staff (currently 7.5% of salary).
N/A
The policy sets an overall contribution
limit of up to 10% of base salary (in
addition to the amount of any salary
sacrifice and employer NIC saved).
| other Nanoco salary increases.
The group provides life assurance
of eight times salary, for all Executives.
in addition, post year end the Group
has introduced a workplace health
programme for all employees.
Directors are reimbursed for out-of-
pocket expenses incurred wholly and
necessarily on group business.
Benefits are reviewed periodically,
taking individual circumstances into
consideration. Benefits provided may
include, for example, medical insurance,
relocation expenses, expatriate
allowances and travel expenses.
The group currently operates a salary
sacrifice pension arrangement under
which employees may elect to sacrifice
salary and the group pays an amount
equal to the amount of the salary
sacrifice, together with the employer
National Insurance saved, into a private
pension scheme.
Executive Directors are also eligible
to participate in the group’s defined
contribution scheme (or other appropriate
pension plan). In circumstances where
the lifetime allowance is protected,
Executive Directors are permitted to
take an equal cash supplement
(not counted towards bonus or
LTIP opportunity).
070
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Directors’ remuneration policy continued
Element and purpose
Operation
Maximum opportunity
Performance measures
Annual bonus
Rewards and incentivises
the achievement of annual
objectives which are aligned
with key financial and
strategic goals that support
the enhancement of
shareholder value.
Long Term Incentive Plan
(“LTIP”)
To reflect stakeholder
philosophy, provide a
longer-term retention
mechanism and provide
alignment with shareholders.
Performance targets are set annually and
pay-out levels are determined after the year
end following the Committee’s assessment
of actual performance against set targets.
Up to 100% of any bonus earned can be paid in
deferred shares or options under the Deferred
Bonus Plan (“DBP”) that will vest after two years.
Deferred share option awards may incorporate
the right to receive (in cash or shares) the value
of the dividends that would have been paid on
vested shares; this may assume the reinvestment
of dividends into shares on such terms as the
Committee determines.
Personal bonus element is only payable if at
least one financial target is achieved.
Under the LTIP, awards of conditional shares,
restricted stock or nil-cost options (or similar
cash equivalent) can be made with vesting,
dependent on the achievement of performance
conditions, normally over a three-year
performance period.
There will be no retesting of performance
after the end of the performance period.
Vested awards are normally subject to a
two-year holding period.
LTIP awards may incorporate the right to
receive (in cash or shares) the value of the
dividends that would have been paid on
the shares that vest; this may assume the
reinvestment of dividends into shares on
such terms as the Committee determines.
Maximum annual bonus opportunity is
125% of salary based on performance
as shown below:
Stretching performance
targets are set each year,
reflecting the group strategy.
Below threshold
Threshold
On-target
Maximum
0%
25%
60%
100%
On-target performance pays out at
60% (and not 50%) as the Committee
includes an element of stretch when
setting targets.
The maximum value of shares over
which an individual can be granted
an award in respect of a financial
year is normally 150% of base salary,
although this limit may be increased
to 250% of base salary in exceptional
circumstances. The percentage of
maximum awards for the different
levels of performance would be no
greater than:
Below threshold
Threshold
On-target
Maximum
0%
25%
60%
100%
On-target performance pays out at
60% (and not 50%) as the Committee
includes an element of stretch when
setting targets.
Ordinarily, at least 80% will be
subject to achievement of
financial and/or corporate
measures and the balance
will be based on challenging
personal objectives.
The Committee retains
discretion to apply different
weightings in relevant
circumstances, and to
override formulaic outturns
where circumstances require.
Vesting of LTIP awards
is subject to meeting
performance targets set
by the Committee.
Performance targets are
reviewed regularly to
ensure relevance and
financial measures which
link to creating shareholder
value (such as share price,
revenue and EPS) and/or
the achievement of
strategic milestones.
The targets and their
weightings may vary each
year based on group
strategic priorities. The
Committee retains discretion
to override formulaic outturns
where circumstances require.
Shareholding requirement
In service requirement
To align Directors to
shareholder interests.
Post-employment
shareholding requirement
To further align Directors
to shareholder interests.
Shareholding of at least 200% of base salary.
50% of vested shares under the DBP or LTIP
(post tax) are to be retained until the
shareholding requirement has been met.
Executive Directors’, upon ceasing employment
with the Company, are required to retain their
shareholdings, up to 200% of salary, for one
year post employment. This reduces to 100%
of salary in the second year post employment.
Shares will be subject to this requirement only
if they are acquired from employee share plan
awards granted on or after 1 August 2021.
N/A
N/A
N/A
N/A
Nanoco Group plc – Annual Report and Accounts 2023 071
Directors’ remuneration report continued
Directors’ remuneration policy continued
Notes to the policy table
Application of clawback and malus to variable remuneration
Under the Deferred Bonus Plan (“DBP”), during the two-year deferral period, the Committee has the right to reduce any deferred
bonus awards which have not yet been released in the event of a material misstatement of the group’s financial results, material
misconduct on the part of the participant, a material corporate failure as determined by the Board, a material failure of risk
management by the group, or in the event of serious reputational damage (i.e. a malus provision). For up to two years following
the payment of a cash bonus award, the Committee may also require the repayment of some or all of the award in these
circumstances (i.e. a clawback provision). The same provisions apply to awards under the 2015 LTIP at any time prior to the
end of the holding period for LTIP awards.
Explanation of performance measures chosen
Selected performance measures for the annual bonus and LTIP awards reflect the group’s strategy. Stretching performance
targets are set each year by the Committee taking into account a number of different factors.
Annual bonus
Ordinarily, at least 80% of the potential maximum annual bonus will be subject to achievement of a combination of financial
and corporate measures, with the remainder based on challenging personal objectives. The Committee will disclose the metrics
and performance against these on a retrospective basis to the extent that these are not commercially sensitive. The personal
bonus element is only payable if at least one financial target is achieved.
LTIP
In line with the prior year, the Committee has opted for any potential LTIP award in FY24 to be based on a combination of revenue
targets and total shareholder returns (“TSR”). Both metrics are closely aligned to long-term shareholder interests in that revenue
growth will lead to a valuable self-financing organic business and TSR is a direct measure of increases in shareholder value. It is
the Committee’s view that these metrics are the most appropriate performance measure at present for determining LTIP vesting
for the awards for the reasons given above. The Committee intends to review each year the performance metrics for future
awards taking into account the business priorities and strategy at that time.
The Committee also retains the discretion to adjust or set different performance measures or targets where it considers it
appropriate to do so (for example, to reflect a change in strategy, a material acquisition and/or a divestment of a group business
or a change in prevailing market conditions) and to assess performance on a fair and consistent basis from year to year.
Operation of the LTIP and DBP
The LTIP and DBP are operated by the Committee in accordance with their respective rules. These include the ability to adjust
the number of shares subject to awards in the event of a variation of share capital, demerger, delisting, special dividend, rights
issue or other event which may, in the opinion of the Company, affect the current or future value of shares. The “market value” of a
share for the purposes of determining the number of shares subject to the LTIP or DBP award will be the average share price over
the three dealing days following the announcement of results preceding the grant date. The Committee can determine that an
alternative basis should apply but this would still be by reference to market prices such as the average price over the three-day
period leading up to an award at a different date. All members of staff are eligible to participate in both schemes.
Early vesting of awards
As described on pages 75 and 76, awards under the DBP and LTIP may vest earlier than anticipated in “good leaver”
circumstances.
On a change of control of the Company or other relevant corporate event (such as a demerger, delisting, special dividend
or other event which may affect the value of an award), the extent to which unvested awards will vest will be determined in
accordance with the rules of the relevant plan.
Awards under the DBP will vest in full in the event of a takeover, merger or other relevant corporate event.
Awards under the LTIP may vest early on a takeover, merger or other relevant corporate event. The Committee will determine
the level of vesting, taking into account the extent to which the performance conditions are satisfied and the perceived value
created as a result of such an event. Such vesting would ordinarily be on a time pro-rata basis, although the Committee has
discretion not to apply time pro-rating.
How the Executive Directors’ remuneration policy relates to the group
The remuneration policy summarised previously provides an overview of the structure that operates for the Executive Directors.
The same broad structure also operates for the members of the senior management team and all other members of staff with
varying levels of participation in the LTIP depending on seniority. Staff other than Executives can choose to take some or all of
their annual bonus as a participation in the DBP with a 50% uplift in the number of options on the value deferred.
072
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Directors’ remuneration policy continued
Remuneration outcomes in different performance scenarios
The charts below set out an illustration of the remuneration policy for FY24. The charts provide an illustration of the proportion of
total remuneration made up of each component of the remuneration policy and the potential value of each component.
Five scenarios have been illustrated for each Executive Director:
Below threshold
performance
Fixed remuneration
No annual bonus pay-out
No vesting under the LTIP
Threshold performance
Fixed remuneration
25% annual bonus pay-out (31.25% of salary)
25% vesting under the LTIP (37.50% of salary)
Target performance
Fixed remuneration
60% annual bonus pay-out (75% of salary)
60% vesting under the LTIP (90% of salary)
Maximum performance
Fixed remuneration
100% annual bonus pay-out (125% of salary)
100% vesting under the LTIP (150% of salary)
Maximum + 50% share
price increase
Fixed remuneration
100% annual bonus pay-out (125% of salary)
100% vesting under the LTIP (150% of salary) plus an assumed 50% increase in share price from grant date
Brian Tenner £
1,500k
Dr Nigel Pickett £
1,200k
Liam Gray £
800k
1,200k
900k
600k
£513,769
21%
18%
4%
300k
£313,363
7%
£1,333,613
£1,114,988
900k
49%
39%
£794,338
£949,048
600k
£793,466
49%
£678,930
£567,630
49%
39%
600k
39%
400k
£404,390
33%
28%
33%
27%
£365,617
3%
2%
2%
300k
21%
18%
4%
£233,000
7%
£565,280
28%
28%
33%
27%
200k
3%
2%
2%
£261,555
21%
18%
4%
£159,530
7%
33%
28%
33%
27%
3%
2%
2%
93%
57%
37%
26%
22%
93%
57%
37%
26%
22%
93%
57%
37%
26%
22%
0
0
0
e
c
n
a
m
r
o
f
r
e
p
l
d
o
h
s
e
r
h
t
w
o
e
B
l
l
d
o
h
s
e
r
h
T
e
c
n
a
m
r
o
f
r
e
p
t
e
g
r
a
T
e
c
n
a
m
r
o
f
r
e
p
m
u
m
x
a
M
i
e
c
n
a
m
r
o
f
r
e
p
%
0
5
+
m
u
m
x
a
M
i
e
s
a
e
r
c
n
i
e
c
i
r
p
e
r
a
h
s
Key: l Fixed pay l Pension l Annual bonus l LTIP
e
c
n
a
m
r
o
f
r
e
p
l
d
o
h
s
e
r
h
t
w
o
e
B
l
l
d
o
h
s
e
r
h
T
e
c
n
a
m
r
o
f
r
e
p
t
e
g
r
a
T
e
c
n
a
m
r
o
f
r
e
p
m
u
m
x
a
M
i
e
c
n
a
m
r
o
f
r
e
p
%
0
5
+
m
u
m
x
a
M
i
e
s
a
e
r
c
n
i
e
c
i
r
p
e
r
a
h
s
e
c
n
a
m
r
o
f
r
e
p
l
d
o
h
s
e
r
h
t
w
o
e
B
l
l
d
o
h
s
e
r
h
T
e
c
n
a
m
r
o
f
r
e
p
t
e
g
r
a
T
e
c
n
a
m
r
o
f
r
e
p
m
u
m
x
a
M
i
e
c
n
a
m
r
o
f
r
e
p
%
0
5
+
m
u
m
x
a
M
i
e
s
a
e
r
c
n
i
e
c
i
r
p
e
r
a
h
s
Nanoco Group plc – Annual Report and Accounts 2023 073
Directors’ remuneration report continued
Directors’ remuneration policy continued
Remuneration outcomes in different performance scenarios continued
Fixed pay currently comprises the following elements from 1 August 2023:
Chief Executive Officer – Brian Tenner
Chief Technical Officer – Dr Nigel Pickett
Chief Financial Officer – Liam Gray
Current
base salary
£300,245
£213,665
£152,852
Benefits 1
Pension 2
Total
—
—
—
£22,518
£322,763
£16,025 £229,690
£11,464
£164,316
1
No benefits are currently provided to the Executive Directors other than under the group life assurance scheme, the value of which in the case of the
Executive Directors cannot be identified. The Executive Directors will be eligible for the group health wellbeing programme that will be implemented in
FY24 but the value will not be known until it is finalised.
2 Based on 7.5% employer pension contribution/cash supplement in lieu of pension which applies for the year ended 31 July 2024 (2023: 7.5%).
With the exception of the final scenario (which assumes a 50% increase in share price from grant date of LTIPs), the values
illustrated assume a constant share price from the time of grant of LTIPs and do not take into account share price fluctuation or
dividend equivalents that may be received under the share plans. The ultimate amounts received by the Directors may be higher
or lower than the amounts illustrated above.
Remuneration policy for Non-Executive Directors
Purpose and link to strategy
Operation
Other items
To enable the group
to attract and retain Non-
Executive Directors of the
required calibre by offering
market-competitive rates.
The Chairman’s fee is determined by the
Committee and those of other Non-Executive
Directors by the Board.
Fees take into account several factors, including
the size and complexity of the business, fees paid
at companies of a similar size and complexity, and
the expected time commitment and contribution
for the role. The Committee receives independent
benchmark advice from Deloitte on Non-Executive
Director fees.
Overall fees paid to Non-Executive Directors will
remain within the limits set by the Company’s
Articles of Association.
Non-Executive Directors are provided
with Directors’ and officers’ insurance
and indemnity protection and are eligible
to be reimbursed for any reasonable
hotel and travelling expenses and other
reasonable expenses incurred in the
performance of their duties.
The Non-Executive Directors do not
participate in the group’s annual bonus,
share plans or pension schemes.
Remuneration policy on recruitment
When hiring a new Executive Director, the Committee will seek to align the remuneration package with the above policy. When
determining appropriate remuneration arrangements, the Committee may include other elements of pay which it considers are
appropriate and necessary in the circumstances. However, this discretion is capped and is subject to the limits referred to below:
| base salary will be set at a level appropriate to the role and the experience of the appointee. We may agree future increases
up to a market rate, in line with increased experience and/or responsibilities, subject to good performance;
| benefits and pension contributions will only be provided in line with the above policy;
| the Committee will not offer non-performance related incentive payments (for example a “guaranteed sign-on bonus”);
| other elements may be included in the following circumstances:
| an interim appointment being made to fill an Executive Director role on a short-term basis;
| if exceptional circumstances require the Chairman or a Non-Executive Director to take on a short-term Executive function;
| if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term
incentive award for that year as there would not be sufficient time to assess performance. Subject to the limit on variable
remuneration set out below, the quantum in respect of the months employed during the year may be transferred to the
subsequent year so that reward is provided on a fair and appropriate basis; and
| if the Director will be required to relocate in order to take up the position, it is the group’s policy to allow reasonable
relocation, travel and subsistence payments. Any such payments will be at the discretion of the Committee;
074
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Directors’ remuneration policy continued
Remuneration policy on recruitment continued
| the Committee may also alter the performance measures, performance period and vesting period of the annual bonus or LTIP,
if the Committee determines that the circumstances of the recruitment merit such alteration. The rationale for any such
alterations will be clearly explained in the next Directors’ remuneration report; and
| the maximum level of variable remuneration which may be granted (excluding “buyout” awards as referred to below) is 375% of
salary, in line with the policy set out on pages 70 and 71.
The Committee may make payments or awards in respect of hiring an employee to “buy out” remuneration arrangements forfeited
on leaving a previous employer. In doing so, the Committee will take account of relevant factors, including any performance
conditions attached to the forfeited arrangements and the time over which they would have vested or been paid. The Committee
will generally seek to structure buyout awards or payments on a comparable basis to the remuneration arrangements forfeited. Any
such payments or awards are excluded from the maximum level of variable remuneration referred to previously. “Buyout” awards will
ordinarily be granted on the basis that they are subject to forfeiture or “clawback” in the event of departure within twelve months of
joining the group, although the Committee will retain discretion not to apply forfeiture or clawback in appropriate circumstances.
Any share awards referred to in this section will be granted as far as possible under the group’s existing share plans. If necessary,
and subject to the limits referred to above, recruitment awards may be granted outside of these plans.
Where a position is filled internally, any ongoing remuneration obligations or outstanding variable pay elements shall be allowed
to continue in accordance with their terms.
Fees payable to a newly appointed Chairman or Non-Executive Director will be in line with the policy in place at the time of
appointment and based on current market rates of pay for equivalent roles.
External appointments
The group recognises that Executive Directors may be invited to become non-executive directors of other companies and that
this can help broaden the skills and experience of a Director. Subject to the approval of the Board, Executive Directors are
normally permitted to accept external appointments and may retain fees for such appointments where no significant actual or
potential conflict of interest arises and provided that the Director is able to maintain his time commitment to the group. There are
currently no such appointments.
Payment for loss of office
The group’s policy is that Executive Directors’ service contracts should be capable of termination on not more than six months’
notice. This policy was implemented during FY21 with notice periods being shortened by agreement with the continuing
Executives. The duration of Directors’ service contracts is disclosed on page 85. The principles on which the determination of
payments for loss of office will be approached are set out below:
Element
Policy
Payment in lieu
of notice
The group has discretion to make a payment in lieu of notice which would include base salary and benefits
for the unexpired period of notice, up to a maximum of six months’ notice.
Annual bonus
At the Committee’s discretion, on an individual basis, any annual bonus award will be dependent on a
number of factors, such as the circumstances of departure and their contribution to the business during
the period. Any bonus will normally be pro-rated for time and will be paid at the usual time (although the
Committee retains discretion to pay the annual bonus award earlier in appropriate circumstances). Any such
bonus can, at the discretion of the Committee, be paid wholly in cash.
DBP
Determined in accordance with the rules of the DBP.
Unvested awards will normally lapse on cessation of employment. However, at the Committee’s discretion,
if a participant is deemed to be a “good leaver” (such as leaving due to death, ill health, injury, disability,
redundancy or the sale of his employer), the Committee shall determine whether any unvested award will
vest at cessation or at the normal vesting date. In either case, the extent of vesting will be determined by
the Committee, taking into account, unless the Committee determines otherwise, the period of time elapsed
from the date of grant to the date of cessation relative to the deferral period. Awards may then be exercised
during such period as the Committee determines.
Awards (in the form of nil-cost options) which have vested but remain unexercised at the date of cessation
may be exercised if a participant is a good leaver at the discretion of the Committee. Awards may then be
exercised for such period as the Committee determines.
Nanoco Group plc – Annual Report and Accounts 2023 075
Directors’ remuneration report continued
Directors’ remuneration policy continued
Payment for loss of office continued
Element
LTIP
Policy
Determined in accordance with the rules of the shareholder-approved LTIP.
Unvested awards will normally lapse on cessation of employment. However, if a participant is deemed to be a
good leaver, the Committee shall determine whether the award is released on the normal release date or the
date of cessation (or on some other date). The extent of vesting will be determined by the Committee taking
into account the extent to which the performance condition is satisfied and, unless the Committee determines
otherwise, the period of time elapsed from the date of grant to the date of cessation relative to the
performance period. Awards may then be exercised during such period as the Committee determines.
If a participant leaves for any reason (other than summary dismissal) after an award has vested but before it
has been released (i.e. during the holding period), his award will ordinarily continue to the normal release date
when it will be released to the extent it vested. The Committee retains discretion to release awards when the
participant leaves. If the participant is summarily dismissed, their award will lapse. Awards (in the form of
nil-cost options) which have vested and been released but remain unexercised at the date of cessation may
be exercised if a participant is deemed to be a good leaver. Awards may then be exercised for such period as
the Committee determines.
Mitigation
The Committee’s practice is that if an Executive Director’s employment is terminated, any compensation
payment will be calculated in accordance with normal legal principles including the application of mitigation
to the extent appropriate to the circumstances of the termination.
Other payments
In appropriate circumstances, payments may also be made in respect of accrued holiday, outplacement
and legal fees.
Where a buyout award has been made, the leaver provisions would be determined at the time of the award.
The Committee reserves the right to make additional exit payments where such payments are made in good faith in discharge
of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise
of any claim arising in connection with the termination of a Director’s office or employment.
Where the Committee retains discretion, it will be used to provide flexibility in certain situations, taking into account the particular
circumstances of the Director’s departure and performance.
There is no entitlement to any compensation in the event of Non-Executive Directors’ fixed-term agreements not being renewed
or the agreement terminating earlier.
Consideration of employees’ pay
The Committee generally considers pay and employment conditions elsewhere in the group when considering the Directors’
remuneration. When considering base salary increases, the Committee reviews overall levels of base pay increases offered to
other employees. Employees are not actively consulted on Directors’ remuneration. Employee share ownership is fundamental
to the group’s culture and is reflected in the universal participation in both of our share incentive plans.
Existing contractual arrangements
The Committee retains discretion to make any remuneration payment and/or payment for loss of office outside the policy in
this report:
| where the terms of the payment were agreed before the policy came into effect, provided that they are in line with the
Directors’ remuneration policy approved at the 2021 AGM;
| where the terms of the payment were agreed at a time when the relevant individual was not a Director of the Company and, in
the opinion of the Committee, the payment was not in consideration of the individual becoming a Director of the Company; and
| to satisfy contractual commitments under legacy remuneration arrangements.
For these purposes, “payments” includes the satisfaction of awards of variable remuneration and, in relation to an award over
shares, the terms of the payment are agreed at the time the award is granted.
Consultation with shareholders
The Committee considers shareholder feedback received on remuneration matters, as well as any additional comments received
during any other meetings with shareholders. The Committee consulted with major shareholders in respect of the changes to the
remuneration policy that was approved at the 2021 AGM.
076
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Annual report on remuneration
This report sets out details of the amounts earned by Directors during FY23 and provides details as to how the Committee intends
to implement the policy during FY24. This part of the report will be subject to an advisory shareholder vote at the 2023 AGM.
This report contains unaudited information except where stated that it is audited.
Remuneration Committee
The Committee comprises Dr Alison Fielding, who is Chair of the Committee, Chris Batterham and Dr Christopher Richards, each
of whom is considered to be independent. The Committee may invite anyone it deems appropriate to attend and advise at
meetings, including the Chief Executive Officer, Chief Financial Officer and the Chief Technology Officer, although no Director is
present when their own remuneration is being discussed. The Committee is responsible for establishing a formal and transparent
procedure for developing policy on Executive remuneration and for setting the remuneration of the Directors and certain senior
management, as well as reviewing the performance of the Executive Directors of the Company. The terms of reference of the
Remuneration Committee can be found in the Investors section of the group’s website.
The Committee met five times during the year; its meetings are minuted and its recommendations are presented to the Board.
Advisers to the Committee
The Chief Executive Officer is consulted on the remuneration of those who report directly to him and also of other senior Executives.
No Executive Director or employee is present or takes part in discussions in respect of matters relating directly to their own
remuneration. During the year, the Committee was assisted in its work by the following external consultants:
Adviser
Details of appointment
Services provided by the adviser
Fees paid for remuneration advice
Other services in FY23
Deloitte LLP
(“Deloitte”)
Appointed by the
Remuneration
Committee in
June 2015.
Various advice on
Executive remuneration.
The fees for advice provided
to the Committee during the
financial year were £4,600
(2022: £nil).
Charged on a time/cost basis or
fixed fee depending on project.
Advice to management in
relation to the Directors’
remuneration report, in
relation to share plan
taxation, and in relation to
the establishment of an
Employee Benefit Trust.
Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operates under its Code of Conduct in
relation to Executive remuneration consulting in the UK. The Remuneration Committee took into account the Code of Conduct
when reviewing the appointment of Deloitte. The Committee is satisfied that the remuneration advice provided by Deloitte is
objective and independent.
Single total figure of remuneration for 2023 – (audited information)
The remuneration of the Directors who served on the Board of Nanoco Group plc during the year to 31 July 2023 is as follows
(footnotes for both tables are below the second table):
Base salary
and fees
£’000
Benefits
in kind
£’000
Annual bonus
in cash
£’000
Annual bonus
in shares
£’000
Long-term
incentives
£’000
Pension
£’000
Total 2023
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
Executive Directors
Brian Tenner
Dr Nigel Pickett
Liam Gray
Total Executive Directors
Non-Executive Directors
Dr Christopher Richards
Dr Alison Fielding
Chris Batterham
Henry Turcan
Total Non-Executive
Directors
Total
292
207
148
647
100
46
46
8
200
847
—
—
—
—
—
—
—
—
—
—
228
168
117
513
—
—
—
—
—
118
87
60
265
—
—
—
—
—
513
265
—
—
—
—
—
—
—
—
—
—
22
16
11
49
—
—
—
—
—
49
660
478
336
1,474
100
46
46
8
200
1,674
314
223
159
696
100
46
46
8
200
896
346
255
177
778
—
—
—
—
—
778
Nanoco Group plc – Annual Report and Accounts 2023 077
Directors’ remuneration report continued
Annual report on remuneration continued
Single total figure of remuneration for 2023 – (audited information) continued
The remuneration of the Directors who served on the Board of Nanoco Group plc during the year to 31 July 2022 was as follows:
Base salary
and fees 1
£’000
Benefits
in kind 2
£’000
Annual bonus
in cash
£’000
Annual bonus
in shares
£’000
Long-term
incentives
£’000
Pension 3
£’000
Total 2022
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
Executive Directors
Brian Tenner
Dr Nigel Pickett
Liam Gray4
Total Executive Directors
Non-Executive Directors
Dr Christopher Richards
Dr Alison Fielding
Chris Batterham
Henry Turcan5
Total Non-Executive
Directors
Total
250
196
87
533
100
46
46
40
232
765
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
238
184
85
507
—
—
—
—
—
507
—
—
—
—
—
—
—
—
—
—
15
12
5
32
—
—
—
—
—
32
503
392
177
1,072
100
46
46
40
232
1,304
265
208
92
565
100
46
46
40
232
797
238
184
85
507
—
—
—
—
—
507
1
If less than a year was served, salary or fees are from the date of appointment or to the date of retirement. The Executive Directors’ salaries are shown
before any salary sacrifice pension contributions.
2 The only benefit provided to the Executive Directors is life cover which is contained within a policy covering all employees such that it is not possible to
identify the proportion of the premium in respect of either Directors individually or as a whole.
3 The pension figure represents the cash value of Company pension contributions and/or cash in lieu of pension contributions. This does not include the
amount of the salary sacrifice paid as a pension but does include the employer National Insurance saved that is paid into a private pension scheme.
4 Liam Gray was appointed to the Board on 8 November 2021 on an annualised salary of £120,000. The figure above in FY22 discloses his salary between
the date of his appointment and 31 July 2022.
5 Henry Turcan was a representative of the shareholder Lombard Odier Asset Management, and Nanoco paid £8,000 (2022: £40,000) for these services
direct to Lombard Odier Asset Management. Henry Turcan resigned from the Board on 12 September 2022.
078
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance
Annual report on remuneration continued
Individual elements of remuneration for the year ended 31 July 2023
Base salary
Executive Directors’ base salaries for FY23 were set as disclosed in the FY22 Directors’ remuneration report taking into account
the second, deferred, tranche of the increase for Brian Tenner’s salary previously agreed, Liam Gray’s strong performance in role
since his appointment to the Board, and in the case of each Executive Director the increase for the wider workforce. Accordingly,
the salaries were set as: Brian Tenner, £291,500 (FY22: £250,000); Dr Nigel Pickett, £207,442 (FY22: £195,700); and Liam Gray,
£148,400 (FY22: £120,000).
Annual bonus
For the year ended 31 July 2023, the maximum bonus for Dr Nigel Pickett, Brian Tenner and Liam Gray was 125% of salary.
The annual bonuses comprise two elements: financial corporate objectives (80% of award or 100% of salary) and personal
objectives (20% of award or 25% of salary). Bonuses for personal objectives are only payable if at least one financial corporate
objective is achieved.
Maximum financial target performance was achieved during the year and hence bonuses were also payable in respect of
personal targets. Performance against financial and personal targets is shown in the tables below with the financial and
corporate measures and their weighting as a percentage of maximum award for the year ended 31 July 2023:
Measure and weighting as a
percentage of maximum award
Threshold performance level Maximum performance level
Performance achieved
Bonus earned as a
percentage of maximum award
Revenue and other operating
income (64%)
£2.7m
£3.5m
£5.8m
Adjusted LBITDA (16%)
Loss of £2.2m
Loss of £1.7m
Loss of £0.2m
64.0%
16.0%
The Committee concluded that for the assessment of the financial metrics, the performance achieved should be taken from the
statutory accounts.
The personal objectives and amounts payable in respect of Brian Tenner, Dr Nigel Pickett and Liam Gray are set out in the table
below. Specific bonus targets have not been disclosed by the Committee where they are considered to be commercially
sensitive. The current stage of the group’s development means certain retrospective information could still give competitors
insight into the strategic plans of the business, which is not in the interest of shareholders.
It is the Board’s intention that payment of the bonus will be split between cash (67%) and deferred share options (33%) granted
under the DBP, which will vest after a period of two years. DBP awards are not subject to any further performance condition and
are subject to the “leaver” provisions in the policy and the DBP rules.
Director
Measure
Brian Tenner
Financial and corporate measures
Personal objectives
Confidential commercial objective
Develop post-trial business strategy
Drive all Samsung litigation activities
Win additional Tier 1 JDA
Dr Nigel Pickett
Financial and corporate measures
Personal objectives
Deliver additional R&D revenue
Focused expansion of IP portfolio
Support all Samsung litigation activities
Confidential commercial objective
Liam Gray
Financial and corporate measures
Personal objectives
Complete transition of CFO responsibilities
Development of support services
Development of tax strategy
Outperform FY23 overhead and cash targets
Weighting
(% of maximum
bonus opportunity)
Achievement
(% of maximum
bonus opportunity)
80
20
80
20
80
20
80%
15%
None (0%)
Achieved (2.5%)
Achieved (7.5%)
Partial (5.0%)
80%
18.125%
Achieved (2.5%)
Partial (5.625%)
Achieved (7.5%)
Achieved (2.5%)
80%
15.25%
Partial (3.75%)
Partial (3.25%)
Partial (3.25%)
Achieved (5%)
Nanoco Group plc – Annual Report and Accounts 2023 079
Directors’ remuneration report continued
Annual report on remuneration continued
Individual elements of remuneration for the year ended 31 July 2023 continued
No long-term incentives or DBP’s vested during the year ended 31 July 2023. The threshold level of performance for the LTIP
awards granted in October 2020 and which vested by reference to performance to the end of FY23 was not achieved,
and the awards have lapsed.
LTIP awards granted in FY23
Awards to the Executive Directors made on 25 October 2022 were as follows:
Director
Type of award
Brian Tenner
Share award
Dr Nigel Pickett Share award
Liam Gray
Share award
Percentage
of salary1
%
150%
150%
150%
Number of options
Face value at
grant date1
£’000
Face value at grant
less exercise price
£’000
Performance period
Years
1,192,716
848,780
607,201
437
311
223
437
311
223
3
3
3
LTIP granted 25 October 2022
Share price (average for three months to 31 July 2025)
Revenue2
Vesting ratio
Threshold target
Maximum target
£0.55
£0.70
Confidential
Confidential
25%
100%
1
The face value of the awards is calculated based on a share price of £0.3667, being the three-day average share price to 25 October 2022 used to
determine the number of shares under award.
2 Given the group is entering a new stage in its development, the Directors consider that the revenue targets are commercially sensitive and hence are
not being disclosed at this time. However, in order to maintain transparency, the targets will be disclosed at the same time as the actual outcome is
assessed following the end of the performance period.
Payments made to former Directors and payments for loss of office during the year (audited information)
No payments for loss of office were made during the year. Michael Edelman, the former CEO, was employed during the year as a
special adviser, on an annual salary of $35,000. His employment ceased on 13 July 2023 and his pay was pro-rated accordingly
to 13 July 2023.
080
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Annual report on remuneration continued
Statement of Directors’ shareholding and share interests (audited information)
Directors’ interests in share options to acquire ordinary shares of ten pence in the Company, including options held under the
Deferred Bonus Plan, were as follows:
Share options
Dr Nigel Pickett
Brian Tenner
Liam Gray
Date granted
Exercise
price
At
1 August 2022
Exercised
during
the year
Lapsed
Granted
during
the year
At
31 July
2023
22 Oct 2012 1
57.00p
750,000
—
(750,000)
22 Nov 2016 3
1 Nov 2019 3
10 Dec 2019 3
21 Oct 2020 2
9 Nov 2021 3
9 Nov 2021 2
1 Dec 2021 2
27 Oct 2022 2
27 Oct 2022 3
1 Nov 2019 3
10 Dec 2019 3
21 Oct 2020 2
9 Nov 2021 3
9 Nov 2021 2
1 Dec 2021 2
27 Oct 2022 2
27 Oct 2022 3
21 Oct 2020 2
9 Nov 2021 3
9 Nov 2021 2
1 Dec 2021 2
27 Oct 2022 2
27 Oct 2022 3
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
66,576
437,681
437,681
1,647,668
399,929
927,488
463,744
—
—
521,634
521,634
2,485,956
452,555
1,184,834
592,417
—
—
543,891
35,157
533,175
266,588
—
—
(66,576)
(437,681)
(437,681)
—
—
—
— (1,647,668)
—
—
—
—
—
(521,634)
(521,634)
—
—
—
—
—
—
—
— (2,485,956)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(543,891)
—
—
—
—
—
—
—
—
—
—
—
—
—
848,780
501,421
—
—
—
—
—
—
—
—
—
—
—
399,929
927,488
463,744
848,780
501,421
—
—
—
452,555
1,184,834
592,417
1,192,716
1,192,716
649,072
649,072
—
—
—
—
607,201
253,161
—
35,157
533,175
266,588
607,201
253,161
1 Vested but unexercised share options.
2 Unvested share options still subject to performance conditions.
3 Deferred Bonus Plan awards.
Director shareholdings
In order to align the interests of Executive Directors with those of shareholders and to demonstrate the Executive Directors’
ongoing personal financial commitment to the business, Executive Directors are expected to build up a shareholding equivalent
to 200% of annual salary for all Executive Directors. Executive Directors are required to retain at least 50% of any post-tax shares
that vest under any share incentive plans until this shareholding is reached.
Dr Nigel Pickett holds shares substantially in excess of the shareholding guideline (c. 1,038% of salary using the three-month
average closing share price to the end of July 2023). Brian Tenner, having joined the Company in August 2018, is building up
a holding which currently stands at 68% of salary (or 130% assuming 50% of Deferred Bonus Plan awards are retained until the
minimum shareholding is achieved). Liam Gray, having joined the Board in November 2021, is building up a holding which
currently stands at 6% of salary (24% assuming 50% of all Deferred Bonus Plan awards are retained until the minimum
shareholding is achieved). Non-Executive Directors are not subject to the shareholding requirement.
Nanoco Group plc – Annual Report and Accounts 2023 081
Directors’ remuneration report continued
Annual report on remuneration continued
Director shareholdings continued
Directors’ interests in the shares of the Company, including family and beneficial interests, at 31 July 2023 were:
Ordinary shares of 10p each
31 July
2023
Number
31 July
2023
%
31 July
2022
Number
31 July
2022
%
Current Directors
Dr Christopher Richards
Dr Nigel Pickett
Brian Tenner
Liam Gray
Dr Alison Fielding
Chris Batterham
Henry Turcan1
841,996
0.26
769,270
11,770,911
1,157,834
48,931
279,697
194,111
—
3.63 11,272,575
0.36
0.02
0.09
0.06
—
605,888
48,931
279,697
194,111
—
Total for current Directors
14,293,480
4.42 13,170,472
0.24
3.50
0.19
0.02
0.09
0.06
—
4.10
1 Henry Turcan resigned from the Board on 12 September 2022, having previously been a representative of LOAM. He held no shares directly at the point
he left the Board.
None of the Directors in office as at 31 July 2023 had any interests at that date in shares of any other group company.
In July 2023, Dr Nigel Pickett received 498,336 shares and Brian Tenner received 551,946 shares as a result of options exercised in
July 2023. There were no other changes in Directors’ shareholdings between 31 July 2023 and the publishing date of these accounts.
The market price for Nanoco shares as at 31 July 2023 was 18.3 pence per share; the highest and lowest prices during the year
were 55.8 pence and 17.0 pence respectively.
Details of share options are set out in note 24 to the financial statements.
Unaudited information
Historical comparative TSR performance graph
The performance graph below shows the Company’s total shareholder return (“TSR”) against the FTSE SmallCap over the period
from 1 August 2013 to 31 July 2023. In the opinion of the Board, the FTSE SmallCap is the most appropriate index against which the
TSR of the Company should be measured because it represents a broad equity market index.
Total shareholder return
The graph shows the percentage return of an investment in the Company’s shares on 1 August 2013 compared with the
percentage return of an investment notionally invested in the FTSE SmallCap index.
250%
200%
150%
100%
50%
0%
01/08/2013
01/08/2014
01/08/2015
01/08/2016
01/08/2017
01/08/2018
01/08/2019
01/08/2020
01/08/2021
01/08/2022
01/08/2023
Nanoco
FTSE SmallCap
082
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance
Annual report on remuneration continued
Unaudited information continued
Ten-year view of CEO remuneration
CEO remuneration
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Total remuneration
(£’000)1
Annual bonus
(% of max vesting)
LTIP (% of
max vesting)
293
635
406
327
312
505
323
298 2
503
660
56
—
56
100
40
—
—
—
—
—
52
—
—
—
43
—
75
—
95
—
1
The previous CEO’s (Dr Michael Edelman) remuneration was paid in US Dollars but reported in Sterling in this table for the years 2013 to 2020.
The exchange rate used for this purpose varied during the year.
2 Brian Tenner was appointed CEO on 1 September 2020, having previously been CFO and COO. There was no change in Brian Tenner’s remuneration
at that time to reflect the change in position with the proposed increase being made in two deferred tranches on 1 August 2021 and 1 August 2022.
Having regard to the proportion of 2021 for which Brian Tenner was CEO, his remuneration as a Director for the full year is included for that year, and
the remuneration of Dr Michael Edelman for the part of the year when he was CEO is not included.
Percentage change in the remuneration of the Board
The table below shows the percentage change in each Director’s salary, benefits and annual bonus between the current and
previous financial year, and the average percentage change in the same remuneration over the same period in respect of the
employees of the Company on a full-time equivalent basis. The average employee change has been calculated by reference to
the mean of employee pay, excluding new starters in the year. Henry Turcan was appointed during the year ended 31 July 2022
and resigned during the year ended 31 July 2023 and, accordingly, has been excluded from the table below.
Salary/fees1
Taxable benefits
Annual bonus
Average
employee
Brian
Tenner
Dr Nigel
Pickett
Liam
Gray 2
Dr Christopher
Richards
Dr Alison
Fielding
Christopher
Batterham
FY23
FY22
FY21
FY20
FY23
FY22
FY21
FY20
FY23
FY22
FY21
FY20
9%
4%
7%
1%
N/A
N/A
N/A
N/A
27%
0%
100%
17%
31%
(8%)
1%
N/A
N/A
N/A
N/A
48%
100%
0%
6%
16%
(9%)
(2%)
N/A
N/A
N/A
N/A
38%
100%
0%
0%
(100%)
(100%)
70%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
108%
N/A
N/A
N/A
0%
30%
(13%)
(2%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
30%
(13%)
(1%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
30%
(13%)
(1%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1 The Non-Executive Directors’ fees were reduced by 35% between 1 April 2020 and 31 March 2021, and deferred by 35% with effect from 1 April 2021.
This deferral was repaid in July 2022.
2 The increases in salary and bonus for Liam Gray for FY23 are calculated by reference to the increase between the values included in the single total
figure of remuneration for FY22 and FY23. Therefore, those increases reflect that for FY22 the relevant values related to a part-year only.
The data above is distorted by a number of factors including joining dates, changes in roles and salary and by pay cuts taken
by Directors as part of Company actions to manage the Covid-19 pandemic. From April 2020, some but not all staff had 20% pay
cuts for six months. Executive Directors and other members of the Leadership Team had 20% pay cuts for a full twelve months.
The increases in Executive pay in FY22 are therefore primarily or wholly the result of the end of the temporary Covid-19 pandemic
pay cut.
Nanoco Group plc – Annual Report and Accounts 2023 083
Directors’ remuneration report continued
Annual report on remuneration continued
Unaudited information continued
Relative importance of spend on pay
The following table sets out the percentage change in dividends and the overall expenditure on pay (across the whole group).
Dividends
Overall expenditure on pay
Average headcount
Implementation of policy for the year commencing 1 August 2023
Base salary
Year ended
31 July 2023
£’000
Year ended
31 July 2022
£’000
% change
—
3,225
42
—
2,827
42
0%
14%
0%
Base salaries are reviewed annually with effect from 1 August. For the year commencing 1 August 2023, the workforce had an
increase of 5%. The Executive Directors had an increase of 3%.
Chief Executive Officer – Brian Tenner
Chief Technical Officer – Dr Nigel Pickett
Chief Financial Officer – Liam Gray
Changes to Non-Executive Directors’ fees
There is no increase to the Non-Executive Directors’ fees.
Chairman fee
NED base fee
Chair of Committee fee
Pension
2023
2022
% change
£300,245 £291,500
£213,665 £207,442
£152,852 £148,400
3%
3%
3%
2023
2022
£100,000 £100,000
£41,000
£41,000
£5,000
£5,000
The Company operates a salary sacrifice pension arrangement. For the year commencing 1 August 2023, employer pension
contributions above the amount of any salary sacrifice (and the associated employer National Insurance contribution savings)
have remained at 7.5% of salary for the whole workforce, including the Executive Directors.
Annual bonus
For FY24, the maximum annual bonus potential will remain at 125% of base salary for Executive Directors. Up to the full amount
of any such bonus earned can be paid as deferred shares under the DBP vesting after two years with any balance paid in cash.
This reflects our stakeholder philosophy, provides a longer-term retention mechanism and provides alignment with shareholders.
Consistent with the FY23 annual bonus, performance will be assessed on the basis of a balanced scorecard approach in respect
of performance measures. The balance between corporate financial objectives (80%) and personal objectives (20%) will be
unchanged. The corporate financial measures for FY24 will include annual revenue and Adjusted EBITDA weighted 60%:20%
respectively. Any personal bonus is only payable if at least one of the financial targets is achieved. The Committee will disclose
the metrics and performance against these on a retrospective basis to the extent that these are not commercially sensitive.
Clawback will apply to any cash bonus paid and malus provisions to any unvested deferred bonus award.
LTIP
The Committee intends to make awards of approximately 150% of salary to the CEO, CTO and CFO after the announcement of
the group’s full-year results for the year ended 31 July 2023 (subject to market conditions at the time of award). The Committee
will agree targets if and when any LTIP awards are made during FY24. All awards will continue to be in line with the approved
remuneration policy. This will include a two-year post-vesting holding period.
084
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Annual report on remuneration continued
Unaudited information continued
Statement of voting
The group is committed to ongoing dialogue with its shareholders and takes an active interest in trying to ensure that as many
shareholders as possible submit their votes in time for any shareholder meetings. The following table sets out the actual voting
in respect of the resolutions to approve the Directors’ remuneration policy at the Company’s Annual General Meeting held on
30 November 2021 and to approve the Directors’ remuneration report at the Company’s Annual General Meeting held on
20 December 2022.
Resolution
Votes
for
% for
Votes
against
% against
Votes
withheld
To approve the Directors’ remuneration policy
138,307,164
99.0%
1,451,931
1.0%
178,488
Resolution
Votes
for
% for
Votes
against
% against
Votes
withheld
To approve the Directors’ remuneration report
106,380,116
96.0% 4,378,386
4.0%
46,872
Directors’ contracts
It is the group’s policy that Executive Directors should have contracts with an indefinite term, providing for six months’ notice.
Brian Tenner
Dr Nigel Pickett
Liam Gray
Date of contract
Date of appointment
Notice from the Company
Notice from Director
20 August 2018
20 August 2018
27 June 2006
27 June 2006
8 November 2021
8 November 2021
6 months
6 months
6 months
6 months
6 months
6 months
All Directors will offer themselves for re-election at each AGM in accordance with the UK Corporate Governance Code. Service
contracts are available for inspection at the registered office of the Company.
Date of letter of appointment
Date of appointment
Unexpired term of contract on 31 July 2023
Dr Christopher Richards (Chairman)
28 October 2015
11 November 2015
Dr Alison Fielding
Chris Batterham
Non-Executive Directors
20 March 2017
20 April 2017
12 March 2019
1 April 2019
~ 4 months
~ 9 months
~ 8 months
All Non-Executive Directors are appointed for an initial three-year term and then on a rolling annual term. Non-Executive
Directors’ appointments may be terminated on not less than three months’ notice from either party.
On behalf of the Board
Dr Alison Fielding
Remuneration Committee Chair
19 October 2023
Nanoco Group plc – Annual Report and Accounts 2023 085
Research and development
Approach to risk management and principal risks
Directors’ report
The Directors present their report and
the audited financial statements for
the group and Parent Company for the
year ended 31 July 2023.
Financial instruments
Details of the group’s financial risk
management objectives and policies
are disclosed in note 3 and 27 to the
financial statements.
The principal activity of the group is
research and development with the goal
to transition to a commercial production
company, a review of which is included
in the Chairman’s and Chief Executive
Officer’s statements on pages 5 to 7 and
9 to 17 respectively.
Total research and development
spend was £1.8 million (2022: £1.8 million).
No development expenditure was
capitalised in the year (2022: £nil) for
the reasons provided in note 3(h) to
the accounts.
Dividends
The Directors do not recommend
payment of an ordinary dividend
(2022: £nil).
Disclosures reported elsewhere in the Annual Report
The strategic review of the business of the Company and its subsidiaries is given on
pages 6 to 40. Certain information required for disclosure in this report is provided in
other appropriate sections of this Annual Report. These are set out in the table below:
Disclosure requirement
Financial results and dividends
Board and Committee meetings and Directors’ attendance
Directors’ biographical details and date of appointment
Corporate governance
Research and development activities
Directors’ remuneration
Pages
30 to 32
49
47
48 to 50
33 to 35
29
70 to 85
Greenhouse gas emissions, employee engagement, disability, gender and human rights
40 to 45
Statement on disclosure to the external auditors
Statement of Directors’ responsibilities
Future developments
Going concern statement
87
89
7 and 17
37
Disclosures on financial instruments (note 27 to the consolidated financial statements)
122 to 125
The disclosures are, accordingly, incorporated into this report by reference.
Requirements of the Listing Rules
The following table provides references to where the information required by the
Listing Rule 9.8.4R is disclosed:
Listing Rule requirement
Location
Information required in relation to the publication
of unaudited financial information
Not applicable
Details of any long-term incentive schemes
Remuneration report
Directors who held office during the year and their
interests in shares and share options in the group
Remuneration report
Arrangements where a Director has waived historical
or future emoluments from the Company
Remuneration report on
Chairman’s fees
Details of business relationships with suppliers,
customers and others
Strategic report
Details of any non-pre-emptive issues of equity
for cash
Not applicable
Details of any non-pre-emptive issues of equity
for cash by any unlisted major subsidiary
Details of UK Parent participation in a placing by
a listed subsidiary
No such share allotments
No such share participations
Details of any contract of significance in which
a Director is or was materially interested
No such contracts
Details of rules regarding the appointment and
replacement of Directors
Remuneration report
Contracts of significance between the Company
(or a subsidiary) and a controlling shareholder
No such contracts
Details of a waiver of dividends by a shareholder
No such waivers
Board statement in respect of relationship agreement
with the controlling shareholder
No such agreements
086
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Acquisition of the Company’s
own shares
The Company made no purchases of its
own shares in the year under review. As
at 31 July 2023, the authority given by the
shareholders at the 2021 Annual General
Meeting is for the Company to make
market purchases of up to £3,224,335 of
the nominal value of its ordinary shares
at a price per share of not less than
10 pence, and not more than 5% above
the average of the middle market
quotations for ordinary shares of the
Company for the five business days
immediately preceding the day of
purchase. This authority is being
proposed for renewal at the 2023
Annual General Meeting.
Share capital and funding
As at 31 July 2023, share capital
comprised 324.4 million ordinary shares
of 10 pence each (2022: 322.4 million).
There is only one class of share and all
shares are fully paid. Full details of the
group’s and Company’s share capital
movements during the year are given in
note 22 to the financial statements.
Pursuant to the general provisions of the
Articles of Association and prevailing
legislation, there are no specific
restrictions on the size of a holding.
The Directors are not aware of any
restrictions on the transfer of ordinary
shares in the Company other than
certain restrictions which may from
time to time be imposed by law and
regulations, e.g. insider trading laws,
and pursuant to the Listing Rules of the
Financial Conduct Authority whereby
certain employees of the Company
require prior approval from the Company
to deal in the Company’s securities.
The Company is not aware of any
agreements between shareholders that
may result in restrictions on voting rights
and the transfer of securities.
Details of shares under option are
provided in note 24 to the financial
statements.
Directors and their interests
The Directors who held office throughout the year and their interests are shown in
the Remuneration report. As at 31 July 2023, none of the Directors had any interests
in shares of any other group company.
No Director had an interest in any contract that was significant in relation to the
group’s business at any time during the year.
Directors are formally subject to re-election at intervals of not more than three years
but voluntarily submit themselves for re-election each year.
In the case of each Director in office at the date the Directors’ report is approved:
| so far as the Director is aware, there is no relevant audit information of which the
group and Company’s auditors are unaware; and
| they have taken all the steps that they ought to have taken as a Director in order
to make themselves aware of any relevant audit information and to establish that
the group and Company’s auditors are aware of that information.
Directors’ indemnity insurance
The group has maintained insurance in the form of a qualifying third party indemnity
provision throughout the year for its Directors and Officers against the consequences
of actions brought against them in relation to their duties for the group. This provision
was in force through the financial year and remains in force as at the date of
approval of the financial statements.
Substantial shareholders
The Company is aware that the following had an interest in 3% or more of the issued
ordinary share capital of the Company at 31 July 2023:
Substantial shareholders
Hargreaves Lansdown Asset Management
Lombard Odier Asset Management
Interactive Investor
Tariq Hamoodi
Dr Nigel Pickett
HSDL, stockbrokers
Barclays Smart Investor
Oryx International Growth Fund Limited
Number
of ordinary
shares at
31 July 2023
53,149,546
47,262,703
29,363,356
13,084,542
11,770,911
11,463,620
10,866,886
9,834,000
% of
issued
share
capital
16.38
14.57
9.05
4.05
3.63
3.53
3.35
3.03
There were no notified significant changes in the holdings between 31 July 2023 and
the date the Annual Report and Accounts was signed.
Donations
No political donations were made in the year (2022: £nil). Charitable donations of £nil
were made in the year (2022: £nil).
Compliance with the UK Corporate
Governance Code
The statements of compliance with
the principles of the UK Corporate
Governance Code published by the
FRC in 2018 are set out on page 53.
Foreign branches
The group has just one foreign location,
a subsidiary in the United States, which
provides management services to the
UK business.
Nanoco Group plc – Annual Report and Accounts 2023 087
Directors’ report continued
Additional information
for shareholders
With regard to the appointment and
replacement of Directors, the Company
is governed by its Articles of Association,
the UK Corporate Governance Code
2018, the Companies Act 2006 and
related legislation.
The Articles themselves may be amended
by special resolution of the shareholders.
The Articles provide that Directors may
be appointed by an ordinary resolution
of the Company’s members or by a
resolution of the Directors, provided
that, in the latter instance, a Director
appointed in this way retires and stands
for election at the first Annual General
Meeting following his appointment.
The Articles also provide that at every
Annual General Meeting at least one-third
of the Directors retire by rotation and set
out the circumstances in which and how
they may be re-elected. The Company’s
members may remove a Director by
passing an ordinary resolution of which
special notice has been given. The office
of a Director shall be vacated in any of
the following events: (a) if (but in the case
of a Director holding any executive office
subject to the terms of any contract of
service between him and the Company)
notification in writing, signed by the
Director or otherwise authenticated in
such manner as the other Directors may
accept, is received by the Company from
the Director that he is resigning or retiring
from office as a Director, and such
resignation or retirement has taken effect
in accordance with its terms, or if he shall
in writing offer to resign or retire and the
Directors shall resolve to accept such
offer; (b) if he becomes bankrupt or has
a receiving order made against him or
makes any arrangement or composition
with his creditors generally in satisfaction
of his debts or shall apply to the court for
an interim order under section 253 of the
Insolvency Act 1986; (c) if a registered
medical practitioner who is treating the
Director gives a written opinion to the
Company stating that he has become
physically or mentally incapable of
acting as a Director and may remain so
for more than three months; (d) if he is
absent from meetings of the Directors for
six successive months without leave, and
his alternate Director (if any) shall not
during such period have attended in his
stead, and the Directors resolve that his
office be vacated; (e) if he shall be
removed from office by notice in writing
served upon him signed by all his
co-Directors, but so that if he holds an
appointment to an executive office
which automatically determines, as a
result, such removal shall be deemed an
act of the Company and shall have
effect without prejudice to any claim for
damages for breach of any contract of
service between him and the Company;
or (f) if he ceases to be a Director by
virtue of any provision of the Companies
Act or becomes prohibited by law from
being a Director.
The powers of the Directors are
determined by applicable legislation
and the Company’s Articles of Association.
As provided in those Articles, the Directors
may exercise all the Company’s powers
provided that the Articles or applicable
legislation do not stipulate that any
such powers must be exercised by the
Company’s members. The Directors
have been authorised to issue and allot
ordinary shares, pursuant to the Articles,
and have authority to make market
purchases of shares. These powers are
referred to shareholders at each Annual
General Meeting for renewal. Any shares
purchased may be cancelled or held
as treasury shares.
Employment policies
The group is committed to ensuring
the health and safety of its employees
in the workplace. This includes the
provision of regular medical checks.
The group supports the employment of
disabled people where possible through
recruitment, by retention of those who
become disabled and generally through
training, career development
and promotion.
The group is committed to keeping
employees as fully informed as possible
with regard to the group’s performance
and prospects and seeks their views,
wherever possible, on matters which
affect them as employees.
Independent auditors
Mazars LLP were appointed during the
prior year following an external tender
process. Mazars LLP have indicated
their willingness to continue in office.
Ordinary resolutions to re-appoint
Mazars LLP as auditors and to authorise
the Directors to agree their audit fee will
be proposed at the forthcoming Annual
General Meeting.
Annual General Meeting notice
The Annual General Meeting of the
Company will be held on 7th December
2023, at the Company’s headquarters at
The Conference Centre, The Heath
Business and Technical Park, Runcorn
WA7 4QX. Shareholders will have the
option to attend in person or through
teleconference, with the teleconference
details to be provided. The notice
convening the AGM, together with an
explanation of the resolutions to be
proposed at the meeting, will be sent
to shareholders separately from
this document.
Post-balance sheet events
After the year end, we signed an
agreement to hedge the second
tranche of proceeds from the
Samsung settlement due to be received
in February 2024. The hedge means
Nanoco will receive £48.8 million in return
for selling $71.75 million, which is the net
receipt after deducting withholding tax.
On behalf of the Board
Brian Tenner
Chief Executive Officer
19 October 2023
088
Nanoco Group plc – Annual Report and Accounts 2023
Corporate governance Statement of Directors’ responsibilities in respect of the financial statements
The directors are responsible for
preparing the Annual Report and
Accounts 2023 and the financial
statements in accordance with
applicable law and regulation.
Company law requires the directors to
prepare financial statements for each
financial year. Under that law the
directors have prepared the group
and the company financial statements
in accordance with international
accounting standards in conformity with
the requirements of the Companies Act
2006. Additionally, the Financial Conduct
Authority’s Disclosure Guidance and
Transparency Rules require the directors
to prepare the group financial
statements in accordance with UK
adopted international financial
reporting standards.
The company has also prepared
financial statements in accordance
with UK adopted international financial
reporting standard’s
Under company law, directors must not
approve the financial statements unless
they are satisfied that they give a true
and fair view of the state of affairs of the
group and company and of the profit
or loss of the group for that period.
In preparing the financial statements,
the directors are required to:
| select suitable accounting policies
and then apply them consistently;
| state whether applicable international
accounting standards in conformity
with the requirements of the
Companies Act 2006 and UK adopted
international financial reporting
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
| make judgements and accounting
estimates that are reasonable and
prudent; and
| prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
group and company will continue
in business.
The directors are responsible for
safeguarding the assets of the group
and company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are also responsible for
keeping adequate accounting records
that are sufficient to show and explain
the group’s and company’s transactions
and disclose with reasonable accuracy
at any time the financial position of the
group and company and enable them to
ensure that the financial statements and
the Directors’ Remuneration Report
comply with the Companies Act 2006.
Directors’ confirmations
The directors consider that the Annual
Report and Accounts 2023 and
accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the group’s and
company’s position and performance,
business model and strategy.
Each of the directors, whose names
and functions are listed in the Corporate
Governance Report confirm that, to the
best of their knowledge:
| the group and company financial
statements, which have been
prepared in accordance with
international accounting standards
in conformity with the requirements
of the Companies Act 2006 and UK
adopted international financial
reporting standards, give a true and
fair view of the assets, liabilities and
financial position of the group and
company, and of the profit of the
group; and
| the Directors’ report includes a
fair review of the development and
performance of the business and the
position of the group and company,
together with a description of the
principal risks and uncertainties
that it faces.
By order of the Board
Brian Tenner
Chief Executive Officer
19 October 2023
Nanoco Group plc – Annual Report and Accounts 2023 089
Independent auditors’ report to the members of Nanoco Group plc
Opinion
| We have audited the financial
statements of Nanoco Group Plc
(the ‘parent company’) and its
subsidiaries (the ‘group’) for the year
ended 31 July 2023 which comprise
the Consolidated Statement of
Comprehensive Income, the
Consolidated Statement of Changes
in Equity, the Company Statement
of Changes in Equity, the Group and
Company Statements of Financial
Position, the Group and Company
Cash Flow Statements, and notes
to the financial statements,
including a summary of significant
accounting policies.
| The financial reporting framework that
has been applied in their preparation
is applicable law and UK-adopted
international accounting standards
and, as regards the parent company
financial statements, as applied in
accordance with the provisions of
the Companies Act 2006.
In our opinion, the financial statements:
| give a true and fair view of the state
of the group’s and of the parent
company’s affairs as at 31 July 2023
and of the group’s profit for the year
then ended;
| have been properly prepared
in accordance with UK-adopted
international accounting standards;
and as regards the parent company
financial statements, as applied in
accordance with the provisions of
the Companies Act 2006; and
| have been prepared in accordance
with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards
are further described in the “Auditor’s
responsibilities for the audit of the
financial statements” section of our
report. We are independent of the group
and the parent company in accordance
with the ethical requirements that are
relevant to our audit of the financial
statements in the UK, including the FRC’s
Ethical Standard as applied to listed
entities and public interest entities and
we have fulfilled our other ethical
responsibilities in accordance with these
requirements. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion.
Conclusions relating to
going concern
In auditing the financial statements,
we have concluded that the directors’
use of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.
Our audit procedures to evaluate the
directors’ assessment of the group’s and
the parent company’s ability to continue
to adopt the going concern basis of
accounting included but were not
limited to:
| Undertaking an initial assessment
at the planning stage of the audit to
identify events or conditions that may
cast significant doubt on the group’s
and the parent company’s ability to
continue as a going concern;
| Obtaining an understanding of
the relevant controls relating to the
directors’ going concern assessment;
| Making enquiries of the directors to
understand the period of assessment
considered by them, the assumptions
they considered and the implication
of those when assessing the group’s
and the parent company’s future
financial performance;
| Challenging the appropriateness of
the directors’ key assumptions in their
cash flow forecasts, as described in
note 2c, by reviewing supporting and
contradictory evidence in relation to
these key assumptions and assessing
the directors’ consideration of severe
but plausible scenarios. This included
assessing the viability of mitigating
actions within the directors’ control;
| Testing the accuracy and functionality
of the model used to prepare the
directors’ forecasts;
| Assessing the historical accuracy of
forecasts prepared by the directors;
| Considering the consistency of the
directors’ forecasts with other areas
of the financial statements and
our audit;
| Reviewing contracts and confirming
contractual cashflows included within
the directors assessment;
| Evaluating the availability of sufficient
liquidity and compliance with loan
covenants; and
090
Nanoco Group plc – Annual Report and Accounts 2023
| Evaluating the appropriateness of the
directors’ disclosures in the financial
statements on going concern and
viability.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the
group’s and the parent company’s ability
to continue as a going concern for a
period of at least twelve months from
when the financial statements are
authorised for issue.
Our responsibilities and the
responsibilities of the directors with
respect to going concern are described
in the relevant sections of this report.
In relation to Nanoco Group Plc’s
reporting on how it has applied the UK
Corporate Governance Code, we have
nothing material to add or draw
attention to in relation to the directors’
statement in the financial statements
about whether the director’s considered
it appropriate to adopt the going
concern basis of accounting.
Key audit matters
Key audit matters are those matters
that, in our professional judgement, were
of most significance in our audit of the
financial statements of the current
period and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) we
identified, including those which had
the greatest effect on: the overall audit
strategy; the allocation of resources in
the audit; and directing the efforts of the
engagement team. These matters were
addressed in the context of our audit of
the financial statements as a whole, and
in forming our opinion thereon, and we
do not provide a separate opinion on
these matters.
We summarise below the key audit
matters in forming our opinion above,
together with an overview of the
principal audit procedures performed
to address each matter and our key
observations arising from those procedures.
These matters, together with our findings,
were communicated to those charged
with governance through our Audit
Completion Report.
Financial statements Key audit matters continued
Key Audit Matter
How our scope addressed this matter
Accounting for Samsung contracts
Our audit procedures included, but were not limited to:
As explained in Note 6 to the financial
statements, the Group settled its ongoing
litigation with Samsung on a no-fault basis
through the agreement to sell certain
intellectual property and license the remaining
Intellectual property portfolio.
In addition to having highly material and
pervasive impacts on the Group’s financial
statements for both the current and subsequent
accounting periods, the contracts required
significant judgement and estimation by
management in the application of the relevant
accounting standards, specifically IFRS 15
Revenue from contracts with customers and IAS
12 Income taxes and therefore we deemed the
accounting for the Samsung contract to be a
key audit matter
Refer to Note 2 on page 100 for further
information on the key judgements applied by
management in their assessment of the terms
and accounting implications associated with
the contracts. Refer to Note 6 on page 109 for
the disclosure of the impact of the transactions
on both the current and future accounting
periods.
| Reviewing the signed contracts and management’s paper, discussing
with management and those charged with governance to obtain
sufficient understanding of the contracts and the proposed accounting
and tax implications;
| Agreeing the cash flows to contractual terms and conditions;
| Challenging management’s proposed accounting treatment including
relevant judgments based on the legal and commercial substance of
the contracts, ensuring they are in line with the requirements of relevant
accounting standards and our knowledge of the industry;
| Using the assistance of internal tax specialists to review the tax
considerations made regarding this transaction to ensure that they
complied with the relevant tax legislation;
| Agreeing the amounts presented in the financial statements to the
underlying accounting records and relevant third-party evidence;
| Challenging management’s assessment in relation to the recognition of
revenue for both the current and subsequent periods and assessing the
performance obligations associated with the license revenue.
| Assessing the classification of the related balances in the financial
statements for appropriateness in line with IAS 1 Presentation of financial
statements; and
| Evaluating the adequacy and clarity of the related financial statements
disclosures including the impact of these contracts on the Group’s going
concern and viability assessments.
Our observations
Based on our audit procedures, we consider judgements made by
management in determining the accounting treatment and the associated
note disclosures in relation to both the licensing and sale of certain Intellectual
Property to be appropriate.
Valuation of Share Based Payments
Our audit procedures, but were not limited to:
During the year to 31 July 2023, the group
recognised a charge of £953k relating to the
Long Term Incentive and Deferred Bonus plans
for employees of the group. As at year end,
share-based payment reserve was £5,610k
(2022: £4,916k).
The valuation of share-based payments
is complex and is subject to significant
management estimates and judgement and
we therefore deem this to be a key audit matter.
Therefore, there is a risk that the share-based
payment schemes are not correctly recognised
in accordance with IFRS 2 Share-based
payment and that the vesting conditions are
not accurately reflected.
Refer to the accounting policies included within
note 3(r) to the financial statements and the
disclosures included within note 24.
| Reviewing management’s valuation of the share options expected to vest
in the future and challenged the logic behind this valuation accordingly;
| Challenging the valuation methodology adopted and its consistency with
the requirements of IFRS 2;
| Engaging our internal valuation expert to evaluate the reasonableness
of the key assumptions such as expected volatility and dividend yield used
in the fair valuation of the share options; and
| Testing the mathematical accuracy of the calculation provided by management.
| Assessing the appropriateness of share-based payment disclosures in the
financial statements.
Our observations
Based on our audit procedures, we consider the methodologies and
assumptions made by management in the share-based payment valuation
under IFRS 2 to be reasonable.
Nanoco Group plc – Annual Report and Accounts 2023 091
Independent auditors’ report to the members of Nanoco Group plc continued
Our application of materiality and an overview of the scope of our audit
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect
of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement,
we determined materiality for the financial statements as a whole as follows:
Overall materiality
£360,000
£205,000
Group materiality
Parent company materiality
How we determined it We determined overall materiality for the group
Rationale for
benchmark applied
using a benchmark of approximately 0.71% of
total assets.
We have considered total assets to be the key
metric for determining materiality given the group’s
focus on continued growth through its intangible
asset portfolio for the group and investment in
subsidiaries for the parent company. Therefore,
this is considered most relevant measure of the
underlying position of both the group.
This was determined at 0.5% of total assets capped
at component materiality.
We have considered the value of total assets to be the
critical component for determining materiality given
the parent company’s focus on continued growth of
the group through its investment in subsidiaries, therefore
this is considered most relevant measure of the
underlying position of the group.
Performance
materiality
Performance materiality is set to reduce to
an appropriately low level the probability that
the aggregate of uncorrected and undetected
misstatements in the financial statements exceeds
materiality for the financial statements as a whole.
Performance materiality is set to reduce to an
appropriately low level the probability that the
aggregate of uncorrected and undetected
misstatements in the financial statements exceeds
materiality for the financial statements as a whole.
We set performance materiality at £180,000,
which represents 50% of overall materiality.
Reporting threshold We agreed with the directors that we would report
to them misstatements identified during our audit
above £10,800 as well as misstatements below
that amount that, in our view, warranted reporting
for qualitative reasons.
On the basis of our risk assessments, together with
our assessment of the company’s overall control
environment, we set performance materiality at
approximately 50% of our overall materiality,
being £102,500.
We agreed with the directors that we would report to
them misstatements identified during our audit above
£6,150 as well as misstatements below that amount that,
in our view, warranted reporting for qualitative reasons.
As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud
or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the
directors made subjective judgements, such as assumptions on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial
statements as a whole. We used the outputs of our risk assessment, our understanding of the group and the parent company,
their environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient
coverage across all financial statement line items.
Our group audit scope included an audit of the group and the parent company financial statements. Based on our risk
assessment, Nanoco Group Plc, Nanoco Technologies Limited and Nanoco Limited were subject to a full scope audit performed
by the group audit team. Nanoco Employee Trust was subject to audit procedures over account balances and/or disclosures as
the component was not deemed individually financially significant enough to require a full scope audit for group reporting
purposes. The remaining two components, Nanoco Tech Limited and Nanoco Life Services limited and were subject to analytical
procedures and review of financial information at group level. The audit of the component financial information was performed
by the same group engagement team under the group engagement partner’s direct supervision.
The group audit team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that
there were no significant risks of material misstatement of the aggregated financial information.
Other information
The other information comprises the information included in the annual report and accounts other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
092
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements Other information continued
Our responsibility is to read the other
information and, in doing so, consider
whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained in
the course of audit or otherwise appears
to be materially misstated. If we identify
such material inconsistencies or
apparent material misstatements, we are
required to determine whether this gives
rise to a material misstatement in the
financial statements themselves. If,
based on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters
prescribed by the Companies Act
2006
In our opinion, the part of the directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
| the information given in the strategic
report and the directors’ report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements and
those reports have been prepared
in accordance with applicable
legal requirements;
| the information about internal
control and risk management systems
in relation to financial reporting
processes and about share capital
structures, given in compliance with
rules 7.2.5 and 7.2.6 in the Disclosure
Guidance and Transparency Rules
sourcebook made by the Financial
Conduct Authority (the FCA Rules),
is consistent with the financial
statements and has been prepared
in accordance with applicable legal
requirements; and
| information about the parent
company’s corporate governance
code and practices and about its
administrative, management and
supervisory bodies and their
committees complies with rules 7.2.2,
7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required
to report by exception
In light of the knowledge and
understanding of the group and the
parent company and their environment
obtained in the course of the audit,
we have not identified material
misstatements in the:
| strategic report or the directors’
report; or
| information about internal control and
risk management systems in relation
to financial reporting processes and
about share capital structures, given
in compliance with rules 7.2.5 and 7.2.6
of the FCA Rules.
We have nothing to report in respect of
the following matters in relation to which
the Companies Act 2006 requires us to
report to you if, in our opinion:
| adequate accounting records have
not been kept by the parent company,
or returns adequate for our audit have
not been received from branches not
visited by us; or
| the parent company financial
statements and the part of the
directors’ remuneration report to be
audited are not in agreement with the
accounting records and returns; or
| certain disclosures of directors’
remuneration specified by law are not
made; or
| we have not received all the
information and explanations we
require for our audit; or
| a corporate governance statement
has not been prepared by the parent
company.
Corporate governance statement
The Listing Rules require us to review the
directors’ statement in relation to going
concern, longer-term viability and that
part of the Corporate Governance
Statement relating to Nanoco Group
Plc’s compliance with the provisions of
the UK Corporate Governance
Statement specified for our review.
Based on the work undertaken as part
of our audit, we have concluded that
each of the following elements of the
Corporate Governance Statement is
materially consistent with the financial
statements or our knowledge obtained
during the audit:
| Directors’ statement with regards the
appropriateness of adopting the
going concern basis of accounting
and any material uncertainties
identified, set out on page 37;
| Directors’ explanation as to its
assessment of the entity’s prospects,
the period this assessment covers and
why they period is appropriate, set out
on page 37;
| Directors’ statement on fair, balanced
and understandable;
| Board’s confirmation that it has
carried out a robust assessment of the
emerging and principal risks, set out
on page 33;
| The section of the annual report that
describes the review of effectiveness
of risk management and internal
control systems; and, set out on
page 33;
| The section describing the work of the
audit committee, set out on page 61.
Responsibilities of Directors
As explained more fully in the Statement
of directors’ responsibilities in respect of
the financial statements set out on page
89, the directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view, and for such internal
control as the directors determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements,
the directors are responsible for
assessing the group’s and the parent
company’s ability to continue as a going
concern, disclosing, as applicable,
matters related to going concern and
using the going concern basis of
accounting unless the directors either
intend to liquidate the group or the
parent company or to cease operations,
or have no realistic alternative but to
do so.
Nanoco Group plc – Annual Report and Accounts 2023 093
Independent auditors’ report to the members of Nanoco Group plc continued
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in
the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis
of these financial statements.
The extent to which our procedures
are capable of detecting irregularities,
including fraud is detailed below.
Irregularities, including fraud, are
instances of non-compliance with laws
and regulations. We design procedures
in line with our responsibilities, outlined
above, to detect material misstatements
in respect of irregularities, including fraud.
Based on our understanding of the
group and the parent company and
their industry, we considered that
non-compliance with the following laws
and regulations might have a material
effect on the financial statements:
employment regulations, health and
safety regulations, anti-money
laundering regulations, compliance
with the Data Protection Act, Patent
regulations and compliance with
London Stock Exchange rules for
premium listed companies.
To help us identify instances of non-
compliance with these laws and
regulations, and in identifying and
assessing the risks of material
misstatement in respect to non-
compliance, our procedures included,
but were not limited to:
| Gaining an understanding of the legal
and regulatory framework applicable
to the group and the parent company,
the industry in which they operate,
and the structure of the group, and
considering the risk of acts by the
group and the parent company which
were contrary to the applicable laws
and regulations, including fraud;
| Inquiring of the directors, management
and, where appropriate, those
charged with governance, as to
whether the group and the parent
company is in compliance with laws
and regulations, and discussing their
policies and procedures regarding
compliance with laws and regulations;
| Inspecting correspondence with
relevant licensing or regulatory
authorities including Patent
regulations within countries in which
the group operates;
| Reviewing minutes of directors’
meetings in the year; and
| Discussing amongst the engagement
team and internal experts the laws
and regulations listed above, and
remaining alert to any indications
of non-compliance.
We also considered those laws and
regulations that have a direct effect
on the preparation of the financial
statements, such as tax legislation,
pension legislation, the Companies
Act 2006 and listing rules.
In addition, we evaluated the directors’
and management’s incentives and
opportunities for fraudulent manipulation
of the financial statements, including the
risk of management override of controls,
and determined that the principal risks
were related to posting manual journal
entries to manipulate financial
performance, management bias
through judgements and assumptions
in significant accounting estimates,
and revenue recognition which we
pinpointed to the occurrence of
service and license revenue.
Our procedures in relation to fraud
included but were not limited to:
| Making enquiries of the directors and
management on whether they had
knowledge of any actual, suspected
or alleged fraud;
| Gaining an understanding of the
internal controls established to
mitigate risks related to fraud;
| Discussing amongst the engagement
team the risks of fraud;
| Addressing the risks of fraud through
management override of controls by
performing journal entry testing; and
| Agreeing a sample of revenue
transactions to relevant support.
The primary responsibility for the
prevention and detection of irregularities,
including fraud, rests with both those
charged with governance and
management. As with any audit, there
remained a risk of non-detection of
irregularities, as these may involve
094
Nanoco Group plc – Annual Report and Accounts 2023
collusion, forgery, intentional omissions,
misrepresentations or the override of
internal controls.
The risks of material misstatement that
had the greatest effect on our audit
are discussed in the “Key audit matters”
section of this report.
A further description of our
responsibilities is available on the
Financial Reporting Council’s website at
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Other matters which we are
required to address
Following the recommendation of the
audit committee, we were appointed by
the board of directors on 21 June 2022
to audit the financial statements for the
year ending 31 July 2022 and subsequent
financial periods. The period of total
uninterrupted engagement is 2 years,
covering the years ending 31 July 2022
to 31 July 2023.
The non-audit services prohibited by the
FRC’s Ethical Standard were not provided
to the group or the parent company and
we remain independent of the group
and the parent company in conducting
our audit.
Our audit opinion is consistent with our
additional report to the audit committee.
Use of the audit report
This report is made solely to the
company’s members as a body in
accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work
has been undertaken so that we might
state to the company’s members those
matters we are required to state to them
in an auditor’s report and for no other
purpose. To the fullest extent permitted
by law, we do not accept or assume
responsibility to anyone other than the
company and the company’s members
as a body for our audit work, for this
report, or for the opinions we have formed.
Valerie Levi (Senior Statutory Auditor)
for and on behalf of Mazars LLP
Chartered Accountants and Statutory
Auditor
One St Peter’s Square
Manchester
M2 3DE
19 October 2023
Financial statements Consolidated statement of comprehensive income
for the year ended 31 July 2023
Revenue
Cost of sales1
Gross profit
Other operating income
Government grants
Profit on sale of IP
Operating expenses
Research and development expenses1
Administrative expenses
Operating profit/(loss)
– Before share-based payments and non-recurring items
– Share-based payments
– Profit on sale of IP
– Litigation costs
– EGM requisition
Finance income
Finance expense
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation
Other comprehensive income/(loss)
Total comprehensive profit/(loss) for the year
Profit/(loss) per share
Basic profit/(loss) for the year
Diluted profit/(loss) for the year
Notes
4
5
6
6
6
24
6
6
6
8
8
9
2023
£’000
5,618
(847)
4,771
2022
(restated)
£’000
2,467
(932)
1,535
230
68,687
361
—
(1,295)
(1,258)
(57,401)
(5,409)
14,992
(2,915)
(953)
68,687
(49,337)
(490)
38
(5,457)
9,573
1,512
(4,771)
(4,152)
(619)
—
—
—
—
(450)
(5,221)
524
11,085
(4,697)
—
—
11,085
(4,697)
10
10
3.44p
3.32p
(1.52p)
(1.52p)
1 The comparative balances for cost of sales and research and development expenses have been restated for the year ended 31 July 2022. Refer to note
2b of the accounting policies for more information. The restatement has no impact on the reported loss or net assets.
The profit for the current year and loss for the prior year arises from the group’s continuing operations and is attributable to the
equity holders of the Parent.
The notes on pages 99 to 126 form an integral part of these financial statements.
Nanoco Group plc – Annual Report and Accounts 2023 095
Consolidated statement of changes in equity
for the year ended 31 July 2023
Share
capital
£’000
Share
premium
£’000
Reverse
acquisition
reserve
£’000
Share-based
payment
reserve
£’000
Merger
reserve
£’000
Shares held
by EBT
£’000
Group
At 1 August 2021
Loss for the year
Other comprehensive income
Total comprehensive loss
Issue of share capital on placing
Costs of share placing
Issue of share capital on exercise
of options
Share-based payments
At 31 July 2022
Profit for the year
Other comprehensive income
Total comprehensive profit
Capital reduction
Issue of capital to EBT on option exercise
Share-based payments
30,570
117,292
(77,868)
4,318
(1,242)
—
—
—
1,528
—
146
—
—
—
—
4,127
(274)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(21)
619
—
—
—
—
—
—
—
32,244
121,145
(77,868)
4,916
(1,242)
—
—
—
—
199
—
—
—
—
(121,145)
—
—
—
—
—
—
—
—
—
—
—
—
—
(259)
953
—
—
—
—
—
—
Retained
earnings/
accumulated
losses)
£’000
Total
£’000
(70,018)
3,052
(4,697)
(4,697)
—
—
(4,697)
(4,697)
—
—
—
—
5,655
(274)
125
619
(74,715)
4,480
11,085
11,085
—
11,085
121,145
60
—
—
11,085
—
(105)
953
—
—
—
—
—
—
—
—
—
—
—
—
—
(105)
—
(77,868)
5,610
(1,242)
(105)
57,575
16,413
Share
capital
£’000
Share
premium
£’000
Share-based
payment
reserve
£’000
Capital
redemption
reserve
£’000
Retained
earnings/
(accumulated
losses)
£’000
Total
£’000
30,570
117,292
4,318
4,402
(119,978)
36,604
—
1,528
—
146
—
—
4,127
(274)
—
—
—
—
—
(21)
619
—
—
—
—
—
(340)
—
—
—
—
(340)
5,655
(274)
125
619
32,244
121,145
4,916
4,402
(120,318)
42,389
—
—
199
—
32,443
—
(121,145)
—
—
—
—
—
(259)
953
5,610
—
46,182
46,182
(4,402)
125,547
—
—
953
60
—
51,471
89,524
—
—
—
At 31 July 2023
32,443
Company statement of changes in equity
for the year ended 31 July 2023
Company
At 1 August 2021
Loss for the year and total comprehensive loss for the year
Issue of share capital on placing
Costs of share placing
Issue of share capital on exercise of options
Share-based payments
At 31 July 2022
Profit for the year and total comprehensive profit for the year
Capital reduction
Issue of capital to EBT on option exercise
Share-based payments
At 31 July 2023
096
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements Group and Company statements of financial position
at 31 July 2023
Registered no. 05067291
Assets
Non-current assets
Tangible fixed assets
Right of use assets
Intangible assets
Deferred tax asset
Foreign withholding tax receivable
Investment in subsidiaries
Current assets
Inventories
Trade and other receivables
Foreign withholding tax receivable
Income tax receivable
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans
Lease liabilities
Income tax liability
Provisions
Deferred revenue
Non-current liabilities
Loans
Lease liabilities
Provisions
Deferred revenue
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium
Reverse acquisition reserve
Share-based payment reserve
Merger reserve
Capital redemption reserve
Shares held by EBT
Retained earnings/(accumulated losses)
Total equity
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
Notes
11
12
13
9
9
14
15
16
9
9
17
18
19
21
9
23
20
19
21
23
20
22
22
22
24
25
25
26
26
304
2,075
966
2,573
1,756
—
—
—
—
—
—
41,700
98
56
1,616
—
—
—
—
—
—
—
—
40,747
7,674
41,700
1,770
40,747
308
33,986
592
—
8,207
—
52,876
—
—
105
43,093
52,981
174
1,664
—
524
6,762
9,124
—
175
—
—
5,497
5,672
50,767
94,681
10,894
46,419
(2,783)
(4,004)
(456)
(770)
—
(6,123)
(1,153)
(4,004)
—
—
—
—
(1,510)
—
(153)
—
(172)
(560)
(14,136)
(5,157)
(2,395)
(638)
—
—
—
—
—
(638)
(557)
(1,415)
(445)
(17,801)
(20,218)
—
—
—
—
—
(3,919)
(16)
(40)
(44)
(3,392)
—
—
—
(4,019)
(3,392)
(34,354)
(5,157)
(6,414)
(4,030)
16,413
89,524
4,480
42,389
32,443
—
(77,868)
5,610
(1,242)
—
(105)
57,575
32,443
—
—
5,610
—
—
—
51,471
32,244
121,145
(77,868)
4,916
(1,242)
—
—
(74,715)
32,244
121,145
—
4,916
—
4,402
—
(120,318)
16,413
89,524
4,480
42,389
The Parent Company’s result for the year ended 31 July 2023 was a profit of £46,182,000 (2022: loss of £340,000). There was no
other comprehensive income in either the current or prior year.
The notes on pages 99 to 126 form an integral part of these financial statements. The financial statements on pages 95 to 126
were approved by the Board of Directors on 17 October 2023 and signed on its behalf by:
Dr Christopher Richards
Chairman
19 October 2023
Brian Tenner
Chief Executive Officer
19 October 2023
Nanoco Group plc – Annual Report and Accounts 2023 097
Group and Company cash flow statements
for the year ended 31 July 2023
Profit/(loss) before tax
Adjustments for:
Net finance expense
(Profit)/loss on exchange rate translations
Depreciation of tangible fixed assets
Depreciation of right of use assets
Amortisation of intangible assets
Profit on disposal of intangible assets
Impairment of intangible assets
Reversal of impairment
Share-based payments
(Profit)/loss on disposal of tangible fixed assets
Changes in working capital:
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
(Decrease)/increase in provisions
Increase/(decrease) in deferred revenue
Cash (outflow)/inflow from operating activities
Foreign withholding tax paid
Research and development tax credit received
Cash flow from investing activities
Purchases of tangible fixed assets
Purchases of intangible fixed assets
Proceeds from sale of tangible fixed assets
Proceeds from sale of intangible fixed assets
Interest received
Net cash inflow/(outflow) from investing activities
Cash flow from financing activities
Proceeds from placing of ordinary share capital
Costs of financing/placing
Payment of lease liabilities (capital)
Payment of lease liabilities (interest)
Interest paid
Net cash (outflow)/inflow from financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the start of the year
Effects of exchange rate changes
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
Notes
9,573
46,182
(5,221)
(340)
8
11
12
13
6
13
24
11
5,419
1,747
76
555
279
(68,687)
92
—
953
8
(134)
282
970
(176)
23,320
(25,723)
(2,641)
524
5,337
(10)
—
—
—
—
—
—
—
—
—
(52,701)
316
—
—
450
(211)
105
366
498
—
858
—
619
(36)
(64)
(141)
(105)
212
205
(876)
(2,465)
—
—
—
688
11
13
8
(305)
(76)
15
34,509
38
34,181
199
—
(463)
(86)
—
—
—
—
—
—
(4)
(114)
36
—
—
(82)
199
5,655
—
—
—
(274)
(506)
(83)
(3)
4,789
2,930
3,813
19
(4,728)
(4,725)
(5,078)
(4,526)
1,263
6,762
182
(5,402)
5,497
10
105
6,762
5,497
396
19
—
—
—
—
—
(76)
—
—
—
—
116
—
—
115
—
—
115
—
—
—
—
—
—
5,655
(274)
—
—
—
5,381
5,496
1
—
Net cash (outflow)/inflow from operating activities
(27,840)
(876)
(1,777)
Cash and cash equivalents at the end of the year
17
8,207
The notes on pages 99 to 126 form an integral part of these financial statements.
098
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements
Notes to the financial statements
1. Reporting entity
Nanoco Group plc (the “Company”), a public company limited by shares, is on the premium list of the London Stock Exchange.
The Company is incorporated and domiciled in England, UK. The registered number is 05067291 and the address of its registered
office is Science Centre, The Heath Business and Technical Park, Runcorn WA7 4QX. The Company is registered in England.
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 2023.
The financial statements of the Group for the year ended 31 July 2023 were authorised for issue by the Board of Directors on
19 October 2023 and the statements of financial position were signed on the Board’s behalf by Dr Christopher Richards and
Brian Tenner.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent
Company’s income statement.
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 and Parent Company’s financial statements have been prepared in accordance with International Accounting
Standards in conformity with the requirements of the Companies Act 2006 and UK-adopted IFRSs as issued by the International
Accounting Standards Board for the year ended 31 July 2023.
(b) Basis of measurement
The Parent Company and group financial statements have been prepared on the historical cost basis, except for the revaluation
of financial assets classified as “fair value through other comprehensive income” or “fair value through profit or loss”, which are
reported in accordance with the accounting policies below.
In order to more fairly represent the cost of sales of the group, we have reclassified certain employee costs from administrative
expenses to cost of sales for the comparative period. Total impact of the reclassification is an increase to cost of sales of
£512,000 with an equal and opposite reduction in administrative expenses. There is no impact on reported loss or net assets of
this reclassification.
(c) Going concern
All of the following matters are taken into account by the Directors in forming their assessment of going concern. The group’s
business activities and market conditions are set out on pages 9 to 27. The principal risks and uncertainties are shown on pages
33 to 35 while the group’s financial position is described in the Financial review on pages 30 to 32. Furthermore, note 27
summarises the group’s financial risk management objectives, policies and processes. The group funds its day-to-day cash
requirements from existing cash reserves.
For the purposes of their going concern assessment and the basis for the preparation of the 2023 Annual Report, the Directors
have reviewed the same trading and cash flow forecasts and sensitivity analyses that were used by the group in the viability
assessment described on p36, with the going concern assessment covering the period to November 2024. The same base case
and downside sensitivities were also used with the addition of an extreme downside where no uncontracted revenue was
included and the group contracted to become an IP shell.
The base case represents the Board’s current expectations. Assumptions in the base case are:
| minimal sales of nanomaterials beyond current contracts. Commercial services contracts are based on the existing pipeline
of opportunities or agreements already in place;
| modest demand for commercial production materials in CY24 with a subsequent slow ramp-up in demand;
| a further extension to the services and supply contract with the European electronics customer;
| no revenue is assumed from other business lines though some small scale commercial deals are currently under discussion;
| small expansion of our self-funded research activities and continued maintenance costs to support our IP portfolio;
| Board, plc and other costs reflect the current inflationary environment; and
| the installed cost base is capable of supporting significant increases in revenue above those assumed in the base case so
there is no immediate requirement for short-term increases or new capital expenditure.
The downside case then flexes those assumptions as follows:
| a full-year delay in small scale commercial production revenues (into CY25); and
| no new business from other customers once existing active engagements end.
Nanoco Group plc – Annual Report and Accounts 2023 099
Notes to the financial statements continued
2. Basis of preparation continued
(c) Going concern continued
The extreme downside case then flexes those assumptions further as follows:
| all commercial agreements come to an end;
| no revenues other than those already contracted; and
| the group ceases all operations.
As the IP sold in the year was non-core and unrelated to current and forecast revenue streams, there is no impact on future cash
flows other than the inflow from the sale.
All three cases above produce cash flow statements that demonstrate that the group has sufficient cash throughout the period
of the forecast, being a period to November 2024.
Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements. The
financial statements do not reflect any adjustments that would be required to be made if they were prepared on a basis other
than the going concern basis.
(d) Functional and presentational currency
These financial statements are presented in Pounds Sterling, which is the presentational currency of the group and the functional
currency of the Company. 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 judgements 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 judgements 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 judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and
judgements may have a material impact on the financial statements.
In the process of applying the group’s accounting policies, management has made the following estimates and judgements,
which have the most significant effect on the amounts recognised in the consolidated financial statements.
Estimates
Samsung licence of IP
Judgement is required in reviewing the terms of the licence agreement with Samsung as to whether the associated revenue
should be recognised at a point in time or over time, and if over time, over what period. The Directors reviewed the contract in
detail and analysed the terms against the specific requirements of IFRS 15 in relation to licences. They concluded that the
company had an ongoing performance obligationin regards to the licence and therefore the revenue should be recognised over
time. It was determined that the appropriate period for revenue recognition was the average remaining life of the relevant IP of
8.8 years. This is a significant estimate and sensitivity analysis is included in note 6.
Equity-settled share-based payments
The group has historically issued LTIPs to incentivise employees. The determination of share-based payment costs requires: the
selection of an appropriate valuation method; consideration as to the inputs necessary for the valuation model chosen; and
judgement regarding when and if performance conditions will be met. Inputs required for this arise from judgements relating to
the future volatility of the share price of Nanoco and 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. The share-based payment expense is most sensitive to non-market vesting
assumptions. Further information is included in note 24.
Deferred tax
The Company recognises deferred tax assets only to the extent that it is probable that future taxable profits, feasible tax
planning strategies and deferred tax liabilities will be available against which the tax losses can be utilised. Estimation of the
level of future taxable profits is therefore required in order to determine the appropriate carrying value of the deferred tax asset.
The Company has recognised £2.2 million of deferred tax assets in the year (2022: £nil) which represents the proportion of
accumulated losses that are expected to be utilised in the medium term. Additional information is included in note 9.
Judgements
Recoverability of investment and inter-company receivable
Judgement is required to assess the carrying value of the Company investment and inter-company receivable at each reporting date.
Indicators of potential impairment noted in IAS 36 (paragraph 12) include, but are not limited to, situations where the carrying
amount of the net assets of the entity is more than its market value and where significant changes with an adverse effect on the
entity have taken place during the year.
100
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 2. Basis of preparation continued
(e) Use of estimates and judgements continued
Judgements continued
Recoverability of investment and inter-company receivable continued
The Directors consider there are no indicators of impairment in the year. Given the main trading entity is Nanoco Technologies
Limited (owned by Nanoco Tech Limited), this holds the majority of the value.
The recoverable amount of intercompany receivables is measured under IFRS 9 at the lower of original value and recoverable
amount. The value of the required provision is set such that the recoverable amount is the amount that is intended to be repaid.
Revenue recognition
Judgement is required in reviewing the terms of development agreements to identify separate components of revenue, if any,
that are consistent with the economic substance of the agreement and in turn the period over which development revenue
should be recognised. Judgements are required to assess the stage of completion including, as appropriate, whether and when
contractual milestones have been achieved. Management judgements are similarly required to determine whether services or
rights under licence agreements have been delivered so as to enable licence revenue to be recognised. This matter is further
complicated where a contract may have different elements which may result in separate recognition treatments under IFRS 15.
Further information is included in note 3(d).
Impairment of intellectual property
As the group generates IP as part of early stage research projects, the carrying value of these assets may need to be impaired.
Impairment exists where the carrying value of an asset exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its potential value in use. A regular review is undertaken to identify which patents are uncertain to be of
value to Nanoco and should be allowed to lapse. As a consequence, patents with a value of £0.1 million (2022: £0.9 million) have
been fully impaired in these financial statements. 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. The group does not believe that any of its patents in isolation are material to the business.
Management has adopted the prudent approach of amortising patent registration costs over a ten-year period, which is shorter
than the life of the patent to reflect obsolescence risk in rapidly changing technology markets. For external patents acquired, the
same rule is adopted unless the remaining life of the patent is shorter, in which event the cost of acquisition is amortised over the
remaining life of the patent.
Research and development
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 until such time as technical
viability has been proven and commercial supply agreements are likely to be achieved. 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. Further information is included in note 3(h).
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.
(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 over the investee (i.e. existing rights that give it the current ability
to direct the relevant activities of the investee), exposure, or rights, to variable returns from its involvement with the investee and
ability to use its power over the investee to affect its returns. All of Nanoco Group plc’s subsidiaries are 100% owned. Subsidiaries
are fully consolidated from the date control passes. During the year, the group established an Employee Benefit Trust (“EBT”) for
the purpose of awarding shares to employees on exercise of options under the share-based compensation schemes. Although
the EBT is an independent legal entity and not owned by the group, it is reliant on funding from the group and acts at its request;
as such, it is deemed to be controlled by the group and is consolidated into the group accounts.
The acquisition 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.
Nanoco Group plc – Annual Report and Accounts 2023
101
Notes to the financial statements continued
3. Significant accounting policies continued
(a) Basis of consolidation continued
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 (i.e. discount on acquisition) is recognised directly in the consolidated statement of comprehensive income.
In the consolidated financial statements, the assets and liabilities of the foreign operations are translated into Sterling at the exchange
rate prevailing at the reporting date. Income and cash flow statement items for group entities with a functional currency other than
Sterling are translated into Sterling at monthly average exchange rates, which approximate to the actual rates, for the relevant
accounting periods. The exchange differences arising on translation are recognised in other comprehensive income. See note 3(b).
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.
(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 (including those of the group’s US subsidiary)
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, being the research, development and manufacture of
products and services based on high performance nanoparticles.
(d) Revenue recognition
Revenue comprises the fair value of the sale of products and services to external customers, net of value added tax or other sales
taxes or duties, rebates, discounts and returns. Revenue is recognised according to the five-step model set out in IFRS 15 as follows:
1. identify the contract(s) with a customer;
2. identify the performance obligations in the contract;
3. determine the transaction price;
4. allocate the transaction price to the performance obligations in the contract; and
5. recognise revenue when (or as) the entity satisfied a performance obligation.
Products sold
Revenue from the sale of products is recognised at the point of transfer of control, which is generally on shipment or delivery of
the product. This is dependent on the delivery terms agreed with the customer. At this stage the group has completed its
performance obligations. The supply and delivery of products are not deemed to be separable performance obligations as the
customer is obliged to make use of the group’s delivery arrangements in most cases.
Rendering of services
Revenues from development programmes are recognised over time on a cost to cost method whereby cost is used to measure
progress and costs are incurred evenly throughout the period.
Licences
Licences grant customers access to the group’s technology over a set length of time. Therefore, revenue related to the granting
of a licence is recognised over the same period of time. The length of time to which the licence, and therefore the revenue, relates
varies by customer and agreement.
(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 as other operating income in the consolidated statement of
comprehensive income. Government grants of an expense nature are recognised as a credit to administrative expenses in the
consolidated statement of comprehensive income.
Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset.
102
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 3. Significant accounting policies continued
(f) Cost of sales
Cost of sales comprises the materials, direct labour, duty, freight, and employee and employee-associated costs incurred in the
generation of revenue from products sold and research and development services supplied.
Revenue from royalties and licences, which comprises payments from customers to gain preferential treatment in terms of supply
or pricing, does not have an associated cost of sale.
(g) Deferred revenue and accrued income
When either party to a contract has performed, the contract balance is presented in the statement of financial position as
accrued income or deferred revenue, depending on the relationship between the completion of the performance obligations
and the customer’s payment. Accrued income represents consideration earned through the completion of performance
obligation, or part performance where revenue is recognised over time, that is not yet due for payment. Deferred revenue
represents advanced consideration received from customers, for which the corresponding performance obligation has not been
performed or is only part performed where revenue is recognised over time.
(h) Research and development
Research costs are charged in the consolidated statement of comprehensive income as they are incurred. Development costs
will be capitalised as intangible assets when it is probable that future economic benefits will flow to the group. 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 based on the circumstances at the 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, the exception being the costs of filing intellectual property as these are considered to generate probable future economic
benefits and are capitalised as intangible assets (see note 13).
(i) Finance income and expense
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 expense comprises interest expense on borrowings and lease liabilities. All borrowing costs are recognised using the
effective interest method.
(j) 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 (including research and development income tax credit) 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 or 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 substantively enacted at the balance sheet date and which are expected to apply when the related deferred
tax asset is realised or the deferred tax liability is settled.
Nanoco Group plc – Annual Report and Accounts 2023 103
Notes to the financial statements continued
3. Significant accounting policies continued
(j) Income tax continued
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 of economic benefits in the future
is uncertain.
Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the group to
make a single payment.
(k) Property, plant and equipment
Property, plant and equipment 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 five years or the remainder of the lease period (if shorter)
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 derecognised 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 derecognition of the asset is included in the consolidated statement of
comprehensive income in the period of derecognition.
Assets under construction, which principally relate to leasehold improvements and plant and machinery, are not depreciated until
such time as they are available for use. If there are indications of impairment in the carrying value, then the recoverable amount
is estimated and compared to the carrying amount. The recoverable amount is determined as the value that will ultimately be
capitalised as an asset, based upon IAS 16 recognition and capitalisation criteria.
(l) 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 consideration for the purchase of an intangible asset includes contingent consideration, the fair value of the contingent
consideration is included in the cost of the asset.
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
(m) Impairment of non-financial 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 group reviews the potential markets for the
asset, and considers the possibility of short to medium-term commercial success being derived from the asset. In determining fair
value less costs of disposal, an appropriate valuation model is used and these calculations are 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 asset.
104
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 3. Significant accounting policies continued
(m) Impairment of non-financial assets continued
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 a revalued 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.
Impairment charges have been posted during the year in relation to intangible assets. See the relevant note for more information.
(n) Investments in subsidiaries
Investments in subsidiaries are stated in the Company statement of financial position at cost less provision for any impairment.
(o) 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.
(p) Financial instruments
Financial assets and financial liabilities are recognised when the group becomes party to the contractual provisions of the
relevant instrument and derecognised when it ceases to be party to such provisions. Such assets and liabilities are classified
as current if they are expected to be realised or settled within twelve months after the balance sheet date. Financial assets and
liabilities are initially recognised at amortised cost and subsequently measured at amortised cost including directly attributable
transaction costs.
The group has the following categories of financial assets and liabilities:
Receivables
(i) 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.
For trade receivables and contract assets, the group applies the IFRS 9 simplified approach in calculating ECLs. Therefore, the
group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting
date. The group has established a provision matrix that is based on shared credit risk characteristics, its historical credit loss
experience and days past due, adjusted for forward-looking factors specific to the debtors and the economic environment.
The amount of the provision is recognised in the balance sheet within trade receivables. Movements in the provision are
recognised in the profit and loss account in administrative expenses.
(ii) 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.
Financial liabilities at amortised cost
(i) Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised at amortised cost. They are subsequently
measured at amortised cost using the effective interest rate method.
(ii) Loans and convertible loan notes
Obligations for loans and borrowings are measured initially at fair value and subsequently interest-bearing loans are measured
at amortised cost. Convertible loan notes are presented as financial liabilities as rights of the note holder to convert the loan
notes into equity are within the control of the Company.
(q) Share capital
Proceeds on issue of shares are included in shareholders’ equity, net of transaction costs. The carrying amount is not remeasured
in subsequent years.
(r) 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.
Nanoco Group plc – Annual Report and Accounts 2023 105
Notes to the financial statements continued
3. Significant accounting policies continued
(r) Share-based payments continued
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.
Where awards relating to services within the year have not been issued and therefore the fair value has not been calculated at
the year end, an estimate, based on the current share price, is made of the cost incurred to date and a true-up is performed
once the valuation is complete.
(s) 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.
(t) Provisions
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, 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. Provision is not made for future operating losses. Provisions are
discounted where the impact is deemed to be material. Where obligations are covered by “no win, no fee” funding arrangements,
the liability is recognised in full at the point when the group becomes liable, i.e. when the outcome is known.
(u) Alternative performance measurements
Items of income and expenditure which are material and non-recurring are presented separately in the consolidated statement
of comprehensive income. The separate reporting of such items helps to provide an indication of the underlying performance of
the group and hence allows the user of the accounts a fuller understanding of that performance.
(v) Contingent assets and liabilities
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the group. Contingent assets are not
recognised but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable.
Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the
occurrence of one or more uncertain future events not wholly within the control of Nanoco. Additionally, contingent liabilities may
be present obligations that arise from past events but which are not recognised because it is not probable that an outflow of
resources will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not recognised in the consolidated statement of financial position but are disclosed and explained in
the notes.
(w) IFRS 16 Leases
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and
the lessor. It eliminates the classification of leases as either operating leases or financial leases and introduces a single lease
accounting model requiring lessees to recognise a lease liability reflecting the future lease payments and a right of use asset
for lease contracts. The group has applied the modified retrospective transition approach, with recognition of transitional
adjustments on the date of initial application (1 August 2019), without restatement of comparative figures.
Lease payments for low value or short-term leases where the group has elected not to recognise a right of use asset and lease
liability are charged as an expense on a straight-line basis.
At the date of commencement of property leases, the group determines the lease term to be the full term of the lease, assuming
that any option to break or extend is not likely to be exercised. Leases are regularly reviewed and will be revalued if it becomes
likely that a break clause or option to extend will be exercised. The weighted average incremental borrowing rate applied at the
date of transition was 3.75%. For new leases entered into in the year ended 31 July 2023, the weighted average incremental
borrowing rate applied was 8.00% (2022: 4.25%).
106
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 3. Significant accounting policies continued
(w) IFRS 16 Leases continued
The group recognises a right of use asset at the lease commencement date. The right of use asset is measured at its carrying
amount as if IFRS 16 had been applied since the commencement date, discounted using the lessee’s incremental rate at the date
of initial application. Subsequent to measurement, right of use assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset if assessed to be shorter.
The lease liabilities are measured at the present value of the remaining lease payments, discounted using the group’s incremental
borrowing rate as at initial application or commencement date if later. The group’s incremental borrowing rate is the rate at which
a similar borrowing could be obtained over a similar term in a similar economic environment. Judgement is required to determine
an approximation with consideration given to the Bank of England base rates adjusted by an indicative credit premium and lease
specific adjustment. Subsequently, the lease liability is increased by the interest cost on the lease liability and decreased by the
lease payments made. It is remeasured if there is a modification, a change in lease term or a change in the fixed lease payment.
(x) New accounting standards and interpretations
The following standards have been issued but have not been applied by the group in these financial statements.
These amendments to standards and interpretations had no significant impact on the financial statements:
IFRS standards effective from 1 January 2023 (EU endorsed and UK adopted)
| IFRS 17 Insurance Contracts
| IAS 1 Amendment: Disclosure of Accounting Policies
| IAS 8 Amendment: Definition of Accounting Estimates
| IAS 1 Amendment: Classification of Liabilities as Current or Non-current
| IAS 12 Amendment: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction
IFRS standards effective from 1 January 2023 (EU endorsed, not UK adopted)
| IFRS 17 Amendment: Initial Application of IFRS 17 and IFRS 9 – Comparative Information
IFRS standards effective from 1 January 2023 (not yet EU endorsed)
| IAS 12 Amendment: International Tax Reform - Pillar Two Model Rules
The amendments to standards and interpretations noted above are expected to have no significant impact on the
financial statements.
4. Segmental information
Operating segments
During the years ended 31 July 2023 and 2022, the group operated as one segment, being the research, development and
manufacture of products and services based on high performance nanoparticles. This is the level at which operating results
are reviewed by the chief operating decision maker (i.e. the Board) to make decisions about resources, and for which financial
information is available. All revenues have been generated from continuing operations and are from external customers.
Analysis of revenue
Products sold
Rendering of services
Licenses
31 July
2023
£’000
867
1,685
3,066
5,618
31 July
2022
£’000
782
1,582
103
2,467
There was one material customer who generated product and service revenue of £2,014,000 (2022: one material customer
amounting to £2,089,000). £2,963,000 of the licence income related to the Samsung licence (2022: £nil).
Revenue from the provision of services delivered over time totalled £4,751,000 (2022: £1,685,000). Revenue from the sale of goods
transferred at a point in time amounted to £867,000 (2022: £782,000).
Nanoco Group plc – Annual Report and Accounts 2023
107
Notes to the financial statements continued
4. Segmental information continued
Operating segments continued
The group operates in a number of countries across the world, although all are managed in the UK. The group’s revenue per
country based on the customer’s location is as follows:
Revenue
USA
Japan
UK
Singapore
Holland
France
Taiwan
Canada
Poland
South Korea
31 July
2023
£’000
31 July
2022
£’000
59
447
1
—
27
244
1
3
1,423
1,474
385
323
9
8
2,963
5,618
348
351
19
—
—
2,467
All of the group’s assets are held in the UK and all of its capital expenditure arises in the UK. The profit before taxation and
attributable to the single segment was £9,573,000 (2022: loss of £5,221,000).
5. Other operating income
Government grants
31 July
2023
£’000
230
31 July
2022
£’000
361
Grants of £230,000 (2022: £361,000) are included in other operating income. There are no unfulfilled conditions or other
contingencies attached to these grants.
6. Operating profit/(loss)
Operating profit/(loss) is stated after charging/(crediting):
Depreciation of tangible fixed assets (see note 11)
Depreciation of right of use assets (see note 12)
(Profit)/loss on disposal of fixed assets
Amortisation of intangible assets (see note 13)
Impairment of intangible assets (see note 13)
(Profit) on disposal of intangible assets
Settled litigation costs
Requisitioned general meeting
Lease costs of low value/short life lease obligations
Staff costs (see note 7)
Foreign exchange losses/(gains)
Research and development expense1
Share-based payments
Employers tax on Share-based payments
31 July
2023
£’000
31 July
2022
£’000
76
555
8
279
92
(68,687)
49,337
490
7
3,480
1,747
1,802
953
(225)
105
349
(36)
498
859
—
—
—
11
2,552
(192)
1,770
619
264
1
Included within research and development expense are staff costs totalling £1,117,000 (2022: £1,439,000) also included in note 7. Included in research and
development expenses are £507,000 (2022: £512,000) included in cost of sales.
108
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 6. Operating profit/(loss) continued
On 3 February 2023, the group signed agreements with Samsung for a sale of part of the group’s IP portfolio and a licence on the
remaining IP. The two contracts also ended the litigation against Samsung for the alleged infringement of the group’s IP on a no
fault basis. The information and tables below set out the impact of the transactions on the group’s financial statements for FY23.
Income statement impact for FY23
Revenue (licence fee income)
Administrative costs (litigation costs)
Profit on disposal of intangible assets
Unrealised foreign exchange loss on accrued income
Net operating profit
Interest payable on loan notes
Profit before tax
£’000
2,963
(49,337)
68,687
(1,929)
20,384
(4,725)
15,659
The sale of IP was recognised in full in FY23 as a profit on disposal of intangible assets. The litigation costs were also recognised
in full in FY23 as an administrative expense. The profit on disposal of intangible assets is made up of proceeds of £69,067,000 less
£356,000 of net book value at the time of sale and £24,000 of IP registration transfer fees.
The IP licence income will be recognised as revenue over the average remaining life of the patent portfolio as it exists at
3 February 2023. This is estimated to be 8.8 years from 3 February 2023. The licence income in FY23 reflects the six months of the
revenue recognition period included in FY23. The following table demonstrates the sensitivity to the estimate of the remaining life
of the patent portfolio.
Remaining patent life at start of licence
7 years
8 years
9 years
10 years
The following table sets out the balance sheet impact of the agreements on initial recognition and as at 31 July 2023.
Balance sheet impact
Impact on
revenue
2023
£’000
775
307
(56)
(347)
Proceeds receivable (debtors due within one year)
Deferred income (due within one year)
Deferred income due after more than one year
Disposal of intangible assets
Litigation fees payable
Financial liability
Withholding tax asset
Cash
Net assets
03 Feb 2023
£’000
31 July 2023
£’000
96,616
33,041
—
—
(6,080)
(17,801)
(356)
(356)
(48,436)
(4,725)
—
—
—
—
2,269
4,458
43,099
15,531
The second tranche of license fee of $32.5 million, including above in proceeds receivable, has not yet been recognised as the
performance obligation is only part complete and the payment is not yet due. This will be recognised on the due date for
payment and the income deferred until recognised over time. The figures above are shown before the impact of any UK taxation.
Tax treatment is disclosed in note 9.
During the year a small group of activist shareholders called a general meeting with the aim of removing the entire Board and
appointing their own six nominees instead. The group incurred costs of £490,000 in legal and advisory fees in relation to this
matter of which £348,000 was included in accruals at 31 July 2023.
Nanoco Group plc – Annual Report and Accounts 2023 109
Notes to the financial statements continued
6. Operating profit/(loss) continued
Auditors’ remuneration
Audit services:
– Fees payable to Company auditors for the audit of the Parent and the consolidated accounts
– Auditing the accounts of subsidiaries pursuant to legislation
Total auditors’ remuneration
7. Staff costs
The group’s costs for employees, including Directors, during the year were as follows:
Wages and salaries
Social security costs
Defined contribution pension costs
Share-based payments
Social security costs on share-based payments
Total staff costs
Directors’ remuneration (including benefits in kind) included in the aggregate remuneration above comprised:
Emoluments for qualifying services
31 July
2023
£’000
31 July
2022
£’000
102
60
162
41
44
85
31 July
2023
£’000
3,022
340
118
31 July
2022
£’000
2,241
226
85
3,480
2,552
953
(225)
619
264
4,208
3,435
1,401
797
Emoluments for Directors of the group (excluding social security costs and long-term incentives, but including benefits in kind)
disclosed above include £542,000 paid to the highest paid Director (2022: £265,000). Details of the compensation of key
management personnel are described in note 29.
The group made contributions to money purchase pension schemes for two current Directors (2022: two). Aggregate gains made
by Directors during the year following the exercise of share options were £357,000 (2022: £nil). An analysis of the highest paid
Director’s remuneration is included in the Directors’ remuneration report.
The monthly average number of employees during the year (including Directors) was as follows:
Group
Directors
Laboratory and administrative staff
8. Finance income and expense
Group
Finance income
Interest receivable
Finance expense
Loan note interest
Loan note success fee
Unwinding interest on lease liabilities
Other interest payable
31 July
2023
Number
31 July
2022
Number
6
36
42
7
35
42
31 July
2023
£’000
31 July
2022
£’000
38
—
(643)
(4,725)
(86)
(3)
(433)
—
(14)
(3)
(5,419)
(450)
The loan note success fee was a one-off interest payment to the loan note holders on the successful conclusion to the Samsung litigation.
110
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 9. Taxation
The tax credit is made up as follows:
Group
Current income tax
UK corporation tax
Research and development income tax credit receivable
Foreign taxation
Adjustment in respect of prior years
Deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior periods
Total income tax credit
The tax assessed for the year varies from the standard rate of corporation tax as explained below:
Group
Profit/(loss) before taxation
Tax at standard rate of 21% (2022: 19%)
Effects of:
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation
Additional deduction for research and development expenditure
Surrender of research and development relief for repayable tax credit
Research and development tax credit receivable
Share options exercised (CTA 2009 Pt 12 deduction)
Losses (Recognised)/Not Recognised
Foreign tax credits
Adjustment in respect of prior years
Tax charge/(credit) in income statement
31 July
2023
£’000
31 July
2022
£’000
1,072
(302)
291
—
—
(524)
—
—
1,061
(524)
(2,522)
(51)
—
—
(1,512)
(524)
31 July
2023
£’000
9,573
2,011
1,237
13
—
—
(302)
(75)
(4,636)
291
(51)
31 July
2022
£’000
(5,221)
(992)
(15)
16
(365)
640
(524)
—
716
—
—
(1,512)
(524)
The group has accumulated losses available to carry forward against future trading profits of £31.6 million (2022: £40.5 million).
Deferred tax liabilities/(assets) provided/(recognised) at a standard rate of 25% (2022: 19%) are as follows:
Accelerated capital allowances
Short-term temporary differences
Tax losses
Foreign withholding tax receivable - current
Foreign withholding tax receivable - non-current
Total foreign withholding tax receivable
31 July
2023
£’000
(37)
(272)
(2,264)
(2,573)
(592)
(1,756)
(2,348)
31 July
2022
£’000
—
—
—
—
—
—
—
The group also has deferred tax assets, measured at a standard rate of 25% (2022: 25%), in respect of share-based payments and
tax losses of £5,326,000 (2022: £10,246,000) which have not been recognised as an asset as it is not yet sufficiently probable that
future taxable profits will be available against which the assets can be utilised. The foreign withholding tax receivable relates to
withholding tax incurred on license income that will be recovered through tax deductions in future years.
Nanoco Group plc – Annual Report and Accounts 2023
111
Notes to the financial statements continued
10. Earnings per share
Group
Profit/(loss) for the financial year attributable to equity shareholders
Share-based payments
Profit/(loss) for the financial year before share-based payments
Weighted average number of shares
Ordinary shares in issue
Options exercisable at the reporting date
Options not yet exercisable at the reporting date
Diluted weighted average number of shares
Adjusted profit/(loss) per share before share-based payments (pence)
Basic profit/(loss) per share (pence)
Diluted adjusted profit/(loss) per share before share-based payments (pence)
Diluted profit/(loss) per share (pence)
31 July
2023
£’000
11,085
953
12,038
31 July
2022
£’000
(4,697)
619
(4,078)
322,472,939 308,610,928
195,000
11,720,600
334,388,539
3.73
3.44
3.60
3.32
—
—
—
(1.32)
(1.52)
—
—
Diluted loss per share has not been presented for 2022 as the effect of share options issued is anti-dilutive.
Adjusted profit/(loss) per share and diluted adjusted profit/(loss) per share are non-GAAP measures included for reference.
11. Tangible fixed assets
Group
Cost
At 1 August 2021
Additions
Disposals
At 31 July 2022
Additions
Disposals
At 31 July 2023
Accumulated depreciation
At 1 August 2021
Charged during the year
Disposals
At 31 July 2022
Charged during the year
Disposals
At 31 July 2023
Net book value
At 31 July 2023
At 31 July 2022
Laboratory
infrastructure
£’000
Office equipment,
fixtures and
fittings
£’000
Plant and
machinery
£’000
Total
£’000
3,380
466
8,020
11,866
—
(42)
3,338
25
(1,825)
1,538
3,380
—
(42)
3,338
4
(1,825)
1,517
21
—
—
(67)
399
50
(88)
361
432
23
(67)
388
8
(86)
310
51
11
4
(796)
7,228
230
4
(905)
10,965
305
(1,385)
(3,298)
6,073
7,972
7,855
11,667
82
(796)
7,141
64
105
(905)
10,867
76
(1,364)
(3,275)
5,841
7,668
232
87
304
98
The aggregate original cost of tangible assets now fully depreciated but considered to be still in use is £7,458,000 (2022: £10,668,000).
Capital commitments
At 31 July 2023, the group had capital commitments amounting to £nil in respect of orders placed for capital expenditure (2022: £nil).
112
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 12. Right of use assets
Right of use assets
Cost
At 1 August 2022
Additions
Disposals
At 31 July 2023
Accumulated depreciation
At 1 August 2022
Charged during the year
Disposals
At 31 July 2023
Net book value
At 31 July 2023
At 1 August 2022
Lease liabilities
Opening liabilities at 1 August 2022
Additions
Lease payments
Interest charge
Closing liabilities at 31 July 2023
Office
Equipment
£’000
Property
Leases
£’000
—
34
—
34
—
6
—
6
28
—
Total
£’000
893
2,574
(225)
893
2,540
(225)
3,208
3,242
837
549
(225)
1,161
837
555
(225)
1,167
2,047
2,075
56
56
Total
£’000
(169)
(2,165)
549
(86)
(1,871)
A provision for dilapidations of £445,000 is recognised in relation to the right of use assets, see note 23.
The group had undiscounted future lease payments due as follows:
31 July 2023
31 July 2022
Within 1 year
£’000
1 to 2 years
£’000
2 to 3 years
£’000
3 to 4 years
£’000
4 to 5 years
£’000
509
156
509
4
500
4
496
4
—
4
More than
5 years
£’000
—
—
Total
£’000
2,014
172
The group has several lease contracts that include extension and termination options. These options are negotiated
by management to provide flexibility in managing the leased-asset portfolio and align with the group’s business needs.
Management exercises judgement in determining whether these extension and termination options are reasonably certain
to be exercised.
Set out below are the undiscounted potential future rental payments related to periods following the exercise date of extension
and termination options that are not included in the lease term:
31 July 2023
Extension options expected to be exercised
Extension options expected not to be exercised
Total
31 July 2022
Extension options expected not to be exercised
Extension options expected to be exercised
Total
Within
five years
£’000
More than
five years
£’000
—
—
—
—
—
—
Within
five years
£’000
More than
five years
£’000
17
2,493
2,510
—
—
—
Nanoco Group plc – Annual Report and Accounts 2023
Total
£’000
—
—
—
Total
£’000
17
2,493
2,510
113
Notes to the financial statements continued
12. Right of use assets continued
Capital commitments
At 31 July 2023, the group had capital commitments amounting to £nil in respect of new leases (2022: £2,119,000).
13. Intangible assets
Group
Cost
At 1 August 2021
Additions
Disposals
At 31 July 2022
Additions
Disposals
At 31 July 2023
Accumulated amortisation
At 1 August 2021
Charged during the year
Impairment charge
Disposals
At 31 July 2022
Charged during the year
Impairment charge
Disposals
At 31 July 2023
Net book value
At 31 July 2023
At 31 July 2022
Patents
£’000
7,668
115
(3,004)
4,779
76
(1,034)
3,821
4,810
498
859
(3,004)
3,163
279
92
(679)
2,855
966
1,616
Contingent consideration of $150,000 is payable in respect of a purchase of patents made during a previous period. The amount
is payable if the group reaches a revenue target in a future reporting period.
Intangible assets are amortised on a straight-line basis over ten years. Amortisation provided during the period is recognised in
administrative expenses. The group does not believe that any of its patents in isolation are material to the business. The
aggregate original cost of intangible assets now fully depreciated but considered to be still in use is £1,470,000 (2022: £1,988,000).
The group continues to undertake annual reviews to identify patents which are deemed insufficiently certain to recover their
carrying value and should therefore be allowed to lapse. The lapses in the current year related to patent applications where a
grant was no longer deemed to be likely. As a consequence, patents with a value of £92,000 (2022: £859,000) have been fully
impaired in these financial statements. The impairment charge is recognised within administrative expenses.
14. Investment in subsidiaries
Company
At 1 August 2021
Shares
£’000
Share
impairment
£’000
Loans
£’000
Loan
impairment
£’000
Total
£’000
63,235
(24,006)
25,074
(24,175)
40,128
Increase in respect of share-based payments
—
—
619
—
619
At 31 July 2022
63,235
(24,006)
25,693
(24,175)
40,747
Increase in respect of share-based payments
—
—
953
—
953
At 31 July 2023
63,235
(24,006)
26,646
(24,175)
41,700
114
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 14. Investment in subsidiaries continued
By subsidiary
Nanoco Tech Limited
Nanoco Life Sciences Limited
Nanoco Technologies Limited
At 31 July 2023
Shares
£’000
Share
impairment
£’000
63,235
(24,006)
Loans
£’000
—
Loan
impairment
£’000
Total
£’000
—
39,229
—
—
—
—
20,286
(20,286)
—
6,360
(3,889)
2,471
63,235
(24,006)
26,646
(24,175)
41,700
Accounting standards (IAS 36 Impairment of Assets) require investments in subsidiary undertakings (equity and loans) to be
carried at the lower of cost or recoverable value. Recoverable value is defined as the higher of fair value less costs of disposal
(effectively net sale proceeds) and value in use. Indicators of potential impairment noted in IAS 36 (paragraph 12) include, but
are not limited to, situations where the carrying amount of the net assets of the entity is more than its market value and where
significant changes with an adverse effect on the entity have taken place during the year.
Consistent with IAS 36 and the indicator of impairment noted above in respect of net assets exceeding market capitalisation,
the Directors have used the Company’s market capitalisation as at 31 July 2023 as its fair value less costs of disposal. Given the
volatility of the share price during the year, the Directors do not believe that a sufficiently robust period of share price appreciation
has occurred as yet to merit an upwards revision in the value of the investment, which has therefore been left unchanged.
The investment balance with Nanoco Technologies Limited arises due to the recharge for share-based payments. There is no
immediate intention for this to be repaid.
Loans to subsidiary undertakings carry no interest and are repayable on demand. Further information in relation to these loans is
given in note 28.
Subsidiary undertakings
Country of incorporation
Principal activity
Nanoco Life Sciences Limited
England and Wales
Research and development
Nanoco Tech Limited
England and Wales
Holding company
Nanoco Technologies Limited1
England and Wales
Manufacture and development of nanoparticles
Nanoco 2D Materials Limited
England and Wales
Research and development
Nanoco US Inc.2
USA
Management services
Share of issued
ordinary share capital
31 July
2023
100%
100%
100%
100%
100%
31 July
2022
100%
100%
100%
100%
100%
All subsidiaries incorporated in England and Wales are registered at Science Centre, The Heath Business and Technical Park,
Runcorn WA7 4QX. Nanoco US Inc. is registered at 33 Bradford Street, Concord, MA 01742.
With the exception of the two companies footnoted below, all other shareholdings are owned by Nanoco Group plc.
1 Share capital is owned by Nanoco Tech Limited.
2 Nanoco US Inc. is a wholly owned subsidiary of Nanoco Tech Limited. It was formed in July 2013 primarily in order to provide the services of US-located
staff to the rest of the group.
15. Inventories
Finished goods
Raw materials and consumables
Total
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
37
271
308
—
—
—
—
174
174
—
—
—
A total of £626,000 (2022: £296,000) was included in cost of sales with respect to the cost of inventory expensed during the year.
Inventories are stated net of an allowance of £111,000 (2022: £126,000) in respect of excess or slow-moving items. Movement in the
allowance was due to utilisation in the year.
Nanoco Group plc – Annual Report and Accounts 2023
115
Notes to the financial statements continued
16. Trade and other receivables
Trade receivables
Accrued income
Prepayments
Inter-company short-term loan to subsidiary
Less impairment provision
Other receivables
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
87
33,139
430
—
—
—
—
—
67,220
(14,490)
330
146
33,986
52,876
975
143
248
—
—
298
1,664
—
—
29
66,813
(66,813)
146
175
The impairment of the short-term loan is explained in note 14. The quantum of this provision will be reviewed at each reporting date.
Trade receivables are non-interest bearing and are generally due and paid within 30 to 60 days. The Directors consider that the
carrying amount of trade and other receivables approximates to their fair value. An expected credit loss of £nil (2022: £10,000)
has been recognised at the year end.
Accrued income includes the second tranche of the consideration on the sale of IP to Samsung of $42.5 million (£33.0 million)
which is due in Feb 24. The $32.5 million second tranche of the license income, also due in Feb 24 has not been recognised at
31 July 23.
Other receivables include an amount of £146,000 (2022: £146,000) relating to consideration due on shares awarded as part of
the Deferred Bonus Plan.
Trade receivables are denominated in the following currency:
US Dollars
Sterling
At 31 July, the ageing analysis of trade receivables was as follows:
2023
2022
17. Cash and cash equivalents
Cash and cash equivalents
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
87
—
87
—
—
—
963
12
975
Not
yet due
£’000
58
497
Past due
90 days to
120 days
£’000
—
1
Due
£’000
29
477
Past due
> 120
£’000
—
—
—
—
—
Total
£’000
87
975
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
8,207
105
6,762
5,497
Under IAS 7, cash held on long-term deposits (being deposits with original maturity of greater than three months and no more
than twelve months) that cannot readily be converted into cash must be classified as a short-term investment. There were no
such deposits at 31 July 2023 (2022: none).
An analysis of cash, cash equivalents and deposits by denominated currency is given in note 27.
116
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 18. Trade and other payables
Current
Trade payables
Other payables
Accruals
Inter-company payable
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
864
338
1,581
—
—
146
381
626
622
113
775
—
2,783
1,153
1,510
—
—
—
638
638
The Directors consider that the carrying amount of trade and other payables approximates to their fair value. The average credit
period taken is 67 days (2022: 46 days). Interest is not charged on inter-company loans (2022: no interest).
19. Loans
Convertible Series A loan note 2028
Accrued interest on Convertible Series A loan note 2028
Loan notes (net of costs)
Accrued interest on loan notes
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
400
157
2,989
1,015
4,561
—
—
2,989
1,015
4,004
400
127
2,989
403
3,919
—
—
2,989
403
3,392
The loan note issued by Nanoco 2D Materials Limited is unsecured, bears a fixed interest at 6.5% p.a. and is fully repayable with
accrued interest in 2028 unless options to convert into shares of that company have been exercised. The note holders have a right
to convert the loan note into shares of the subsidiary in certain circumstances but these are within the control of the Company.
On 26 July 2021, there was a non-dilutive loan note subscription with two major shareholders, raising net proceeds before fees
(£161,000) of £3.15 million on a loan note price of £4.50 million. The loan notes are unsecured and have a nominal value of £1 each,
and an arrangement fee of 1.4% of the nominal amount and are repayable three years from completion. The subscription price of
70 pence represents a discount to the nominal value of £1 equivalent to 12% interest per annum. The Company may redeem the
loan notes at any time prior to their maturity at 80% of nominal value during the first year of the term, 90% at any time in year two,
and 100% at any time in year three. Following the successful outcome to the Samsung litigation, the loan note holders were paid
a success bonus of £4,725,000, 105% of the nominal value of the loan notes subscribed. There have been no changes in liabilities
arising from financing activities other than described in this note.
Movement in loans
At 1 August 2021
Accrued interest on loan note
Reclassification to current liabilities
Interest on convertible loan
At 31 July 2022
Accrued interest on loan note
Success fee due following Samsung agreement
Success fee paid
Interest on convertible loan
At 31 July 2023
Group
£’000
Company
£’000
3,487
3,446
396
—
36
3,919
612
4,725
396
(450)
—
3,392
612
4,725
(4,725)
(4,725)
30
—
4,561
4,004
Nanoco Group plc – Annual Report and Accounts 2023
117
Notes to the financial statements continued
20. Deferred revenue
Current
Upfront licence fees
Milestone payments
Non-current
Upfront licence fees
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
6,123
—
6,123
17,801
23,924
—
—
—
—
—
103
457
560
44
604
—
—
—
—
—
Deferred revenue arises under IFRS where upfront licence fees are accounted for on a straight-line basis over the initial term of
the contract or where performance criteria have not been satisfied in the accounting period.
Opening deferred revenue
Revenue deferred
Revenue booked current year
Closing deferred revenue
21. Lease liabilities
Current
Property leases
Equipment leases
Total current
Non-current
Property leases
Equipment leases
Total non-current
2023
£’000
604
26,843
2022
£’000
399
1,825
(3,523)
(1,620)
23,924
604
31 July 2023
Group
£’000
31 July 2023
Company
£’000
31 July 2022
Group
£’000
31 July 2022
Company
£’000
448
8
456
1,399
16
1,415
—
—
—
—
—
—
153
—
153
16
—
16
—
—
—
—
—
—
22. Issued equity capital
On 18 July 2023, the Company undertook a capital reduction which cancelled the share premium reserve.
Group
Allotted, called up and fully paid ordinary shares of 10p
At 1 August 2021
Shares issued on placement
Shares issued on exercise of options
At 31 July 2022
Capital reduction
Shares issued on exercise of options
At 31 July 2023
Share
capital
£’000
Share
premium
£’000
Reverse
acquisition
reserve
£’000
Total
£’000
Number
305,699,102
30,570
117,292
(77,868)
69,994
15,284,340
1,462,302
1,528
146
3,853
—
—
—
5,381
146
322,445,744
32,244
121,145
(77,868)
75,521
—
1,985,206
—
199
324,430,950
32,443
(121,145)
—
—
—
—
(121,145)
199
(77,868)
(45,425)
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 ordinary shares.
118
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 22. Issued equity capital continued
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 the Company 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.
23. Provisions
At 1 August 2022
Provided during the period
Utilised during the period
At 31 July 2023
Property
dilapidations
£’000
212
297
(64)
445
Total
£’000
212
297
(64)
445
The provision relates to the potential dilapidation costs from the exit of all its premises. Because of the long-term nature of the
liability, there is uncertainty in estimating the provision. The extent and cost of potential dilapidation costs represent a best
estimate applied across the group’s lease portfolio based on past experience, the extent of remediation work required and the
expected timing of activity, for which there is a high level of uncertainty.
During the year, part of the provision was utilised against the exit of the Manchester premises.
24. Share-based payment reserve
Group and Company
At 1 August 2021
Share-based payments
Exercise of share options
At 31 July 2022
Share-based payments
Exercise of share options
At 31 July 2023
£’000
4,318
619
(21)
4,916
953
(259)
5,610
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 £953,000 has been recognised in the statement of comprehensive income for the year (2022: charge of £619,000).
Share option schemes
The group operates the following share option schemes, all of which are operated as Enterprise Management Incentive (“EMI”)
schemes insofar 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 Group plc Long Term Incentive Plan (“LTIP”)
Grant in May 2014
Share options were granted to certain staff on 23 May 2014. The exercise price was set at 89 pence, being the average closing
share price on the three days preceding the 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. The options vested at the end of three
years from the date of grant and are exercisable until the tenth anniversary of the award. The awards were not subject to
performance conditions. Vesting of the award was subject to the employees remaining full-time members of staff at the point
of vesting. No options were granted to Executive Directors.
Nanoco Group plc – Annual Report and Accounts 2023
119
Notes to the financial statements continued
24. Share-based payment reserve continued
Share option schemes continued
Nanoco Group plc 2015 Long Term Incentive Plan (“LTIP”)
Grants in December 2015 (fully lapsed), April 2016 (fully lapsed), November 2017 (fully lapsed), November 2018 (fully lapsed),
October 2020 (fully lapsed), November 2021, December 2021 and October 2022
Following approval of the new scheme at the 2015 AGM, share options have been granted to Executive Directors and key staff on
a number of occasions at nil cost, and have an exercise price of £nil. The fair value benefit is measured using a stochastic model,
taking into account the terms and conditions upon which the share options are issued. In each case, the options vest at the end
of the three-year performance period subject to meeting the performance criteria (as detailed in the Directors’ remuneration
report) in each reporting period and are exercisable after a two-year holding period until the tenth anniversary of the award.
Deferred Bonus Plan (“DBP”)
On 22 November 2016, awards in the form of nil-cost options were granted to the Executive Directors in respect of 50% of their
bonuses for the year ended 31 July 2016 which are delivered in the form of a share award under the DBP. The awards vested
during FY19, after the required two-year holding period.
On 31 October 2019 and 10 December 2019, awards in the form of nil-cost options were granted to the Executive Directors in
respect of 100% of their bonuses for the year ended 31 July 2019 which were delivered in the form of a share award under the DBP.
The awards vested during FY22, after the required two-year holding period.
On 9 November 2021, awards in the form of nil-cost options were granted to the Executive Directors and certain other employees
in respect of 100% of their bonuses for the year ended 31 July 2021 which are delivered in the form of a share award under the
DBP. The awards will vest in FY24, after the required two-year holding period.
On 27 October 2022, awards in the form of nil-cost options were granted to the Executive Directors and certain other employees
in respect of 100% of their bonuses for the year ended 31 July 2022 which are delivered in the form of a share award under the
DBP. The awards will vest in FY25, after the required two-year holding period.
The following tables illustrate the number and weighted average exercise prices of, and movements in, share options during
the year.
Group and Company
Outstanding at 1 August
Granted during the year
Exercised during the year
Forfeited during the year
Expired during the year
Lapsed during the year
Outstanding at 31 July 2023
Exercisable at 31 July 2023
2023 total
Number
2022 total
Number
19,820,352
20,580,246
5,314,890
6,806,783
(1,985,206)
(1,462,302)1
(237,388)
(260,466)
(2,853,193)
(1,921,403)
(8,143,855)
(3,922,506)
11,915,600
19,820,352
195,000
5,048,399
1 For the share options exercised during the prior year, the exercise price payable was the nominal value of the shares issued of 10p.
Weighted average exercise price of options
Group and Company
Outstanding at 1 August
Granted during the year
Exercised during the year
Expired during the year
Lapsed during the year
Outstanding at 31 July 2023
120
Nanoco Group plc – Annual Report and Accounts 2023
2023
Pence
8.9
—
—
57.0
0.2
1.0
2022
Pence
28.8
—
—
50.0
60.3
8.9
Financial statements 24. Share-based payment reserve continued
Weighted average exercise price of options continued
The weighted average exercise price of options granted during the year to 31 July 2023 was £nil (2022: £nil). The range of exercise
prices for options outstanding at the end of the year was £nil–89 pence (2022: £nil–89 pence). The weighted average exercise
price of options exercisable at 31 July 2023 was 64 pence (2022: 35 pence).
For the share options outstanding as at 31 July 2023, the weighted average remaining contractual life is 8.6 years (2022: 6.59 years).
The aggregate fair value of options issued in the year was £1,550,000 (2022: £1,009,000).
The following table lists the inputs to the models used for the years ended 31 July 2023 and 31 July 2022.
Group and Company
Expected volatility
Risk-free interest rate
Expected life of options (years average)
Weighted average exercise price
Weighted average share price at date of grant
Expected dividends
Model used
Market
performance-linked grants
Non-market
performance-linked grants
2023
89.5%
3.19%
3
£nil
35.6p
£nil
2022
112.3%
0.50%
3
£nil
22.3p
—
Stochastic
Stochastic
2023
N/A
N/A
2
£nil
2022
N/A
N/A
2
£nil
35.6p
£nil
Black-
Scholes
22.3p
—
Black-
Scholes
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.
Certain awards are subject to a holding period after vesting. A Finnerty model has been used to determine a discount for the
lack of marketability of the shares.
Sensitivity analysis to movement in non-market vesting assumptions
The following table demonstrates the sensitivity to a reasonably possible change in the non-market vesting assumptions with all
other variables held constant, of the group’s share based payment charge for the year
Increase/(decrease) @ vesting %
100%
60%
25%
0%
25. Merger reserve and capital redemption reserve
Merger reserve
Group
At 1 August 2021, 31 July 2022 and 31 July 2023
Impact on share
based payment
expense
2023
£’000
—
(66)
(124)
(165)
£’000
(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 reorganisation on 27 June 2007.
Capital redemption reserve
Company
At 1 August 2021 and 31 July 2022
Capital reduction
At 31 July 2023
£’000
4,402
(4,402)
—
The capital redemption reserve arises from the off-market purchase of deferred shares on 4 May 2005 and their subsequent
cancellation. On 18 July 2023, the Company undertook a capital reduction which cancelled the capital redemption reserve.
Nanoco Group plc – Annual Report and Accounts 2023
121
Notes to the financial statements continued
26. Movement in retained earnings/(accumulated losses)
Group
At 1 August 2021
Loss for the year
Other comprehensive income
At 31 July 2022
Profit for the year
Capital reduction
Issue of shares to EBT
Shares utilised by EBT to satisfy options
At 31 July 2023
Profit
and
loss
£’000
Foreign
currency
translation
reserve
£’000
Treasury
shares
£’000
Shares held
by EBT
£’000
Total
(accumulated
losses)/retained
earnings
£’000
(70,002)
(4,697)
—
(74,699)
11,085
121,145
—
60
57,591
4
—
—
4
—
—
—
—
4
(20)
—
—
(20)
—
—
—
—
(20)
—
—
—
—
—
—
(199)
94
(105)
(70,018)
(4,697)
—
(74,715)
11,085
121,145
(199)
154
57,470
Profit and loss represents the cumulative profit/(loss) attributable to the equity holders of the Parent Company.
During the year a new Employee Benefit Trust (“EBT”) was established by the Company for the purpose of satisfying employee
share options when exercised. At 31 July 2023 1,050,282 shares in the Company were held by the EBT and were distributed to
employees post year end following the exercise of share options in the year (2022: nil). In addition there are 12,222 (2022: 12,222)
treasury shares not held by the EBT.
Company
At 1 August 2021
Loss for the year
At 31 July 2022
Profit for the year
Capital reduction
Exercise of share options
At 31 July 2023
27. Financial risk management
Overview
Accumulated
losses
£’000
(119,958)
(340)
(120,298)
46,182
125,547
60
51,491
Total
(accumulated
losses)/retained
earnings
£’000
Treasury
shares
£’000
(20)
—
(20)
—
—
—
(119,978)
(340)
(120,318)
46,182
125,547
60
(20)
51,471
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 accumulated losses as disclosed in notes 22 to 26 and in the group statement of changes in equity. At 31 July 2023
total equity was £16,413,000 (2022: £4,480,000).
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.
122
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 27. Financial risk management continued
Categorisation of financial instruments
Financial assets/(liabilities)
31 July 2023
Cash and cash equivalents
Trade receivables
Other receivables
Inter-company short-term loan to subsidiary
Less impairment provision
Trade and other payables
Lease liabilities
Loan notes and accrued interest
Inter-company payable
Financial assets/(liabilities)
31 July 2022
Cash and cash equivalents
Trade receivables
Other receivables
Inter-company short-term loan to subsidiary
Less impairment provision
Trade and other payables
Lease liabilities
Loan notes and accrued interest
Inter-company payable
Financial
assets at
amortised
cost
£’000
Financial
liabilities at
amortised
cost
£’000
Financial assets
and liabilities at
amortised cost
Group
£’000
Company
£’000
8,207
87
184
—
—
—
—
—
—
—
—
—
—
—
(2,637)
(1,871)
(4,561)
—
8,207
87
184
—
—
(2,637)
(1,871)
105
—
—
67,220
(14,490)
(378)
—
(4,561)
(4,004)
—
(626)
8,478
(9,069)
(591)
47,827
Financial
assets at
amortised
cost
£’000
Financial
liabilities at
amortised
cost
£’000
Financial assets
and liabilities at
amortised cost
Group
£’000
Company
£’000
6,762
975
298
—
—
—
—
—
—
—
—
—
—
—
(1,510)
(169)
(3,919)
—
6,762
5,497
975
298
—
—
(1,510)
(169)
—
146
66,813
(66,813)
—
—
(3,919)
(3,392)
—
(638)
1,613
8,035
(5,598)
(2,437)
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.
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 maximum exposure to credit risk in relation to cash, cash equivalents and deposits is the carrying value at the balance
sheet date.
The group trades only with recognised, creditworthy third parties. Receivable and accrued income balances are monitored on
an ongoing 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 16, which was neither past due nor impaired. All trade receivables and accrued income are
ultimately overseen by the CFO and are managed on a day-to-day basis by the UK finance team. Credit limits are set as
deemed appropriate for the customer.
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.
Nanoco Group plc – Annual Report and Accounts 2023
123
Notes to the financial statements continued
27. Financial risk management continued
Foreign currency risk continued
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 flows 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 2023 or at 31 July 2022.
After the year end, the group took out a one-off hedge at a rate of GBP1:USD1.22, against the second tranche of proceeds from
the Samsung agreements which means the net cash receipt of $71.75 million will be converted to £58.8 million.
The split of group assets between Sterling and other currencies at the year end is analysed as follows (Company assets are
all in Sterling):
Group
Cash and cash equivalents
Trade receivables
Accrued income
Trade payables
GBP
£’000
7,948
—
97
(775)
7,270
31 July 2023
EUR
£’000
USD
£’000
258
87
Total
£’000
8,207
87
33,042
33,139
(84)
(864)
GBP
£’000
6,547
12
143
(614)
33,303
40,569
6,088
1
—
—
(5)
(4)
31 July 2022
EUR
£’000
30
—
—
(1)
29
USD
£’000
185
963
—
(7)
Total
£’000
6,762
975
143
(622)
1,141
7,258
All other categories of assets and liabilities in the statement of financial position are denominated in Sterling.
Sensitivity analysis to movement in exchange rates
The following table demonstrates the sensitivity to a reasonably possible change in the Sterling rate against other currencies
used within the business, with all other variables held constant, of the group’s loss before tax (due to foreign exchange translation
of monetary assets and liabilities) and the group’s equity.
Increase/(decrease)
10%
5%
(5%)
(10%)
Interest rate risk
Impact on
loss before
tax and
group equity
2023
£’000
Impact on
loss before
tax and
group equity
2022
£’000
3,700
1,753
(1,586)
(3,027)
132
62
(56)
(108)
As the group’s borrowing is in the form of loan notes with a fixed rate of return and are held at amortised cost, interest rate risk is
limited to the reduction of interest received on cash surpluses held at bank which receive a floating rate of interest. The group’s
financial instruments with interest rate risk exposure and maximum exposures are set out below:
31 July 2023
Fixed
rate
£’000
Floating
rate
£’000
—
8,207
4,561
—
Total
£’000
8,207
4,561
31 July 2022
Floating
rate
£’000
Fixed
rate
£’000
—
6,762
Total
£’000
6,762
(3,919)
—
(3,919)
—
4,004
105
—
105
4,004
—
5,497
5,497
(3,392)
—
(3,392)
Group
Cash and cash equivalents
Loan notes
Company
Cash and cash equivalents
Loan notes
The exposure to interest rate movements is immaterial.
124
Nanoco Group plc – Annual Report and Accounts 2023
Financial statements 27. Financial risk management continued
Maturity profile
Set out below is the maturity profile of the group’s financial liabilities at 31 July 2023 and 31 July 2022 based on contractual
undiscounted payments, including contractual interest.
2023
Financial liabilities
Trade and other payables
Lease liabilities
Loans (including contractual interest)
2022
Financial liabilities
Trade and other payables
Lease liabilities
Loans (including contractual interest)
Up to
one year
£’000
2,521
509
4,500
7,530
Up to
one year
£’000
1,728
41
—
1,769
One to
five
years
£’000
445
1,505
751
2,701
One to
five
years
£’000
—
128
3,392
3,520
Greater
than five
years
£’000
—
—
—
—
Greater
than five
years
£’000
—
—
527
527
Total
£’000
2,966
2,014
5,251
10,231
Total
£’000
1,728
169
3,919
5,816
Trade and other payables are due within three months.
As all financial assets are expected to mature within the next twelve months, an aged analysis of financial assets has not
been presented.
28. 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:
Long-term loans owed to Nanoco Group plc by:
Nanoco Life Sciences Limited
Nanoco Technologies Limited1
Less provision against debt owed by Nanoco Life Sciences Limited
Less provision against debt owed by Nanoco Technologies Limited
Short-term loan owed to Nanoco Group plc by:
Nanoco Technologies Limited2
Less impairment provision
Inter-company payable by Nanoco Group plc to:
Nanoco Tech Limited
Nanoco US Inc.
Notes
31 July 2023
£’000
31 July 2022
£’000
20,286
20,286
6,360
5,407
26,646
25,693
(20,286)
(20,286)
(3,889)
(3,889)
2,471
1,518
67,220
66,813
(14,490)
(66,813)
52,730
—
(450)
(176)
(450)
(188)
14
14
16
16
18
18
Nanoco Group plc – Annual Report and Accounts 2023
125
Notes to the financial statements continued
28. Related party transactions continued
1 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.
2 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 and the funding of trading losses.
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. Long-term loans to subsidiaries are classed as investments.
None of the loans are interest bearing.
There is no controlling party of the group or Company.
29. Compensation of key management personnel (including Directors)
Company
Short-term employee benefits
Pension costs
Cash bonus
Share-based payments
2023
£’000
753
56
549
283
1,641
2022
£’000
644
39
—
624
1,307
The key management team comprises the Executive Directors and one member of staff (2022: one) who are not Directors of the
Company. The staff member of the team is the Operations Director.
30. Reconciliation of net debt
Group
At 1 August 2021
Financing cash flows
New leases
Foreign exchange adjustments
Interest expense
At 31 July 2022
Financing cash flows
New leases
Foreign exchange adjustments
Interest expense
At 31 July 2023
Company
Net debt at 1 August 2021
Financing cash flows
Interest expense
Net debt as at 31 July 2022
Financing cash flows
Foreign exchange adjustments
Interest expense
Net debt at 31 July 2023
126
Nanoco Group plc – Annual Report and Accounts 2023
Liabilities from financing activities
Loans
£’000
(3,487)
—
—
—
(432)
(3,919)
4,725
—
—
(5,367)
Lease
liabilities
£’000
(678)
589
(67)
—
(13)
(169)
549
(2,165)
—
(86)
Total
liabilities
from
financing
activities
£’000
(4,165)
589
(67)
—
(445)
(4,088)
5,274
(2,165)
—
Cash
and cash
equivalents
£’000
Total
net debt
£’000
3,813
2,930
—
19
—
6,762
1,263
—
182
(352)
3,519
(67)
19
(445)
2,674
6,537
(2,165)
182
(5,453)
—
(5,453)
(4,561)
(1,871)
(6,432)
8,207
1,775
Cash
and cash
equivalents
£’000
1
Loans
£’000
(2,996)
—
5,496
(396)
—
Total
net debt
£’000
(2,995)
5,496
(396)
(3,392)
5,497
2,105
4,725
(5,402)
—
(5,337)
10
—
(677)
10
(5,337)
(4,004)
105
(3,899)
Financial statements Investor information
Directors
Legal adviser
Dr Christopher Richards
Non-Executive Chairman
Reed Smith LLP
Brian Tenner
Chief Executive Officer
Dr Nigel Pickett
Chief Technology Officer
Liam Gray
Chief Financial Officer
Dr Alison Fielding
Senior Independent and
Non-Executive Director
Chris Batterham
Non-Executive Director
Secretary
Liam Gray
Registered office
Science Centre
The Heath Business and Technical Park
Heath Road South
Runcorn WA7 4QE
Website
www.nanocotechnologies.com
Independent auditors
Mazars LLP
1 St Peter’s Square
Manchester M2 3DE
The Broadgate Tower
20 Primrose Street
London EC2A 2RS
Investor relations
MHP Communications
60 Great Portland Street
London W1W 7RT
Joint corporate brokers
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
Turner Pope Investments
8 Frederick’s Place
London EC2R 8AB
Registrar
Neville Registrars
Neville House
Steelpark Road
Halesowen B62 8HD
CBP021436
Nanoco Group plc’s commitment to environmental issues is reflected in
this Annual Report, which has been printed on Arena Extra White Smooth,
an FSC® certified material. This document was printed by Pureprint Group
using its environmental print technology, with 99% of dry waste diverted
from landfill, minimising the impact of printing on the environment. The
printer is a CarbonNeutral® company.
Both the printer and the paper mill are registered to ISO 14001.
N
a
n
o
c
o
G
r
o
u
p
p
l
c
–
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
3
Nanoco Group plc
The Science Centre
The Heath Business and
Technical Park
Runcorn
WA7 4QX