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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Nanoco Group Plc | LSE:NANO | London | Ordinary Share | GB00B01JLR99 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.39 | -1.97% | 19.41 | 19.22 | 19.60 | 19.96 | 19.00 | 19.50 | 1,460,942 | 16:35:15 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Coml Physical, Biologcl Resh | 5.62M | 11.09M | 0.0343 | 5.54 | 61.44M |
TIDMNANO
RNS Number : 4547B
Nanoco Group PLC
04 April 2017
For immediate release 4 April 2017
NANOCO GROUP PLC
("Nanoco" or the "Company")
Interim results for the six months ended 31 January 2017
Nanoco Group plc (LSE: NANO), a world leader in the development and manufacture of cadmium-free quantum dots and other nanomaterials, is pleased to announce its interim results for the six months ended 31 January 2017.
Highlights
Current trading
-- First commercial sales of Nanoco's products expected in the remainder of the second half of this financial year
Operational
-- Debuted at CES, the global consumer electronics and consumer technology tradeshow, demonstrating Hisense, TCL and TPV Philips televisions containing Nanoco Fine Color Film(TM)
-- Nanoco cadmium-free quantum dot (CFQD(R)) technology being evaluated in 14 active TV and monitor programmes with nine major Original Equipment Manufacturers (OEMs)
-- Creation of a robust global supply chain for display and lighting OEMs - including a ten-fold increase in manufacturing capacity at Nanoco's Runcorn plant, delivered with little additional capex
-- On track technology transfer to Merck, which has successfully produced CFQD(R)s in Germany
-- Merck is evaluating plans for its own manufacturing facility and will continue to purchase product from Nanoco until that facility is commissioned
-- Merck's own marketing efforts have resulted in a clear understanding of significant potential for Nanoco's technology
-- Dow is progressing well with initial commercialisation following the transfer of Nanoco's improved green CFQD(R) production process
-- Intellectual property portfolio expanded to c.550 (2016: c.400) patents and patent applications
Financial
-- Although first half results are in line with the Board's expectation, sales have not yet materialised in the second half and we are therefore lowering our full year expectations
-- Personnel cost savings of GBP1.1 million per annum following cost cuts in December 2016
-- Cash and cash equivalents of GBP8.3 million plus R&D tax credit receivable of GBP1.9 million; the Board believes this gives the Company sufficient headroom under the expected timeframe for commercial sales to commence and has carried out detailed contingency planning in event that sales are further delayed
Dr Michael Edelman, Nanoco's Chief Executive Officer, said:
"We have continued to make good progress in our first half. We were particularly encouraged by the positive feedback and significant interest shown in Nanoco's CFQD(R) quantum dots at CES by major display manufacturers, customers, partners and the financial community.
"In response to growing global interest in our technology, we and our partners have been making further enhancements to our manufacturing processes, ensuring the Group is fully prepared to fulfil commercial orders, which are anticipated in the near future.
"Nanoco is engaged with more near term commercial opportunities than at any time in its history, so it is frustrating not to be able to report significant revenues to date and it is essential that sales commence as expected. This activity, combined with our cash position and careful management of our cost base, means we look forward to the future with confidence."
This announcement contains inside information.
Analyst meeting and webcast details
A meeting for analysts will be held at 10am this morning, 4 April 2017, at the offices of Peel Hunt, Moor House, 120 London Wall, London, EC2Y 5ET. For further details, please contact MHP on 020 3128 8570.
To listen to a live webcast of the analyst briefing, please log on to the following web address approximately 5 minutes before the event: http://webcasting.brrmedia.co.uk/broadcast/58d925805afb680410263991.
A recording of the webcast will be made available later today on Nanoco's website, www.nanocogroup.com.
For further information, please contact:
Nanoco Tel: +44 (0) 161 603 7900
Dr Michael Edelman, Chief Executive Officer
David Blain, Chief Financial Officer
Caroline Watson, Investor Relations Manager Tel: + 44 (0) 7799 897357
cwatson@nanocotechnologies.com
Peel Hunt Tel: +44 (0) 20 7418 8900
Adrian Trimmings
George Sellar
MHP Communications Tel: +44 (0) 20 3128 8570
Reg Hoare / Andrew Leach / Giles Robinson / Peter Lambie
nanoco@mhpc.com
Notes for editors:
About Nanoco Group plc
Nanoco is a world leader in the development and production of cadmium-free quantum dots and other nanomaterials for use in multiple applications including LCD displays, lighting, solar cells and bio-imaging. In the display market, Nanoco has non-exclusive manufacturing and marketing licensing agreements with The Dow Chemical Company, Merck KGaA and Taiwan's Wah Hong Industrial Corporation. Nanoco also has a strategy of direct sales in display and in its other target markets, including lighting.
Nanoco was founded in 2001 and is headquartered in Manchester, UK. It has production facilities in Runcorn, UK, and a US subsidiary, Nanoco US Inc, based in Concord, MA. Nanoco also has business development executives in Japan and Korea. Its technology is protected worldwide by a large and growing patent estate.
Nanoco is listed on the main market of the London Stock Exchange and trades under the ticker symbol NANO. For further information please visit: www.nanocogroup.com.
Business Review
Commercial applications - Display
The march towards commercialisation of our products continues apace.
In March 2016 Nanoco evolved its go to market strategy in the display industry from an exclusive licensing model with Dow to a hybrid model combining multiple non-exclusive licenses with direct sales of own manufactured product. This was enabled by changing our contract with Dow and significantly increasing the Company's manufacturing capacity at our Runcorn, UK, facility through significant process improvements, but minimal capital investment.
This strategic change means the Company has created multiple channels to commercialise its technology in the display market, thus de-risking the business by broadening the range of opportunities available. Today the Company is in the strongest position it has ever been to commercialise its technology and is working directly with nine display OEMs on 14 distinct TV and monitor programmes. It is important to the business that this strategy is successful and sales commence as expected. The Board has completed detailed contingency plans to address the risk of delays in sales being achieved.
Nanoco's cadmium-free quantum dots are now being manufactured at Runcorn, at Dow's large manufacturing plant in Cheonan, South Korea and, in future, at a Merck facility. All three sites will manufacture CFQD(R)s, blend the CFQD(R)s into a resin system and supply the combined CFQD(R) resin system to multiple display integrators located across Asia. Nanoco, Dow and Merck are all actively marketing Nanoco technology to the global display industry.
The establishment of this global manufacturing and supply network will give the largest display OEMs the confidence to adopt Nanoco technology with the knowledge that they can procure quantities of the most up-to-date cadmium-free quantum dot technology from multiple leading electronic materials suppliers. This in turn will allow the industry to meet the rapid increase in demand which is forecasted.
Wah Hong
Wah Hong, a company based in Taiwan and quoted on the Taipei Exchange, is our partner for production and sale of our Fine Color Film(TM). We chose to partner with Wah Hong as it is one of the world's largest manufacturers of optical films and sheets for the display industry and has a large operational footprint across China, Taiwan and Southeast Asia. Its industry and supply chain knowledge and customer contacts are an important resource we have benefitted from since signing the agreement in July last year. Under the agreement, Nanoco will supply resins containing cadmium-free quantum dots from our manufacturing facility in Runcorn and Wah Hong will incorporate the resin into a film, under Nanoco's CFQD(R) Fine Color Film(TM) brand, and sell to the display industry. We will generate revenue from the sale of resin to Wah Hong and receive a license fee from Wah Hong based on its sales and two further milestone payments associated with volume of film sold.
Following an extensive trial sampling programme performed over recent months with Wah Hong, we are confident that high quality films can be produced to meet customer requirements. We are delighted that Wah Hong has brought forward its investment in a new, wider coating line and this demonstrates its commitment to our products. Wah Hong's new coating line will enable films large enough to fit 100 inch TVs to be produced and is on track to commence production in Q2 2017.
Testimony to the progress achieved since we changed the commercial strategy is that we attended CES in Las Vegas in January this year and for the first time demonstrated three developmental televisions from three leading Chinese display OEMs utilising our Fine Color Film(TM). The three manufacturers, Hisense (global top five, fast growing Chinese TV manufacturer with an increasing global presence), TCL (the third largest TV manufacturer in the world and America's fasted growing TV brand) and TPV Philips (part of TPV Vision, the world's leading monitor and LCD TV manufacturer), all displayed 55 inch, ultra-high definition, wide-colour gamut LCD televisions at our presentation and marketing suite. The televisions were well received by the industry, TV manufacturers, suppliers and media.
Extensive activity alongside Wah Hong is focused on specifying our film in 14 TV and monitor programmes with nine OEMs. Together, Wah Hong and Nanoco are currently going through the final stages of the detailed product approval and supplier audit processes required before we receive first commercial orders and begin shipping product. We expect this to deliver our first commercial orders in the near future.
Merck
Merck KGaA is the leading German science and technology company focused on healthcare, life sciences and performance materials, and the manufacturer of approximately 60% of the world's liquid crystals used in Liquid Crystal Displays. We will generate revenue from sales made by Merck from licence fees and royalties on Merck manufactured sales. We have been working closely with Merck since the licence agreement was signed at the end of July 2016. The technology transfer from Nanoco to Merck has progressed well and is largely complete resulting in Merck successfully producing batches of CFQD(R)s at its Darmstadt, Germany pilot plant.
Merck is evaluating plans for its own manufacturing facility and will continue to purchase product from Nanoco until that facility is commissioned. Merck's own marketing efforts have resulted in a clear understanding of significant potential of Nanoco's technology.
Dow
Nanoco signed an exclusive license agreement with The Dow Chemical Company in January 2013 for Dow to manufacture, market and sell Nanoco heavy metal-free quantum dots into the display market. Last year Dow and Nanoco agreed to amend the licensing agreement from exclusive to non-exclusive. Dow sells product under the TREVISTA(TM) brand. We generate royalty revenue from Dow calculated as a percentage of Dow's sales of Nanoco CFQD(R)s.
Dow is progressing well with initial commercialisation following the transfer of Nanoco's improved green CFQD(R) production process.
Runcorn
Significant improvements in the Company's manufacturing processes have led to a large increase in manufacturing capacity at Runcorn. Flexible working practices have been introduced allowing the plant to work on a 24-hour basis. Runcorn has the capacity to produce enough CFQD(R)s to supply roughly one million large TVs operating a 24/7 shift pattern. To handle the increased quantities tremendous work has gone into improving all of the Company's systems.
We were pleased to announce in December that the Company had been awarded ISO 9001:2015 certification for our production and supply processes which provides reassurance to customers that our systems are robust.
The plant is now ready to fulfil commercial orders as they arrive.
Supply chain
With our licensees Dow and Merck and our route to market via our own manufacturing and agreement with Wah Hong we have built a robust supply chain to service a significant part of the display market. Nanoco's cadmium-free quantum dots are now being manufactured by Dow in its South Korean, Choenan facility as well as in Runcorn by Nanoco. Merck's own production will come on stream in the near future. All three companies provide quantum dots in a resin formulation to a number of partner film coaters. Nanoco works directly with Taiwan headquartered Wah Hong while Dow and Merck work with other independent film manufacturers based across Asia.
Display and lighting OEMs have the reassurance that a robust global supply chain has been implemented to meet their needs.
Commercial applications - Life Sciences
Nanoco's Life Sciences business continued to make significant progress in the in-vivo optical imaging, diagnosis and targeted therapy of cancer. The Company is currently evaluating options to exploit this important technology.
Despite the favourable optical and physical properties of quantum dots as biological probes over organic dyes and radioisotopes, their exploitation in medical applications has been hindered by toxicity concerns due to the presence of cadmium or other toxic elements. The Nanoco Life Sciences ("NLS") team has been making great strides in the development of safe and clinically acceptable quantum dot nanomaterials based on the Company's heavy metal-free quantum dot technology.
The team has focused on delineating the underlying challenges and given full attention to the attributes of safety, consistency and performance. A novel type of safe, biocompatible and efficient quantum dot has been developed by Nanoco with a unique functional coating which renders the dots biocompatible and avoids the danger posed by cadmium toxicity. This has been confirmed by safety tests which have so far proved the benign nature of this new type of quantum dots. We have demonstrated that the new quantum dots are stable in common biological buffers and can be conjugated to active ligands and proteins. As a proof of concept, we have used cell cultures and animal models, and assessed the capability of the new dots for the detection of breast cancer and the surrounding lymphatic nodes. We clearly observed superior performance against currently used organic dyes.
The promising outcome from our efforts may be used to develop quantum dot probes for the early detection of deadly tumours like pancreatic and bladder cancers. This, in addition to our burgeoning relationships with commercial and research institutions at the cutting edge of the battle against cancer, shows the scope of our ambition and the value of our technology.
Following our rapid progress, work is being undertaken to prepare the technology for clinical trials. To date Nanoco's life sciences efforts have been grant funded. We continue to seek grant and other funding to enable the development to continue in life sciences whilst maintaining our focus on our Display business.
Commercial applications - Lighting
The lighting market is worth more than $100 billion in annual sales and is heavily fragmented into multiple market segments. Nanoco is focusing on niche lighting applications where our quantum dots add value to the end user and fit into the Company's current supply chain. One application which meets these criteria is horticultural lighting where light can be tuned to match ideal growing conditions for specific plants, vegetables and flowers. Nanoco's prototype horticultural lighting product was recognised at the CES earlier this year when it won a CES Innovation Award. Emphasis is being given on the development of display products over lighting products at present to generate sales revenues as soon as possible.
Commercial applications - Solar
We have developed our printable CIGS based technology to the point where it now needs to be scaled-up beyond the 5cm x 5cm cells made in the Company's laboratories. The attractiveness of this technology is its ability to convert sunlight to electricity at a very competitive cost.
In order to take the technology to the next level the Company is seeking an industrialization partner with whom we can work to develop the business.
Research and development
Continuous innovation through the Company's active research and development programmes is a core value of Nanoco and the Company actively protects its intellectual property by filing patents. We currently have circa 550 patents and patent applications filed globally.
Notable projects during the period have resulted in significant improvement in manufacturing processes providing a ten-fold increase in capacity compared to a year ago.
We have also incorporated a new subsidiary, Nanoco 2D Materials Limited, to encapsulate our new discoveries in new classes of quantum materials. This work is at a very early stage and we have reached agreement with the University of Manchester to carry out further work to demonstrate the feasibility of this new technology.
During December 2016 we purchased a group of Kodak patents relating to electroluminescence which we believe will have an important role in future developments in display and lighting. This patent portfolio which contained 35 patents is focused on using quantum dots in future generations of electroluminescent displays.
Restriction of Hazardous Substances ("RoHS")
The use of highly toxic cadmium in electronics and electrical products continues to be regulated in the EU by the RoHS Directive [2011/65/EU]. This limits cadmium to 0.01% or 100 ppm, ten times less than mercury or lead due to its greater danger to health and the environment. Exemption 39, which allows it to be used in quantum dots ("QDs") for lighting and display products, is time limited and should have ended in 2014. Despite the commercial launch of cadmium-free QD televisions in early 2015, the Commission pressed ahead with an Act to extend Exemption 39 by three years, but this was overwhelmingly rejected by the European Parliament on 20 May 2015 voting 618 to 33. Regrettably, the Commission insisted on repeating a full review with its consultant, the Öko-Institut, instead of terminating the exemption.
The new Öko-Institut report, published in May 2016, proposed a three-year extension for displays, but none for lighting since no commercial cadmium QD lighting products exist. The justification given for displays was based on claimed energy savings for cadmium QDs compared to cadmium-free QDs and other technologies. However, this is disputed both technically and legally since:
-- The test used was not independent or to a recognised standard
-- Statutory testing of "real" display products available on the market shows that cadmium-free QD televisions actually use less energy
-- The overall safety and environmental benefits were not properly accounted for as RoHS regulations require
After consultation in September 2016 with Member State representatives highlighted increasing concern, the Commission issued a draft Act in February 2017 that reduced the extension for displays to two years, the minimum possible. However, this is still being objected to strongly by Nanoco and others. Given the proven performance and availability of cadmium-free QDs, we believe that there is a strong case for the Commission to end Exemption 39 now, which would result in a twelve to 18 month selling-off period of remaining cadmium based display inventory under RoHS rules. Even if the Commission puts forward an Act to extend the exemption, this would have to be ratified by both the EU Council and Parliament, with a strong possibility that it would be rejected again. Even if it were passed, it is clear that the exemption must end at some point in the near future and this will limit the number of display brands which would be willing to invest in a technology that is both controversial and of limited life-span.
It should be noted that, although it is an EU standard, RoHS restrictions are being implemented in similar legislation around the world. China introduced its own RoHS-2 in 2016, which will be equivalent when fully implemented. We expect that China and other major states will quickly follow the lead set by the EU when it removes the exemption for cadmium QDs.
Financial results
Loss for H1 2017 after exceptional items and taxation was GBP5.43 million (H1 2016: GBP5.24 million).The increase in revenues compared to prior year of GBP0.53 million was offset by an increase in costs resulting in an increase in the operating loss of GBP0.05 million.
Cash, cash equivalents and deposits, at 31 January 2017 were GBP8.3 million (31 January 2016: GBP18.35 million; 31 July 2016: GBP14.5 million) and the Company is due to receive an R&D tax credit of GBP1.9 million in respect of the financial year ended 31 July 2016.
During the period, the Group continued to exercise prudent cash management and reduced personnel costs by GBP1.1 million per annum, conserving cash while maintaining operational efficiency. The Board realises that commencement of commercial sales is vital to the future of the Group and it has carried out significant contingency planning as described in detail in the Financial review.
People
Gordon Hall retired as a Non-executive Director of Nanoco on 31 January 2017. We thank Gordon for his valuable contribution to the Company over his many years of service. As announced in January, Robin Williams has informed us that he will leave the Board after three years with the Company in July 2017. Accordingly we are looking to recruit one additional Non-executive Director to fill the gap created by these two departures. Following the recruitment of a new Non-executive Director the Board will then include two independent Non-executive Directors which the Board considers appropriate for the size of the Company.
We reduced our staff numbers during December 2016 in order to conserve our cash balances. This action was considered necessary for the future of the business, but the decision was not taken lightly as we are very aware of the impact this has on our staff. Critical to these cuts was ensuring that the Company's core ability to deliver against orders and continue to innovate was not jeopardized.
Outlook
Progress over the last six months has been transformative for the business. We now have active engagement with nine display OEMs working on 14 different programs and have developed the manufacturing capabilities through our own facilities and those being developed by our partners and supply chain to fulfil the demand. We look forward to our current activities generating our first commercial sales.
Dr Christopher Richards Dr Michael Edelman
Chairman Chief Executive Officer
4 April 2017 4 April 2017
Chief Financial Officer's Review
Revenue
Revenues in the six months to 31 January 2017 were GBP0.68 million (H1 2016: GBP0.14 million) and the loss before tax was GBP6.4 million (H1 2016: loss of GBP6.26 million). Other operating income was GBP0.14 million (2016: GBP0.15 million). Revenues are higher than in the prior period due to an increase in material sales and the release of deferred revenue during the period relating to the licence agreements signed in July 2016.
Research and development
Gross investment in research and development in 2017 was GBP2.87 million (H1 2016: GBP2.94 million) to support the ongoing development of CFQD(R) and other nanoparticles.
Administrative expenses
Administrative expenses increased by GBP0.77 million due to increases in expenditure on travel, professional fees (including patent maintenance), recruitment costs, marketing fees and costs associated with the EU cadmium review. A cost reduction programme was implemented in December 2016 and the benefit of this will commence in the second half of the current financial year. The programme will result in a reduction of personnel costs by GBP1.1 million per annum and in addition there will be further overhead savings from the lower headcount.
Operating loss before tax
Operating loss in H1 2017 was GBP6.43 million (H1 2016: loss of GBP6.39 million). Interest income decreased to GBP0.04 million (H1 2016: GBP0.13 million) reflecting lower cash balances. As a result, loss before tax for H1 2017 was GBP6.40 million (H1 2016: loss of GBP6.26 million).
Taxation
The Group continues to make research and development tax credit claims on its qualifying expenditure. We also take advantage of the provision whereby such losses so generated may be surrendered for cash. The tax credit for the period was GBP0.97 million (H1 2016: GBP1.02 million). The amount receivable at 31 January 2017 was GBP2.94 million (H1 2016: GBP2.83 million).
Net result
Loss for H1 2017 after exceptional items and taxation was GBP5.42 million (H1 2016: loss of GBP5.24 million).
Earnings per share
For H1 2017, basic loss per share was 2.28 pence per share (H1 2016 loss of 2.21 pence per share). As at 31 January 2017 there were 238,236,828 ordinary shares in issue (31 January 2016: 237,077,578).
Cash position and liquidity
As at 31 January 2017 the Group had short-term deposits, cash and cash equivalents of GBP8.33 million (31 January 2016: GBP18.3 million). Both cash and costs continue to be prudently and tightly managed.
During H1 2017, the Group generated a cash outflow from operations of GBP5.89 million compared with an outflow of GBP5.66 million in H1 2016.
In H1 2017 the Group's total cash outflow in respect of tangible fixed assets was GBP0.24 million (H1 2016: GBP0.14 million) mainly comprising the continued investment in scale up of manufacturing capacity, support for R&D activities and IT improvement projects. In H1 2017 the Group's total cash outflow in respect of intangible fixed assets was GBP0.58 million (H1 2016: GBP0.39 million) and related to patent costs.
Balance sheet
At 31 January 2017, the consolidated balance sheet showed total shareholders' equity of GBP14.1 million (31 January 2016: GBP24.0 million).
Going concern
In assessing whether the going concern basis is an appropriate basis for preparing the interim Condensed Consolidated Financial Statements, the Directors have utilised their detailed forecasts which take into account current and expected business activities, cash balance of GBP8.3 million as shown in its balance sheet at 31 January 2017, the principal risks and uncertainties the Group faces and other factors impacting the Group's future performance.
The Group has prepared sales forecasts for the period ending 31 July 2018. The forecasts include low, base and high levels of sales. These forecasts have been created based on the detailed work which is ongoing with Wah Hong and nine OEMs covering 14 projects and management's expectations of revenues from Merck and Dow.
The base case forecast reflects the Board's current expectations. The key assumptions underpinning the base case sales forecast are:
-- Sales of commercial quantities of materials produced in Runcorn commence in May 2017 and monthly quantities sold more than double by October 2017
-- Dow and Merck commence shipping commercial sales in July 2017 and November 2017 respectively and royalties and milestone payments are paid to Nanoco quarterly in arrears. Within six months of commencement each company reaches a stable level of sales representing a five-fold increase from initial volumes.
-- Cost base grows in line with manufacturing activities
The base case forecast produces a cash flow forecast that demonstrates that the Company has sufficient cash throughout the period of the forecast and generates cash during that period.
The Group is in extensive discussions with nine OEMs regarding 14 projects and expects a number of these opportunities to convert to sales. However the Board acknowledges that there is a risk that some or all of these projects may not convert to sales during the forecast period. Accordingly, the Board has identified a worst case scenario to consider in assessing the going concern status of the business. The worst case scenario is that no new sales materialise from any of the Company's licensing partners, which could occur if the Company's products fail to meet the specifications of the OEMs, the Company is unable to supply product from Runcorn, the EU extends the exemption for cadmium products and Dow and Merck fail to exploit their licence agreements.
In the worst case scenario, the Company's cash resources would run out in the first quarter of calendar year 2018 if no action to reduce current costs is taken. Management has identified a series of mitigating actions, including cost savings and a reorganisation of its operations that could be undertaken in the event sales do not materialise. On the basis that no sales have occurred, the Group would enact its cost reduction plans on a timely basis including a very significant reduction in its manufacturing capability and focus on its licensing operations. Sub contract manufacture would be put in place to satisfy future demand. All of the cost savings are under the direct control of the Board and the Board has the ability and intention to make such changes on a timely basis.
IAS 1 Presentation of Financial Statements requires the Directors to disclose "material uncertainties related to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern". The Directors consider that the uncertainty regarding the Company's ability to achieve its forecast sales revenues within its base case described above meets the definition of a "material uncertainty". Nevertheless, considering the mitigating actions that can be made and after making enquiries and considering the uncertainty described above, the Directors have a reasonable expectation that the Company 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 Condensed Consolidated Financial Statements. The financial statements do not reflect any adjustments that would be required to be made if they were prepared on a basis other than the going concern basis.
Principal risks
The Directors have considered the principal risks which may have a material impact on the Group's performance in the second half of 2017. The risks remain as disclosed in pages 22 to 23 of the 2016 Annual Report and Accounts.
Forward-looking statements
The foregoing disclosures contain certain forward-looking statements. Although Nanoco believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will materialise. Because the expectations are subject to risks and uncertainties, actual results may vary significantly from those expressed or implied by the forward-looking statements based upon a number of factors. Nanoco undertakes no obligation to revise or update any forward statement to reflect events or circumstances after the date of this Interim Report.
David Blain
Chief Financial Officer
4 April 2017
Responsibility statement
The Directors of Nanoco Group plc, as listed on pages 26 and 27 of the 2016 Annual Report and Accounts, confirm to the best of their knowledge:
a) The condensed set of financial statements have been prepared in accordance with International Accounting Standards 34 Interim Financial Reporting, as required by paragraph 4.2.4 of the Disclosure and Transparency Rules ("DTR");
b) The condensed set of financial statements, which have been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by DTR 4.2.10;
c) The Interim Management report includes a fair review of the information required by DTR 4.2.7 - an indication of important events which have occurred during the first six months of the year, and a description of the principal risks and uncertainties for the remaining six months of the year; and
d) The Interim Management report includes a fair review of the information required by DTR 4.2.8 - the disclosure of related party transactions occurring during the first six months of the year, and any changes in related party transactions disclosed in the 2015 Annual Report and Accounts.
By order of the Board
Dr Michael Edelman
Chief Executive Officer
4 April 2017
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 January 2017
(Re-presented - note 4) Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) Notes GBP'000 GBP'000 GBP'000 ------------------------------------------ ------ ------------ -------------- ---------- Revenue 3 676 144 474 Cost of sales (36) (29) (177) Gross profit/(loss) 640 115 297 Other operating income 4 142 146 284 Operating expenses Research and development expenses (2,873) (3,061) (5,995) Administrative expenses (4,347) (3,586) (7,367) Operating loss (6,438) (6,386) (12,781) * Before share-based payments (6,198) (6,273) (12,511) * Share-based payments (240) (113) (270) ------------------------------------------ ------ ------------ -------------- ---------- Finance income 5 35 130 193 Finance expense 5 - (2) (12) Loss on ordinary activities before taxation (6,403) (6,258) (12,600) Taxation 6 975 1,021 1,993 Loss for the period and total comprehensive loss for the period (5,428) (5,237) (10,607) ------------------------------------------ ------ ------------ -------------- ---------- Loss per share: Basic and diluted loss for the period 7 (2.28)p (2.21)p (4.47)p ------------------------------------------ ------ ------------ -------------- ----------
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 January 2017
Issued Share-based equity payment Merger Revenue capital reserve reserve reserve Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------- -------- ------------ -------- --------- -------- At 1 August 2015 (audited) 58,037 2,445 (1,242) (30,160) 29,100 Loss for the six months to 31 January 2016 - - - (5,237) (5,237) Share-based payments - 113 - - 113 At 31 January 2016 (unaudited) 58,037 2,558 (1,242) (35,397) 23,976 --------------------------- -------- ------------ -------- --------- -------- Loss for the six months to 31 July 2016 - - - (5,370) (5,370) Share-based payments - 157 - - 157 At 31 July 2016 (audited) 58,057 2,715 (1,242) (40,767) 18,763 --------------------------- -------- ------------ -------- --------- -------- Loss for the six months to 31 January 2017 - - - (5,428) (5,428) Shares issued on exercise of options 545 - - - 545 Share-based payments - 240 - - 240 At 31 January 2017 (unaudited) 58,602 2,955 (1,242) (46,195) 14,120 --------------------------- -------- ------------ -------- --------- --------
Condensed Consolidated Statement of Financial Position
As at 31 January 2017
31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) Notes GBP'000 GBP'000 GBP'000 ------------------------------- ------ ------------ ------------ ---------- Assets Non-current assets Property, plant and equipment 1,106 1,668 1,260 Intangible assets 8 2,820 2,068 2,423 3,926 3,736 3,683 ------------------------------- ------ ------------ ------------ ---------- Current assets Inventories 238 232 208 Trade and other receivables 9 1,013 855 2,045 Income tax asset 2,945 2,825 1,970 Short-term investments and cash on deposit 5,000 10,000 5,000 Cash and cash equivalents 3,328 8,273 9,511 12,524 22,185 18,734 ------------------------------- ------ ------------ ------------ ---------- Total assets 16,450 25,921 22,417 ------------------------------- ------ ------------ ------------ ---------- Liabilities Current liabilities Trade and other payables 1,526 1,882 2,443 Financial liabilities - 63 32 Deferred revenue 10 207 - 531 1,733 1,945 3,006 ------------------------------- ------ ------------ ------------ ---------- Non-current liabilities Deferred revenue 10 597 - 648 - - 648 ------------------------------- ------ ------------ ------------ ---------- Total liabilities 2,329 1,945 3,654 ------------------------------- ------ ------------ ------------ ---------- Net assets 14,120 23,976 18,763 ------------------------------- ------ ------------ ------------ ---------- Capital and reserves Issued equity capital 11 58,602 58,057 58,057 Share-based payment reserve 12 2,955 2,558 2,715 Merger reserve (1,242) (1,242) (1,242) Revenue reserve (46,195) (35,397) (40,767) ------------------------------- ------ ------------ ------------ ---------- Total equity 14,120 23,976 18,763 ------------------------------- ------ ------------ ------------ ----------
Approved by the Board and authorised for issue on 4 April 2017
Dr Michael Edelman
Chief Executive Officer
Condensed Consolidated Cash Flow Statement
For the six months ended 31 January 2017
Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 --------------------------------- ------------ ------------ ---------- Loss before tax (6,403) (6,258) (12,600) Adjustments for: Net Finance income (35) (128) (181) Depreciation of tangible fixed assets 393 533 991 Amortisation of intangible assets 186 139 298 Share-based payments 240 113 270 Changes in working capital: Increase in inventories (30) (24) - Decrease/(increase) in trade and other receivables 1,054 2 (1,143) (Decrease)/increase in trade and other payables (917) (27) 503 (Decrease)/increase in deferred revenue (375) - 1,179 ---------------------------------- ------------ ------------ ---------- Cash outflow from operating activities (5,887) (5,650) (10,683) Research and development tax credit received - - 1,830 Overseas corporation tax paid - (4) (7) ---------------------------------- ------------ ------------ ---------- Net cash outflow from operating activities (5,887) (5,654) (8,860) ---------------------------------- ------------ ------------ ---------- Cash flows from investing activities: Purchases of tangible fixed assets (239) (139) (189) Purchases of intangible fixed assets (583) (386) (900) Decrease in cash placed on deposit - 10,000 15,000 Interest received 13 175 224 ---------------------------------- ------------ ------------ ---------- Net cash inflow from investing activities (809) 9,650 14,135 ---------------------------------- ------------ ------------ ---------- Cash flows from financing activities Interest paid - (2) (12) Exercise of share options 545 - - Loan repayment (32) (32) (63) ---------------------------------- ------------ ------------ ---------- Net cash (outflow)/inflow from financing activities 513 (34) (75) ---------------------------------- ------------ ------------ ---------- (Decrease)/increase in cash and cash equivalents (6,183) 3,962 5,200 Cash and cash equivalents at the start of the period 9,511 4,311 4,311 ---------------------------------- ------------ ------------ ---------- Cash and cash equivalents at the end of the period 3,328 8,273 9,511 Monies placed on short-term deposit 5,000 10,000 5,000 ---------------------------------- ------------ ------------ ---------- Cash, cash equivalents and deposits at the end of the period 8,328 18,273 14,511 ---------------------------------- ------------ ------------ ----------
Notes to the Condensed Consolidated Financial Statements
For the six months ended 31 January 2017
1. Corporate information
The Interim Report and Accounts of the Group for the six months ended 31 January 2017 was authorised for issue in accordance with a resolution of the Directors on 4 April 2017. The Interim Report and Accounts 2017 is unaudited but has been reviewed by the Auditors as set out in its report.
Nanoco Group plc (the "Company") has a premium listing on the main market of the London Stock Exchange and is incorporated and domiciled in the UK.
These Condensed Consolidated Financial Statements consolidate those of the Company and its subsidiaries (together referred to as the "Group").
These Condensed Consolidated Financial Statements are unaudited and do not constitute statutory accounts of the Group as defined in section 434 of the Companies Act 2006. The auditor, Ernst & Young LLP, has carried out a review of the financial information in accordance with the guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and their review report is set out at the end of this report.
The financial information for the year ended 31 July 2016 has been extracted from the Group's published financial statements for that year, and a copy of the statutory accounts for that financial year has been delivered to the Registrar of Companies. The auditors reported on those accounts and itd report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Accounting policies
Basis of preparation
The accounting policies adopted in these Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Group's Annual Report and Accounts for the year to 31 July 2016. This interim condensed financial report includes audited comparatives for the year to 31 July 2016. The 2016 Annual Report and Accounts, which are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, received an unqualified audit opinion and has been filed with the Registrar of Companies. These interim Condensed Consolidated Financial Statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, IAS 34 Interim Financial Reporting as adopted by the European Union and using the recognition and measurement principles of IFRSs as adopted by the European Union and have been prepared under the historical cost convention.
Going concern
In assessing whether the going concern basis is an appropriate basis for preparing the Condensed Consolidated Financial Statements, the Directors have utilised their detailed forecasts which take into account current and expected business activities, cash balance of GBP8.3 million as shown in its balance sheet at 31 January 2017, the principal risks and uncertainties the Group faces and other factors impacting the Group's future performance.
The Group has prepared sales forecasts for the period ending 31 July 2018. The forecasts include low, base and high levels of sales. These forecasts have been created based on the detailed work which is ongoing with Wah Hong and nine OEMs covering 14 projects and management's expectations of revenues from Merck and Dow.
The base case forecast reflects the Board's current expectation. The key assumptions underpinning the base case sales forecast are:
-- Sales of commercial quantities of materials produced in Runcorn commence in May 2017 and monthly quantities sold more than double by October 2017
-- Dow and Merck commence shipping commercial sales in July 2017 and November 2017 respectively and royalties and milestone payments are paid to Nanoco quarterly in arrears. Within six months of commencement each company reaches a stable level of sales representing a five-fold increase from initial volumes.
-- Cost base grows in line with manufacturing activities
The base case forecast produces a cashflow forecast that demonstrates that the Company has sufficient cash throughout the period of the forecast and generates cash during that period.
The Group is in extensive discussions with nine OEMs regarding 14 projects and expects a number of these opportunities to convert to sales. However the Board acknowledges that there is a risk that some or all of these projects may not convert to sales during the forecast period. Accordingly, the Board has identified a worst case scenario to consider in assessing the going concern status of the business. The worst case scenario is that no new sales materialise from any of the Company's licensing partners, which could occur if the Company's products fail to meet the specifications of the OEMs, the Company is unable to supply product from Runcorn, the EU extends the exemption on cadmium products and Dow and Merck fail to exploit their licence agreements.
In the worst case scenario, the Company's cash resources would run out in the first quarter of calendar year 2018 if no action to reduce current costs is taken. Management has identified a series of mitigating actions, including cost savings and a reorganisation of its operations that could be undertaken in the event sales do not materialise. On the basis that no sales have occurred, the Group would enact its cost reduction plans on a timely basis including a very significant reduction in its manufacturing capability and focus on its licensing operations. Sub contract manufacture would be put in place to satisfy future demand. All of the cost savings are under the direct control of the Board and the Board has the ability and intention to make such changes on a timely basis.
IAS 1 Presentation of Financial Statements requires the Directors to disclose "material uncertainties related to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern". The Directors consider that the uncertainty regarding the Company's ability to achieve its forecast sales revenues within its base case described above meets the definition of a "material uncertainty". Nevertheless, considering the mitigating actions that can be made and after making enquiries and considering the uncertainty described above, the Directors have a reasonable expectation that the Company 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 Condensed Consolidated Financial Statements. The financial statements do not reflect any adjustments that would be required to be made if they were prepared on a basis other than the going concern basis.
Accounting policies
Accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 July 2016.
There are no new, revised or amended standards and interpretations which are mandatory for the first time for the financial year ending 31 July 2017 and which have a material impact on the interim condensed consolidated financial statements. New, revised or amended standards and interpretations that are not yet effective have not been early adopted.
Basis of consolidation
These interim condensed consolidated financial statements include the financial statements of Nanoco Group plc and the entities it controls (its subsidiaries).
3. Segmental information
Operating segments
The Board has identified that it has one reportable operating segment being the provision of high performance nanoparticles as each of the Group's divisions continue to have similar activities, economic characteristics and future prospects.
. All revenues have been generated from continuing operations and are from external customers.
(Re-presented Six months - note Year to 4) to Six months to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 ------------------------ ------------- -------------- ---------- Analysis of revenue Products sold 196 89 204 Rendering of services 101 55 114 Royalties and licences 379 - 156 ------------------------- ------------- -------------- ---------- 676 144 474 ------------------------ ------------- -------------- ---------- Analysis of operating loss ------------------------ ------------- -------------- ---------- Loss for the period (6,438) (6,386) (12,781) ------------------------- ------------- -------------- ----------
The timing of the annual submission and subsequent receipt of the R&D tax credit has a material effect on the cash flow of the Group. There are no other factors of a seasonal or cyclical nature affecting the results of the Group.
All the Group's assets are held in the UK and all of its capital expenditure arises in the UK.
4. Other operating income (Re-presented) Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 ------------------- ------------- --------------- ---------- Government grants 142 146 284 -------------------- ------------- --------------- ----------
In the period to 31 January 2016 income from government grants was reported within revenue as rendering of services and costs of GBP115,000 relating to such services were included in cost of sales instead of Research and development expenses. We have re-presented the comparative disclosure in these statements.
5. Finance income and expense Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 -------------------------- ------------ ------------ ---------- Finance income Bank interest receivable 35 130 193 Finance expense Loan interest payable - (2) (12) --------------------------- ------------ ------------ ---------- 35 128 181 -------------------------- ------------ ------------ ---------- 6. Taxation
The tax credit is made up as follows:
Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 ------------------------------- ------------ ------------ ---------- Current income tax: UK corporation tax losses - - - in the year Research and development income tax credit receivable (975) (975) (1,970) Adjustment in respect of prior years - (50) (30) Overseas corporation tax - 4 7 -------------------------------- ------------ ------------ ---------- Income tax credit (975) (1,021) (1,993)
-------------------------------- ------------ ------------ ----------
The Group has accumulated losses available to carry forward against future trading profits of GBP26.3 million (2016: GBP22.1 million).
Deferred tax liabilities/(assets) provided/recognised are as follows:
Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 -------------------------------- ------------ ------------ ---------- Accelerated capital allowances 138 238 189 Share-based payments (138) (238) (189) Tax losses - - - --------------------------------- ------------ ------------ ---------- - - - -------------------------------- ------------ ------------ ----------
The Group also has deferred tax assets, measured at a standard rate of 18% (2016: 20%) in respect of share-based payments of GBP454,000 (2016: GBP307,000) and tax losses of GBP4,728,000 (2016: GBP3,970,000) which have not been recognised as an asset as it is not probable that future taxable profits will be available against which the assets can be utilised.
7. Loss per share Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 ---------------------------------- ------------ ------------ ------------ Loss for the period attributable to equity shareholders (5,428) (5,237) (10,607) Share-based payments 240 113 270 ----------------------------------- ------------ ------------ ------------ Loss for the period (5,188) (5,124) (10,337) ----------------------------------- ------------ ------------ ------------ Weighted average number of shares No. No. No. ---------------------------------- ------------ ------------ ------------ Ordinary shares in issue (1) 238,120,572 236,535,267 237,077,578 ----------------------------------- ------------ ------------ ------------ Adjusted loss per share before share-based payments (pence) (2.18) (2.17) (4.36) ----------------------------------- ------------ ------------ ------------ Basic loss per share (pence) (2.28) (2.21) (4.47) ----------------------------------- ------------ ------------ ------------ (1) Excludes the 12,222 shares held in Treasury.
Diluted loss per share has not been presented above as the effect of share options issued is anti-dilutive. The adjusted loss is presented as the Board measures overall performance taking into account IFRS 2 charges and any material one-off costs incurred in a reporting period.
No interim dividend has been recommended.
8. Intangible assets Six months Six months Year to to to 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) Cost GBP'000 GBP'000 GBP'000 -------------------------------- ------------ ------------ ---------- At the beginning of the period 3,703 2,803 2,803 Additions in the period 583 386 900 --------------------------------- ------------ ------------ ---------- At the end of the period 4,286 3,189 3,703 --------------------------------- ------------ ------------ ---------- Amortisation --------------------------------- ------------ ------------ ---------- At the beginning of the period 1,280 982 982 Provided in the period 186 139 298 --------------------------------- ------------ ------------ ---------- At the end of the period 1,466 1,121 1,280 --------------------------------- ------------ ------------ ---------- Net book value 2,820 2,068 2,423 --------------------------------- ------------ ------------ ----------
The expenditure on patents is 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 is material to the business.
To date the Group has not capitalised any of its development costs and all such costs are written off as incurred. Careful judgement by the Directors is applied when deciding whether the 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.
9. Trade and other receivables 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 -------------------------------- ------------ ------------ ---------- Trade receivables 94 37 1,455 Prepayments and accrued income 650 642 422 Other receivables 269 176 168 --------------------------------- ------------ ------------ ---------- 1,013 855 2,045 --------------------------------- ------------ ------------ ---------- 10. Deferred revenue 31 January 31 January 31 July 2017 2016 2016 (Unaudited) (Unaudited) (Audited) GBP'000 GBP'000 GBP'000 ------------- ------------ ------------ ---------- Current 207 - 531 Non-current 597 - 648 -------------- ------------ ------------ ---------- 804 - 1,179 ------------- ------------ ------------ ----------
Deferred revenue arises under IFRSs 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.
11. Share capital Reverse Share Share acquisition capital premium reserve Total Number GBP'000 GBP'000 GBP'000 GBP'000 ------------------------------ -------------- --------- ---------- ------------ --------- Allotted, called up and fully paid ordinary shares of 10p: At 31 July 2015, 31 July 2016 and 31 January 2016 (unaudited) 237,077,578 23,708 112,217 (77,868) 58,057 Shares issued on exercise of options 1,159,250 116 429 - 545 At 31 January 2017 238,236,828 23,824 112,646 (77,868) 58,602 ------------------------------ -------------- --------- ---------- ------------ ---------
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.
12. Share-based payment reserve Total GBP'000 ---------------------- -------- At 31 July 2015 2,445 Share-based payments 113 ----------------------- -------- At 31 January 2016 2,558
Share-based payments 157 ------------------------- -------- At 31 July 2016 2,715 Share-based payments 240 ------------------------- -------- At 31 January 2017 2,955 ------------------------- --------
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 Condensed consolidated statement of changes in equity.
A charge of GBP240,000 has been recognised in the Statement of comprehensive income for the half year (2016: GBP113,000).
Share option schemes
Full details of the Group's share option schemes are detailed in note 21 of the 2016 Annual Report.
Shares held in the Employee Benefit Trust ("EBT")
On 2 August 2016, the remaining holder of Jointly Owned shares exercised their option to convert the holding to sole beneficiary. As a result, there are no shares held by the EBT
Fair value benefit
The fair value benefit is independently measured using Binomial or Black-Scholes valuation models where there are non-market performance conditions and Stochastic (Monte Carlo) models for options with market based performance conditions taking into account the terms and conditions upon which the options were granted.
Grant of options
On 22 November 2016 the Company granted a total of 3,818,149 nil-cost options over ordinary shares in the Company under the Nanoco Group 2015 Long Term Incentive Plan to the Executive Directors and all other eligible employees.
The vesting of the options granted under the LTIP is subject to the achievement of performance conditions based upon share price growth and revenue targets over the three-year performance period commencing with Nanoco's 2016/2017 financial year. Ordinarily, the options will vest (subject to the achievement of the performance conditions) following the announcement of Nanoco's results for its 2018/2019 financial year and be released to the participants following the end of a two-year holding period.
In addition, on 22 November 2016, a total of 340,672 nil-cost options were granted under the Deferred Bonus Plan.
13. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated upon consolidation.
The Company has intercompany loans and accounts with its subsidiary undertakings, details of which are set out in the 2016 Annual Report and Accounts.
14. Post-balance sheet events
There have been no reportable events from the balance sheet date to the approval of these interim condensed consolidated financial statements.
Independent Review Report to Nanoco Group Plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2017 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Cash Flow Statement and the related notes 1 to 14. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.
Emphasis of matter - going concern
In reaching our conclusion, which is not qualified, we have also considered the adequacy of the disclosures made in note 2 to the interim financial statements concerning the Company's ability to continue as a going concern. The conditions described in note 2 indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The condensed set of financial statements in the half-yearly financial report do not include the adjustments that would result if the Company was unable to continue as a going concern.
Ernst & Young LLP
Manchester
4 April 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UOOURBOASRUR
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April 04, 2017 02:01 ET (06:01 GMT)
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