Nanoco reaches agreement with US customer over plant costs

Nanoco

Manchester technology firm Nanoco has been released from an obligation to repay more than £4m to a US customer, it announced today.

Last month the firm, a spin-out from Manchester University which develops materials used in the manufacture of monitors and TV screens, revealed that a major contract with the US customer would end in December this year.

In January it said it had agreed a major contract extension to its initial agreement with the US customer.

This covered a range of stress testing and commissioning services of its Runcorn facility in the 12 month period to December 2019.

However, Nanoco said the customer had decided that the project will not continue beyond the current contract, “for reasons wholly unconnected to the performance of our materials and our service delivery”, it added.

Now, today, it announced the customer has formally released Nanoco from its obligation to repay £4.25m of capital funding provided for the new Runcorn production facility due to the uncertainty over the timing or use of the facility to manufacture the new nanomaterials.

While still subject to external audit, the lack of contracted production orders on the new Runcorn facility means that an accounting impairment charge is likely to be made in the year end accounts.

Immediately prior to any such impairment, the net book value of the new facility is forecast to be approximately £3.7m.

Nanoco said the difference in the two values reflects depreciation already charged in the year.

In addition to both items, approximately £500,000 of other contract-specific raw materials and minor contractual liabilities are also likely to require provisioning at the end of the current financial year.

None of these accounting items have any impact on cash, the firm said.

It added: “For the avoidance of doubt, the operational capability and capacity of the plant has in no way been impaired.

“Commissioning work continues in line with the current contract with the US customer.

“Once that contract is complete in December 2019, the full production capacity will remain available for use by Nanoco to service any future demand from the US customer or any other potential new customers with whom the group is in early stage discussions.

“As previously announced, the group still expects to deliver a cash breakeven positon for the 12 months ending December 2019 and to have £6m of cash on hand at that time.”

Chief executive Michael Edelman said: “The waiver of the contract liability and the impairment of the Runcorn plant creates a balanced outcome for Nanoco.

“While the impairment of the plant reflects the lack of current commercial contracts – the plant remains at our disposal and fully capable of producing high quality nanomaterials for use in a number of electronics applications.”

He added: “With the validation of production material nearing completion, the time to market will be significantly reduced when new commercial customers are identified and we continue our efforts in this area to identify new potential opportunities and to provide excellent service to the US customer.”

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