Tech firm halts sale process due to impact of COVID-19 on markets

Nanoco Group has decided to halt its formal sales process (FSP) due to the impact of COVID-19 on the markets.

The business, a spin-out from Manchester University which develops materials used in the manufacture of monitors and TV screens, started formal moves regarding a possible sale on November 5, last year.

But, in its interim results announcement today, it said due to the disruptions caused by COVID-19 the economic climate remains “highly challenging” and, as a result, the board has concluded that it is unlikely the sales process would produce an attractive outcome in such an uncertain environment.

The company said it will make further announcements as appropriate.

Nanoco reported lower revenues, but reduced pre-tax losses for the six months to January 31.

It achieved a turnover of £2.858m, down from £3.192m the previous year, although its pre-tax loss of £2.449m compared with £3.074m previously.

The adjusted LBITDA was significantly reduced to £1.1m, against £2.5m last year.

During the year it reported the successful completion of contract deliverables with a US customer and revenues earned in full, it reduced its monthly cash burn to under £700,000 by the period end, while operational and R&D capability has been protected, alongside core IP assets.

Since the six month period end, a patent infringement lawsuit was filed against Samsung in February 2020, while purchase orders have already been received for existing and new materials for sensing applications and a new joint development agreement for R&D services is being documented with an existing customer

The monthly cash burn has been reduced further to under £400,000 through a combination of new commercial revenues, management actions, and UK Government COVID-19 employment support.

Nanoco has a cash runway now extending to the second quarter of 2021, subject to new commercial agreements being completed, with contingency plans in place if required.

Chief executive Dr Michael Edelman said: “The last six months saw the successful completion of commercial deliveries for the US customer as well as continued improvement in the technical performance of our nano-materials in both display and sensing applications.

“We have successfully maintained our core capabilities while scaling down our cost base to offset a slowdown in new commercial orders following the announcement of the FSP.

“Following the period end, we filed a patent infringement lawsuit against Samsung, seeking an injunction from further acts of infringement and significant monetary damages.

“We have received a number of offers of third-party funding for the lawsuit and are now discussing the final terms of a litigation financing agreement. Once agreed, this will protect the group’s cash resources and decouple the funding of the lawsuit from the Group’s financial position.

“In response to COVID-19, we have taken immediate action to reduce our cost base further and to extend our cash runway while retaining our core competence in production, scale-up and R&D.

“These actions are designed to preserve the financial position of the group and to safeguard the interests of all stakeholders by protecting our core IP assets, the ongoing Samsung lawsuit, and continued employment of our highly skilled staff.”

He added: “Whilst we are disappointed that we had to terminate the FSP, in light of the challenging market environment, all of these measures preserve optionality to deliver maximum value to shareholders.”