City round-up: Nanoco; Strix Group; James Halstead

Runcorn tech company, Nanoco, has delivered its first commercial orders since being spun-out from Manchester University.

The business revealed the milestone in its half year results for the period ending January 31, 2024, today.

Revenues rose from £1.562m to £3.956m from the previous year, while a pre-tax profit of £2.091m was a turnround from a pre-tax loss of £2.334m the prior year.

During the period the company, which develops materials used in the manufacture of monitors and TV screens and technologies for medical imaging and the early diagnosis of cancer, completed the shipment in November 2023 of two first-generation materials for use in infra-red sensing applications in electronic devices (cameras and imagers).

Also, in January this year, a Joint Development Agreement was signed with STMicroelectronics, a global semiconductor leader, to optimise the performance of a second-generation sensing material over a two-year period.

This followed a Joint Development Agreement signed in November 2023 with an important Asian Chemical supplier of materials to global electronics supply chains over two years to enhance another high performing sensing material.

Nanoco also retured £33m to shareholders from its $150m intellectual property litigation payout from electronics giant Samsung, and a share buyback programme is now under way.

Retained funds from the legal payout are to be invested in operational capability, enhancing future growth prospects, and improving gross margins.

Nanoco says it will be debt-free by the end of fiscal year 2024 and is now fully funded through to cash breakeven, expected during calendar year 2025.

CEO Brian Tenner said: “Delivering our first ever commercial orders was a huge achievement for the whole Nanoco team.

“Sales volumes of first generation materials are expected to grow gradually over time to deliver a cash breakeven position during CY25. Adoption of the technology in mobile phones would lead to further significant growth.”

He added: “Our current two global customers – both leading suppliers to the electronics industry – are a testament to Nanoco’s leadership in novel nanomaterials.

“Our key display and sensing IP was emphatically validated in the recent Samsung litigation. The new second generation materials under development will deliver significant performance improvements to open up new applications in automotive and dynamic image capture. All of our materials form part of our ‘platform technology’, being adaptable to a wide range of markets, applications and form factors.

“We are pleased to be returning £33m of value to shareholders while retaining funds for the compelling use cases we have previously outlined. Having spent five years fighting for financial survival, we have now been able to make some cautious but important strategic investments in new capabilities and our resilience as a supply chain partner.

“These will accelerate our development plans and commercial progress, as well as allowing us to self-fund IP licensing efforts. The combination of a fully funded business with commercial traction is a strong foundation on which to build.”

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Mark Bartlett, Strix CEO (Credit: Twitter / Strix Group)

Strix, the AIM-listed Isle of Man-based group, focused on kettle controls, appliances, and water purification and disinfection solutions, achieved impressive increases in annual revenues and profits, and pledged to return to its sustainable dividend payout policy in 2025, following a pause in the current year.

Announcing annual results for the year ending December 31, 2023, today, its reported revenues jumped 35.2% to £144.6m, and it’s pre-tax profits improved by 10.3% to £17.7m.

Net debt was reduced from £87.4m to £83.7m, and the total dividend per share for the period rose by 85% to 0.9p per share.

Strix said it has demonstrated good revenue growth, largely driven by its acquisition of Billi last year, which continues to be highly profitable and is strongly cash generative.

It said a rebasing of the core business is being undertaken in 2024 to build strong foundations for medium term growth opportunities as the market continues to recover.

The board said it remains focused on maximising cash generation to support debt reduction which will result in a temporary pause in the final and interim dividend payments in calendar year 2024, with a planned return to a sustainable dividend pay-out ratio of 30% of adjusted PAT (profit after tax) in 2025.

This pause will enable the company to accelerate its deleveraging profile to ensure that it will be in a stronger financial position. It will also provide the flexibility to enable the business to selectively invest in new technologies to support longer term growth initiatives, it said.

Chief executive, Mark Bartlett, said: “Strix is a resilient and highly cash generative business with the opportunity to expand its addressable market across all divisions.

“The recent strategic acquisition of Billi has delivered double-digit revenue and profit growth on a constant currency basis over the period which is anticipated to continue, helped by a staged expansion into key European markets.

“The group plans to return to its sustainable dividend pay-out ratio policy in 2025 reflecting the board’s confidence in the medium term prospects.”

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Mark Halstead CEO of James Halstead

Shareholders in James Halstead, the Manchester-based flooring specialist, will receive another record interim dividend payout to reflect their support in the business.

Announcing interim results for the six month period to December 31, 2023, the group today revealed that investors will receive a payment of 2.50p per share, up from 2.25p the previous year.

The group saw revenues fall in the period from £149.6m in the prior year to £136.5m, but pre-tax profits came in at £27.4m up from £23.2m in 2022.

Cash at the end of the reporting period stood at £62.4m, substantially higher than £44.3m a year ago.

Chief executive, Mark Halstead, said: “Against difficult markets we have raised profits and are confidently growing our export of UK manufactured goods across the globe.

“Once again, we have declared a record interim dividend to shareholders to reward their continued investment.”

Chairman, Anthony Wild, said the fall in revenues was mainly due to recessionary pressures in several major markets and delays in the rebuilding of its UK manufactured flooring export markets.

He added: “Margins remain solid and overheads are contained within inflationary parameters. Consequently, the improved first half profitability continues into the early months of the second half of the year. I, and the board, remain confident of making further progress.”

Adrian Kearsey, an analyst with investment bank, Panmure Gordon, reiterated his ‘Buy’ call on Halstead shares today, and raised his full year pre-tax profit forecast.

He said: “James Halstead, the UKs largest commercial flooring manufacturer, has delivered a positive set of interim results for the six months to Dec-23. Increased productivity has translated into higher gross margins and PBT is up 18.0% YoY to £27.4m (1H24).

“Given the positive progress in margins, we are raising our FY24 PBT estimate by £1.0m to £54.5m (+1.7% upgrade).”

He added: “The quality of a business is demonstrated by its ability to navigate turbulent markets. In this regard, James Halstead continues to score well, validating our positive stance on the stock.

“Moreover, the high (and sustainable) RoIC and the scope to further expand international sales provide additional layers to the James Halstead story. Therefore, we reiterate our BUY recommendation and 320p target price.”