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Trading statements

Nanoco performing in line with expectations

25 August 2017 07:21

Nanoco said unaudited revenues in the year and net cash at the year end were in line with the Board's expectations.

It has been a significant year for the group with solid advances towards the commercialisation of its technology.

HIGHLIGHTS:

- The group's first commercial orders - to supply CFQD resin to global manufacturer Wah Hong

- New routes to market established for CFQDs in Display

- TVs using Nanoco CFQD Fine Color Film exhibited at CES in January 2017

- Runcorn manufacturing facility became commercially viable

- A growing pipeline of potential Display business

- Progress in Life Sciences and Lighting markets

DISPLAY MARKETS

The market in Display for CFQDs continues to grow, driven by the increasing appetite for enhanced colour and brightness and the penetration of Ultra High Definition (UHD) TVs.

According to IHS forecasts, 26 million displays will be QD equipped by 2021, with more than 90% of the market cadmium-free.

Samsung, with its recently launched QLED brand, is leading the field and sold more than three million QD displays in 2016.

While other Display OEMs are embracing CFQD technology, adoption continues to be slow and protracted regulatory change to restrict the use of Cadmium has been unhelpful.

However, the recently announced legislation in Europe, banning the use of Cadmium in Displays from October 2019, may be expected to accelerate the move to CFQDs.

Several major Taiwanese and Chinese display and TV manufacturers are now actively seeking CFQD solutions, where Nanoco continues to have a competitive lead.

COMMERCIALISATION

Nanoco's Runcorn manufacturing facility has been extensively enhanced - with costs substantially reduced - to enable the Group to supply commercial quantities of its product to fulfil the anticipated volume of future orders.

It now has capacity to produce enough CFQDs to supply approximately one million large TVs, operating on a 24/7 shift pattern.

Further capacity can be achieved with limited capital expenditure and will be brought online as demand increases.

The group's relationship with Wah Hong Industrial Corporation, its optical film partner, has progressed well.

Product from Nanoco / Wah Hong was used by three manufacturers, Hisense, TCL and TPV Philips at CES in January 2017, to demonstrate prototype large screen, UHD, wide colour gamut LCD TVs.

Feedback and lead generation from CES was encouraging and further validated the market opportunity.

As a result, Wah Hong brought forward its investment in a new coating line which is now commissioned and capable of producing films to fit up to 100 inch TVs.

These developments resulted in Wah Hong placing the first commercial order for CFQDs from Nanoco in June 2017.

Nanoco's sales pipeline remains full with the same number of OEMs and programmes as stated on 30 June 2017. The group's key short-term focus is on 10 TV and monitor projects with five companies, however Nanoco will continue to develop further opportunities in the future.

Nanoco's other channels to market are via its two licensees, The Dow Chemical Company and Merck. Dow sells product under the Trevista brand, manufactured in its facility in South Korea.

Dow commented that it sees growing interest in cadmium-free quantum dots and has been engaged with several display customers considering adopting quantum dot technology.

Nanoco has completed the transfer of our technology to Merck who have successfully produced pilot plant scale quantities of CFQD's at their Darmstadt Germany facility.

Merck is carefully watching the development of the cadmium free quantum dot market and will continue to purchase CFQD products from Nanoco until they decide to build their own manufacturing facility.

Merck is actively engaged with their potential customers on various CFQD application projects and sells under the LiviluxR brand.

In May 2017 Nanoco signed a collaboration and JDA with Kyulux Inc to future proof the group and ensure it remains at the forefront of next generation products.

Under the agreement, Nanoco's CFQDs will be combined with Kyulux's technology to create future generation hybrid OLED / QLED display technology with superior qualities to existing products in the display market.

Nanoco has also strengthened its patent portfolio in Electroluminescence with the acquisition of a patent portfolio from Kodak Eastman. Today the group benefits from c.600 patents and patent applications.

OTHER MARKETS

While Display was the group's primary focus during the year, Nanoco continued to develop its other target markets of Life Sciences and Lighting.

Nanoco's Life Sciences division made further progress in in-vivo optical imaging, diagnosis and targeted therapy of cancer, being awarded an Innovate UK Grant for a VIVODOTS TM programme in conjunction with University College London targeting pancreatic cancer.

Lighting continues to make headway, in line with management's expectations, within specialty niche markets including horticulture and photodynamic therapy products.

The Board has decided that the Solar business is non-core and has commenced the process to divest that business.

PEOPLE

Due to the changes in commercialisation strategy and continued prudent cash management, staff numbers have been reduced to c.80. However, there were also important new hires during the period, including the appointment of David Yao as Senior Vice President of Global Sales, based in Asia.

FINANCIAL

Unaudited revenues and other operating income in the year were in line with the Board's expectations.

The balance sheet had unaudited net cash of £5.7 million at 31 July 2017 compared with £8.3m at 31 January 2017 (31 July 2016: £14.5m) and was in line with the Board's expectations. Costs continue to be tightly controlled to maximise the cash runway and operating costs are currently c.£750k/month.

OUTLOOK

The group continues to make solid progress in commercialisation of CFQDs and expects to announce further orders from its healthy pipeline of projects.

With the market continuing to develop more slowly than originally anticipated, we remain focused on careful management of costs ahead of the anticipated sales ramp-up.

The Board remains confident that the opportunity for CFQDs, both in Display and in other sectors, remains exciting and, moreover, that the Company has a competitive lead in this technology.

Story provided by StockMarketWire.com

Related Company: NANO

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