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No sales yet, but Nanoco still exciting

Investors reacted badly to half-year results from the tech group
April 4, 2017

Informing the market that expected sales have failed to materialise is never going to sit well with investors, and Nanoco (NANO) was duly punished for such an announcement. Shares in the innovative tech group fell 13 per cent after management made a substantial cut to full-year expectations.

IC TIP: Buy at 31.3p

Chief executive Michael Edelman is disappointed not to report the group's first commercial sales in these half-year numbers - as opposed to simply licence and royalty income - but he's not concerned about the long term. "It's not a question of if, but when", he said.

The group makes quantum dots, which are generating excitement in industrial circles thanks to their ability to produce a source of light using very little energy. Nanoco's 70-strong team of scientists is working on developing these for use in television displays, solar cells and even cancer imaging. In the display market, the group has licensing agreements with three global industrial companies, which sell components to the world's biggest tech companies. Alongside these partners, Nanoco has been refining its products and expects to deliver its first commercial order "in the near future".

Until then, manufacturing investment and £2.87m of research and development expenditure widened operating losses to £6.43m (£6.39m in H1 2016). Broker Peel Hunt expects the group to continue to be lossmaking until at least 2019, but has pencilled in sales of £15.4m in the year to July 2018.

NANOCO (NANO)

ORD PRICE:31.3pMARKET VALUE:£74m
TOUCH:31-31.3p12-MONTHHIGH:79pLOW: 29p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:5.9pNET CASH:£8.3m*

Half-year to 31 JanTurnover (£'000)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016144-6.3-2.2nil
2017676-6.4-2.3nil
% change+369---

Ex-div: na

Payment: na

*Includes £5m of short-term investments