- Increased number of customers but sales fell in year to 31 July
- Lawsuit against Samsung making "good progress"
Nanoco (NANO) produces ‘quantum dots’ that “emit lights at different wavelengths across the visible and infrared spectrum”.
The primary focus is sensing applications, such as infra-red sensors, but they have uses in display, horticulture and life sciences. Televisions are also now being made with the technology, known as QLED, but Nanoco is still small scale, with the holy grail for the business getting its quantum dots into commercial production.
In 2018, one material was used to make the sensors and these were sold to one customer. This year, eight materials/wavelength combinations were used and the company engaged with five different customers. An anonymous European electronics customer and “a very significant” Asian chemical company contributed most of Nanoco's £2.1m of revenue.
Last year, the company generated £3.9m of revenue: the fall in sales has come because a large US customer finished its contract. Despite this fall, new debt of £3m in July has helped extend the cash runway into the second half of 2022, taking cash to £3.8m against a monthly burn of around £400,000.
Lurking in the backdrop to all this is an ongoing intellectual property lawsuit against Samsung, which the board believes has “significant potential to transform shareholder value”. Nanoco said a deferral in the case while a patents board looks at the claims again was a positive because it "increases potential damages from allegedly infringing TVs sold by the time of the trial".
Looking at the overall business, there is some confidence the European electronics customer has the potential to move into commercial production in the medium term. However, Nanoco has reiterated "the material uncertainty around the timing of future revenue streams” because of risks in parts of the supply chain.
FactSet consensus is that loss per share will improve to 0.97p for the year-end from a loss of 1.30p last year. We won’t hold our breath for the boost in sales to justify its 30 times revenue price, but based on the potential upside from the Samsung case – and this is no sure thing – we move to hold.
Last IC View: Sell, 10p, 5 May 2020
| NANOCO (NANO) | ||||
| ORD PRICE: | 20p | MARKET VALUE: | £61m | |
| TOUCH: | 19.54-20p | 12-MONTH HIGH: | 31p | LOW: 8p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 0.98p* | NET DEBT: | 12% | |
| Year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 1.33 | -10.90 | -3.80 | nil |
| 2018 | 3.32 | -7.40 | -2.20 | nil |
| 2019 | 7.12 | -5.51 | -1.52 | nil |
| 2020 | 3.86 | -5.97 | -1.77 | nil |
| 2021 | 2.09 | -5.08 | -1.44 | nil |
| % change | -46 | -15 | -19 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £2.86m, or 0.94p a share | ||||
