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Highlights:
The Board has appointed CDX Advisors LLC to assess whether the trading business would benefit from alternative ownership structures, including a potential sale.
To optimize financial performance, Nanoco is implementing cost-cutting measures, including staff reductions and deferral of fees for non-executive directors.
Nanoco is committed to returning surplus cash to shareholders, with an initial distribution planned after the FY24 results. Future returns will depend on cost management and developments in the potential sale process of the trading business.
Nanoco (LSE:NANO), a leading developer and manufacturer of cadmium-free quantum dots and specialized nanomaterials, has conducted a strategic review in response to a European customer’s decision to shift its focus away from quantum dot (QD) enabled infrared sensors. The Board undertook this review to assess the company’s position, strategic direction, and capital allocation policy, aiming to balance the preservation of existing value with the maximization of future potential returns.
Key Findings of the Strategic Review
Commercial Potential and Value
The Board is optimistic about Nanoco’s commercial applications and inherent value. They believe there are significant opportunities for organic growth across various markets that can generate meaningful revenue in the short to medium term. The current collaboration with an Asian customer specifically targets mass-market applications for a leading global sensing company. This conclusion is supported by growing interest in QD technology within display and sensing markets, direct customer feedback, and independent expert analysis.
Nanoco’s technology and intellectual property (IP) are poised for significant growth in line with independent market forecasts. The rising number of market participants in QD display applications and substantial investments in micro-LED and electro-luminescent devices further validate this outlook. Nanoco plans to leverage its robust IP portfolio to pursue commercial licensing opportunities actively.
As a business utilizing its own IP, Nanoco is in a favorable position to enforce its rights effectively. With sufficient financial resources and expertise in IP protection, the company aims to capitalize on the expanding market for QD displays. However, pursuing these opportunities will require investment in maintaining its unique team and assets.
Appointment of Financial Adviser
Given that Nanoco’s trading business is in the scale-up phase, the Board deems it prudent to explore whether growth and investment would be better facilitated under different ownership than as a standalone listed company. To this end, they have appointed CDX Advisors LLC as a financial adviser to evaluate options for optimizing the financial outcome for the business and its assets, including the potential sale of the trading business and its IP.
While this process is underway, the Board has taken immediate steps to rationalize costs, including reducing headcount, trimming the Board's size without compromising governance standards, and cutting non-essential operating costs. As a significant measure, non-executive directors have agreed to defer 50% of their fees until either the end of the financial year (July 31, 2025) or the potential sale of the trading business, with the deferred amounts to be settled in ordinary shares.
These measures are expected to reduce the Group’s annual cash cost base by approximately £2.6 million (or 34%) compared to the Q4 FY24 run-rate, incurring a one-off restructuring cost of just over £0.1 million.
Return of Surplus Cash to Shareholders
The Board is committed to delivering shareholder value swiftly and plans to return surplus cash during FY25. An initial cash return will occur following the release of FY24 results, with further returns contingent on the completion of cost right-sizing, working capital needs, and progress in a potential sale process.
