TIDMNANO
RNS Number : 2257D
Nanoco Group PLC
20 June 2023
20 June 2023
NANOCO GROUP PLC
("Nanoco", the "Company" or the "Group")
Posting of Circular in relation to
Proposed Capital Reduction Facilitating Future Returns to
Shareholders
Notice of General Meeting
Nanoco Group plc (LSE: NANO), a world leader in the development
and manufacture of cadmium-free quantum dots and other specific
nanomaterials emanating from its technology platform, announces
that it will today post a Circular setting out details of a
Proposed Capital Reduction to create distributable reserves in
order to facilitate future returns to Shareholders. The Circular
will also contain the Notice of General Meeting to be held on 7
July 2023.
Highlights of the Circular:
-- The Company is proposing to undertake a Capital Reduction in
order to facilitate the return of capital to Shareholders. The
Company is currently restricted from returning capital to its
Shareholders as it does not have distributable reserves.
-- The Board intends to initiate a return of between GBP33
million and GBP40 million (or approximately 10 pence to 12 pence
per share) using the second tranche of the proceeds of the Samsung
litigation ($75 million) which is expected to be received during
February 2024. No final decision has yet been taken as to the
method of any such return of capital.
-- Nanoco intends to retain approximately GBP20 million of cash
(following the return to shareholders) to invest in R&D and
commercial activities, a proactive IP licensing programme, payment
of debt obligations, and to provide working capital through to the
self-financing position that is expected to be achieved during
2025.
-- The Board is confident that the near term opportunities for
commercial production of sensing materials, together with the
current interest in the Group's display materials following the
successful IP litigation and the growing display market for CFQD(R)
cadmium free quantum dots, fully merit the allocation of funds
noted above.
Christopher Richards, Non-Executive Chairman of Nanoco,
said:
"The Proposals in relation to a Capital Reduction and the
proposed return to Shareholders are consistent with our stated
intention to balance the investment needs of Nanoco's growing
organic business whilst delivering a material return of capital to
Shareholders following the Samsung litigation.
"The Board considers the Resolutions to cancel the Company's
share premium account and capital redemption reserve to be in the
best interests of the Company and its Shareholders as a whole and
the Board unanimously recommend that Shareholders vote in favour of
the Resolutions to be proposed at the General Meeting."
- Ends -
A copy of the Circular will be published on the Company's
website later today at www.nanocotechnologies.com .
This summary should be read in conjunction with the full text of
the Circular. Capitalised terms used but not defined in this
announcement will have the same meaning given to them in the
Circular.
The person responsible for arranging for the release of this
announcement on behalf of Nanoco is Liam Gray, Chief Financial
Officer.
MAR
The information contained within this announcement is considered
by the Company to contain inside information for the purposes of UK
MAR. Upon the publication of this announcement via a Regulatory
Information Service, this inside information will be considered to
be in the public domain.
FORWARD LOOKING STATEMENTS
This announcement (including information incorporated by
reference in this announcement) and other information published by
Nanoco may contain statements about Nanoco that are or may be
deemed to be forward looking statements. Such statements are
prospective in nature. All statements other than historical
statements of facts may be forward looking statements. Without
limitation, statements containing the words "targets", "plans",
"believes", "expects", "aims", "intends", "will", "may",
"anticipates", "estimates", "projects" or "considers" or other
similar words may be forward looking statements.
Forward looking statements inherently contain risks and
uncertainties as they relate to events or circumstances in the
future. Important factors such as business or economic cycles, the
terms and conditions of Nanoco's financing arrangements, tax rates,
or increased competition may cause Nanoco's actual financial
results, performance or achievements to differ materially from any
forward looking statements. Due to such uncertainties and risks,
readers are cautioned not to place undue reliance on such forward
looking statements, which speak only as of the date hereof. Nanoco
disclaims any obligation to update any forward looking or other
statements contained herein, except as required by applicable
law.
EXTRACTS FROM THE CIRCULAR
Expected Timetable of Principal Events
Publication of this document 20 June 2023
Latest time and date for receipt of Forms of Proxy for the
General Meeting 9:00 a.m. on 5 July 2023
General Meeting 9:00 a.m. on 7 July 2023
Expected date of initial directions hearing of the Court 10 July 2023
Expected date of Court Hearing to confirm the Capital Reduction 18 July 2023
Expected effective date for the Capital Reduction 19 July
2023
Background to, and reasons for, the Capital Reduction
Review of addressable markets reaffirms the commercial
opportunity
As announced on 3 February 2023, and following the successful
conclusion of the IP litigation, the Company made the following
statement: "In deciding the allocation of the net proceeds, the
Board will balance any investment needs of Nanoco's growing organic
business with a firm intention to deliver a material return of
capital to shareholders."
The Board has recently completed a review of the addressable
sensing and display markets for the Group's unique and IP protected
nano-materials. The review assessed multiple compelling
opportunities for the use of funds within the commercial business,
including a licensing programme for the Group's now validated
IP.
The Board recognizes that the adoption of nano-material
technology has taken longer than expected for both Nanoco and its
competitors and has been challenging. However, the Board is
encouraged by customers' feedback that Nanoco's materials are
superior to others in the market. This position is strongly
reinforced by the recent licensing of Nanoco's technology by
Samsung. Other nano-material companies have failed to generate a
net positive lifetime return on capital, sometimes resulting in the
distressed sale of their assets. By contrast, following the
litigation settlement, Nanoco has generated a net positive cash
return compared to the total amount of equity capital raised in its
history.
IP licensing programme opportunity
In addition, the validation of Nanoco's IP provides an
opportunity to build a licensing programme to leverage further
value. The Group has identified a number of potentially infringing
third parties and has created a team to pursue them, where
economically viable, and early stage activity is already
underway.
The Board notes that the customary model for third party IP
licensing companies often requires the surrender of full or partial
ownership rights of IP, as well as control of any licensing
activity or litigation in return for an approximate 50% share of
any net proceeds. If such a model had been in place for the recent
IP litigation involving Samsung, the Board estimates the Group's
net cash receipt would have been less than $60 million on a pre-tax
basis, compared to the approximately $90 million actually received
and to be received. This economic analysis makes clear the
potential additional value that can be retained by a self-funded
licensing programme whilst retaining ownership and control of the
IP assets within the Group.
Use of litigation proceeds for investment
Given the substantial achievements of Nanoco to date, the Board
intends to continue investing in R&D and commercial activities,
through to the self-financing position that is expected to be
delivered during 2025. The Board therefore intends to retain
approximately GBP20 million of cash (following the return of
capital set out below) to invest as follows:
-- Funding the Group's commercial business activities until they
become self-financing (expected in 2025) along with a number of
promising investments in R&D and capital equipment, whilst
accelerating the development of new generation sensing materials,
and delivering valuable device capability.
-- Self-financing the IP licensing programme as set out above.
-- Paying off the Group's current debt facilities (approximately
GBP5.0 million) to become debt-free and self-funded.
-- The Group will also maintain a modest cash buffer for working
capital and to mitigate the risk of unforeseen events.
The Board is confident that the near term opportunities for
commercial production of sensing materials, together with the
current interest in the Group's display materials following the IP
litigation and the growing display market for CFQD(R) cadmium free
quantum dots, fully merit the allocation of funds noted above.
Use of litigation proceeds for return of capital
The second tranche of litigation proceeds is expected to be
received during February 2024. Taking into account the proposed
investments noted above, the Board is proposing to return between
65% and 75% of the second tranche of net proceeds to Shareholders,
subject to no material change in circumstances ahead of that time
and after allowing for Korean withholding tax and the payment of
the Group's current debt obligations. Using the current $USD /
GBPGBP exchange rate of approximately $1.25 / GBP1.00, this will
equate to a return of capital of between GBP33 million and GBP40
million (or approximately 10 pence to 12 pence per share (including
vested options)). The return of capital is expected to commence
shortly after the receipt of the second tranche of litigation
proceeds.
If the Group's prospects improve further or the self-financing
point arises earlier than 2025, the Board will consider further
returns of capital in line with developing an appropriate dividend
policy for a profitable and cash generative business.
The Board is currently examining the most tax efficient method
of making the return of capital and options include, but are not
limited to, dividends, tender offer, or a share buyback
programme.
The Capital Reduction proposal
The Company is currently restricted from returning cash to its
Shareholders as it does not have distributable reserves so cannot
currently either pay a dividend or buy-back shares. The Board is
therefore proposing to undertake a Capital Reduction in order to
facilitate the return of cash to Shareholders.
Under the Act, a company may, with the sanction of a special
resolution passed by its shareholders and confirmation of the
Court, reduce or cancel its share capital, share premium account,
capital redemption reserve and other reserves. It may then apply
the sums resulting from such reduction to its distributable
reserves. These sums may then be treated as distributable for the
purposes of making future returns to Shareholders.
The Company currently has:
-- the Share Premium Account standing to the credit of GBP121,145,010.91; and
-- the Capital Redemption Reserve standing to the credit of GBP4,402,245.79.
The Act requires that if a company issues shares at a premium to
the nominal value of those shares for cash or otherwise, a sum
equal to the aggregate amount of or value of the premiums must be
transferred to the company's share premium account. A share premium
account can only be used in very limited circumstances. The Company
intends to reduce the Share Premium Account in full.
The Company currently has a Capital Redemption Reserve which
arose as a result of the off-market purchase of deferred shares on
4 May 2004 and their subsequent cancellation. The Company plans to
reduce the Capital Redemption Reserve in full.
The Share Premium Account and the Capital Redemption Reserve are
statutory reserves in respect of which the Court has the power to
sanction their reduction or cancellation.
The Capital Reduction, if approved by the Court and when it
becomes effective, will have the effect of creating distributable
reserves and provide the Company, subject to the financial
performance of the Company and the Act, with the ability to make
distributions of profits by way of share buy-back or dividend in
cash. The Capital Reduction would create additional distributable
reserves to the value of GBP125,547,256.70.
In the event that any of the return of capital to Shareholders
is by means of a buy-back of Ordinary Shares, the Company will
either cancel those shares or transfer them to the Company's
Employee Benefit Trust to meet its obligations in respect of
outstanding vested and not yet vested Deferred Bonus Plan Options
and vested and likely to vest Long Term Incentive Plan Options.
The Capital Reduction
In addition to the approval by Shareholders of the Resolutions,
the Capital Reduction requires the approval of the Court.
Accordingly, following the General Meeting, an application will be
made to the Court in order to confirm and approve the Capital
Reduction.
In providing its approval of the Capital Reduction, the Court
may require measures to be put in place for the protection of
creditors (including contingent creditors) of the Company whose
debts remain outstanding on the relevant date, except in the case
of creditors who have consented to the Capital Reduction. Such
creditor protection measures may include seeking the consent of the
Company's creditors to the Capital Reduction or the provision by
the Company to the Court of an undertaking to deposit a sum of
money into a blocked account created for the purpose of discharging
the non-consenting creditors of the Company or an undertaking to
treat as undistributable for the time being certain sums
representing the realisation of "hidden value" in the balance sheet
as at the Effective Date. It is currently expected that no such
measures will be required in view of the fact that the Company's
cash balances exceed its total creditors.
It is anticipated that the initial directions hearing in
relation to the Capital Reduction will take place on 10 July 2023,
with the final Court Hearing taking place on 18 July 2023 and the
Capital Reduction becoming effective on the following day,
following the necessary registration of the Court Order at
Companies House.
There will be no change in the number of Ordinary Shares in
issue (or their nominal value) following the implementation of the
Capital Reduction and no new share certificates will be issued as a
result of the Capital Reduction. The Capital Reduction itself will
not involve any distribution or repayment of capital or share
premium by the Company and will not reduce the underlying net
assets of the Company. The distributable reserves arising on the
Capital Reduction will, subject to the discharge of any
undertakings required by the Court as explained above, support the
Company's ability to pay dividends or buy-back shares should
circumstances in the future make it desirable to do so.
Shareholders should note that if, for any reason, the Court
declines to approve the Capital Reduction, the Capital Reduction
will not take place. The Board reserves the right to abandon or to
discontinue (in whole or in part) the application to the Court in
the event that the Board considers that the terms on which the
Capital Reduction would be (or would be likely to be) confirmed by
the Court would not be in the best interests of the Company and/or
its Shareholders as a whole. The Board has undertaken a thorough
and extensive review of the Company's liabilities (including
contingent liabilities) and considers that the Company will be able
to satisfy the Court that there is no real likelihood that any
creditor of the Company would be prejudiced by the Capital
Reduction.
General Meeting and Resolutions
The Notice of General Meeting is set out in the Circular.
The General Meeting will take place at The Conference Centre,
The Heath Business and Technical Park, Runcorn, WA7 4QX at 9:00
a.m. on 7 July 2023. At the General Meeting, the Resolutions set
out in Part III of the Circular will be proposed to
Shareholders.
The Resolutions will be passed if 75% or more of the votes cast
(in person or by proxy) at the General Meeting are in favour of the
Resolutions.
The Resolutions, which are special resolutions, are summarised
below:
-- Resolution 1 - this is a resolution to approve, subject to
confirmation of the Court, the cancellation of the Share Premium
Account.
-- Resolution 2 - this is a resolution to approve, subject to
confirmation of the Court, the cancellation of the Capital
Redemption Reserve.
Questions
Any questions should be submitted in advance of the Meeting by
emailing such questions to the Company Secretary at
LGray@nanocotechnologies.com. Please include in your email: the
shareholder's full name, number of shares held and telephone
contact details.
For further information, please contact:
Nanoco Group PLC : +44 (0) 1928 761 404
Brian Tenner, CEO
Liam Gray, CFO & Company Secretary
Peel Hunt (Joint Corporate Broker): +44 (0) 20 7418 8900
Paul Gillam
James Smith
Turner Pope Investments (Joint Corporate Broker):
Andrew Thacker +44 (0) 20 3657 0050
James Pope
MHP Communications : +44 (0) 20 3128 8990
Reg Hoare
Matthew Taylor
Christian Harte
nanoco@mhpgroup.com
Notes for editors:
About Nanoco Group plc
Nanoco (LSE: NANO) harnesses the power of nano-materials.
Nano-materials are materials with dimensions typically in the range
1 - 100 nm. Nano-materials have a range of useful properties,
including optical and electronic. Quantum dots are a subclass of
nano-material that have size-dependent optical and electronic
properties. The Group produces quantum dots and other
nano-materials. Within the sphere of quantum dots, the Group
exploits different characteristics of the quantum dots to target
different performance criteria that are attractive to specific
markets or end-user applications such as the Display, Sensor and
Electronics markets. An interesting property of quantum dots is
their absorption spectrum. Nanoco's HEATWAVE(TM) quantum dots can
be tuned to absorb light at different wavelengths across the
near-infrared spectrum, rendering them useful for applications
including image sensors. Another interesting property of quantum
dots is photoluminescence: the emission of longer wavelength light
upon excitation by light of a shorter wavelength. The colour of
light emitted depends on the particle size. Nanoco's CFQD(R)
quantum dots are free of
cadmium and other toxic heavy metals, and can be tuned to emit
light at different wavelengths across the visible and infrared
spectrum, rendering them useful for a wide range of applications
including displays, lighting and biological imaging.
Nanoco was founded in 2001 and is headquartered in Runcorn, UK,
with a US subsidiary, Nanoco Inc., in Concord, MA. Nanoco continues
to build out a world-class, patent-protected IP portfolio generated
both by its own innovation engine, as well as through
acquisition.
Nanoco is listed on the Main Market of the London Stock Exchange
and trades under the ticker symbol NANO. For further information
please visit: www.nanocotechnologies.com.
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