Nanoco Group plc (LON: NANO), a world leader in the development and manufacture of cadmium-free quantum dots and other specific nanomaterials emanating from our technology platform, has today announced an update to the current contract with the US Customer.
The US Customer has formally released Nanoco from its obligation to repay £4.25m of capital funding provided for the new Runcorn production facility due to the uncertainty over the timing or use of the facility to manufacture the new nanomaterials. The facility was completed in December 2018 and is currently undergoing commissioning as part of the current contract of work that is due to expire on 31 December 2019.
While still subject to external audit, the lack of contracted production orders on the new Runcorn facility, means that an accounting impairment charge is likely to be made in the year end accounts. Immediately prior to any such impairment, the net book value of the new facility is forecast to be approximately £3.7m. The difference in the two values above reflects depreciation already charged in the year. In addition to both items above, approximately £0.5m of other contract specific raw materials and minor contractual liabilities are also likely to require provisioning at the end of the current financial year. None of the above accounting items have any impact on cash.
For the avoidance of doubt, the operational capability and capacity of the plant has in no way been impaired. Commissioning work continues in line with the current contract with the US Customer. Once that contract is complete in December 2019, the full production capacity will remain available for use by Nanoco to service any future demand from the US Customer or any other potential new customers with whom the Group is in early stage discussions.
As previously announced, the Group still expects to deliver a cash breakeven positon for the twelve months ending December 2019 and to have £6.0m of cash on hand at that time.
Michael Edelman, Chief Executive of Nanoco Group, said:
“The waiver of the contract liability and the impairment of the Runcorn plant creates a balanced outcome for Nanoco. While the impairment of the plant reflects the lack of current commercial contracts – the plant remains at our disposal and fully capable of producing high quality nanomaterials for use in a number of electronics applications.
With the validation of production material nearing completion, the time to market will be significantly reduced when new commercial customers are identified and we continue our efforts in this area to identify new potential opportunities and to provide excellent service to the US Customer.”