As flagged in the post-close trading update, Nanoco generated £7.1m revenues in FY19. This was more than double FY18’s level and slightly ahead of consensus because of the early delivery of some revenue under the major services contract. FY19 billings totalled £9.6m, including £2.4m as the final sum payable to complete the new Runcorn production facility. Operating losses, adjusted for exceptionals and share-based payments, narrowed from £7.2m to £5.0m. Cash at end FY19 was £7.0m, an increase of £0.8m since end January 2019.

Our FY20 revenue estimate is backed by contracts, primarily from the major US partner, and has been revised downwards to reflect some revenues moving forward into FY19 (see Exhibit 1). With a fixed cash cost base of c £9m, management expects cash balances to be c £6m at end December 2019. On this basis, we estimate that current cash balances will last until summer next year, giving the company headroom to explore commercial and strategic options. We will release FY21 estimates when there is more visibility regarding execution. 

The share price is one-third of the level before the major US customer announced it would not continue when the current contract expires in December 2019. However, development activity in quantum dots appears to be accelerating across a number of applications and Nanoco is the largest IP holder in this field with c 750 patents. Moreover, it has a new, nearly fully commissioned manufacturing facility able to output significant volumes of nanomaterials. We believe that the current market capitalisation of £29m ascribes little value to this IP and asset base.