### Annual Report ### and Accounts 2023 ## Our ## inflection ## point Strategic report ### Our year in briefAbout us Nanoco is a market leader in the 2023 was a significant year for Nanoco; the business is now financially underpinned with transition to production status likely in the short term research, development, licensing and  Final validation underway for two commercial production  Litigation validated the group’s core IP, with further materials, with an order anticipated by end of CY23 monetisation initiatives ongoing large scale manufacture of novel  Major works package for European electronics customer  Firm commitment to return capital to shareholders upon completed, two materials in final validation receipt of second tranche of litigation proceeds nanomaterials for use in a wide range  Five work packages successfully completed for Asian  Ongoing discussions with major strategic players in the chemical customer, sixth work package ongoing electronics sector for longer and deeper collaborations  Forecast growth in core markets, with increasing end user  Consolidation of operations in Runcorn, now expanding ## of commercial applications applications in sensing and increasing QD market share in anticipation of commercial production in display  Capital reduction completed to facilitate the return of  Licence agreement and sale of IP to Samsung brought capital to shareholders about a successful conclusion to the litigation, netting $90 million after fees 1 2 Revenue Adjusted LBITDA Billings Cash ## £5.6m (£0.4m) £63.0m £8.2m ## +128% +83% +2,233% +21%  See page 31 for reconciliation.  See page 32 for reconciliation. Contents Strategic report Corporate governance Financial statements Our year in brief 001 Board of Directors 046 Independent auditors’ report to the members of Nanoco Group plc 090 Nanoco at a glance 002 Corporate governance statement 048 Consolidated statement Chairman’s statement 005 Nominations Committee report 058 of comprehensive income 095 Chief Executive Officer’s statement 009 Audit Committee report 061 Consolidated statement of changes Our markets 016 Remuneration Committee report 067 in equity 096 IP monetisation 018 Directors’ remuneration report 070 Company statement of changes | Revenue streams 020 | Directors’ report 086 | in equity 096 | | --- | --- | --- | | Section 172(1) statement 021 | Statement of Directors’ | Group and Company statements | | | responsibilities in respect | of financial position 097 | Our business model 024 of the financial statements 089 Our strategy 026 Group and Company cash flow statements 098 Our key performance indicators 028 Notes to the financial statements 099 Financial review 030 Our platform technology can be used to design Investor information IBC Principal risks and uncertainties 033 and manufacture bespoke materials. This means Viability statement 036 that they can be custom made for our customers and end use applications. TCFD disclosure 2023 038 Sustainability 040 Our leading edge R&D team exploits both the emissive and absorptive properties of the materials we design. These are critical properties in electronics markets for sensing, imaging and display uses. ® Our CFQD quantum dots are free of the toxic For more on Nanoco, visit our new website: cadmium which many of our competitors and display www.nanocotechnologies.com manufacturers still use today despite the expected ban in RoHS legislation. ## Nanoco Group plc – Annual Report and Accounts 2023 001 Strategic report ### Infinite possibilities ### Nanoco at a glance ## We design, develop, scale What are nanomaterials ## up and manufacture novel and what is a quantum dot? ## nanomaterials for use in a wide Nanomaterials are any material that has a dimension or structure measured at the nanoscale, typically 10,000 to 100,000 times narrower than human hair (1–100 nm). ## range of potential applications Nanomaterials have unique optical, electrical and mechanical properties often not accessible in the bulk material. This can enhance properties such as light absorption, emission, strength, reactivity and conductivity. Quantum dots are a subclass of nanomaterials whose optical and electronic properties depend on their size, shape and composition. | Our core competencies | | | World-class talent | | Respected globally | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | |  We custom design bespoke |  Scale up capability to | |  At 31 July 2023, 46 | |  International partnerships | | | | | | | | nanomaterials to exploit | move from laboratory | | employees, of whom | | with global players from | | | | | | | | emission, absorption and | to industrial scale | | 7 are inventors | | US to Europe to Asia | | | | | | | | other properties | | | | | | -12 | -9 | -6 | -3 | 3 | | | |  ISO certified, low-cost | |  13 staff with PhDs | |  R&D, scale up and twin | 10 m | 10 m 10 | m 10 | m 1 m 10 | m | | |  Our materials can be | in-house production | | | | production facilities all | | | | | | | | | | |  5 nationalities of staff: | | | | | | | 1 km1 m1 mm1,000 nm1 nm | | | used in a wide variety of | facilities in Runcorn, UK | | | | located in Runcorn, UK | | | | | | British, German, Indian, commercial applications Cosmic rays Gamma rays X-rays IR Microwaves Radar Radio Broadcast UV Italian and Portuguese  Customers operate in  Continuous expansion of $multi-billion markets with Long wavelengthsShort wavelengths our portfolio of materials wide range of applications Visible light Infra-red 400 nm 600 nm 800 nm 1,000 nm 1,200 nm 1,400 nm 1,600 nm 1,800 nm Why invest in Nanoco? Platform technology gives access to a wide range of large and rapidly growing end markets with our focus currently on consumer electronics, Internet of Things, automotive and multiple display devices. Large and defensible QD materials market Significant IP portfolio valued at manufacturing scale 1 | 375 | $10.5bn | | 2,000 | | | | | --- | --- | --- | --- | --- | --- | --- | | patents granted or pending | by 2030 | | kgs per annum | | | | | | | | production capacity | Display applications | NIR | SWIR | | | | | | (400 – 800 nm) | (900 – 1200 nm) | (1200 – 1800 nm) | | | | | | In the visible region, the | Quantum dots can both emit and | Beyond the NIR, by selecting the correct | | New Licence | Display | | SWIR imaging | | | | | | | | | emissive properties of QDs | absorb very pure light, the latter of | size of quantum dots, the spectral range | | | | | | have revolutionised the display | which can be exploited for sensors. | of CMOS image sensors can be extended | | World’s leading display | | | | industry. The efficiency and | Traditionally, very expensive InGaAs | into the SWIR, at a much lower cost than | | company has taken a | | | | nature of quantum dots leads | sensors have been used. QDs can | InGaAs detectors. Potential applications | | licence over Nanoco IP | $13.1bn | | $2.9bn | to ultra-pure colour emission. | be combined with cheap silicon | in this region are wide-ranging, with the | | | | | | This leads to enhanced display | CMOS image sensors to extend the | ability to see through water vapour and | | | addressable market by c.2030 | | addressable market by c.2030 | | | | | | | | | and lighting applications. | spectral range of silicon. In the NIR, | fog enabling LiDAR, while skin penetration | | | | ® | | | applications include facial | in the SWIR is being explored for security | | |  CFQD | film |  Consumer electronics | | | | | | | | | | recognition and night vision. | applications such as anti-spoofing, as | | |  QD on microLED | |  Automotive applications | | | well as the development of novel optical | diagnostic techniques.  Electro-luminescence 1 Source – Infinity Business Insights Global Quantum Dot Market, Forecast to 2030. ## 002 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 003 ### Infinite possibilities ### Chairman’s statement ## Our core markets of sensing Nanoco’s commercial ## and display are forecast to business is now ## experience rapid growth. financially underpinned, ## enabling the Company ## to pursue exciting Dr Christopher Richards ## mid-term opportunities Chairman two first generation sensing products Summary Overview for final validation for potential use in commercial applications. We are now  Settlement in the Samsung This has been an incredibly important focusing on building our supply chain litigation delivered a gross year for Nanoco. The $150 million capabilities in preparation for a $150 million for the Company, settlement agreement with Samsung commercial production order expected and $90 million after litigation costs (structured as a sale of IP for $85 million by the end of 2023. and an ongoing licence agreement for  Very large “blue ocean” $65 million) vindicated our decision to We have also successfully delivered opportuntity in sensors, with litigate. Our IP in display has now been all challenging milestones in a series Nanoco technology in forefront; emphatically validated. The net $90 of short-term development projects for embedded with European million proceeds underpin Nanoco’s our Asian chemical customer. This work electronics customer, with first ### Sensing commercial potential, and allows the continues and we are now discussing production order expected in CY23 | | | business to plan for growth on a more | a much longer-term collaboration which | | --- | --- | --- | --- | | Yole Intelligence forecast growth in SWIR imaging |  Five sensing development projects | secure financial footing. | will signal a significant investment in the | | from $322 million in 2022 to $2,899 million in 2030. | with Asian chemical customer | | future of this technology. The Executive | We believe there is still value to be This is due to emerging markets in consumer completed in full, a sixth in progress team continues to seek further customer unlocked in our IP - though this will electronics and automotive. engagements in both sensing and  Validated IP in display presents take time. We do not believe anyone can display markets. The CMOS imaging sensor market is forecast to mid-term potential make Cadmium-free Quantum Dots at ### increase from revenues of $21.3 billion in 2022 Display scale without using our IP. We have  Consolidation of operations to $28.8 billion in 2028. identified potential infringers and have Strategy in Runcorn, investing to accelerate | | | Infinity business insights estimates the | | now engaged with the most likely | | | --- | --- | --- | --- | --- | --- | | | | | product development and create | | Nanoco has a clear vision for the future. | | | | Quantum Dot and Quantum Dot display | | candidates to pursue monetisation | | | | | | device capability | | Underpinned by our IP, we intend to be | | | | market was valued at $3.2 billion in 2022 | | through licencing or litigation. | | | $2.9bn | $28.8bn | | | | the “go-to” manufacturer of quantum | | | | and is projected to reach $13.1 billion by |  Firm commitment to return | | | | | | | | In sensing, devices are now being trialled | dots for a variety of applications and | | SWIR imaging market | CMOS imaging sensor | 2030, at a CAGR of 19.9%. | significant capital to shareholders | | | | | | | | which incorporate Nanoco’s QDs. The | markets. Our ultimate aim is to advance | | forecast for 2030 | market forecast for 2028 | | in Q1 CY24 | | | | | | | | market opportunity is clearly very large, | technology through making the small | | | | | | when and if adoption gains traction. | things matter. By focusing on our core | | | | $13.1bn | | During the year, we successfully delivered | competencies (our “dot only strategy”) | | | | Quantum Dot and Quantum | | all milestones on time in our major | we play to our key strengths and continue | | | | Dot display market forecast | | development agreement for the | to build on and extend our foundational | | | | for 2030 | | European electronics customer, sending | intellectual property. Our sensing | ## 004 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 005 Strategic report ### Chairman’s statement continued Strategy continued Board and General Meeting can provide significant improvements As the majority of stakeholders will be ## We are discussing | | over existing technologies at a | aware, during the year a small group of | | --- | --- | --- | | longer term, deeper | competitive price point while our display | activist shareholders called a general | | | materials offer performance and clear | meeting in August 2023 with the aim of | ## collaborations with environmental benefits over highly toxic, removing the entire Board and cadmium-based quantum dots. appointing their own six nominees ## key customers.” instead. All of the activists’ resolutions were emphatically voted down. Voting in Our people favour of the Board ranged from 80.8% to | Our staff have shown great fortitude in | 89.1% of votes cast. I strongly believe that | | --- | --- | | coping with the stresses and challenges | these votes reflect shareholders’ | | of the uncertain working environment | confidence in the current Board and | | at Nanoco over the last four years. | its strategy. | A number of staff have also relocated We have taken on board the constructive as part of the consolidation of our criticism received during the last six operations to our Runcorn production months. In particular, we are working facility. Our employees have continued to improve our communications and to to work hard throughout this period, bolster the Board’s current breadth of and deserve special recognition for experience by recruiting an additional where we are today. We are now able Non-Executive Director with a to increase our investment in our staff, background in commercialising Outlook including expanding their training and technology in consumer electronics career development, and thereby Our near-term goal remains to achieve markets. We expect to update the providing them with the opportunities the transition to commercial production. market on an appointment in the to achieve their individual potential. We expect our technology to gain short term. traction in a number of different electronics applications after an Sustainability and ESG strategy Dividends expected initial low volume use case. Ultimately, our medium-term goal is to The Board is committed to the promotion No dividend is proposed for the year achieve adoption in high volume use and achievement of environmental, social (2022: none). cases such as premium and mass market and governance objectives within the mobile phones. context of a small, listed company. To that end, we have set ourselves the target of Return of Capital The funds that we intend to retain from achieving ISO 14001 accreditation the settlement of the Samsung litigation As announced in February 2023 at the (Environmental Management) in the will allow us to plan with confidence for time of the litigation settlement, financial year ending 31 July 2024. the future and to accelerate the the Board stated, that when considering We are also pursuing accreditation to development of higher performing the allocation of the net proceeds its ISO 45001 (Occupational Health and second generation materials. Our intention was to balance any investment Safety). Post year end, we have industrial production capacity positions needs of Nanoco’s growing commercial appointed an ESG steering committee us well to benefit from any widespread business with delivery of a material with a wide remit to support the adoption of quantum dots in commercial return of capital to shareholders. Company to achieve its ESG goals. This is applications, whilst our validated IP Accordingly, the Board resolved to represented at Board level by Liam Gray, creates a strong barrier to entry to return between £33-40 million (or our CFO. the industry. approximately 10-12 pence per share) ## to shareholders, using some of the Our industrial capacity positions us By leveraging our validated IP portfolio Governance second tranche of the proceeds of and successfully delivering near-term ## well to benefit from any widespread the litigation (net $71.75 million), which commercial opportunities, we hope We remain committed to the highest ## is expected to be received during adoption of quantum dots in to deliver an increase in value for standards of corporate governance and February 2024. all stakeholders. | we comply with all of the provisions of | | commercial applications whilst our | | | --- | --- | --- | --- | | the UK Corporate Governance Code | In July 2023 a capital reduction was | | | | | effected to create the sufficient | validated IP creates a strong barrier | | | as outlined on page 53. | | | Dr Christopher Richards | | | distributable reserves to facilitate the | | Chairman | ## to entry to the industry.” return of capital. No decision has yet 19 October 2023 been taken as to the method of any such return of capital and further announcements will be made in due course. ## 006 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 007 ### Infinite possibilities ### Chief Executive Ocer’s statement ## We are leveraging our We are at an exciting ## experience to generate inflection point: the litigation ## further value from our IP proceeds fully underpin our ## transition from an R&D first ## mover to a leading Brian Tenner ## producer of QD materials Chief Executive Officer ### Monetisation of IP ## in the short term During the litigation against Samsung, the Company continued monitoring potential infringement of our IP. Once our IP was validated and the litigation settled, this created a robust platform to engage with those other | potential infringers. | The Nanoco team continues to deliver | levels across the business and | The critical point is that for the first time | | --- | --- | --- | --- | | | outstanding service and results for key | preparations for commercial production. | in our 20 year history, we will have a | |  Our team of expert advisers and experienced | customers. We have successfully | | product in commercial production with | After the year end, we signed an staff from the Samsung litigation process are achieved all of the challenging technical a world leading customer operating in agreement to hedge the second tranche driving these efforts forward milestones set for our high performing electronics markets. A significant of proceeds from the Samsung | | nanomaterials. As a result, our customers | | validation of our technology and | | --- | --- | --- | --- | |  The litigation proceeds have allowed us to | | settlement due to be received in | | | | are now seeking longer and deeper | | production capacity. There is then clear | | change the funding model for this initial work | | February 2024. The hedge means | | | | collaborations for the development, scale | | scope for growth to other use cases. | | to reduce the level of contingent third party | | Nanoco will receive £58.8 million in return | | up and commercial production of costs and funding for selling $71.75 million, which is the net We also made progress throughout the nano-materials for use in sensing devices. receipt after deducting withholding tax. year on a number of sequential short In parallel with organic progress, we term development projects for our major achieved a successful conclusion to Asian chemical customer. Material Business performance the IP litigation against Samsung. performance has exceeded challenging Nanoco is now on a firm financial footing Electronics expectations, and we continue to transition from being an R&D first discussions around further collaboration. We continued our on-time delivery mover to being a leading producer of all development milestones for our Both the European and Asian customers of QD materials in the short term. | | | major European electronics customer. | operate in large global markets wherein | | --- | --- | --- | --- | | | We have also completed a number of | Our processes for two sensing materials | final customer adoption of QD sensing | | Patents | critical first steps for further potential | have been successfully scaled up to | technology could lead to significant | | | monetisation of our IP: these steps | industrial production levels for consumer | revenue growth for Nanoco. | | At year-end, Nanoco had 352 patents granted | include identifying potential infringers | electronics and additional raw material | | Following the validation of our IP in and 23 patents pending. Four of these patent and associated devices, analysing those suppliers have been qualified to secure the Samsung litigation process, we have families, totalling 46 patents worldwide, were devices, and shortly after year end, the supply chain as part of the full year received inbound enquiries not just for part of the litigation against Samsung and have engaging with companies who may want contract that ran until the end of April display applications but also for sensing a number of years before they expire (see page or need to take a license over Nanoco IP. 2023. Two materials are now in final applications. This reflects the fact that 18 for more detail). This will take time to deliver but as the production validation with our customer our scale up IP is equally applicable to market grows, so does the opportunity. and a new second generation material Nanoco continues to invest in its IP portfolio a range of sensing materials. has passed the “proof of concept” stage. to protect the potential commercial advantages We continue to strengthen our Enquiries have ranged in size from which our scientific progress can provide. operational capabilities to assure our As previously announced, the size of any customers of a similar scale to the | | critical place in complex global supply | first production order for the materials in | | | --- | --- | --- | --- | | In addition to IP, there is a significant level | | | European and Asian customers to | | | chains for electronics devices. We expect | final validation is likely to be modest in | | | of trade secrets and know-how which is not | | | startups. We are working to add further | | | to achieve certification to ISO 14001 | scale, potentially a few million devices, | | | patented, but is important to the processes. | | | customers and development work to | | | (the environmental standard) and ISO | with consequently low associated | | our commercial pipeline. 45001 (the health and safety standard) revenue. This is typical of many new during FY24. technologies initial use cases. We increased our headcount in the second half of the year by one third (11 people) to reflect increasing activity ## 008 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 009 Strategic report ### Chief Executive Ocer’s statement continued The development cycles tend to be long As previously announced, already The graphics below show a sample of the wide range of potential Business performance continued because the whole supply chain often published customer plans for a product applications for NIR and SWIR technologies in electronics supply chains. needs to be re-engineered on top of launch in 2024 support our goal of a Electronics continued | | developing QD material. One of the | commercial production order by the | | | --- | --- | --- | --- | | We started FY24 with a limited short term | advantages of the QD enhanced | end of calendar year 2023, though, | | | order book for development work due to | CMOS sensors that Nanoco specialises | as always, the final decision to adopt | | | the successful completion of the large | in is that the material represents an extra | the technology lies with the customers | | | contract with the European customer | layer in a pre-existing material stack. | of our customer and this cannot be | | | in April 2023. Discussions are ongoing | Reaching final product validation testing | taken for granted. Our task is to ensure | | | with our European customer on the | within six years demonstrates Nanoco’s | that our materials consistently perform | | | development of next generation material | clear ability to develop and scale novel | as required by our customer so that | | | and on commercial supply terms for | materials to the exacting standards of | we are scaled up and ready for | | | production orders. Any production | consumer electronics applications in | a potential production order. | | | orders will run in parallel with any new | a relatively short time frame. | | Quality control ADASFog/smog Iris recognitionAgriculture Surveillance | Our small scale allows us to be much development agreement. | | As shown in the infographic on page 13, | more agile and responsive to our | | | | --- | --- | --- | --- | --- | | If the negotiations are successful with | our offering of nanomaterials for use in | customers’ when compared to our | | | | the European customer, in combination | sensing applications continues to | competitors. The in-depth nature of our | | | | with other revenues, we expect our order | progress from a single customer/single | technological insight also means that we | | | | book to rise to deliver similar services | product offering in early 2018 to a | do tend to “punch above our weight” in | | | | and material revenue to that seen | position today where we are engaged | terms of direct engagement with very | | | | in FY23. | with multiple customers and are working | large end customers and their | | | | | with many distinct materials and | technology teams. Conversely, given our | | | | The Board recognises that the adoption | | | Display (CFQD® quantum dots) | Board (“PTAB”) and the final outcome to | | | wavelength combinations. The | small scale, we work proactively to agree | | | | of nano-material technology has taken | | | | the litigation. | | | infographic also shows the advancing | commercial solutions of our customers to | Display materials remain a key focus | | longer than expected for both Nanoco position of a number of materials as they the issue of supply chain risk. for Nanoco. Independent market Applying quantum dots to micro-LEDs ## and its competitors, creating commercial We delivered all of the move through the steps from research supports a growing share of for small screen devices, such as smart challenges. Shareholders will be aware development towards final validation – quantum dot technology in the flat watches or phones, is becoming an challenging technical that development cycles for new the last step before commercial panel display market where consumer important focus for a number of industry advanced materials for use in consumer ## milestones set by our production orders are placed. and environmental concerns mean that participants. In such applications, the electronics can be very long: cadmium free solutions are much volume of quantum dots, as a ratio to ## For example, Samsung was working with customers for our preferred (source: Omdia, TDR). the area covered, is significantly higher quantum dots for over ten years before ## than in a film for a television. So, while high performing commercialising the technology, and QD The forecast combination of cadmium the end devices may be smaller, this is ## Vision worked for almost ten years to free systems taking a larger share of nanomaterials.” partly compensated for by the higher commercialise a technology that was the overall market, together with a fall concentration required. withdrawn after only one year. in Samsung’s relative share, is expected to create two opportunities for Nanoco: While legislative progress around the Restriction of Hazardous Substances  Firstly, as a manufacturer of cadmium (“RoHS”) in Europe continues to be free quantum dots (in our own facility frustratingly slow, a number of display which can be readily expanded); and makers appear to be pre-empting the  Secondly, as the owner of a validated legislative enforcement by exploring IP portfolio and process know how a move to cadmium free solutions. which is fundamental to the We have maintained our focus on our manufacture of cadmium free “dot only” strategy where we aim to quantum dots on an industrial scale. ® provide the highest performing CFQD Consumer device use of The licence taken by Samsung on our quantum dots. We retain our core cameras and imagers | | | | IP clearly demonstrates the broader | capabilities to deliver display R&D | | --- | --- | --- | --- | --- | | | | | need to access our IP and technology. | services, scale up and commercial | | | $ | 2,900m | This demand will grow over time, in line | production of material from our Runcorn | | | | | with the number of cadmium free display | facility. We will continue to adopt a dual | | | | | products sold in the market. With a firm | approach to commercial exploitation of | | | | | financial underpin, we now have the | our display materials, whether through | | $322m | | | option to self-finance the pursuit of those | licencing or material supply from our | | | | | who chose to incorporate our patented | own manufacturing capability. | Consumer device IP without entering into either a licence We remain well positioned to take use of imagers | Consumer device | | or material supply agreement with us. | advantage of any broadening in the | | --- | --- | --- | --- | | use of imagers | | | adoption of non-toxic quantum dots | | | $650m | As noted above, activity and new inbound | | by global display manufacturers when enquiries about display materials have ## $97m the opportunity arises. continued following our success with our patents at the Patent Trial and Appeal ### 2022 2028 ## 010 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 011 Strategic report ### Infinite possibilities ### Chief Executive Ocer’s statement continued Addressable display market for Nanoco CFQD and IP set to rise from ~6% to ~34% of the total TV market ## Investment in new material sets this Millions of TVs ## year has increased our customer 400 ## reach for new applications leading 350 300 ## to new R&D service income 250 200 150 100 50 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 l Non-QD l Samsung QD TVs l Other QD TVs We expect to deploy some of the ## Sensing goals: one material in production, a second validated Operations retained proceeds from the Samsung Leveraging intellectual property litigation to further reinforce and | The first half of 2023 saw further | | We continue to proactively manage | | | --- | --- | --- | --- | | | upgrade our production processes and | | Continued development of our sensing portfolio | | consolidation and re-organisation of | | our IP portfolio to maximise value and | | systems. As part of our quality equipment and processes in our protect our core competencies. management system we are Runcorn production facility, having We finished the year with 375 patents implementing electronic batch recording completed the exit from our Manchester and patents pending (2022: 503). The July 2023 NIR SWIR and line side systems to match our facility at the end of CY22. The display Group has retained its most strategic IP, position in important electronics supply facility in Runcorn was taken out of including both of the patents that had chains. As with our staffing profile, “mothball” and now hosts the R&D teams been scheduled to go to trial and two Wavelength < 1.0 m 1.0-1.3 m 1.3-1.5 m > 1.5 m we expect to increase our capital as well as our production capability for others included in earlier stages of the expenditure from the absolute minimum NIR SWIR ® CFQD quantum dots. We are seeing litigation (the ”patent families” of these levels of the last three years of the operational benefits of R&D, scale up four patents number 46 patents in total extremely tight cash management. and production teams all working in the covering various territories around This will proceed in parallel with projects Material A B C A B C A AB BC C same location. The financial benefits of the world). Only one of the five patents to deliver accreditation to ISO 14001 the Manchester exit have helped offset involved at the start of the litigation (the environmental standard) and ISO ### inflationary increases in salaries and was sold as part of the settlement Development 2 1 1 1 1 1 1 1 45001 (the health and safety standard). other input costs. (representing just one PTAB validated Both certifications are often expected claim from the total of 47). This patent The proceeds from the Samsung litigation fundamental requirements of our had an unfavourable outcome in the | have allowed us to expand our team in | customers in electronics supply chains. | | | | | | --- | --- | --- | --- | --- | --- | | | | Markman hearing. As a film patent, | Optimisation | | | | | | | | 1 | 1 | the second half of FY23. At the end of the After the year end we signed a new rolling it was also outside the scope of our year we had 46 staff (FY22: 39). The one-year licence to occupy additional “dot only” strategy. additional staff are largely in customer space in our Runcorn facility. That space facing or customer support roles which The remainder of the patents sold to is being used to create a small-scale Scale up were added in preparation for a Samsung (excluding the film family facility for device fabrication and a commercial production order. We also which had 23 patents), made up of 95 dedicated analytical laboratory. Both will added staff in key positions where we had individual patents, included patents for significantly increase the speed of new | been operating on a lean basis while | | applications such as Animal Husbandry, | | | | --- | --- | --- | --- | --- | | | product development as we will be able | | Validation | | | tightly managing our cash resources over | | which is not considered a high value | | 1 1 | to generate our own device performance the last three years. Our estimated market for Nanoco in the medium term. data on our new materials without having recurring cash cost base for FY24 is to wait on third party feedback. The new In summary, the sale of the IP is expected approximately £6.4 million which is just device facility will also support business to have minimal impact on Nanoco’s Production over half of the £11.0 million seen in FY19. development by allowing us to current or planned commercial activities. This reduction was achieved without losing demonstrate proven ‘in device’ In any case, the sale agreement also any of our core “dot only” capabilities. performance to potential customers. includes a licence back to Nanoco so that it retains the right to utilise the IP in those same patents if so required. The IP licence granted to Samsung is a non- exclusive licence and hence does not impede Nanoco’s current or planned commercial activities. ## 012 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 013 Strategic report ### Chief Executive Ocer’s statement continued Leveraging intellectual property Investing retained litigation proceeds People Outlook continued | | Given the promising opportunities facing | Our employees continue to provide | Over the last five years, Nanoco | | --- | --- | --- | --- | | We continue to preserve trade secrets | the Group, as outlined in the Reduction of | great service to our customers in | has grown from a “one customer, | | and have targeted our financial | Capital Circular issued on 20 June 2023, | delivering high quality materials on | one product” position for sensing | | resources on strategic areas such as | the Board intends to invest as follows: | time and achieving challenging | materials to multiple first and second | | infra-red sensing where there is a strong | | milestones and deliverables. As noted | generation materials for two global |  funding the Group’s commercial overlap with our core IP. These are also above, we have increased the number electronics supply chain companies, business activities until they become areas with clear future commercial of staff in the second half of FY23 to with reach to thousands of their own self-financing (expected in CY25); opportunities and benefits to be had reinforce our capabilities and to ensure customers. The focus of R&D activity from holding high quality patents.  pursuing a number of promising that the workload for staff has been narrowed to near-term investments in R&D to accelerate the is manageable. commercial opportunities and our fixed We have created a heat map of development of new generation cash cost base has been carefully potential infringers. That heat map then Our Employee Voice Committee (“EVC”) sensing materials; managed. The successful completion of guided our analysis towards a sample of has been very active throughout the year the Samsung litigation will deliver a net devices from the more promising  capital investments to improve to support the Group and all staff on $90 million of proceeds by February 2024. opportunities. We have now engaged production efficiency; matters of stress, mental health and with a number of potential infringers to general well-being at a time of We are also seeing growing interest  capital investment to expand our ® explore options for commercial significant change and uncertainty. in CFQD quantum dots for use in footprint at Runcorn by creating | engagement. Further information is set | | | the display industry and are engaging | | --- | --- | --- | --- | | | in-house device capability; | During the year the majority of staff | | | out on pages 18 to 19. If significant and | | | cautiously with market players other | have been trained on LEAN techniques costly litigation is eventually required, the  self-financing the IP licencing than Samsung who already participate to improve problem solving and quality Group will have the option to self-finance programme while retaining ownership in or are seeking to enter the QD display control processes. All staff are also any legal action for a higher return or and control of the Group’s core IP market. This extends to interest in Gen 2 actively engaged on health and safety once again use third party financing for which also includes significant QD displays as well as displays utilising initiatives to improve our working a lower return but with lower risk. know-how and trade secrets; micro-LEDs. environment and reduce the overall risk |  paying off the Group’s entire current | environment. We will continue to invest in | At this time, the Board expects Nanoco’s | | --- | --- | --- | | borrowings (approximately £5.0 | further training and development for all | first commercial production order before | | million) to become debt-free; and | staff as part of their career development | the end of CY23 and expects the first | | | and our staff retention aims. This includes | order to be for a low volume application |  the Group will also maintain a cash general management training that feeds (measured in millions of sensor units; buffer for working capital and to into succession planning. mid-volume would be tens of millions mitigate the risk of unforeseen events. and high volume would be hundreds Retaining and incentivising our highly of millions). skilled team is key to delivering organic Environment/Restriction of value and growth from the business. We Once the material has been adopted Hazardous Substances (“RoHS”) have awarded a general cost of living in the technology ecosystem for one ## We continue to increase for all staff for FY24 of 5% of application by one end customer, We previously reported that the European Commission (“EC”) received salary (excluding the Executive Directors our expectation is that customers ## strengthen our | | a recommendation that the exemption | who are receiving 3%). We are also in the | and applications will increase towards | | --- | --- | --- | --- | | operational capabilities | to allow cadmium (>100 ppm) in QD films | process of arranging a workplace health | the goal of a high volume mobile | | | for display is no longer justified and | programme for all staff that has an | phone application. | ## to assure our critical should be phased out by 31 October equivalent cost of 1% of salary. In The significant investment by our ## place in complex global 2021. Progress in implementing legislation combination with the review of customers in Nanoco materials as part | | to enforce this recommendation has | comparative salaries against national | | | --- | --- | --- | --- | | supply chains for | | | of their their production and marketing | | | been slow. It therefore seems likely that | benchmarks (excluding London) in FY22, | | efforts strongly support this view. In any European consumers will continue to we believe that all staff are now paid ## electronic devices.” event, Nanoco already has the flexibility, be exposed for some time to the known around median salaries or higher. Upside capability and capacity to meet low hazards of cadmium in televisions that potential comes from bonuses linked to and high volume demand and everything Company-wide performance objectives exceed the limits shown above. in between. covering revenue, health and safety, In December 2022, the EC received quality, and LEAN improvement The Board is confident that near-term further recommendations that: initiatives. All staff are also eligible to opportunities for commercial production participate in the Group’s Deferred of sensing materials, growing interest in  a request to allow cadmium Bonus Plan and Long Term Incentive Plan. the Group’s display materials and the (> 100 ppm) in solid-state lighting should be denied; and potential for leveraging the Group’s IP We will review other benefits options portfolio will deliver increases in and further potential improvements  a new exemption should be granted shareholder value in the short to medium to pension contributions as our financial for on-chip QD applications until term. We remain focused on our goal situation improves and when the 30th November 2027. of becoming a self-financing producer Company becomes self-financing Ahead of nations passing the required of high performing nano-materials. in its organic operations. legislation, a number of display | manufacturers appear to be anticipating | Brian Tenner | | --- | --- | | the phasing out of cadmium from | Chief Executive Officer | | QD displays and Nanoco has received | 19 October 2023 | inbound enquiries in this field. ## 014 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 015 Strategic report ### Our markets ## Display markets ## Significant potential for revenue ## generation from multiple ## commercial markets Evolution of the flat panel TV market Other QD display devices m 0 0 , 9 2 $ Millions of TVs Millions of units 8 2 0 400 800 2 ## Sensing markets 350 700 300 600 ## $2,074m +86% 250 500 CAGR 26-28 ## $395m +28.3% 200 400 Market forecast m CAGR 22-28 Cameras and modules 2 2 3 150 300 $ Key 2 2 | l Defence, aerospace | 0 | | | 100 | 200 | | --- | --- | --- | --- | --- | --- | | | 2 | | $19m | | | | and research | | | +41% | | | | | | $405m | CAGR 26-28 | 50 | 100 | l Industry | | $228m$89m | +10.1% | | | | | --- | --- | --- | --- | --- | --- | | l Medical | | CAGR 22-28 | $7m | | | | | | | +5% | 0 | 0 | | l Consumer | | | CAGR 22-28 | | | 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 l Automotive $5m l Non-QD l Samsung QD TVs l Other QD TVs l Monitor l Laptop l Tablet/Phablet l Other Source: Yole Applications Applications ADAS Smart watchSecurity & TVFace / Iris TabletsAgricultural Phones HeadsetsQuality control MonitorsWearable recognition drones systems diagnostics surveillance Independent market researchers Yole Group estimate 6.1% Yole predict the adoption of SWIR technologies in high The current market for flat panel TVs is approximately suggests that number of cadmium based units is expected to compound annual growth rate for CMOS (complementary end mobile phones during 2026 and penetration to higher 250 million units per annum and is forecast to grow to over fall significantly, reflecting toxicity and environmental concerns metal oxide semiconductor) Image Sensors in the six years volume phones in 2028, helped by under-display capability 300 million units by 2030. (“RoHS”) in various territories. 1 to 2028 to reach approximately $30 billion . During the same (equivalent to 86% CAGR between 2026 and 2028 to reach During the same period, the market share for displays Samsung’s relative share of the market is also forecast to period, they forecast an increasing share of that market $2.1 billion for 3D sensing modules). This research is consistent containing quantum dots is forecast to grow from over 15 decline over the same period. for 3D sensors and multi-spectral cameras where the with Nanoco’s view that initial use cases in 2024 will be for low million TVs (6% of the market in 2022) to over 100 million TVs by performance of these devices can be significantly volume applications outside mobile phones. Nanoco’s existing 2030 (35% of the forecast market). Based on market research, enhanced by the integration of quantum dots. Runcorn production facility has capacity to produce sensing the Company estimates that approximately 90% of the QD TVs materials for hundreds of millions of CMOS sensors. The Group’s QD enhanced CMOS sensors operating at SWIR (“Short Wave sold today are cadmium free, reflecting Samsung’s market position in the supply chain has contractual protection to Infra Red”) wavelengths are the most viable alternative to dominance. Within the QD TV market, the market research mitigate the risk of a competitor becoming a major supplier extremely expensive Indium Gallium Arsenide (“InGaAs”) sensors to our European customer. 2 for use in consumer electronics. According to Yole , “Quantum dots appear to be the most well-positioned technology for potential integration in consumer devices”. 1 “Yole” – Image Sensors Europe 2023. 2 “Yole” – SWIR Imaging 2023, Market Technology Report. ## 016 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 017 Strategic report ### IP monetisation ## Delivering value from our ## IP requires two things: ## 1. Commanding patent portfolio 2. Deep and impacted market PTAB validated four retained patents | Retained litigation claims | | | Remaining patent lives | Key: l Lawsuit l Lawsuit reserve l Other | Forecast QD TV market Analysis of potentially | | Value chain analysis | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | Millions of TVs Gross ‘value’ to each player | infringing products | | | | | | 25 | | 80 | 16 | 100% | | | | | | | 70 | 14 | | | | | 1 | 20 | | | | 80% | | | | | | | 60 | 12 | | | | | | | | 50 | 10 | | | | | | 15 | | | | 60% | | | Number of | | | | 40 | 8 | | | | | claims | Time to expiry | | | | | | | | | 10 | | | | 40% | | | | | | | 30 | 6 | | | | | | | | 20 | 4 | | | | | | 5 | | | | 20% | 46 10 2 0 0 0 0% Retained 1 53 106 159 212 265 318 375 20 21 22 23 24 25 26 27 28 29 30 Sold Year To do Brand QD Co Film Co No QDs Retailer Suspects Panel Co Cadmium Tear downs Cadmium-free Settlement Infringement heat map | | $150m | | | Initial engagement, | Direct engagement | | | --- | --- | --- | --- | --- | --- | --- | | | | | | seek collaboration | | in near term | | Strong case for enforcement | Leveraging Samsung litigation | Expert working group | Summary | | | | | As a UK-based business specialising in | The experience gained by the Nanoco | Nanoco continues to monitor the market | Nanoco is focused on maximising | | | | | the design, scale up and manufacture | team during the Samsung litigation, | for potential infringement of our IP. | value from our IP portfolio. Whilst we | | | | | of novel nanomaterials, we will continue | combined with our retained experts, | | have already settled with the largest | | | | Our expert team is made up of internal to take steps to protect our platform is a strong platform for delivering further manufacturer of cadmium-free quantum staff and external advisers. | technology and our IP portfolio. | value from our IP portfolio and ensuring | | dot televisions, as the market develops | | --- | --- | --- | --- | | Following the validation of all 46 claims | that income is for the benefit of Nanoco | We have identified a number of | there will be more opportunity for | | in the four retained patents by the | and its shareholders. | potential infringers as shown in the | licensing or potential litigation. | | Patent Trial and Appeal Board and the | | heatmap opposite. | | | | The $150 million agreement with | | We will also continue to build our IP | subsequent licensing of our remaining Samsung to settle the litigation also sets We have analysed a range of consumer portfolio to ensure future technological patent portfolio by Samsung, the group Value to pursue (today) a precedent for future discussions with devices available in the market to focus developments are protected. is confident in the applicability of our IP potential infringers. on devices and manufacturers most likely to other participants in the cadmium- As QD TVs capture a larger share of to be infringing our IP. free quantum dot display market. the total flat panel TV market and as more market participants build market presence, we see a significant opportunity to generate income Monitor activity Initial engagement, by aggressively enforcing our IP. await volume growth Probability ## 018 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 019 Strategic report ### Revenue streams Section 172(1) statement ## All revenue streams can contribute How we engage with ## to our growth our stakeholders following key areas: health, safety and environment; Products Services Licences Section 172(1) report whistleblowing; anti-bribery and corruption; human rights; and modern slavery. The environmental, social and governance Our Runcorn facility has the capacity to Our highly skilled R&D and scale up When a channel partner initially acquires In line with section 172(1) of the Companies Act 2006, the (“ESG”) disclosures section of the Directors’ report, from pages ® make high volumes of CFQD quantum teams are able to design, develop a right of access to or use of Nanoco Directors of the Company must act in a way which they 38 to 45, provides further insight into measures put in place by dots and HEATWAVE™ nanomaterials for and scale new materials for customer- technology and IP, it typically pays a consider, in good faith, would most likely promote the success the Board to assist with maintaining a reputation for high IR sensing applications. The revenue specific applications. We are able to one-off licence fee. These fees reflect of the Company for the benefit of its members as a whole, and business conduct standards. generation capacity can be easily charge customers for professional the costs already previously incurred in doing so must have regard to a number of other key matters. scaled by adding additional shifts with services when we carry out these by Nanoco in developing our technology Acting fairly between members of the Company (s.172(1)(f)) Likely long-term consequences of decisions (s.172(1)(a)) the overall potential return on the asset sorts of development activities for and IP and hence represent a return on The Directors also have regard to the need to act fairly base being attractive, and benefiting them with rewards often linked to those historical investments. Success in Given the nature of the business, the Board takes a medium- between members of the Company, aiming to understand strongly from operational leverage if achieving technical milestones or the Samsung litigation has increased term approach to its decision making to ensure that the their views and act in their best interests. The ownership of extra shifts and volumes are added. outcomes. The last two financial the potential of this income stream. Company is able to deliver its strategy of creating value the Company follows a “one share, one vote” structure, which Revenue potential: HIGH. years have seen significant revenue Revenue potential: LOW. for all of our stakeholders. Risk management is also key to assists with promoting parity in shareholder rights. The Board generated in this area. Revenue understanding the likely consequences of actions. ensures that there is fair and equal dissemination of information potential: LOW. Royalties The Board plays a key role in reviewing the Company’s to all shareholders and has a dedicated Investors section on approach to risk, including an assessment of its emerging the Company’s website which is available to all shareholders. As well as the ability to make and sell and principal risks. See pages 33 to 35 of the Strategic report materials directly to our customers, This provides easy access to RNS announcements and reports for a description of the identified risks and how these are the agreements with our channel and publications. All members are invited to attend the Annual being controlled or mitigated. partners allow them to manufacture General Meetings of the Company, offering an opportunity for or distribute our materials themselves Given the group’s finances, the Board has been continually members of any size shareholding to have a conversation with, and then pay a royalty on the value reviewing the Company’s current and forecast financial position. and ask questions to, each of the Directors. For any Annual of their sales to their customers. This year the Directors selected a four-year timeframe over which General Meetings where in-person attendance is prohibited This revenue stream has the potential to assess the viability of the Company. The Viability statement due to the Government’s regulations, all shareholders will be for high leverage since it is not can be found on pages 36 and 37 of the Strategic report. offered the opportunity to submit questions to the Board ahead constrained by manufacturing scale of the meeting with answers being made available to them. Maintaining a reputation for high standards of business and also has minimal costs associated conduct (s.172(1)(e)) Having regard to specific stakeholder groups (s.172(1)(b) ### Products with incremental sales via this channel. to s.172(1)(d)) Success in the Samsung litigation has The Company has in place a Code of Conduct which acts as increased the potential of this income a guide for employees to do the right thing. The Company also The table which follows on the next page seeks to stream. Revenue potential: MEDIUM. has well-embedded policies in place which assist with ensuring provide insight into how the Board carries out its duty high standards of conduct, including with respect to the under this section. ### Case studyCase study Key Samsung settlement Move to Runcorn and investment in Runcorn infrastructure l Low - < £5m per annum | | | | | | Background | | Background | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | l Medium - < £10m per annum | | | Our | | | | | | | | Services | | | Royalties | | | | | | l High - > £10m per annum | | revenue | | | The Company agreed a settlement with Samsung | | Management decision to consolidate operations in Runcorn | | | | | | | | s.172 factors considered: | | s.172 factors considered: | | | | | | | | |  Long-term consequences: The cash resources underpin | |  Long-term consequences: The new facility has been | | | | | | | | the Company’s future commercial prospects | | updated to provide better facilities for staff | | | | | | | |  Interests of shareholders: The cash removes uncertainty | |  Interests of the Company employees: Staff were | | | | | | | | around the future of the company, with no further equity | | consulted on what they wanted in the facility. | | | | | | | | fundraises required, and provides a return of capital | | The expanded facility preserves R&D, scale up | and production capability to generate value Licences  Interests of the Company employees: The cash resources received and to be received significantly mitigates the  Impact on customers: The improved meeting rooms risk of further redundancies and offices provide Nanoco with somewhere to facilitate customer visits  Impact on customers: Customers have increased faith in Nanoco as a supplier  Impact on community: Increased jobs in the local area  Impact on suppliers: Suppliers can offer improved terms to Nanoco ## 020 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 021 Strategic report Strategic report ### Section 172(1) statement continued Having regard to specific stakeholder groups (s.172(1)(b) to s.172(1)(d)) continued Why we engage How we engage and respond Impact of engagement Engagement during the year  To enable shareholders to understand  We build relationships with our investors  We aim to create long-term investor value,  We engaged openly with shareholders through analyst briefings and Nanoco’s strategic aims and results through our investor relations activities through growing from an R&D services subsequent Q&A sessions business to a commercially viable niche  To help shareholders to understand  In our Annual Reports, we update all  We expanded engagement in Investor Meet Company presentations production company management’s aims, responsibilities and stakeholders on our strategic progress,  We ensured an open forum at the general meetings held during the year Shareholders incentive structures and explain any financial implications  The successful conclusion to the  Following the requisitioning of a general meeting, we met with a number Samsung litigation provides a means  To help shareholders to understand our  We consider investor feedback, and what of shareholders to listen to their concerns and we will look to address to return capital to shareholders in the commitment to our staff, communities impact this may have on the business these going forward short term and the wider environment  To ensure employees feel valued for  We communicate key decisions and  Our employees feel empowered to achieve  We ran our third successive annual engagement survey to solicit their contribution collaborate through our Employee Voice solutions to problems employee feedback. We continue to build on this feedback Committee, which includes a Director  To empower our employees  Our employees feel more valued and  We held a number of all-Company days to explain our Company strategy Employees  We give them the tools to work effectively aligned to the business to employees  To enhance our employees through training and progression  We encourage our employees to provide  We improve as our employees improve  We set our employee targets in line with corporate goals solutions to problems  We consulted on further remuneration proposals through the EVC  To ensure we can provide the best service  We ensure open and constant communication  We build strong relationships with  Through the year, we actively engaged in weekly technical updates to aid and products possible, to meet the with customers, to ensure our products and customers, who believe in the capabilities development and collaboration customers’ needs services are world leading of our platform technology and our  We discussed openly any logistical challenges due to import/export Customers employee expertise  To protect our customers’ technology  We welcome feedback from customers, regulations, helping customers with their own compliance goals and work collaboratively to achieve our  Our customers trust us to be able to  To ensure we are complying with customers’ goals meet their requirements to create regulatory requirements world-leading products  To develop long-term, collaborative  We create close collaborative working  This helps us to attain best value from  We performed audits on suppliers to ensure their compliance with legislation partnerships for key, difficult to source relationships with key suppliers, to ensure clear our supply chain, and mitigates the risk  We engaged with a number of suppliers on the qualities of our raw materials communication, active issue resolution and of a breakdown in process negatively materials, and considered their impact on our products for our customers effective qualification of products impacting the business Suppliers  To mitigate the risk of not being able to  We maintained dialogue on the availability of raw materials, and took succeed commercially  We encourage open engagement,  Through regulatory checks, we ensure our action when there was a risk this could be compromised to ensure compliance with the relevant suppliers are complying with regulatory  To comply with regulatory requirements  Some supply chain issues have been experienced, but the impact of regulatory requirements requirements, e.g. payment of minimum wage these has been mitigated through close collaboration with suppliers  To ensure compliance with regulatory  We review our operations periodically to  Compliance with regulatory requirements  Post year end, we completed our ISO 9001 recertification requirements ensure compliance with regulations enables the business to operate in a safe  We constantly reviewed operating procedures to ensure best practice manner, protecting our employees and the  To protect our staff and communities  We actively maintain standards through  We continued engagement with European RoHS regulators to remove Regulators wider communities external reviews (e.g. ISO 9001 accreditation)  To ensure best practice exposure to toxic cadmium from EU customers  To make a meaningful contribution  Our Employee Voice Committee (“EVC”) looks  Our EVC look at ways in which we can have  We held a number of Company events, organised by the EVC, to the community at ways in which we can help the community a positive impact on the local community which benefitted the communities  To create a positive working culture  We invite both members and non-members to  Being involved with the local community  Provided matched fundraising Community ask questions at our general meetings improves morale across the employees,  To attract and retain talent  Allowed employees to donate blood during work time and improves external perceptions of Nanoco as a company  To improve our ESG credentials  We have engaged an external party to review  To reduce carbon emissions as a result of  We have looked at purchasing raw materials in bulk to reduce our materiality assessment business activity emissions from deliveries  To mitigate environmental damage from business activities  We are reviewing our ESG strategy  To ensure waste is recycled where possible  We discussed a number of ESG projects with landlords (such as installation of electric car charging points)  Looking at ways of reducing our  To improve our impact on the environment Environment environmental footprint  We have implemented a process to consolidate waste to reduce emissions from deliveries and excess packaging  Ensuring we recycle as much waste as possible  Engaging with our landlord to make facilities more environmentally friendly ## 022 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 023 Strategic report ### Our business model | | | Platform technology | Employees | | --- | --- | --- | --- | | Our platform technology | About our business model | | | | | | Our nanomaterials have a wide range | Our staff are highly skilled in a | | | Our business model has a number of | of electronic properties, usually | number of specialist areas. There are | | is the basis for our growth | key strengths. It also enjoys a diverse | opto-electrical in nature. These include | 13 employees with PhDs and other | | | range of potential income streams. | absorption of different forms of energy | postgraduate qualifications. In R&D | | | This was amply demonstrated over the | and its emission and potentially its | our expertise ranges from chemistry to | ## and commercialisation last two years where services income conversion to a different form of energy physics. Staff are also adept at taking featured strongly compared to previous (electricity to light, for example) or a lab scale processes and scaling them years. Our over-arching medium-term different variety of the same energy up to industrial production scale. We also ## is the ultimate goal for goal is to maximise our revenue from (blue light to green light, for example). have strong process improvement and direct product sales. yield optimisation skills that improve both One specific class of our materials is our ## all stakeholders production volumes and our input costs. ® Intellectual property (“IP”) CFQD quantum dots that avoid the use We further invest in our employees of toxic cadmium in display applications. IP and process technology know-how through training to ensure they are The same absence of toxic chemicals Intellectual are foundational assets for the group developing their capabilities further. means we can also develop dots that property and a key strength. Our technology is can be applied in life sciences Production capacity heavily patented to secure its use for the Deep IP portfolio, applications for use in the human body, a key investment group. New IP is continually generated Our Runcorn production facility has two although this is not currently something proposition through our R&D activities and all distinct production labs. One is focused the Group is working on. ® potential patents are reviewed by our on CFQD quantum dots for use in internal Patent Review Board for Expertise and agility display. The other facility is focused on commercial value before being filed. nanomaterials for use in infra-red sensing We take advantage of our extensive We continue to strengthen our IP position applications. In combination they create technical expertise and agile workforce by patenting technology we believe will an extensive revenue-generating to be able to respond to complex and Platform have real commercial value in the future. capacity for the group through direct challenging customer requirements. technology product sales to our customers. It is worth noting that on top of our We can also do this much faster than High performing The nature of the facilities means they E M P formal IP portfolio, we also have many of our competitors. Whilst L O nanomaterials also deliver strong operational leverage Y significant know-how around our development cycles may take a number E E if additional volumes are added with S methods and processes. We tend to of years, we believe our expertise in additional shifts, and we continue to hold this information as commercial these areas mean we can solve technical identify ways to improve our efficiencies. secrets rather than as formally challenges quickly to develop and scale registered IP. up novel new nanomaterials. E Expertise S I S E T ### R T E C H Our platform and people ### E S M N ### E R O S R P deliver novel solutions to ### E O L ### N X F O ### E M E T new application challenges ### G ### C O A ### I T L Y L Agility ### S P U INTELLECTUAL R E C PROPERTY Broad skill set and agile N D team structures enable rapid T R N resource pivot to alternative A A A P G commercial opportunities L I T I Y Licence partners Major channel partners with global reach to multiple S markets and applications N I O T A Employees E R P O Highly skilled staff with extensive technical knowledge and flexible skill set Operations Installed asset base capable of generating significant revenue in multiple markets Operator assessing the performance of raw materials. ## 024 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 025 Strategic report ### Our strategy ## Our “dot only” strategy ## 1 2 3 ## delivers world-class ## Growth Investment IP monetisation ## nanomaterials for Objective Objective Objective ## our customers  To become a full service  To maintain our competitive  To utilise our core IP to generate production company advantage future revenue streams  To become self-sustaining  To continue investing for future financially product pipeline ## Our IP and staff ## ensure we continue How How How  Own manufacture and direct  Continuing to create and patent  Assisting licensees in maximising ## to be at the forefront supply to customers new IP with clear short to their manufacturing opportunities medium-term commercial  Non-exclusive technology  Potential litigation against opportunities ## of quantum dot licensing infringers of our IP  Continuing to develop in-house  Professional services manufacturing capabilities ## advancements  Royalty income Future focus Future focus Future focus  Converting current opportunities  Continuing to invest in R&D in  Giving partners the best into revenues with a strong order to remain at the forefront performing dots emphasis on nanomaterials of this technology  Identifying companies which  Exploring opportunities with a  Exploring ways to open up new may be infringing our IP number of potential customers market opportunities KPIs KPIs KPIs  Revenue  Year-end cash and cash burn rate  Investment in R&D  EBITDA  Investment in R&D  Portfolio of patents and patents pending  Billings  Portfolio of patents and patents pending Risks Risks Risks  Strategic  Strategic  Strategic  Operational  Compliance  Financial ## 026 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 027 Strategic report ### Our key performance indicators ## We have made strong progress ## in safeguarding the future of the ## Company and delivering value to Key Strategy link ## shareholders in the medium term | 1 | Growth | | --- | --- | | 2 | Investment | | 3 | IP monetisation | Revenue Adjusted LBITDA Year-end cash Billings Investment in R&D Portfolio of patents £ million £ million £ million £ million £ million and patents pending Number of patents 1 2 ## £5.6m (£0.4m) £8.2m £63.0m £1.8m 375 ## +128% +83% +21% +2,233% 2% (25%) | 2023 | 5.6 | 2023 | (0.4) | 2023 | 8.2 | 2023 | 63.0 | 2023 | 1.8 | 2023 | 375 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 | 2.5 | 2022 | (2.3) | 2022 | 6.8 | 2022 | 2.7 | 2022 | 1.8 | 2022 | 503 | | 2021 | 2.1 | 2021 | (2.8) | 2021 | 3.8 | 2021 | 1.7 | 2021 | 2.2 | 2021 | 559 | | 2020 | 3.9 | 2020 | (2.9) | 2020 | 5.2 | 2020 | 2.5 | 2020 | 3.1 | 2020 | 731 | | 2019 | 7.1 | 2019 | (3.8) | 2019 | 7.0 | 2019 | 9.6 | 2019 | 4.4 | 2019 | 745 | Measurement Measurement Measurement Measurement Measurement Measurement The value of goods and services Operating profit excluding Cash and cash equivalents. The value of invoices raised during The sum of all costs incurred in The group’s IP lawyers report recognised as income in accordance exceptional items, share-based the year for goods and services research and development activities. monthly on patents granted This reflects current monthly gross with IFRS 15 Revenue Recognition. payment charges, depreciation delivered or to be delivered to This includes salary costs and other or filed in the respective patent cash consumption before revenues Grant income is also important and amortisation. customers including those relating direct R&D costs. offices in various countries. and other receipts. and included under other to the sale of IP (excluding VAT). Why it is important Why it is important Why it is important operating income. Why it is important Why it is important Reducing LBITDA is a critical Nanoco prides itself on the scale Our IP portfolio is a key strength Why it is important The business operates on a cash medium-term goal as it Billings are a useful indicator of both and quality of its R&D efforts – of Nanoco and a strong reason consuming basis and this blended Revenue (and its change year on demonstrates progress towards the current and future revenue. which feed its IP portfolio and also to invest. It supports our efforts to KPI indicates the duration of year) shows the speed with which the organic business being self-funding. commercial opportunity pipeline as monetise our investments in R&D. funding visibility. What it means business is growing or contracting. it develops new materials for potential What it means What it means What it means Billings are a leading indicator of future new markets and applications. What it means The group’s LBITDA is a very good revenues and cash flows. This year, an The overall quality of our IP portfolio In combination with the group’s What it means In combination with gross margins proxy for its organic cash flows and element of the billings to Samsung will continues to improve. We continue operating plans and budgets, and overheads it shows whether shows how close the group is to be deferred and the income R&D spend is a leading indicator of to proactively review the portfolio for the current balance underpins the group is getting closer to the being self-financing. recognised over future periods. new product development. It also relevance and value. As our business the Directors’ going concern targeted breakeven position. impacts potential customer pipelines. focus changes this can lead to a Impact of Samsung settlement and viability statements. Impact of Samsung settlement decision to allow no longer relevant | Impact of Samsung settlement | | | | Impact of Samsung settlement | | | --- | --- | --- | --- | --- | --- | | | The IP licence income during | Impact of Samsung settlement | Billings to Samsung in the year | | IP to lapse. | | The IP licence income during | the year, relating to the Samsung | | totalled $75 million (£60.9 million). | No impact. | | | | | The Group retained £4.5 million from | | | Impact of Samsung settlement | | the year, relating to the Samsung | litigation, contributed £3.0 million | | | | | | | | the first Samsung payment. | | 2 Includes £0.5 million in Cost of Sales due | | | litigation, contributed £3.0 million | to EBITDA. | | | | The Group sold 118 non-core patents | to reallocation within Income Statement. to revenue. to Samsung. 1 Calculation provided on page 31. Strategy link 31 Strategy link 1 Strategy link 21 3 Strategy link 1 Strategy link Strategy link 2 3 2 3 ## 028 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 029 Strategic report ### Financial review ## Financially underpinned ## group with growth ## opportunities 2023 2022 ### Highlights £ million £ million % change Impact of the Samsung settlement in the year Revenue 5.6 2.5 128% Other operating income 0.2 0.4 (36%) ## £3.0m £68.7m Adjusted LBITDA (0.4) (2.3) 83% Liam Gray IP license revenue Profit on sale of IP Net profit/(loss) 11.1 (4.7) 236% Chief Financial Officer Profit/(loss) per share (p) 3.44 (1.52) 226% ## Billings 63.0 2.7 2,233% (£49.3m) £60.9m Cash and cash equivalents 8.2 6.8 21% Settled litigation costs Billings | | | Revenue increased by £3.1 million to | Billings including those to Samsung | | The Company has £30.8 million of | | --- | --- | --- | --- | --- | --- | | Summary | | £5.6 million (2022: £2.5 million). | increased by £60.3 million to £63.0 million | Non-GAAP measures | accumulated losses to offset against | | | | The increase is due to the licence | (2022: £2.7 million). Excluding the impact | | future profits. | | |  Revenue increased by 128% to | | | The non-GAAP measures of adjusted operating loss and adjusted loss before | | | | | agreement signed with Samsung | of any Samsung related billings, billings | | | | | £5.6 million (2022: £2.5 million), | | | interest, tax, depreciation, amortisation, share-based payment charges and | | | | | which contributed £3.0 million, with the | were £2.1 million which is lower than | | | | | driven by the licence income | | | exceptional items (“LBITDA”) are provided in order to give a clearer understanding | Cash flow and balance sheet | | | | remaining revenue largely related to | revenue due to the invoicing profile | | | | | from Samsung. | | | of the underlying loss for the year that more closely reflects the recurring operational | | | | | the ongoing project with the European | of the agreement with the European | | During the year cash, cash equivalents, | cash flow of the business. The calculation of non-GAAP measures is shown in the  The sale of non-core IP to Samsung electronics customer. electronics customer. deposits and short-term investments tables opposite and below: | in the year generated a one-off | | | | | | | increased to £8.2 million (2022: £6.8 million). | | --- | --- | --- | --- | --- | --- | --- | --- | | | The sale of products and services | Other operating income generated | | | | | | | profit of £68.7 million | | | | 2023 | | 2022 | The net cash outflow, excluding the net | | | rendered accounted for 45% (2022: 96%) | £0.2 million (2022: £0.4 million) and | | | | | | | | | | £ million | | £ million | | cash flows related to the Samsung | |  Litigation related costs of | of revenue, with the balance being | related to two ongoing projects with | | | | | | settlement in February 2023 (£4.5 million £49.3 million were recognised licence income (including Samsung Innovate UK. Operating profit/(loss) 15.0 (4.8) inflow after fees), was £3.1 million in full in the year income in FY23). Revenue from services Settled litigation costs 49.3 — During the year, the group sold non-core (2022: £2.4 million outflow). The increase has increased from £1.6 million to £1.7  Adjusted LBITDA has reduced IP to Samsung which generated a profit Profit on sale of IP (68.7) — in cash outflows reflects increases in the million due to the continued work with | to £0.4 million (2022: £2.3 million) | | on disposal of £68.7 million (2022: £nil) as | | cost base, with an increase in headcount | | --- | --- | --- | --- | --- | | | the European electronics customer. | | Requisitioned general meeting 0.5 — | | | excluding the profit on disposal | | part of the settlement of the Samsung | | in the second half of the year, inflationary | Revenue from the sale of development of IP, reflecting the additional litigation. As part of the agreement, Foreign exchange 1.7 (0.2) pressures, one off costs including the products was £0.9 million (2022: revenue in the period Nanoco dismissed its litigation against Share-based payment charge 1.0 0.6 requisitioned general meeting, £0.8 million). | | Samsung, and incurred litigation-related | | and investment in capital expenditure | | --- | --- | --- | --- | |  Nanoco retained £4.5 million of | | Employer’s NI on SBP (0.2) 0.3 | | | | costs of £49.3 million. | | compared to FY22. Tax credits of | the first tranche of cash received | | | Depreciation 0.6 0.5 | | | £0.5 million (2022: £0.7 million) were | | --- | --- | --- | --- | --- | --- | | from Samsung after paying all | There were a number of significant one-off costs in the financial year ended 31 July | | | | | | | | | 1 | | received during the year. | | litigation related costs | 2023, shown below | Amortisation | | 0.4 1.3 | | Expenditure incurred in registering Adjusted LBITDA (0.4) (2.3) 2023 2022 patents totalled £0.1 million £ million £ million (2022: £0.1 million). Capitalised patent 1 Includes impairment of intangible assets. R&D expense 1.3 1.3 spend is amortised over ten years in line The finance expense in the year of £5.5 million (2022: £0.5 million) included a one-off Administrative expenses 57.4 5.4 with the established group accounting contingent interest payment of £4.7 million against the outstanding loan notes in policy. During the year, the group Total operating expenses 58.7 6.7 relation to the successful conclusion of the Samsung litigation. disposed of patents with a net book Settled litigation costs (49.3) — The profit before tax was £9.6 million (2022: £5.2 million loss), with the improvement value of £0.3 million as part of the driven by the sale of IP during the year, contributing a profit of £68.7 million, offset by Samsung settlement. Foreign exchange on USD balance (1.7) 0.2 the litigation costs of £49.3 million and contingent interest of £4.7 million. During the year, an IP impairment charge Share-based payment charge (1.0) (0.6) of £0.1 million was recognised Employer’s NI on SBP 0.2 (0.3) Taxation (2022: £0.9 million). This reflects the Requisitioned general meeting (0.5) — continued rationalisation of the patent The tax credit for the year was £1.5 million (2022: £0.5 million). This comprises of a UK portfolio to ensure the remaining patents Adjusted operating expenses 6.4 6.0 corporation tax charge of £1.0 million (2022: £nil) and an overseas corporation tax are commercially viable in the short to charge of £0.3m (2022: £nil), offset by a R&D tax credit of £0.3 million (2022: £0.5 medium term. Total adjusted operating expenses increased on prior year to £6.4 million million) and the recognition of a deferred tax asset of £2.5 million (2022: £nil). In (2022: £6.0 million). Savings from the completion of the exit from the Manchester addition, the Group incurred withholding tax in Korea of £2.3 million in the year, premises in November 2022 were offset by an increased headcount, which at year which has been recognised as an asset as it can be offset against future profits. end totalled 46 (2022: 39), and additional inflationary cost increases across the group. ## 030 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 031 Strategic report ### Financial review continued Principal risks and uncertainties 2023 2022 Billings reconciliation £ million £ million ## Managing risk is key to the delivery Revenue 5.6 2.5 ## Movement in deferred income 23.3 0.2 of the group’s strategic objectives Billings on sale of IP 34.5 — FX movement between billing and recognition (0.4) — In common with all businesses at Risks are evaluated with respect to Billings 63.0 2.7 Nanoco’s stage of development, the the probability of occurrence and the Other principal risks group is exposed to a range of risks, potential impact if a risk crystallised. Risks are broadly categorised as some of which are not wholly within our Where the group has identified risks, strategic, operational, financial or control or capable of complete mitigation these are monitored with controls and compliance. The table overleaf focuses or protection through insurance. action plans to reduce the probability of on those risks that the Directors believe a risk crystallising and the impact of each Specifically, a number of the group’s are the most important currently faced potential event if it did occur. The residual products and potential applications are by the business. Other risks may be risk score, after mitigating controls, Cash flow and balance sheet Credit risk Macroeconomic factors at an early stage in their development, unknown at present and some that are is then plotted on a “risk heat map”. | continued | | | or still being validated by customers, | | currently rated as low risk could become | | --- | --- | --- | --- | --- | --- | | | The group only trades with recognised, | We continue to see inflationary pressures | | The group’s principal risks are shown on | | | | | | and hence it is not possible to be certain | | more material risks in the future. | | Expenditure on tangible fixed assets | creditworthy third parties. Receivable | on raw materials. We attempt to mitigate | | the heat map below and are discussed | | | | | | that a particular project or product will | | The group’s risk management process | | increased to £0.3 million (2022: £nil) | balances are monitored on an ongoing | these by regularly reviewing suppliers | | in further detail in the pages following. | | | | | | lead to a commercial application. | | tracks risks as they evolve and change. | | as the Company improved its Runcorn | basis and any late payments are promptly | where possible, negotiating with new | | | | Other products require further infrastructure. investigated to ensure that the group’s suppliers and trying to achieve volume development work to confirm a Principal overarching risk exposure to bad debts is not significant. breaks. We are also cognisant of the Principal risk identified in FY20 commercially viable application. impact of the cost of living crisis on our The historical principal overarching – now expired Foreign exchange management The technology, particularly in the staff and implemented a Company-wide strategic risk faced by the business was | | Treasury activities and policies | | Sensing division, is still in its infancy | | | | --- | --- | --- | --- | --- | --- | | | | 5% inflationary wage increase from | | | In February 2020, the group initiated | | The group invoices most of its revenues | | | | that the group exhausted its available | | | | | | and has yet to see market adoption. | | litigation against Samsung for wilful | | in US Dollars. The group is therefore | The group manages its cash deposits | August 2023. We will continue to review | | | | funding before achieving adequate | | | market conditions and assess the impact | | | infringement of its IP. In February 2023, | | --- | --- | --- | --- | --- | --- | | exposed to movements relative to | prudently. Cash balances are regularly | | Equally, a number of products are | levels of commercial revenues and cash | | | | | on all stakeholders. | | | the group signed agreements with | | Sterling. The group will use forward | reviewed by the Board and cash | | considered commercially viable but | flows to be self-funding. This risk has | | Samsung which brought these currency contracts to fix the exchange forecasts are updated monthly to have yet to see demand for full scale been largely mitigated by the settlement proceedings to an end. Therefore, rate on invoiced or confirmed foreign ensure that there is sufficient cash production. It is also the case that the with Samsung during the financial year Summary this risk no longer exists. currency receipts should the amount available for foreseeable requirements. group is often only one part of a long ended 31 July 2023. This mitigation has become significant and more predictable. Nanoco is now financially underpinned and complex supply chain for new shifted the focus of risk to market More details on the group’s treasury with a stable cost base, IP that has been product applications. adoption of the technology, which policies are provided in note 27 to New risks identified in FY23 The second tranche of litigation validated by the US PTAB, and we have is required for the business to be proceeds is expected to be received in the financial statements. The group therefore has little visibility commercial opportunities in large and With the move towards commercially viable in the long term. | February 2024 (gross $75 million, net | | of demand other than from contracts | | | --- | --- | --- | --- | | | growing markets. As we continue to | | commercialisation, the group now | | $71.75 million after $3.25 million | | already in place. There are therefore a | | | | deliver against our strategic objectives, | | reports a number of extra risks which | Going concern | withholding tax paid at source). After the | | | range of risks that are associated with the | | | --- | --- | --- | --- | --- | | | | we aim to achieve a value inflection | | largely relate to potentially competing | | year end, the group took out a one-off | The settlement signed during the year | | different stages of product development | | | | | point in the short to medium term. | | technologies in our target markets. | | hedge at a rate of GBP1:USD1.22, which | with Samsung will result in a significant | | as well as for the group as a whole. | | | | | We look forward to updating | | These are further detailed in the table | | means the net cash receipt of $71.75 | cash surplus for the business upon receipt | | | | | | | shareholders on our progress in | | on pages 34 and 35. | | million will be converted to £58.8 million. | of the second tranche of cash in February | | | | | | | due course. | Risk management process | | 2024. The Company has committed to a There were no open forward contracts as return of capital to shareholders, but will The group has established a process for at 31 July 2023 (2022: none). The group’s Liam Gray retain enough cash for our business needs. carrying out a robust risk assessment Likelihood and impact of principal risks FY22 FY23 net profit and equity are exposed to Chief Financial Officer Given the remaining cash balance, our low that evaluates and manages the movements in the value of Sterling 10 19 October 2023 cost base, and the exciting commercial principal risks faced by the group. A relative to the US Dollar. The indicative | | opportunities, the Directors have a | detailed review of individual risks was | | | --- | --- | --- | --- | | impact of movements in the Sterling | | | 9 | | | reasonable expectation that the group | undertaken initially by the leadership | | exchange rate on profits and equity has access to adequate resources to team, and then reviewed by the Board 8 A B based on the retranslation of the closing | | continue in operational existence for | during the financial year ended 31 July | | | | --- | --- | --- | --- | --- | | balance sheet is summarised in note 27 | | | 7 | A C | | | the foreseeable future. | 2023. This year, that review also | | | to the financial statements and was incorporated climate related risks, as 6 D based on the year-end position. Accordingly, they continue to adopt the required by TCFD reporting. The Board going concern basis in preparing the 5 has also established an acceptable level Impact consolidated financial statements and the of risk (risk appetite) that informs the Board concluded that it is appropriate to 4 G F E scale and urgency of actions required. utilise the going concern assumption. Where risks are deemed to be outside 3 H Further detail is included in the going management control, efforts are focused concern statement on p37. 2 on mitigating any potential impact. Where all practical measures to prevent F 1 or mitigate risks have been taken and 1 2 3 4 5 6 7 8 9 10 a residual element of risk still remains, Probability these risks are accepted by the group. ## 032 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 033 Strategic report ### Principal risks and uncertainties continued Link to Likelihood and impact of principal risks continued Risk description Potential causes and impact Mitigation Change strategy Operational Link to | Risk description Potential causes and impact Mitigation Change | strategy | | While the group maintains a high level | The group offers rewarding | | | --- | --- | --- | --- | --- | --- | | | | E | | | 1 | | | | | of protected documented IP, our staff | careers that allow staff to develop | | Strategic Loss of key remain a critical asset with significant new skills while pursuing interesting All staff now relocated to one 2 | | Market fails to commercially | The Group targets a wide range | | | personnel | levels of technical and sector know-how. | research ideas. | site. Increased investment in | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | A | | | | 1 | | | | | | | adopt technology incorporating | of potential applications in the | | | | Loss of key personnel would have an | | infrastructure and focus on | | | | | | | Responsibility: | | The group reviews remuneration | | | Lack of market | the Group’s nanomaterials. | sensing industry. | Sensing projects moving | | | adverse impact on the group’s | | remuneration and benefits. | to ensure that appropriate reward adoption of to commercialisation. CFO development and commercialisation. Working with industry leaders packages accompany the fulfilling technology to differentiate products from Expanded customer portfolio. work environment. Responsibility: current offerings. Expanded range of materials Post-employment obligations and CEO Making products addressing more potential protected IP expose potential commercially competitive. market applications. competitors to the threat of litigation. De-risking Nanoco as a supply | chain partner. | Financial | | | | | | --- | --- | --- | --- | --- | --- | | Maintaining capacity to scale | | Revenues from own product sales, | Cash will continue to be | | | | | F | | | | 1 | | to meet demand from very | | services rendered and licensee | prudently managed. | | | | large customers. | Lack of adequate | royalties do not materialise as planned. | | The agreements signed with | | 2 Focus on revenue-generating | | | | | | resources to | | | Samsung in the year, and the | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | The group is unable to carry out its | activities without abandoning | | | | | | | | sustain the group | | | corresponding cash receipts | | | A different competing technology | The group works with a number | NEW | | | operations and hence cannot deliver | worthwhile and focused R&D work. | | | B | | | | 1 | until it becomes | | | give the business a significant | | | achieves commercialisation in sensors | of market-leading companies in | | | | on medium-term or strategic goals. | | | | | | | | | self-sustaining | | Cost reduction actions identified | cash runway. | | Competing | ahead of Nanoco (whether QD or | this area. | | | | | | | if necessary. technology in another technology). Responsibility: The R&D leaders in the Company sensing applications Retention of a portion of the stay abreast of advancements CFO litigation proceeds. Responsibility: to understand their implications. CEO/CTO Group’s technology enjoys a very Compliance significant cost advantage over | | competitor products. | | | Failure to follow existing procedures or | Extensive and ongoing efforts to | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | G | | | | 1 | | | | | | a new unforeseen risk could result in | continuously improve procedures. | | | | | | | Major | injury to staff, equipment, reputation | | Continued focus on EHS | | | A different competing technology | The group licenses its technology | NEW | | | | | 2 | Renewed leadership focus on | C | | | 1 | environmental, | and finances and potential loss of | | including incentivisation of staff. | | --- | --- | --- | --- | --- | --- | --- | --- | | | (either QD or another) reduces the | to the market leader in this area, | | | | the “tone at the top” and | | | | | | | health and safety | operating licences. | | | | Competing | quantum dot share of TVs in | and will be discussing further | 3 | | | cultural change. | | (“EHS”) issue technology in the market. licensing opportunities. Continuous training of staff in display applications Responsibility: The R&D leaders in the Company risks and how to mitigate risks. Responsibility: stay abreast of advancements CEO to understand their implications. CEO/CTO Nanoco’s cadmium-free solutions Governance deliver clear environmental benefits. | | | | | | Shareholder activism has an impact | Continued engagement | NEW | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | H | | | | 1 | | | | | | | on a number of stakeholders, including | with shareholders. | | | | | Reliance on a small number of key | Commercial strategy in the | | Shareholder | but not limited to customers, suppliers | | | | | D | | | 1 | | | | | 2 | Focus on the commercial customers exposes the group to risk of medium term is to dilute customer relations and employees, and also has significant business being successful. Customer delays in the customers’ own supply concentration risk by selling into Same core significant financial and non-financial implications. 3 Responsibility: concentration risk chains over which the group can exert various markets, through various customers as in prior years. Open and transparent limited influence (one customer was channels and to a range CEO communication with stakeholders. Responsibility: 79% of revenue excluding licences in of customers. CEO/CTO FY23). These delays can then have a Continuing to work with new knock-on adverse effect on the group’s The Executive team manages a greater number of more detailed risks on an ongoing basis, none of which are considered of customers to develop expected revenue streams. commercial offerings. strategic importance to the group. The Board reviews the detailed risk register annually to ensure that all strategic risks are being appropriately considered at the Board level while business as usual (“BAU”) risks are actively managed by the Executives. Key | Risk change | | Strategy | | | --- | --- | --- | --- | | | Up | 1 | Growth | | | Neutral | 2 | Investment | | | Down | 3 | IP monetisation | ## 034 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 035 Strategic report ### Viability statement ## The litigation settlement provided ## Nanoco with sufficient resources to ## continue to deliver on its strategy ## for the foreseeable future | In accordance with the provisions in | commercialisation of its products, | The assumptions above were then | |  modest demand for commercial | The extreme downside case then flexes | | | --- | --- | --- | --- | --- | --- | --- | | the UK Corporate Governance Code | the $90 million net cash receipt, | flexed to create a “severe but plausible” | Going concern | production materials in CY24 with a | those assumptions further as follows: | | | (C.2.2 of the 2018 revision), the Directors | in addition to the cash which already | downside stress test. This includes the | | subsequent slow ramp-up in demand; | | | | | | | All of the following matters are taken into | | |  all commercial agreements come to | | have assessed the viability of the group’s | existed in the business, is more than | assumption that commercial production | | | | | | | | | account by the Directors in forming their |  a further extension to the services | | an end; | | business model and determined that a | sufficient to support the group for | is delayed by a year and that a number | | | | | | | | | assessment of going concern: | contract with the European | | | | four-year period is a suitable period to | the foreseeable future. | of current active development | | | |  no revenues other than those already | electronics customer and the | be utilised. This is an increase on the | | engagements end with no further service |  the group’s business activities and | | contracted; and | | --- | --- | --- | --- | --- | --- | | | On a commercial basis, we continue | | | Asian chemical customer; | | | two-year period used in prior years and | | work or material demand. The group | market conditions are set out on | | | | | to see progress with our customers in | | | |  the group ceases all operations. | | reflects both the progress towards full | | remains viable in this scenario. | pages 9 to 27; |  no revenue is assumed from other | | Sensing. Both the European electronics | commercialisation and the strong | | Modelling of an extreme downside for | | business lines though some small | All three cases above produce cash flow | | --- | --- | --- | --- | --- | --- | | | customer and the Asian chemical | |  the principal risks and uncertainties | | | | financial underpinning of the group. | | the going concern assessment still | | scale commercial deals are currently | statements that demonstrate that the | | | customer are discussing further R&D | | are shown on pages 33 to 35; | | | | A four-year period is considered | | shows the group remains viable even if | | under discussion; | group has sufficient cash throughout the | collaboration agreements to continue | appropriate given the increased stability | | no further commercial wins are achieved |  the group’s financial position is | | period of the going concern forecast. | | --- | --- | --- | --- | --- | --- | | | development work in this area, and the | | |  other companies pay to access | | | of the group, however, the evolving | | beyond those which are already | described in the Financial review | | | | | ongoing validation of two of our | | | Nanoco’s technology in the future; | | | nature of the markets for the group’s | | contracted. Given the cash resources of | on pages 30 to 32; and | | | | | materials in final products is nearing | | | | Going concern conclusion | | products and the group’s stage of | | the group, in all scenarios, all outstanding | |  small expansion of our self-funded | | | | completion. We continue to anticipate | |  note 27 to the accounts summarises | | | | commercial development means | | liabilities are settled. | | research activities and continued | Considering the current financial | | | commercial production orders in | | the group’s financial risk management | | | | forecasting time horizons remain | | | | maintenance costs to support our | resources and monthly cash costs | | | calendar year 2023, although we | | objectives, policies and processes. | | | | relatively short. | | | | IP portfolio; | of the group, and after making | | | believe these will be relatively low | Conclusion | | | | | | | | For the purposes of their going concern | | appropriate enquiries, the Directors have | | The Directors’ assessment has been | volumes initially. | | |  costs associated with being a listed | | | | | As a result of the assessment outlined | assessment and the basis for the | | a reasonable expectation that the group | | made with reference to the current | | | | entity and other costs reflect the | | | | We have continued to add other | above, the Directors have confirmed that | preparation of the 2023 Annual Report, | | has access to adequate resources to | | position of the group and the group’s | | | | current inflationary environment; and | | | | customers in the year in both Sensing | they have a reasonable expectation that | the Directors have reviewed the same | | continue in operational existence for | current strategy and principal risks as and Display, and continue to progress the group will remain viable and able to trading and cash flow forecasts and  the installed cost base is capable of the foreseeable future. described in this Strategic report. other IP monetisation opportunities. continue in operation and meet liabilities sensitivity analyses that were used by supporting significant increases in Accordingly, the Directors continue Inflationary pressures are mitigated as they fall due over the four-year period the group in the viability assessment revenue above those assumed in the to adopt the going concern basis in by reviewing suppliers and achieving of their assessment. as noted above, with the going concern base case so there is no immediate The viability assessment process preparing the consolidated financial volume breaks. In addition, given the assessment covering the period to requirement for short-term increases statements. The financial statements ongoing cost of living crisis, we continue In assessing the viability of the group, November 2024. The same base case or new capital expenditure. do not reflect any adjustments that | to review market conditions and assess | the Directors have utilised their forecasts | and downside sensitivities were also | | | | --- | --- | --- | --- | --- | | | | | The downside case then flexes those | would be required to be made if they | | the impact on all stakeholders. | for the period to 31 October 2027 which | used with the addition of an extreme | | | | | | | assumptions as follows: | were prepared on a basis other than | | | take into account the group’s current | downside where no uncontracted | | | the going concern basis. and expected business activities and revenue was included and the group  a full-year delay in small scale Changes during the year commercial opportunity pipeline, contracted to become an IP shell. commercial production revenues In the third quarter of FY23, we the current cash resources (£8.2 million (into CY25); and The base case represents the Board’s | announced an agreement had been | as at 31 July 2023), the contracted | | | | --- | --- | --- | --- | | | | current expectations. Assumptions in |  no new business from other | | reached with Samsung to settle the | receivables (including the $75 million | | | | | | the base case are: | customers once existing active | | ongoing lawsuit relating to IP infringement | second tranche from Samsung), the | | | engagements end. | for $150 million. After legal costs, | contracted revenue and prospects |  commercial services contracts are | | --- | --- | --- | | this resulted in a net balance to the | for FY24, the return of capital to | based on the existing pipeline of | | group of $90 million ($75 million still to | shareholders, and any liabilities as they | opportunities or agreements already | | be received in Feb 24). Given the group’s | fall due. These inputs form the basis of | in place; | | cost base is circa £6 million per year, | a conservative base case with the main | | | and the group is targeting to be cash | assumptions shown below in the section | | | flow break-even in CY25 due to the | on going concern. | | ## 036 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 037 Strategic report ### TCFD disclosure 2023 are currently discussed ad hoc, but will the world transitions to a low carbon Improvements to date: related targets. As the Group continues Introduction be included on the Board agenda every economy. In effect, the group’s climate- Risk management to assess the materiality of climate-  incorporated ESG risks into the risk six months going forward. related risks are indirect. related risks and opportunities, we will Nanoco recognises and acknowledges As part of the risk management process, register review process, including consider whether new data should be the serious challenges presented by the Board’s members have relevant In addition to enhancing our all potential risks are assessed according potential mitigating actions. collected and whether relevant targets | climate crisis to governments, businesses | capabilities related to climate risks | understanding of the climate-related | to the probability of the risk occurring | | | | --- | --- | --- | --- | --- | --- | | | | | | 2024 planned actions to enhance | should be set. | | and communities around the globe. | and opportunities, including significant | risks that could impact our business, | and the potential impact should the risk | | | alignment: | Our direct exposure to climate-related | experience navigating energy markets. | the Group actively seeks to mitigate | be realised. These include risks related to | | 2024 planned actions to enhance | | --- | --- | --- | --- | --- | --- | | risks is limited, but the group is | The Board acknowledges it can improve | its impacts on the climate. During the | current and emerging regulations. In |  continue to monitor and identify new | alignment: | | nonetheless committed to playing its | upon its broader ESG skill set and | financial year, we had a number of LEAN | respect to climate change, the group | ESG risks with the support and input | |  revisit the materiality of scope 3 part to mitigate the environmental knowledge base, which will be projects ongoing which all carried has concluded through initial qualitative of the new ESG steering committee; categories to determine whether | impacts of our activities and to enhance | considered by the Nominations | objectives of reducing waste or | assessment and discussion that the | | | | --- | --- | --- | --- | --- | --- | | | | | |  embed consideration of potential | additional data is needed to | | our resilience to the uncertainties posed | Committee as part of any future | inefficiencies. All staff are LEAN trained, | business has relatively low exposure to | | | | | | | | climate impacts in the controls and | understand the full climate impacts | | by climate change. | appointments. Training is also occurring | and we will continue a focus on this in | climate-related risks. | | | | | | | | action plans related to the | and exposure of the Group; | | | at Board level on ESG matters to improve | FY24. The group promotes low carbon | | | | | As a premium-listed organisation, | | | However, the group acknowledges that | management of risk; and | | | | the existing skill set. Read more about | working patterns, including car sharing | | |  evaluate whether meaningful metrics | | Nanoco is obliged to make climate- | | | the growing attention on ESG and the | | | | | the Board’s roles and responsibilities on | and cycle-to-work schemes, as well as | |  implement ISO 14001 (Environmental | and targets can be introduced to | | related financial disclosures consistent | | | widespread consequences of the climate | | | | | pages 39 to 40. | an electric vehicle (“EV”) salary sacrifice | | Management). | communicate the energy saving | | with the TCFD framework in line with | | | crisis will leave no business untouched. | | | | | | scheme. Where possible, we use video | | | potential of our products to | | Listing Rule 9.8.6R(8). Despite being a | The leadership team is responsible | | In light of these transformations and | | | | | | conferencing instead of face-to-face | | | customers; | | small organisation with only 43 | for the day-to-day management of | | following an annual review of the group | Metrics and targets | | meetings, reducing travel-related costs employees at year end (excluding operational risks. To support oversight risk register, Nanoco incorporated  establish long-term targets for and emissions. Nanoco monitors and reports Non-Executive Directors) and turnover of operational risks, the leadership team potential ESG risks to the register in the ESG; and environmental performance indicators | of c.£5.6 million, the business has made | maintains a risk register of identifiable | During the year, Nanoco have performed | financial year, which included a more | | | | --- | --- | --- | --- | --- | --- | | | | | | including waste and energy efficiency |  work with our landlords to devise | | progress towards meeting its TCFD | risks to the business. Within this register, | an assessment of the risks and | robust assessment of the group’s | | | | | | | | metrics. The Group’s greenhouse gas | strategies to reduce our on-site | | obligations. Limited resources and our | the potential impact of climate change | opportunities related to climate change, | exposure to climate-related risks. The | | | | | | | | emissions, including its scope 3 emissions | energy consumption. | | obvious current strategic focus on | is currently highlighted as a | and have not identified any which are | integration of these risks into the register | | | related to business travel, can be viewed protecting the group’s operational macroeconomic risk factor. However, no significant or could have a significant will lead to a review of the controls and on page 41. and R&D capabilities mean that the specific significant risks were identified financial impact on the Company. action plans associated with the disclosures that follow are therefore relating to climate related factors. If any management process. Read more The Group does not currently monitor In consideration of climate-related not yet fully aligned with the TCFD risks are identified in the future, these will about the group’s approach to risk any additional climate-related metrics, opportunities, Nanoco’s product portfolio recommendations at this time. The group be added to the risk register. Read more management on page 33. and therefore has not set any climate- has potential to support the energy is compliant in seven areas out of eleven about our approach to governing and transition. The Group’s technologies can (as shown in the table overleaf), with managing risks on page 33. support the energy efficiency objectives 4 TCFD pillars 11 TCFD recommended disclosures Description and reference a strategy and metrics yet to be fully | | Improvements to date: | | of our customers. Nanoco’s products are | | | | | --- | --- | --- | --- | --- | --- | --- | | developed. These are detailed in the | | | | Governance | | To be further developed in FY24 | | | | | also notably free of toxic cadmium, | |  Describe the Board’s oversight of climate-related risks | | | table overleaf. Where not yet compliant, | |  post year end, established an ESG | | | | Key risks and responsibilities - P38, | | | | | which reduces emissions associated with | | and opportunities | | | the group will incorporate target | | steering committee with Board | | | | Corporate Governance - P48 | managing the disposal of toxic waste. | compliance dates into the ESG strategy, | representation who meet every two | | | | | --- | --- | --- | --- | --- | | | | |  Describe management’s role in assessing and managing climate | To be further developed in FY24 | | which will be reported on in FY24. | weeks and assess any identified risks; | Read more about the group’s initiatives | | | | | | | related risks and opportunities | Key risks and responsibilities - P38 | | The group is taking progressive steps | | to promote low carbon practices in its | | | Strategy  Describe the climate-related risks and opportunities the towards building climate knowledge operations on page 41. To be further developed in FY24 C Strategy organisation has identified over the short, medium, and long term and capacity, as outlined by the 2024 2024 planned actions to enhance | planned actions described in this | Nanoco acknowledges the need to | |  Describe the impact of climate-related risks and opportunities | | | --- | --- | --- | --- | --- | | | | alignment: | | To be further developed in FY24 C | | statement which we will endeavour to | conduct more comprehensive | | on the organisation’s business, strategy, and financial planning | | | complete within the next reporting cycle. | identification and assessment of |  embed climate-related issues into | | |  Describe the resilience of the organisation’s strategy, taking into | | climate-related risks and opportunities, | updates provided on staff days and | | | | | --- | --- | --- | --- | --- | --- | | | | | | consideration different climate-related scenarios, including a | To be further developed in FY24 | | | as well as the potential impacts of those | within employee surveys to enhance | | | | | Governance | | | | 2°C or lower scenario | | | | risks and opportunities on the business | engagement across the business on | | | | | | | the topic of climate risk; | Risk |  Describe the organisation’s processes for identifying and | | | The Board takes responsibility for the | model and the organisation’s strategic | | | | | Key risks and responsibilities - P38 C management assessing climate-related risks oversight of all strategic risks facing resilience over various timeframes.  the ESG Steering Committee will the business. ESG issues, including the We outline our initial consideration of  Describe the organisation’s processes for managing climate- explore opportunities to further Key risks and responsibilities - P38 C risks associated with climate change, climate-related risks within this section, related risks mitigate Nanoco’s impact on the | currently fall within the remit of the ESG | with a focus on transition risks as | | | | | --- | --- | --- | --- | --- | | | | climate and conduct a deeper |  Describe how processes for identifying, assessing, and managing | | | Steering Committee which was | the area where Nanoco has the | | | | | | | assessment of climate-related risks, | climate-related risks are integrated into the organisation’s overall | Key risks and responsibilities - P38 C | | established post year end. The ESG | most exposure. | | | | | | | including the potential impact of risks | risk management | | Steering Committee is a cross-functional | | Nanoco’s products are inputs into | on capital expenditure plans, future | | | | | | --- | --- | --- | --- | --- | --- | --- | | group with representation at Board level | | | Metrics and |  Disclose the metrics used by the organisation to assess climate | | | | | consumer goods, and macroeconomic | strategy and financial planning; and | | | To be developed further in FY24 | | | from the CFO. The CFO ultimately takes | | | targets | related risks and opportunities in line with its strategy and risk | | C | | | pressures driven by climate-related | | | | - current metrics disclosed on P41 | | | responsibility for reporting any relevant | |  engage a third party to conduct | | management process | | | hazards could impact the future | environmental or climate-related risks | | qualitative climate scenario analysis | | | | | --- | --- | --- | --- | --- | --- | | | revenues of the business. The group also | |  Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 | To be developed further in FY24 | | | to the Board and its Committees, | | in FY24. | | | C | | | acknowledges the potential reputational | | greenhouse gas ("GHG") emissions and the related risks | - current metrics disclosed on P41 | | and keeps the Board abreast of consequences of failing to meet the  Describe the targets used by the organisation to manage climate developments in reporting and To be further developed in FY24 climate expectations of stakeholders as related risks and opportunities and performance against targets performance requirements. ESG matters C – Compliant with TCFD recommendation ## 038 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 039 Strategic report ### Sustainability Whole portfolio carbon generation (energy use) Intensity (tCO e/average number 2 of employees) | | | 2023 tCO | | e | 2022 tCO | e | Change | 2023 | | 2022 | Change | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 2 | | 2 | | | | | | | Our focus on the safety, security and | Electricity | | 75 276 | | | | (73)% | | 3 12 | | (75)% | Scope 2 Heating (gas) 8 220 (96)% ## health of our people is key to delivering 2023 tCO e 2022 tCO e Change 2 2 Energy consumption used ## productivity and improved performance Scope 3 Air travel 100%46 0 to calculate emissions (MWh) 2023 2022 Change Total 129 496 (74)% 398 2,500 (84)% Data notes Reporting period 1 August 2022 to 31 July 2023 The group recognises that, although its iv) monthly departmental audits with All controlled documents are reviewed Boundary Operational control primary responsibility under UK corporate assigned action tracking processes and approved via the electronic Reporting method The Greenhouse Gas (“GHG”) Protocol Corporate Accounting and Reporting Standard law is to its shareholders, it also has in place to address issues; document management system. A health responsibilities towards its employees, and safety induction programme is in Emissions factor source Department for Business, Energy & Industrial Strategy, Standard Set 2017 v) monthly health and safety reports customers, suppliers and also, ultimately, place for all new staff and visitors/ issued across the organisation to Data changes and restatements None those consumers who benefit from its contractors performing work on our communicate performance against products, the broader public and premises. Staff are trained in standard annual metrics and progress on key the environment. operating procedures, hazard awareness, improvement initiatives and projects; As at the time of writing, the EC has not responsible, including the combustion generic workplace health and safety risks Environment yet passed the legislation to implement of fuel and the operation of its facilities, vi) annual health checks for staff, and behavioural safety expectations the decisions as recommended and the and resulting from the purchase of Health and safety | | including tests for chemical exposure | applicable to their role within the group. | Nanoco is committed to protecting the | | | | --- | --- | --- | --- | --- | --- | | | | | | legal status of the exemption which was | electricity, heat, steam or cooling by | | | where required; and | | environment in which its activities are | | | | Nanoco recognises that providing a safe, | | | | due to expire in October 2021 is unclear. | the business for its own use. | A cross-functional employee health and conducted. This commitment is directly secure and healthy working environment vii) annual occupational chemical safety team meets on a monthly basis expressed in our decision to develop our The group’s environmental policy aims to As the group’s UK facility is in a multi- is essential and contributes to exposure tests using fixed and with representation from all areas of the ® CFQD quantum dot products to be free foster a positive attitude towards the occupancy site, we place reliance upon productivity and improved performance. personal monitors. group, including the Executive team. of toxic cadmium, which is still widely environment and to raise the awareness the landlord to provide the data needed The health, safety and welfare of all of Effective inputs and outputs from the A risk assessment programme is in place used by our competitors in their quantum of employees towards responsible to determine emissions. Our laboratories our employees, contractors and visitors is team are designed to facilitate a greater to identify and mitigate the risks from our dot products. environmental practices on its site. The require continuous negative pressure taken seriously across the entire focus on health and safety and to operations. These assessments include group endeavours to ensure compliance environments and, consequently, it is not organisation, with ultimate responsibility Nanoco has participated actively with actively encourage discussions within but are not limited to: with all relevant legislation and possible to set realistic reduction targets lying with the CEO. Health and safety regulators on the use of cadmium-based respective groups. regulatory requirements and, where in the consumption of electricity. performance is a standing item on each quantum dots in displays and LED light i) the storage, handling and processing The group has an excellent safety record practical and economically viable, Board and Executive team agenda, and products. The European Commission The completion of the exit from the of hazardous substances; and there has only been one reportable standards are developed in excess of is also discussed within departmental (“EC”) has made a ruling on the appeal ground floor of the Manchester site has ii) fire safety and emergency evacuation; incident to the respective UK authorities such requirements. meetings. The group’s health and safety submitted by three companies that the effectively eliminated it as a source of policy is reviewed annually. In addition, across all our operations. Nanoco is iii) use of mechanical and electrical exemption allowing the use of cadmium- The CEO has responsibility for reporting emissions for Nanoco with only a small there is an Environmental, Health and committed to the continuous equipment; and based quantum dots in display films on relevant environmental matters to the increase in Runcorn emissions from the Safety (“EHS”) Committee to oversee the improvement of the health and safety should continue. The EC was also Board. There have been no environmental co-location of our activities to one site. implementation of policy and involve iv) other workplace operations involving management system. considering an appeal for a five-year incidents to report to the authorities manual handling and ergonomic Our gas consumption is used for heating staff in generating improvement plans. exemption to allow cadmium-based QDs across all our operations. Shareholders Each stakeholder has different interests, risks, working at height and other the facility and site costs are shared some of which are listed below: to be applied directly onto LED chips for and other interested parties are There are various improvement and between tenants on the basis of area of hazards identified as part of the displays and lighting. encouraged to use the online version of reporting systems in place to monitor the occupancy. In the absence of significant EHS improvement programme. Employees the Annual Report and Accounts rather performance of the group’s health and The EC has received a recommendation amounts of revenue from the sale of All risk assessments are documented and Nanoco acknowledges its responsibilities than requesting hard copies. Interested safety management system. These that: commercial products, the emissions of actions assigned and reviewed according for the health and safety of its employees, parties are encouraged to visit the initiatives include: the business primarily arise from the to the defined frequency. All research for their training and development and  the exemption to allow cadmium group’s website or use the regulatory activities of its research and i) reporting all incidents (including near (>100ppm) in QD films for display is news services instead of a hard copy. and development functions are actively for treating them fairly. Further information administration facilities rather than from misses) with appropriate ownership, no longer justified and should be Employees are also encouraged to encouraged to, wherever possible, about its employment policies is revenue related production operations. | root cause analysis and action | | | phased out by 31 October 2021; and | recycle paper, plastic, glass, cardboard | | | --- | --- | --- | --- | --- | --- | | | eliminate or reduce the levels of hazardous | outlined overleaf. | | | | | tracking systems; | | | | and cans wherever possible – through | Our emissions, based on appropriate | substances used in our products and Customers  a new exemption is granted to allow processes. All relevant chemical legislation engagement with our landlord, we conversion factors published by the ii) communication of relevant topics cadmium-based QDs applied directly and regulatory frameworks are used to Nanoco is responsible for the quality understand the vast majority of our Department for Business, Energy & and incidents via weekly toolbox talks onto LED chips for displays and high assess the suitability of a substance prior and safety of its products and for the waste is recycled. Industrial Strategy, for the current year to all departments; CRI lighting for a period of five years. to use as part of the risk assessment performance of its research and are shown in the charts above. Greenhouse gas (“GHG”) reporting | iii) monthly and quarterly leadership | | | | Both of the above recommendations | | | --- | --- | --- | --- | --- | --- | | | | process. Standard operating procedures | development projects. | | | | | safety and observation audits with | | | remain subject to the EC adopting the | Under the Companies Act 2006 | are documented and regularly reviewed. | the focus on immediate action | | Shareholders | | | | --- | --- | --- | --- | --- | | | The group’s robust EHS control | | delegated act. It should also be noted | (Strategic and Directors’ Reports) | | resolution by the Executive or senior | | | that for film-based displays there is not | Regulations 2013, the group is required to | | | environment is evidenced by there being | Nanoco seeks to increase shareholder | | | | manager leading the audit; | | | an outright ban, which could allow | state the annual quantity of emissions in | | | only one externally reportable incident in | value over the long term. | | | | | any category in the last six years. | | displays with cadmium content below | tonnes of carbon dioxide equivalent from | A serious H&S incident could jeopardise the limits above to continue to be sold. activities for which the business is our “licence to operate” and threaten shareholder value. ## 040 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 041 Strategic report ### Sustainability continued chain for QD televisions, and the At the point of appointment, Nanoco We believe that building a positive Environment continued HEATWAVE QDs sit in the energy obtains occupational health advice as partnership between strategic efficiency and low environmental impact to reasonable adjustments. For disabled management and the wider workforce is Waste arena and, as such, will enable customer 26% employees we put together a “Reasonable crucial to Nanoco’s success. Our people Nanoco acknowledges During the year, the group generated companies to increase the uptake of Adjustment Action Plan” to support are our best problem solvers and possess ## its responsibilities for | 10.8 tonnes of waste (2022: 9.3 tonnes) | their products while reducing their | | | employees with disabilities or health | the insight on how we can make Nanoco | | | --- | --- | --- | --- | --- | --- | --- | | and recycled 5.0 tonnes of this (2022: | impact on the environment. | Employee | | conditions by removing or minimising | a top organisation to work for. | | | | | | 48% | | | the health and safety | length | 3.8 tonnes). Net unrecycled was 5.8 | | | workplace barriers. These plans are | | | | --- | --- | --- | --- | --- | --- | | | | of service | | To improve our employee engagement, | | | tonnes (2022: 5.5 tonnes), however it’s | | | reviewed collaboratively between | | of its employees, for | | | Attraction and retention | | | in 2019 we established the Employee | | | important to note this unrecycled is | | | managers and employees to ensure that | | | | | | | | Voice Committee, which gives employee | their training and | | incinerated with waste recovery, and | Recruiting technical specialists has | | they remain relevant. Culturally, we | | | representatives a forum to raise concerns ## therefore doesn’t go direct to landfill. 26% believe that it is important to offer development and for always been key to Nanoco’s success. and communicate directly with Board The group engages a specialist In a highly competitive market this means adjustments in a proactive manner ## members. During the year, the EVC has treating them fairly.” contractor to incinerate batches of that we strive to offer a competitive where appropriate rather than waiting Key organised a number of work-based chemicals and dispose of other materials benefits package and an attractive for our employees to request these. events, and we have had good | no longer required. All waste contractors | workplace culture to ensure that we | 0-4 years | | | | --- | --- | --- | --- | --- | | | | | Nanoco currently employs one person | attendance at a variety of hikes, | | are assessed to ensure the waste | attract and retain the best of the best. | | | | | | | 5-10 years | with a disability with a series of | beekeeping training and crafting, | | hierarchy approach is applied to all of | The number of long-serving employees | | | | | | | | reasonable adjustments in place to | and all staff were given gym passes | >10 years | our materials handled, and that their | demonstrates Nanoco’s ability to retain | | | | | --- | --- | --- | --- | --- | | | | | support this important member of staff. | to use the local facilities. | | operations and systems are compliant | top talent; out of 43 employees at 31 July | | | | | with the relevant legislation. Audits are | 2023 (excluding Non-Executive Directors), | | | In addition, we have run employee | | performed every three years in line with | 26% had over ten years’ length of service | | Engagement and wellbeing | wellbeing surveys, where staff can give | | our duty of care as a waste producer. | and a further 26% had between five and | Employees with disabilities | | their views on a variety of topics | Communication channels at Nanoco ten years’ service. anonymously. The leadership team Other environmental matters It is Nanoco’s policy that people with include all-Company meetings, leadership reviews these comments and acts on Nanoco operates an employee referral disabilities, including job applicants and meetings, and senior team meetings Consideration of the benefits to the them to improve the working environment. scheme for recruiting new talent. employees, should be able to participate which then cascade information down. environment is a significant factor in Referrals from existing employees are a in all of Nanoco’s activities fully on an Communication media used includes the A meaningful employee voice will decisions regarding investments to valued source of new recruits, typically equal basis with people who are not group intranet, all-group email briefings support us as an organisation upgrade the group’s research and introducing high quality candidates with disabled. Nanoco strives to promote an and online meeting software. Our line undergoing change and responding to development facilities in Runcorn. a better cultural fit, and resulted in environment free from discrimination, managers hold regular team meetings, industry changes. A direct link with the Video conferencing is used where Nanoco hiring a new technician harassment and victimisation. cross-functional working group meetings Board also enables our Board members possible instead of physical travel in the year. and management one-to-one updates to better understand the diverse nature Nanoco has a disability inclusion policy in order to reduce the group’s with their team members. of the Company, allowing them to Nanoco has a comprehensive onboarding that states that Nanoco will not, on the environmental footprint through fewer execute their roles more effectively. process for new joiners which includes grounds of a person’s disability, or for a Nanoco is committed to a policy of flights and other means of travel. H&S, HR, intellectual property, IT, finance reason relating to a person’s disability, engaging employees in the activities Lessons learned from continuing and corporate induction sessions. The treat that person less favourably than it and growth of the group. Human operations during the Covid-19 aim of this is to get employees engaged treats, or would treat, others to whom the resources and senior management pandemic have continued to from their first day at Nanoco, and fully same reason does not or would not review communication channels via be adopted. equipped to work towards Nanoco goals apply, unless genuinely justified. the use of employee surveys and plan The group’s display technology removes from the very beginning of their communication activities to ensure a dangerous chemical from the supply Nanoco career. employees are fully informed of current business strategy and financial results or corporate news. Corporate communication is key to the Covid-19 engagement of our workforce. We have Whilst essential work carried on at Nanoco through the  shielding for vulnerable workers; focused on improving the look, feel and lockdown period, staffing levels were reduced at various content of Company-wide electronic  login system for staff, and supervision by management times in line with Government guidance. Because of the EHS communications in order to make these which can be accessed remotely; training which all managers and staff undergo, EHS standards more engaging to employees. were maintained and there was no impact on health and  liaising with the Employee Voice Committee to address Aligning the entire Nanoco organisation safety due to the reduction in numbers during affected any concerns; and to ensure that we focus on what is periods. Measures were taken by the Company to address  return to work assessments for all employees. important to achieve our goals is critical the risk of Covid-19 on the Company and employees, to our success. In order to help us including but not limited to: navigate the exciting opportunities in  risk assessments for both sites; front of us it is crucial that as Nanoco employees and managers we make  PPE policies and protocols for prevention of infection; conscious, careful and informed  social distancing; choices about how we allocate our time and energy – as individuals and members of teams. ## 042 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 043 Strategic report ### Sustainability continued Gender diversity at Nanoco (at 31 July 2023) Proportion of males and females in each income quartile Gender pay gap Upper quartile | | | | | | | | Mean hourly | Median hourly | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | earnings | earnings | | Key | | | | | 80% | 20% | | | | | | 26% | 14% | | | | | | | | Female | | | 46% | | | | | Upper middle quartile Male | | | | | | | £22.86 | | £19.23 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 73% | 27% | | 1 | | 1 | | | | | | | | Total | | Total | | | | All | Board of | Senior | | | | | | | | employees | | Directors | team | Lower middle quartile | | £21.72 | | | | £23.30 | | | | | | | | 1 | | 1 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Male | | Male | | | | | | 64% | 36% | | | | | | | | | | | | | £25.88 | | £23.30 | | | | | | | | | | 1 | | 1 | | 74% | 86% | 54% | | | | Female | | Female | | | | | | Lower quartile | | Key | | | | | Female 82% 18% Male 1 Excluding Directors. Nationalities represented Ethics At the snapshot date of 31 July 2023, Recognition Equality and diversity by our employees Nanoco employed 43 employees Strategic report approval Nanoco aims to demonstrate and (2022: 36) in the UK, of whom 26% were Nanoco recognises that it has a duty to Racial and geographical diversity promote high standards of honest and The Strategic report on pages 5 to 44 female (2022: 21%). Employees work | ensure the health, safety and welfare of | | | ethical conduct throughout the group. | | incorporates: | | --- | --- | --- | --- | --- | --- | | | The group’s employees are from many | | | across a variety of roles in research | | | its employees as far as reasonably | | 5 | Formal policies and procedures are | | | | | different backgrounds, including five | | | and production environments. |  Chairman’s statement | | practicable. This includes physical, | | | reviewed annually and the policies listed | | | different nationalities: British, German, mental and social wellbeing. It is also below are available on the group intranet Overall, female representation across  Chief Executive Officer’s statement Indian, Italian and Portuguese. required to have in place measures to or upon request from the Company the quartile pay bands corresponds  Our business model mitigate as far as practicable factors In addition, group employees come from Secretary. All group employees are fairly closely to the percentage of that could harm employees’ physical a range of business backgrounds, not required to adhere to specified codes female to male employees overall.  Our strategy and mental wellbeing, which includes purely research and development. of conduct, policies and procedures, The median gender pay gap for all  Key performance indicators work related stress. Indeed, of the Board members, including, but not limited to, the: Nanoco employees excluding Directors previous roles and responsibilities  Principal risks and uncertainties Nanoco, as part of its wellbeing strategy,  anti-bribery and corruption policy; is (0%) (2022: 12%). This means that for include those in the supply of chemicals | puts particular focus on mental health. | | | every £1.00 the median man earns at |  Viability statement | | --- | --- | --- | --- | --- | | | and the engineering, electronics, |  whistleblowing policy; and | | | | It does so through a variety of means | | | Nanoco, the median woman earns £1.00. | | | | life sciences and fast-moving consumer | | |  TCFD disclosure | | including events such as Mental Health | |  equal opportunities policy. | The national average pay gap in 2023 | | goods industries. 1 Awareness Week, mindfulness sessions for all UK employees is 8.3% in favour of  Sustainability All Nanoco employees are required to ## Nanoco is committed and charity events to raise awareness of Nanoco will appoint, train, develop, men compared to Nanoco’s parity. complete annual training in the areas | the support available to those that suffer | reward and promote on the basis of merit | | | In research and development, the | | | | --- | --- | --- | --- | --- | --- | --- | | | | to a policy of engaging | of cyber security, GDPR and information | | | Brian Tenner | | from mental health issues. We encourage | and ability. Nanoco’s equal opportunities | | | national average gender pay gap is | | | | | | | security to ensure they remain up to | | | Chief Executive Officer | | | | employees in the | | | 1 | | | an open door policy where employees | policy states that employees will not | | | 16.2% | in favour of men, again compared | | | | | | date and alert to the signs of fraud | | | 19 October 2023 | | are able to disclose and receive support | receive less favourable treatment or | | | to Nanoco’s parity. | | | | | | activities and growth | and unethical practices. | | | | | for any mental health issues they may | consideration on the grounds of age; | | | | | | On behalf of the Board ## face. Nanoco also has employees who disability; gender or gender reassignment; of the group.” are trained in mental health first aid. marriage and civil partnership status; Gender pay gap pregnancy and maternity; race; religion or Dr Christopher Richards The employee assistance programme, Scientific research is a sector challenged belief; sex; sexual orientation; or part-time Chairman as part of the wellbeing policy, provides by a lack of gender diversity, but we feel status, nor will they be disadvantaged caring and compassionate support to that we have an opportunity to by any conditions of employment that Brian Tenner help people cope and build resilience. challenge this status quo. Nanoco cannot be justified as necessary on Chief Executive Officer Both telephone counselling and face-to- believes in being an inclusive and diverse operational grounds relevant to the 19 October 2023 face counselling are available to all organisation where everyone is able to performance of the job. | employees through the programme. | | reach their full potential. The challenge in | | --- | --- | --- | | This support aims to reduce absence and | The group’s equal opportunities policy | our organisation and across Great Britain | | improve wellbeing by addressing issues | is reviewed annually and is available to | is to eliminate any gender pay gap; | | head on and reducing their impact. | employees on the group intranet. A copy | we therefore voluntarily analysed gender | | | can be obtained upon request from the | pay gap data as at 31 July 2023. We can | Post year end, Nanoco are looking to Company Secretary. use these results to assess the levels of implement a workplace health programme gender equality in our workplace and the for the benefit of all employees. This was balance of male and female employees something which was raised through the at different levels. employee wellbeing survey and Nanoco 1 Source – Gender pay gap in the UK: 2022 has acted on. – Office for National Statistics. ## 044 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 045 Corporate governance ### Board of Directors ## Our Board has a wide variety of skills Dr Christopher Richards Brian Tenner Dr Nigel Pickett Non-Executive Chairman Chief Executive Officer Chief Technology Officer ## and experience to help the business Chris was appointed Chairman of Nanoco Group Brian was appointed Chief Executive Officer in Nanoco’s technology team is led by Nigel, who is plc in May 2016, having joined the Board as a September 2020. He originally joined the Board a co-founder of Nanoco and inventor of Nanoco’s Non-Executive Director in November 2015. as Chief Operating Officer and Chief Financial key quantum dot scale up technology. In 2000 he ## grow at a key point in its evolution Officer in August 2018. He has had a significant moved to Manchester where he co-founded Skills and experience impact on the group’s performance in his time Nanoco Technologies in 2001. Chris is the former Chief Executive Officer of with Nanoco, particularly in sharpening the Skills and experience | Arysta LifeScience, a Japan-based agrochemical | commercial focus, providing people leadership | | | --- | --- | --- | | business which grew rapidly under his leadership, | in the UK and improving cost control. Brian also | Nigel has co-authored over 70 academic papers | | with sales growing above $1.6 billion. After | previously served as the Company Secretary. | and is an inventor on 150 patents and pending | | stepping down as CEO in 2010, he became | | applications. He has a passion for and experience | Skills and experience Arysta LifeScience’s Non-Executive Chairman in taking research work from the academic bench until the sale of the business in 2015 to Platform Prior to joining Nanoco, Brian held a number of through to full commercialisation. Nigel graduated Specialty Products. senior executive positions with both publicly listed from Newcastle University in 1991 and chose to and private multinational companies. His roles remain at Newcastle to pursue a PhD in the field After gaining his DPhil from the University of have typically encompassed the full range of of main group organometallics and is a Fellow of Oxford in Biological Science, Chris worked as a commercial, operational and financial activities the Royal Society of Chemistry. After graduation research scientist for four years. He began his with an emphasis on leading change and in 1994 he undertook a postdoctoral fellowship at executive career in 1983 in the Plant Protection transformation programmes. Brian’s previous St Andrews University, Scotland, in the field of division at Imperial Chemical Industries plc, roles include Interim CEO and subsequently precursor design for metalorganic vapour phase which later became Syngenta. For 20 years, CFO of NCC Group plc (LSE: NCC) from 2017 to epitaxy (“MOVPE”) growth and synthesis of he has lived in various countries including 2018 (cyber security professional services) and nanoparticles using chemical vapour deposition Colombia and Japan and led international CFO of Renold plc (LSE: RNO) from 2010 to 2016 (“CVD”) techniques. In 1996 he won a Japan marketing and commercial functions. | | | | | (engineering manufacturing), Scapa plc (AIM: | Society for the Promotion of Science (“JSPS”) | | --- | --- | --- | --- | --- | --- | | | | | Other roles | SCPA) from 2007 to 2010 (speciality chemicals) | fellowship and spent the following year working | | | | | | and British Nuclear Group from 2003 to 2007 | at Tokyo University of Agriculture and Technology, | | | | | Chris currently holds a number of non-executive | (hi-tech chemicals and large-scale | Japan. In 1998 he became a Research Fellow at | | | | | roles at quoted and private businesses. He is the | decommissioning projects). Brian qualified as | Georgia Institute of Technology, US, working on | | | | | Non-Executive Chairman of Plant Health Care plc | a Chartered Accountant with PwC in 1994. | the design and evaluation of precursors used | | | | | (AIM: PHC) and a Non-Executive Director of | He holds a Law degree (LLB Hons) from | in MOVPE. | | Dr Christopher Richards | Brian Tenner | Dr Nigel Pickett | Origin Enterprises plc (AIM: OGN). | Edinburgh University. | | Other roles Non-Executive Chairman Chief Executive Officer Chief Technology Officer Other roles None. N R None. Liam Gray Dr Alison Fielding Chris Batterham Chief Financial Officer Non-Executive Senior Non-Executive Director and Company Secretary Independent Director Chris was appointed to the Board in April 2019. Liam was appointed to the Board in November Alison was appointed to the Board in April 2017. Skills and experience 2021. He originally joined the Company as Group Skills and experience | Financial Controller in March 2019, before | | Chris has considerable financial and operational | | --- | --- | --- | | becoming Finance Director and then | Alison is an experienced entrepreneur and | experience and became the Finance Director of | | subsequently joining the Board. | Non-Executive Director, with significant expertise | Unipalm Group plc, from 1996 to 2001. He then | | | in strategy development and implementation for | went on to become CFO of Searchspace Group | Skills and experience | | start-ups, AIM/main market listed and not-for-profit | Limited from 2001 until 2005. Chris then went on | | --- | --- | --- | | Liam started his career at KPMG LLP, where he | organisations. Her early career included Zeneca | to hold a number of non-executive roles across | | qualified as a Chartered Accountant working | plc and McKinsey & Company. She co-founded | a range of companies with a technology focus | | primarily in audit on both large and medium- | Techtran Group, which was acquired by IP Group | in many cases. | | sized public and private companies. After six | in 2005. Alison spent 13 years with IP Group plc as | | Chris holds a Natural Sciences degree from years at KPMG LLP he moved to Renold plc Chief Technology Officer, Chief Operating Officer Cambridge University. He then qualified as a (LSE: RNO), initially as Group Financial Controller and latterly as Director of Strategy and IP Impact. Chartered Accountant with Arthur Andersen LLP Liam Gray Dr Alison Fielding Chris Batterham before moving into the European division as Alison holds an MBA from Manchester Business in 1979 where he spent his early career. Commercial Finance Manager. He holds an Chief Financial Officer and Non-Executive Senior Non-Executive School, a PhD in Organic Chemistry and a Accountancy degree from the University Other roles first-class degree in Chemistry from the University Company Secretary Independent Director Director of Liverpool. of Glasgow and an MSc in Mindfulness from the Chris is currently a Non-Executive Director of A N R A N R University of Aberdeen. Other roles NCC Group plc. None. Other roles Alison is currently a Non-Executive Director of Maven Income and Growth VCT PLC and a Non-Executive Director of Thomas Swan & Co. Limited. Key A Audit Committee N Nominations Committee R Remuneration Committee Chair ## 046 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 047 Corporate governance ### Corporate governance statement Audit Nominations Remuneration ## The group strives for best Attendance Board Committee Committee Committee Number of meetings 13 7 2 5 ## practice to ensure it can Executive Directors 1 1 1 Brian Tenner ## be flexible and responsive Dr Nigel Pickett — — — 1 Liam Gray — — ## to business change and Non-Executive Directors ## additional challenges Dr Christopher Richards Dr Alison Fielding Dr Christopher Richards ## that arise Chris Batterham Chairman 2 Henry Turcan — — — The Non-Executive Directors met twice during the year without any Executive Directors present. 1 Executive Directors attended these meetings by invitation and are not members of these Committees. 2 Henry Turcan stepped down from the Board part way through the year. | I am pleased to present the Corporate | | it cost a significant amount of time and | Learn and improve |  minutes and matters arising from | | | --- | --- | --- | --- | --- | --- | | | Board focus during the year | | | | 3 | | governance report for the year ended | | resources to ensure the outcome was in | | previous meetings (standing item); | | The Board is committed to continual | 31 July 2023. This section of the Annual | | the interests of all shareholders and not | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Agreeing strategic priorities with | | development. During the year, updates |  CEO report on business performance | | | | | Report describes our corporate | | a select few. | | | | | | | | the Executive Directors | | on corporate governance and legal | (standing item); | | | | | governance structures and processes | | | | | | Board | Executives | | | | Appointment of new Non-Executive | developments were provided by | | | | | | and their application throughout the | The Board has devoted considerable | | |  CEO report on progress and customer | composition | | | | | | Director | corporate lawyers. The Board intends to | | | | Non-Executives | | year ended 31 July 2023. | time to strategic discussion in the current | | | deliverables (standing item); | | | | carry out further training on accounting | | year. The group continues to expand its | | The Board remains committed to | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | | developments and ESG issues. |  CFO report on financial performance | | | | | ® | | | | 3 | | | commercial offering beyond CFQD | | continual improvement, and following | | | | | The Board’s view on | | | | | and rolling forecasts (standing item); | | | | (cadmium-free quantum dots) into a | | the conclusion of the Samsung litigation, | Overall management of risk and change | | | corporate governance range of dot-based nanomaterials for the decision was taken to look for an within the group  CTO report on technical and IP 1 The UK Corporate Governance Code sensing. Our customers continue to invest additional Non-Executive Director to matters (standing item); The rapidly evolving challenges brought | embodies core principles of accountability, | in these areas with Nanoco, and have | complement the existing team. | | | | | --- | --- | --- | --- | --- | --- | | | | | about by Brexit, the Ukraine crisis and the |  Company Secretary report on | 2 | | transparency, probity and a focus on | reported pleasing results, with Nanoco’s | This search is ongoing and we look | | | | | | | | cost of living crisis, against a background | governance issues and any material | | | long-term success. The Board firmly | materials being described as “world | forward to updating all stakeholders | | | | | | | | of other macroeconomic factors, have | litigation (standing item); | | 0-5 believes that a company governed in class”. The group continues to invest in in due course. Tenure required active real-time engagement improvements in existing products and  reports from Committee Chairs (Audit, (years) 5-10 accordance with these principles is Strong corporate governance between all members of the Board. more likely to be successful and that expansion into other materials. Nominations, Remuneration and EHS) >10 this is all the more important in times The Board is committed to ensuring These focus areas were in addition to (standing item); and Conclusion of the lawsuit | of significant uncertainty. | | that a strong governance framework | the normal ongoing responsibilities for | | 3 | | --- | --- | --- | --- | --- | --- | | | against Samsung | | |  any other business (standing item). | | | | | operates throughout the group, | approving the annual operating and | | | The Board and its Committees play a | | The conclusion of the litigation against | recognising that good corporate | capital expenditure budgets and any | Certain key senior management | | | --- | --- | --- | --- | --- | --- | | central role in the group’s governance by | | | | | 1 | | | Samsung allowed the management team | governance is a vital component to | material changes to them. | members are invited to give | | providing an external and independent to return its focus to the opportunities support management in its delivery of presentations at Board and Committee perspective on matters material to for the core organic business. The Board our strategic objectives and to operate meetings where appropriate. Nanoco’s stakeholders, and by seeking A typical Board agenda formally disbanded the Litigation a sustainable business for the benefit to ensure that effective internal controls Other areas, including the review of the Sub-Committee which comprised the of all stakeholders. Each full Board meeting is structured Male group risk register, the strategic plan, the Gender and risk management processes are Board Chairman and the Senior around a standard agenda of standing Female in place. Strategic priorities annual budget, contentious matters and Independent Director, together with the items that then includes a number of succession planning, etc. are reviewed by The Board also promotes a culture of CEO, CTO and Litigation Special Adviser. The Board reviewed the current strategy additional specific focus items for that the Board during each year at intervals | good governance throughout the group | | with the Leadership team, and | month’s meeting. These focus items | | 5 | | --- | --- | --- | --- | --- | --- | | | Shareholder requisition | | | commensurate with their importance. | | | by creating an environment of openness, | | considered how certain developments | are either recurring items (such as risk | | | | transparency and accountability. | It was disappointing to receive notice | should be prioritised to help the | management) or are in response to | | | 1 from a small group of shareholders to Company achieve its short-term goals. emerging issues in our markets, The members of the Board bring a wide requisition a general meeting to propose regulation, or the business itself. range of skills and experience to the Monitor performance the termination of the existing Directors An example of an agenda taken from group as set out on pages 46 and 47. and the appointment of their own team. The Board reviews performance of the the July 2023 meeting is shown below: The diverse skill set allows the Board to We firmly believe that the existing business on a monthly basis through White Ethnicity appropriately challenge and lead the Directors are best placed to deliver formal communications from the Ethnic minority group’s strategy. | shareholder value, and so it was incredibly | Executive Directors. The Board provides | | | --- | --- | --- | | encouraging that all the proposals were | oversight and challenges to the | | | voted down so emphatically. However, | Executive Directors to ensure robust | 5 | | it is important to note that this process | decisions are made. | | was incredibly value destructive, in that ## 048 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 049 Corporate governance ### Corporate governance statement continued Number Number of senior Number Percentage Governance framework of board Percentage positions on in executive of executive members of the board the board management management The different parts of the group’s Men 5 83% 4 3 100% governance framework are shown below, with a description of how they operate Women 1 17% 1 0 0% and the linkages between them. Board Number Number of senior Number Percentage The Board provides leadership of board Percentage positions on in executive of executive and is responsible for the overall members of the board the board management management management of Nanoco, its strategy, White British 5 83% 4 2 67% governance, long-term objectives and risk management. Other ethnic group 1 17% 1 1 33% It ensures the right group structure is in place to deliver long-term value to shareholders and other stakeholders. focus and discussion had improved My role as Chairman and Directors felt fully able to voice their Shareholder engagement activities differing opinions. In addition, the review The structure of the Board, its Engagement with shareholders remains identified areas of potential improvement, Committees and their respective an important activity for the Board. such as composition and strategy, to responsibilities are summarised on pages The group maintained its more formal further enhance the Board’s performance. 51 and 52. My key focus is to ensure that calendar of engagement with Board Committees Nanoco has an effective Board which is Once again it was felt that the balance shareholders and potential investors. collectively responsible for the long-term of time allocated to strategy, operations Support the Board in its work with specific areas of review and oversight objectives and risk management. They ensure the right group structure is in place to deliver success of the group. One of my most and functional areas and governance Longer-term Viability statement long-term value to shareholders and other stakeholders. important jobs is to ensure that the was broadly correct. The Board displayed Board and its Committees have the right great flexibility and nimbleness in The Board utilised the forecast for the balance of skills, experience and responding to rapidly emerging issues. next four years to assess the group’s knowledge suitable for Nanoco’s evolving Throughout the year, the Board has long-term viability. This is an increase strategy and growth aspirations as we maintained good corporate governance on the two-year period used in the prior progress through a new phase of and challenged management to continue year and reflects both the progress our development. to improve the processes and systems towards full commercialisation and that underpin the group’s normal the strong financial underpinning of the operating activities. group. Further details are provided on Board and Committee evaluation Remuneration pages 36 and 37. Audit Each of the Audit Committee, Committee Regular and appropriate Board and Committee Remuneration Committee and Nominations Committee evaluation is vital to Responsible for determining Nominations Committee carried out Primary function is to assist the Committee Statement of compliance the overall remuneration of improving Board effectiveness. This year, Board in fulfilling its financial and risk an internal self-evaluation of its with the Code Responsible for considering the the Executive Directors and the given the various issues the Board was responsibilities. It also reviews effectiveness during the year. Board’s structure, size, composition remuneration of senior managers dealing with, it was again felt that an financial reporting and the internal The conclusion from the Committee I am pleased to confirm that the Board and succession planning. within the broader controls in place and the external performance review would not considers that it has been in compliance institutional context of reviews is that, overall, the Committees external audit process. be as value adding as it would be in with the Code throughout the year remuneration practice. are working well. future with a more established Board. ended 31 July 2023 in all material areas. Therefore, I once again conducted an internal Board evaluation process, which Dr Christopher Richards was discussed by the Board. Overall, it Chairman was concluded that the Board and 19 October 2023 Executive team performed well during the year. The quality of information, Chief Executive Has responsibility for managing the business and overseeing the implementation of the strategy agreed by the Board. Leadership team The Leadership team currently represents the group’s most senior business and operational Executives. It is responsible for assisting the Chief Executive in the performance of his duties including:  developing the annual operating plan;  reviewing the group’s policies and procedures;  monitoring the performance of the different divisions  prioritisation and allocation of resources; and of the group against the plan;  overseeing the day-to-day running of the Company.  carrying out a formal risk review process; ## 050 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 051 Corporate governance ### Corporate governance statement continued Board composition and division of responsibilities Compliance with the UK Corporate Governance Code 2018 Role profiles are in place for the Chairman, Chief Executive Officer and other Directors, which clearly set out the duties of The below provides a guide to the most relevant explanations for how the Company has complied with each Principle. each role. Role Responsibilities Board leadership and Company purpose Page reference Chairman of the Board Is responsible for the running of the Board and promoting a culture of openness and debate. The A. An effective and entrepreneurial Board promotes the long-term sustainable success of the Company, generating P40-52 Chairman, in conjunction with the CEO and other Board members, plans the agendas, which are issued value for shareholders and contributing to wider society. (Dr Christopher Richards) with the supporting Board papers in advance of the Board meetings. These supporting papers provide B. Purpose, values and strategy are set and align with culture, which is promoted by the Board. P46-52 appropriate information to enable the Board to discharge its duties which include monitoring, assessing and challenging the Executive management of the group. C. Resources allow the Company to meet its objectives and measure performance. A framework of controls enables P28-37 assessment and management of risk. Chief Executive Ocer Together with the senior management team, is responsible for the day-to-day running of the group and regularly provides performance reports to the Board. The role of CEO is separate from that of the D. Engagement with shareholders and stakeholders is effective and encourages their participation. P21-23 (Brian Tenner) Chairman to ensure that no one individual has unfettered powers of decision making. The CEO works directly through the Leadership team (CTO, CFO and Operations Director). E. Oversight of workforce policies and practices ensures consistency with values and supports long-term sustainable P21-23, P40-52 success. The workforce is able to raise matters of concern. Chief Financial Ocer Works closely with the CEO and CTO to support them in the delivery of their roles. Key objectives are to ensure the smooth running of many of the back oce functions. Includes responsibility for all financial F. The diversity policy applied to the issuer’s administrative, management and supervisory bodies with regard to P40-52 (Liam Gray) matters including costings and plant eciencies as well as commercial margins. aspects such as, for instance, age, gender, or educational and professional backgrounds. Chief Technical Ocer Responsible for all research and development activities of the group. Includes stewardship of the group’s Division of responsibilities Page reference IP portfolio, new additions and maintenance. Takes leadership position on critical new research areas. (Dr Nigel Pickett) G. The Chair is objective and leads an effective Board with constructive relations. P46-56 Senior Independent Director Provides a sounding board for the Chairman and serves as an intermediary for other Directors, H. The Board comprises an appropriate combination of Non-Executive and Executive Directors, with a clear division P46-50 employees and shareholders when necessary. The main responsibility is to be available to the of responsibilities. (Dr Alison Fielding) shareholders should they have concerns that they have been unable to resolve through normal I. Non-Executive Directors commit appropriate time in line with their role. P46-85 channels or when such channels would be inappropriate. J. The Company Secretary and the correct policies, processes, information, time and resources support P46-56 Other Non-Executive Directors Maintains an ongoing dialogue with the Executive Directors which includes constructive challenge Board functioning. of performance and the group’s strategy. (Chris Batterham) Composition, succession and evaluation Page reference Company Secretary Ensures good information flows within the Board and its Committees and between senior management and Non-Executive Directors. The Company Secretary is responsible for facilitating the induction of new K. There is a procedure for Board appointments and succession plans for Board and senior management which P58-60 (Liam Gray) Directors and assisting with their professional development as required. All Directors have access to the recognise merit and promote diversity. advice and services of the Company Secretary to enable them to discharge their duties as Directors. L. There is a combination of skills, experience and knowledge across the Board and its Committees. Tenure and P46-50 The Company Secretary is responsible for ensuring that Board procedures are complied with and for membership are regularly considered. advising the Board through the Chairman on governance matters. The appointment and removal of the Company Secretary is a matter for the Board as a whole. M. Annual evaluation of the Board and Directors considers overall composition, diversity, effectiveness and contribution. P50 Audit, risk and internal control Page reference Experience of the Board N. Policies and procedures ensure the independence and effectiveness of internal and external audit functions. The Board satisfies itself of the integrity of financial and narrative statements. P61-66 The members of the Board bring a wide range of skills and experience to the group. This diverse skill set allows the Board O. A fair, balanced and understandable assessment of the Company’s position and prospects is presented. P5-37 to appropriately challenge and lead the group’s strategy. P. Procedures manage and oversee risk, the internal control framework and the extent of principal risks the Company P33-35 The chart below summarises its key areas of significant experience. is willing to take to achieve its long-term strategic objectives. Strategy Human Corporate Financial Remuneration Page reference Name development Chemical resources governance management M&A ESG Q. Remuneration policies and practices are designed to support strategy and promote long-term sustainable success, Dr Christopher Richards with Executive remuneration aligned to Company purpose, values and strategic delivery. P67-85 — — R. A transparent and formal procedure is used to develop policy and agree Executive and senior P67-85 Dr Nigel Pickett — — — — — management remuneration. | Brian Tenner | — | | | | --- | --- | --- | --- | | | | S. Independent judgement and discretion is exercised over remuneration outcomes taking account of the relevant | P67-85 | | Liam Gray | | wider context. | | — — Dr Alison Fielding — The Code is published by the Financial Reporting Council, a full copy of which can be viewed on its website, www.frc.org.uk. Chris Batterham — — — Dr Christopher Richards Chairman 19 October 2023 ## 052 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 053 Corporate governance ### Corporate governance statement continued This section of the Corporate governance operates, corporate social responsibility internet. All press releases are published report contains the group’s other reporting The Directors Independence and conflicts matters and other changes affecting on the Company’s website shortly after disclosures on corporate governance of interest the group and the industry it operates they are issued via the regulatory news There is a formal, rigorous and transparent | required by the Companies Act 2006, | | | in as a whole. | service in the United Kingdom. | The Chairman and | | --- | --- | --- | --- | --- | --- | | | procedure for the appointment of new | The group has effective procedures in | | | | | the UK Corporate Governance Code | | | | In addition, a broad range of other | | | | Directors to the Board, which is led by the | place to deal with potential conflicts of | The group acknowledges the importance | | other Non-Executive | | 2018 (the “Code”) and the UKLA’s | | | | relevant information is available on | | | | Nominations Committee. | interest. The Board is aware of the other | of developing the skills of the Directors to | | | | Disclosure and Transparency Rule 7 | | | | the group’s website. | Directors are available | | | | commitments of its Directors and | run an effective Board. To assist in this, | | | | including the required statement of | All Directors are then subject to election | | | | | | | | changes to these commitments are | Directors are given the opportunity to | The group also endeavours to ensure | | | compliance. A copy of the Code is | by the shareholders at the next general | | | | to shareholders to | | | | reported to the Board. The Companies | attend relevant courses and seminars | that all published information is capable | | | publicly available at | meeting following appointment to the | | | | | | | | Act 2006 requires Directors to avoid | to acquire additional skills and | of being readily understood on a | discuss strategy and | | https://www.frc.org.uk. | Board. In accordance with best practice, | | | | | | | | situations where they have, or could | experience to enhance their contribution | standalone basis without the need for a | | | | they are then subject to annual | | | | governance issues at | | | | have, a direct or indirect interest that | to the ongoing progress of the group. | one-to-one meeting. This is an extension | | re-election thereafter. The contracts Disclosure and Transparency Rule 7 conflicts or potentially conflicts with All of the Directors are given briefings of the “fair, balanced, and a shareholder’s request.” of the Non-Executive Directors are | | | the interests of the group. | on trends and developments in | understandable” requirement inherent | | --- | --- | --- | --- | --- | | This statement complies with sub-sections | available for inspection by shareholders | | | | | | | | corporate governance. | in the Annual Report and Accounts. | | 2.1, 2.2(i), 2.3(i), 2.5, 2.7 and 2.10 of Rule 7 of | at the AGM. | Directors are required to declare in | | | | the UK Listing Authority Disclosure Rules. | | advance of a Board meeting whether | | | The Chairman has sufficient time to The information required to be disclosed any of the business to be discussed in Performance evaluation Investor engagement devote to his duties as Chairman and | by sub-section 2.6 of Rule 7 is shown in | | that meeting gives rise to a conflict or | | | | --- | --- | --- | --- | --- | | | this has been demonstrated by his active | | The Board has established a formal | Meetings with analysts and institutional | | the Statement of Directors’ responsibilities | | potential conflict. That Director will then | | | | | participation in the group’s activities. | | process for the annual evaluation of | shareholders are held following the | | on page 89 and is incorporated in this | | be excluded from the relevant discussions | | | | | | | the performance of the Directors. | interim and final results and on an ad hoc | | section by reference. | The Non-Executive Directors | unless agreed otherwise by the Directors | | | | | | | This evaluation is based on a | basis. These are usually attended by the | | | constructively challenge and help | of the group in the limited circumstances | | | | | | | performance evaluation questionnaire | Chief Executive Officer and Chief | | | develop proposals on strategy and | specified in the Articles of Association. | | | | The Board | | | completed by each Director. | Financial Officer. There are times when | | | bring strong, independent judgement, | They will not be counted in the quorum | | | | | | | The Chairman’s performance is reviewed | other members of the Board, such as the | | | knowledge and experience to the | or permitted to vote on any issue in | | | The group is controlled through its Board annually by the Non-Executive Directors Chairman or CTO, also attend these Board’s deliberations. which they have an interest. of Directors. The Board’s main and led by the Senior Independent meetings. Following feedback from responsibilities and those of its various The Directors are given access to The Board considers its independent Director, Dr Alison Fielding. The shareholders, the Group plans for the sub-committees are set out on pages 51 independent professional advice at Non-Executive Directors to be evaluation of the Chief Executive Officer CTO to attend more shareholder and 52. the group’s expense when the Directors independent in character and is performed by the Chairman and the meetings going forward. deem it is necessary in order for them judgement. No Non-Executive Director evaluation of the other Executive To enable it to discharge its key to carry out their responsibilities. has been an employee of the group; has Directors is performed by the Chief Engagement during the year Number responsibilities as set out above, the | Board receives appropriate and timely | | had a material business relationship with | Executive Officer. | | | --- | --- | --- | --- | --- | | | The Board composition is partially | | | One-to-one meetings 10 | | information prior to each meeting. | | the group; receives remuneration other | | | | | compliant with Listing Rules LR 9.8.6R(9) | | | Conference calls 22 | | A formal agenda is set by each Chair | | than a Director’s fee; has close family | | | | | and LR 14.3.33R(1), namely that at least | | | Group meetings 4 | Directors’ dealings in the and Committee papers are distributed ties with any of the group’s advisers, one of our senior Board positions is a group’s shares Investor conferences 4 several days before meetings take place. Directors or senior employees; or holds woman (Dr Alison Fielding is our Senior Any Director may challenge group cross-directorships. Independent Director) and at least The group has adopted a model code The group takes care to ensure that proposals, and decisions are taken for Directors’ dealings in securities of the one member of the Board is from a meetings with shareholders or potential democratically after discussion. group which is appropriate for a minority ethnic background. Professional development investors are structured around Any Director who feels that any concern company quoted on the premium list of information that is already available We are not currently compliant with the On appointment, each Director takes remains unresolved after discussion may the London Stock Exchange. The to all shareholders on an equal footing. | | requirement to have at least 40% female | part in an induction programme in which | | | | --- | --- | --- | --- | --- | | ask for that concern to be noted in the | | | Directors comply with the rules relating to | | | | representation at Board level. This is | they receive comprehensive information | | Feedback from these meetings and | | minutes of the meeting. Specific actions | | | Directors’ dealings and also take all | | | | something which we will consider when | about the group; the role of the Board | | regular market updates are prepared by | | arising from meetings are agreed by | | | reasonable steps to ensure compliance | | | | looking at new appointments. | and the matters reserved for its decision; | | the group’s broker and are shared with | | the Board and then appropriately | | | by the group’s “applicable employees” as | | | followed up. | | the terms of reference and membership | defined in the rules. The Directors’ | the Board. | The group maintains, for its Directors of the Board and Committees and the interests in the ordinary share capital and officers, liability insurance for any The Chairman and other Non-Executive The terms of reference of the powers delegated to those Committees; and in options over such shares of the claims against them in that capacity. Directors are available to shareholders to Committees are publicly available at | | | the group’s corporate governance | Company are shown in the Directors’ | | | --- | --- | --- | --- | --- | | www.nanocotechnologies.com. | | | | discuss strategy and governance issues | | | | practices and procedures, including the | remuneration report on pages 70 to 85. | | | The same pages of the Annual Report | | | | at a shareholder’s request, and attend | | | Donations | powers reserved to the group’s most | | | | show the key officers and the division of | | | | general meetings to meet shareholders | senior Executives; and the group’s responsibilities and duties between each During the year the group made no where possible. Investor communications latest financial information. Throughout role holder. political or charitable donations. their period in office the Directors are Nanoco recognises the importance of updated on the group’s business, the good and timely communication. Its competitive environment in which it primary communication channel is the ## 054 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 055 Corporate governance ### Corporate governance statement continued Shareholders not attending the AGM As appropriate, the Board takes due 10% | Shareholder analysis | Annual General Meeting (“AGM”) | can contact the group via email at | note of their views insofar as these are | | --- | --- | --- | --- | | | | info@nanocotechnologies.com. | relevant to the group’s overall approach | | Shareholders at 31 July 2023 are analysed as follows: | At the AGM, separate resolutions will be | | | to corporate governance. This is | | proposed for each substantially different | The table below shows the different | | | --- | --- | --- | --- | | Territory Shares % | | | achieved, as noted previously, through | | | issue. The outcome of the voting on | resolutions proposed at the 2022 AGM, | | feedback from meetings with significant UK 293,046,877 90% UK shares AGM resolutions is disclosed by means the proportions of possible votes that shareholders and feedback from the (%) | | of an announcement on the London | were cast and the proportions in | | | --- | --- | --- | --- | | Europe (ex. UK) 8,020,495 3% | | | group’s brokers. Significant shareholders | | | Stock Exchange. | favour of and against each resolution | | were consulted regarding the changes North America 18,733,865 6% (resolutions 1 to 12 were passed as All shareholders are encouraged to to the remuneration policy which were 90% Asia 4,455,241 1% ordinary resolutions and resolutions 13 attend the AGM and talk to the Directors proposed at the 2021 AGM and that to 16 were passed as special resolutions). Rest of World 162,250 — there. All Directors, including the Chairs of policy will be effective for three years the Audit, Remuneration and Nominations The Board takes steps to ensure that (until 31 July 2024). Total 324,418,728 100% Committees, are available at the meeting the views of major shareholders are to answer questions. considered through regular contact. Type of holder Shares % 36% Retail investors 206,541,180 64% | | Retail | | Votes for Votes against Votes withheld | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Hedge funds 31,224,746 10% | shares | | | | | | | | | | | | | | | | | | | % of total | | % of total | | | % of total | | % of total | | | | % of total | | | | (%) | No. Resolution Votes | votes cast | voting rights | | 2 | Votes | votes cast | voting rights | | 2 | Votes | voting rights | | 2 | Pension funds 25,159,390 8% Trading 22,790,238 7% 1 To receive the Annual Report 64% and Accounts 110,794,374 100.0% 34.4% 2,000 0.0% 0.0% 9,000 0.0% Directors 14,293,480 4% 2 To appoint the auditors 110,737,657 100.0% 34.3% 21,800 0.0% 0.0% 45,917 0.0% Other 24,409,694 7% 3 Authority to agree the auditors’ fee 110,736,568 100.0% 34.3% 21,800 0.0% 0.0% 47,006 0.0% Total 324,418,728 100% 4% 4 To re-elect Dr Christopher Richards 105,336,051 95.1% 32.7% 5,427,908 4.9% 1.7% 41,415 0.0% Investment style Shares % 5 To re-elect Brian Tenner 110,756,759 100.0% 34.4% 7,200 0.0% 0.0% 41,415 0.0% Retail 199,731,255 62% 6 To re-elect Dr Nigel Pickett 110,756,759 100.0% 34.4% 7,200 0.0% 0.0% 41,415 0.0% Hybrid 47,262,703 15% Directors’ 7 To re-elect Dr Alison Fielding 109,629,809 99.0% 34.0% 1,134,150 1.0% 0.4% 41,415 0.0% shares Trading 25,464,811 8% (%) 8 To re-elect Christopher Batterham 109,622,604 99.0% 34.0% 1,141,895 1.0% 0.4% 41,415 0.0% Directors 14,293,480 4% 9 To re-elect Liam Gray 110,321,260 99.6% 34.2% 435,699 0.4% 0.1% 48,415 0.0% Corporate 10,890,000 3% 96% Value and growth 8,506,976 3% 10 Approval of Directors’ remuneration report 106,380,116 96.0% 33.0% 4,378,386 4.0% 1.4% 46,872 0.0% Other 18,269,503 5% 11 Approval for political donations 110,377,948 99.6% 34.2% 427,326 0.4% 0.1% 100 0.0% Total 324,418,728 100% 12 Authority to issue and allot new ordinary shares 110,717,185 99.9% 34.3% 65,904 0.1% 0.0% 22,285 0.0% 1 13 Disapplication of pre-emption rights 110,661,390 99.9% 34.3% 112,735 0.1% 0.0% 31,252 0.0% 1 14 Disapplication of pre-emption rights on acquisition or investment 110,677,215 99.9% 34.3% 62,641 0.1% 0.0% 65,518 0.0% 1 15 Authority to purchase its own shares 110,736,500 100.0% 34.3% 52,840 0.0% 0.0% 16,034 0.0% 1 16 Reduced notice of general meetings 110,558,701 99.8% 34.3% 231,138 0.2% 0.1% 15,535 0.0% 1 Proposed as special resolutions. 2 Excluding treasury shares. ## 056 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 057 Corporate governance ### Nominations Committee report As well as the members of the Committee, ## We are expanding the mix Governance Committee membership the Chief Executive Officer may be invited to attend, where there are no perceived The responsibilities of the Committee In accordance with the UK Corporate conflicts of interest. On matters of ## of skills and experience on were expanded a number of years Governance Code the Nominations remuneration of new appointees, ago to include a focus on continuous Committee consists only of Non-Executive the Chair works closely with the | | improvement in governance. | Directors. I have chaired the Committee | | | --- | --- | --- | --- | | the Board as Nanoco aims | | | Remuneration Committee. | | | The Committee’s terms of reference | since my appointment as a Non-Executive | | | | therefore include: | Director in November 2015 and thereafter | Meetings of the Nominations Committee | | | | having been made Chairman of the | are either scheduled around existing | ## to evolve to become a  reviewing and considering the Board in May 2016. The Board considers Board meetings or on an ad hoc basis, Company’s procedures and controls it appropriate for me to chair the for example during a recruitment for ensuring compliance with: ## supplier of commercial Nominations Committee in order to process. The Committee Chair provides  the UK Corporate Governance Code; achieve a balance with the Audit the Board with a full briefing on all Dr Christopher Richards and Remuneration Committees, relevant matters. ## production materials for  the FCA Disclosure Guidance and Nominations Committee Chair which are each chaired by other Transparency Rules, the Market The Chairman would not chair this Non-Executive Directors. Abuse Regulation, and any other Committee should it be considering the ## electronics supply chains applicable rules and regulations The Committee’s other members are appointment of a new Chairman. The that apply to the group; and Dr Alison Fielding and Chris Batterham. Senior Independent Director would chair All members of the Committee are the Committee in this situation.  the timely and accurate disclosure considered to have experience and of all information that is required to Board structure and activities during competence relevant to the duties be disclosed in order to satisfy the the year The Board has a wide variety of skills and responsibilities of the Committee. Company’s legal and regulatory | and experience that has served us well | Roles and responsibilities | Members | | | | Following the successful conclusion of | | --- | --- | --- | --- | --- | --- | --- | | | | | | obligations under the Corporate | Summary biographies of all members of | | | in recent years. With a commercial | | | | | | the Samsung litigation, the Company’s | | | The Committee is primarily responsible |  Dr Christopher Richards (Chair) | | Governance Requirements; | the Committee are detailed on pages 46 | | | production order expected in the short | | | | | | financial position has improved | | | for assisting the Board in ensuring the | | | | and 47. | | | term, we have commenced a process | |  Dr Alison Fielding |  recommending any proposed | | | significantly. In addition, the Company | appropriate composition of the Board to add an additional Non-Executive changes in the management of has made good progress towards and any Committees of the Board to  Chris Batterham Director with deep experience in corporate governance to the Board; Meeting frequency achieving its goal of commercial match Nanoco’s stage of evolution. This | consumer electronics supply chains | | | | 10% | | | and attendance | production. As a result of both positive | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | includes considering new appointments | | | | |  reporting on such compliance to | | | | with a focus on commercialisation skills. | | 20% | | | | | | steps, the decision was taken during | | | and potential succession plans. The | | | | | the Board; | The terms of reference of the Committee | | | Where the talent pool permits, we also | | | | | | | | the year to begin the search for a new | | | Committee evaluates the balance of | | | | | | require at least two meetings per year. | | | remain committed to further enhancing | | | | | |  reviewing potential conflicts of interest | | Non-Executive Director with deep | | | skills, knowledge and experience and | | | | 20% | | When specific issues or changes need to | | | diversity and skills. | | | | | | involving Directors and determining | | experience in consumer electronics supply | | | the size, structure and composition of | | Estimated | | | | be addressed, such as the appointment | | | | | | | | | whether such Director or Directors | | chains with a focus on commercialisation | | | the Board and Committees of the Board. | | allocation of | | | | | | of a new Board member, the Committee | | | time in FY23 | may vote on any issue as to which | | skills. We have engaged a specialist | | --- | --- | --- | --- | --- | --- | | This extends to reviewing appointments | | | | meets on additional occasions. The | | | | | | there may be a conflict; and | | worldwide search company to this end, | | of additional and replacement Directors | | | | Committee met two times during the | | | | 30% | | | | and hope to make an appointment by | | and Committee members by making | | |  reviewing all related party | financial year and was attended as | | the end of calendar year 2023. | appropriate recommendations to the | 20% | transactions, with appropriate input | shown in the table below: | | | | --- | --- | --- | --- | --- | --- | | Board on such matters by reference | | from advisers, determining whether | | | Succession planning | | to the parameters set out below: | | such transactions are appropriate | | Meetings/ | | The Chairman will have been with the Performance evaluation Committee member attended for the Company to undertake and Company for nine years in November Succession planning advising the Board accordingly. Dr Christopher Richards (Chair) 2/2 2024. In line with good corporate Recruitment Chris Batterham 2/2 governance, the Nominations Committee Governance Dr Alison Fielding 2/2 will begin its search for a new Chairman Board and Committee composition early in calendar year 2024 to ensure appropriate time for an effective search Supporting and a smooth transition. value creation Board mix Recruitment Diverse Board Strong of skills and to Board and and employees governance experience Committees ## 058 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 059 Corporate governance ### Nominations Committee report continued Audit Committee report ## Meeting frequency and Diversity To provide oversight of attendance continued The group has always aimed to employ ## The Committee is ## Employee engagement the right person for the right job, financial reporting and ## irrespective of sex, gender, race or primarily responsible for The Employee Voice Committee (“EVC”) disability. When recruiting at Board level, ## was established in 2020 as an employee disclosures and to ensure ## assisting the Board in the Nominations Committee requires that representative body which would aim to any Executive search firms used by the ## formally meet with a designated member ensuring the appropriate group have signed up to its industry’s ## an appropriate risk of the Board at least twice a year. Liam ## voluntary code of conduct (prepared in composition of the Board Gray, the CFO, took responsibility for response to the Davies Review of Women ## formal engagement with the EVC, and and any Committees ## management framework on Boards). The group follows a policy of took part in two of its meetings during ## appointing talented people on merit at of the Board to match the year. The EVC gave valuable Chris Batterham every level and does not have a specific ## is in place as the group ## feedback on employee concerns and Nanoco’s stage Audit Committee Chair target for numbers of female Directors issues, which has supported ## or employees. This reflects a market for of evolution.” management initiatives to improve ## industry skills that unfortunately still develops and grows morale and employee engagement. attracts more male candidates than Examples included holding “all-Company female. The Board will also ensure that meetings”, giving more attention its own development in this area is to mental health awareness, and consistent with its strategic objectives considering alternative forms of and enhances Board effectiveness. reward and recognition. Other aspects of diversity in the group Overview Meeting frequency Members are commented on in the Sustainability and attendance | section on pages 40 to 45. | The Audit Committee provides oversight | |  Chris Batterham (Chair) | | --- | --- | --- | --- | | | of the group’s financial and narrative | The terms of reference of the Committee | | | Review of the Nominations Committee’s | | |  Dr Alison Fielding | | | reporting statements, monitors the | require at least four meetings per year. | | effectiveness effectiveness of systems of internal 5% The Committee met seven times during 5% 20% | The Committee has reviewed and | control and risk management processes, | the financial year. As well as the members | | | | --- | --- | --- | --- | --- | | considered the effectiveness of its | and monitors the integrity of the group’s | of the Committee, the meetings are | | | | performance during the year. The review | external audit processes. | usually attended on an invitational basis | | | | included the views of members of the | | by the Chairman, the Chief Executive | | | | | The Audit Committee monitors internal | | | Estimated | | Committee and of regular attendees at | | Officer and the Chief Financial Officer. | 10% | allocation | and external risk factors on behalf of the the various meetings. I am satisfied that The external auditors attend each of time Board. These are maintained in the the degree of rigour and challenge meeting unless the business of the 40% group’s risk register. The status and applied in performing the Committee’s meeting does not need them to be assessment of matters in the risk register | responsibilities is appropriate and | | present. The Committee also has | | | --- | --- | --- | --- | | | also informs the drafting of the Viability | | 20% | | effective and continues to improve. | | meetings with the external auditors | | statement. The Committee does not just without the Executive Directors being respond to external factors but also present. Attendance of each member Dr Christopher Richards supports and challenges management Performance evaluation is set out below: Nominations Committee Chair to anticipate future risks and opportunities. Succession planning 19 October 2023 Accounting matters Meetings/ Committee member attended Risk management Committee membership Internal controls Chris Batterham (Chair) 7/7 The composition of the Committee Financial reporting Dr Alison Fielding 7/7 currently comprises me, Chris Batterham (Chair), and Dr Alison Fielding. Meetings of the Audit Committee are In accordance with the provisions of In addition to the scheduled Committee scheduled to occur in the run-up to key the Code, the Committee is made up of meetings, the members of the Committee events in the group’s reporting calendar. independent Non-Executive Directors. meet and discuss emerging issues for Each meeting precedes a Board meeting The Board considers that I have recent the business with the CEO and CFO to to allow the Committee Chair to fully and relevant financial experience to act ensure that the work of the Committee brief the Board on all relevant matters. as Chair of the Committee, by virtue of remains appropriately focused on the being a qualified Chartered Accountant The Committee has a pre-determined risks and needs of the business. with extensive relevant experience as a series of subjects and issues to be reviewed each year. These are then Continuous improvements in the quality, former CFO and finance director of a supplemented by additional review of relevance and timeliness of information number of private and public companies. emerging issues or changes in the being provided to the Committee and All members of the Committee are financial reporting or governance regimes. the Board as a whole ensure that similar considered to have experience and In this way, the Committee ensures that gains are also made in the quality review, competence relevant to the material key recurring themes are regularly challenge and scrutiny by the Committee. science sector. reviewed while maintaining the flexibility Summary biographies of all members of to adapt to changing circumstances. the Committee are detailed on pages 46 and 47. ## 060 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 061 Corporate governance ### Audit Committee report continued Significant issues considered during the During the year, the group entered  ensuring the group remains up to date of the business and to ensure that Financial reporting year in respect of the financial statements into a significant settlement transaction ### Audit Committee with developments in accounting and investments represent an appropriate with Samsung, which had two linked ### responsibilities Our approach to materiality The Committee assessed the following reporting requirements; and balance of risk and return. We work to components: matters in respect of financial reporting | The key areas of focus for the | | ensure that these are as good as they | | The financial statements must present | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | |  advising the Board on whether or not | | | | and in the preparation of the Interim Report | |  Disposal of IP – The proceeds from | | Audit Committee are set out below. | | can be for our business’ scale. | | a true and fair view of the performance | | | | | | the financial statements, when taken | | | | and the Annual Report and Accounts: | | the settlement were netted off | | This includes specific duties of the | | | | and financial position of the group. They | | | | | | as a whole, are fair, balanced and | Our responsibilities in this area include: | | | | | against the remaining net book value. | | Committee in each area, how it | | | | must also present a fair, balanced and | |  continuing appropriateness of the | | | | understandable. In simple terms, | | | | | | This part of the settlement had no | | operates and any changes and | | |  continual monitoring of the | understandable view. These are both | | group’s accounting policies; | | | | this means that shareholders receive | | | | | | impact on revenue or deferred income | | improvements made over time. | | | appropriateness and effectiveness | aimed at ensuring that a user of the | | | | | | adequate information to assess the | | | | |  continuous development in the quality | and was accounted for as a “profit on | | The subjects referred to are a mix | | | of internal controls (including | accounts can gain an accurate picture | | | | | | group’s strategy, business model, risks, | | | | | and transparency of the group’s | disposal of intellectual property” in | | of annually recurring areas and also | | | whether an internal audit function | of the underlying performance and | | | | | | and performance. | | | | | external reporting; | line with IAS 38. | | specific issues that have arisen or | | | is required); | position of the business. To achieve this, | | | | | been reviewed during the last year. | | | | all material matters need to be addressed. | |  a review of key judgements and |  Licence revenue – In line with IFRS 15, |  review of lessons learnt and External audit Material matters are those that are estimates made by management the licence revenue from the management remediation plans for | | | | considered by the Directors to be | (see table below); and | settlement is being recognised in the | | --- | --- | --- | --- | --- | --- | | Financial reporting | The primary objective in this area is | any shortcomings or improvement | | | | | | | | sufficiently specific and have a large | | income statement evenly over the | | | to ensure that the group is subject to an | plans to internal control processes; | |  considering if the financial statements, | | | The primary objective is to ensure | | | enough real or potential impact that | | average remaining life of the patent | | | appropriately robust, risk-focused | | | when taken as a whole, are fair, | | | that internal and external financial | |  review of progress and commitment | they would be likely to influence the | | portfolio (being 8.8 years from the | | | external audit from a qualified and | | | balanced and understandable. | | | information is robust, relevant, reliable, | | to addressing control improvement | decisions of a reader of the accounts. | | signing of the agreement). The | independent firm of auditors. and a firm basis for decision making opportunities identified by the unrecognised revenue is recorded as The Directors take a range of by management and external Further responsibilities in this external auditors; Significant accounting matters deferred income in the statement of quantitative and qualitative matters into stakeholders alike. These activities are area include: and areas of significant financial position.  review and challenge of the account in assessing whether or not a typically carried on throughout the management judgement  advising the Board on the models and assumptions underlying matter is deemed to be material. These A major one-year work package that year. They lend themselves to a appointment of the external auditors; the going concern and viability include the absolute size of a potential commenced in May 2022 with the The Committee, together with the “continuous improvement” mindset statements; adjustment by reference to the overall European electronics customer was the Board, considered what the significant that means we are always looking to  reviewing and monitoring the income statement or the financial most material source of revenue in the accounting matters and areas of do better. performance of the external auditors,  continual focus on cash and position statement and also by reference year from services and material sales, management judgement in relation which includes the planning and cash forecasting; Our responsibilities in this area include: to an individual component of the and was completed at the end of April to the financial statements were and effective execution of the external  oversight of whistleblowing and financial statements. Qualitative 2023. Deliverables were all accounted how these would be addressed. |  reviewing and monitoring the | audit process itself; | | | | | | --- | --- | --- | --- | --- | --- | | | | fraud detection and prevention | judgements include whether an issue | | for on the basis noted above regarding | | integrity of the group’s annual and | | | | Each item is considered in further | | | |  setting the audit and non-audit fees | mechanisms; and | would reverse or materially alter a trend | | sales of materials or service revenue in | | interim financial statements; | | | | detail below. | | | | of the auditors to avoid any potential | | (such as turning a profit into a loss, or | | line with the requirements of IFRS 15. |  ongoing review of the group’s risk  ensuring the appropriateness of conflicts of interest with Executive growth into a decline). Revenue recognition and deferred management processes and Other new sources of revenue earned in accounting policies; management (non-audit fees are set income (recurring item) systems, including a substantive In this way, the Directors aim to make sure the year were derived from the sale of out in note 6 to the financial  reviewing and challenging the critical review and challenge of as wide a range of issues as possible are goods or the performance of short-term The Committee reviewed the revenue statements); and judgements and estimates used in management’s assessment of considered without over-burdening the professional services work. A low level of recognition policies and management financial reporting. This includes  controlling the award of non-audit key risks. reader of the financial statements with judgement was required in assessing judgements made in the preparation of assessing any potential impact work to the external auditors to ensure insignificant or immaterial matters. these contracts under IFRS 15. the financial statements. Where revenue The Audit Committee also assists the of accounting judgements and that there is no actual or perceived relates to the sale of products, revenue is Board in ensuring the overall corporate The Committee discharged its obligations The Committee concluded that the estimates on Executive remuneration; threat to their independence. recognised on the transfer of risks and governance framework is appropriate in response to the financial year as follows: judgements and estimates made by rewards of ownership. For services to  ensuring that the financial by giving due consideration to laws management in respect of revenue customers, revenue is recognised on a information being provided and regulations, the provisions of the recognition and, if relevant, the treatment Internal control and risk time and material basis for delivery internally to the Board and to UK Corporate Governance Code and of deferred income and contract liabilities management of services. management is as robust as that the requirements of the Listing Rules. were reasonable and appropriately Our internal control and risk reported externally and evolves disclosed in the financial statements. management processes are a to meet the changing needs of fundamental part of the overarching the business; framework used to safeguard the assets Key item Judgement or estimate? Materiality Uncertainty Revenue recognition Judgement High Medium Carrying value of intangible assets Estimate Medium Low Going concern Judgement and estimate Medium Low Internal control Financial External Audit and risk Samsung litigation accounting Judgement High Low reporting audit Committee management Capital reduction Judgement Low Low ## 062 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 063 Corporate governance ### Audit Committee report continued The litigation settlement in the financial external auditors. The Committee document conveys a fair, balanced Significant accounting matters year provides significant cash resources challenged the assumption that the and understandable view of business External audit and areas of significant for the group. Taking into account the settlement was one linked transaction performance in the current year. The External audit plan management judgement proposed return of capital, the remaining and also the identification of the Committee members themselves also The Board has overall continued cash resources and the group’s projected different performance obligations that perform this function by reference to The Committee reviewed the proposed ## responsibility for the cash cost base, and the assessment by needed to be accounted for. In respect the matters discussed at the regular audit plan. The Committee was satisfied Carrying value of intangible assets management and the Committee of the of the deferred income arising, the Board meetings. that the areas of audit risk highlighted by ## group’s system of internal (recurring item) material potential risks identified in the Committee reviewed the various options Mazars were appropriate and included Drawing on this knowledge of the group’s group’s risk register and any mitigating for the calculation of the useful economic all material matters. The Committee controls as one critical The group holds a number of intangible activities and its own industry knowledge | assets, primarily relating to IP. At the end | actions and controls as shown on pages | life of the IP portfolio and agreed with | | subsequently reviewed the actual audit | | | --- | --- | --- | --- | --- | --- | | | | | and experience, supplemented by | | part of the overall | | of the year, these had a carrying value of | 33 to 35, the Committee concluded that | management’s conclusion that using the | | report by Mazars to ensure that it aligned | | advice received from external advisers £0.9 million (2022: £1.6 million). During the the group has adequate financial average remaining life of the portfolio as closely with those risks and the planned corporate governance during the drafting process, the year, the group entered into a number resources to adopt the going concern a whole was the most appropriate basis audit work. ## Committee determined that the Annual framework.” of transactions which support the net basis for the preparation of the financial for revenue recognition in future years. Report and Accounts is fair, balanced Safeguarding auditors’ independence book value of the portfolio; the profit on statements. Given the nature of the risks Capital reduction and understandable and this finding disposal of IP during the year totalled that the group faces while its activities The independence of the external was confirmed by the Board. | £68.7 million, in addition to the licensing | are at a pre-commercial stage, the | The Board has committed to returning | | auditors is essential to the provision | | --- | --- | --- | --- | --- | | of the remaining portfolio which provided | Committee continues to recommend | capital to shareholders upon receipt of | Audit Quality Review (“AQR”) by the | of an objective opinion on the true | | revenue of £3.0 million during the year | that the Annual Report and Accounts | the second tranche of cash from | Financial Reporting Council (“FRC”) | and fair view presented in the financial | | and a further £49.9 million to be | maintains a relatively high level of | Samsung. In order to facilitate this, the | | statements. The Committee reviews the | The Committee also reviewed and recognised in future years. disclosure of these matters in the Parent Company is required to have policies and status of the independence assessed the findings of the AQR carried | | financial statements – as set out in the | distributable reserves. Historical losses | | of the external auditors consistent with | | --- | --- | --- | --- | --- | | Management continued their bi-annual | | | out by the FRC on the external auditors’ | | | | sections on risk, viability and going | meant a transfer from share premium | | the ethical standards published by the | | review of the portfolio to identify any | | | audit of the Annual Report and Accounts | | | | concern on pages 36 to 37. | was required to create distributable | | Auditing Practices Board. | | one-off patents which may require | | | for FY23 as part of the FRC’s rolling | | reserves. This was a court-approved impairment. The Committee challenged Litigation accounting programme of quality reviews. While Auditors’ independence and objectivity proposal which also received significant and reviewed the results of the an AQR focuses on the performance of are also safeguarded by limiting the Management reviewed the various shareholder approval and was assessment carried out by management. the audit by the external auditors, the nature and value of non-audit services adviser contracts linked to the litigation, completed during the financial year. The Committee agreed with Committee noted the two areas of performed by the external auditors and concluded that as a result of these management that a £0.1 million good practice and the two areas where (see later section). The group has a all being payable following the impairment of a number of individual Financial reporting on a fair, improvements were needed. The policy of not recruiting senior employees settlement, these should be recognised assets was required in the current year, balanced and understandable Company has agreed to adopt the of the external auditors who have worked in full as a one-off cost in the financial with the majority related to technology (“FBU”) basis recommendations highlighted by the on the audit in the past two years. The year. The Committee agreed with areas that the group is no longer AQR for the year ended 31 July 2023, group works with the external auditors this treatment. The Committee reviewed the Interim and pursuing or territories where prosecution namely recording employee costs in to achieve the rotation of the lead Annual Report and Accounts. As part of of IP rights is more difficult. In addition, management reviewed the Costs of sales in the Consolidated engagement partner at least every that review process, the members of the recognition of revenue relating to the Statement of Comprehensive Income. five years. The gross book value of any assets which Committee were provided with a draft of agreements signed with Samsung, namely The Committee was satisfied that there have been lapsed are treated as being The current external audit firm and the the full Annual Report enabling them to the sale of IP and the licence agreement. were no material changes required to the disposed during the year. This totalled current lead engagement partner are in ensure that the performance reported Both agreements are payable in two group’s reporting and that overall Mazars £0.3 million in the current financial year their second year of providing external therein was consistent with the tranches with 50% being received in the had performed appropriately in the first (net book value £0.0 million). audit services to the group. Committee’s knowledge gained from year and 50% due in Feb 24. year as external auditors. regular reviews of the monthly The group continues to recognise IP The external auditors are also required The sale of IP is shown as a profit on management accounts and Board assets at their external cost of periodically to assess whether, in their disposal of IP after netting off the discussions of issues arising and business registration (typically, legal fees and professional opinion, they are independent amortised cost of the IP being sold. performance throughout the year. amounts payable to patent offices). and those views are shared with the IAS 38 allows the measurement and The licence income is recognised over Audit Committee. The Committee has The Committee also assessed whether recording of intangible assets using time. Management considered the time authority to take independent advice as the narrative description of the group’s either a cost model or a revaluation period to which the licence income it deems appropriate in order to resolve activities and performance was model. The group uses a cost model should relate, and decided the most issues on auditors’ independence. No consistent with its own understanding approach as patents are specifically relevant period would be the average such advice has to date been required. obtained through Board and Audit excluded from the revaluation approach. remaining life of the IP portfolio, which is Committee meetings and other For the current year, the Committee has 8.8 years. interactions it had with management. Going concern (recurring item) concluded that the external auditors The Committee reviewed in detail the remain independent and objective for The CFO advised the Committee of the The Committee considered the use of accounting and disclosures for the the purposes of their role. findings of independent readers of the the going concern basis for preparing litigation settlement. This reflects the very draft Annual Report and Accounts. the financial statements. This is currently significant materiality of the settlement. These reviews are carried out by Nanoco an annual recurring activity given the The CFO produced an extensive senior managers who have not been ongoing losses incurred by the business accounting and disclosure paper that closely involved in drafting the Annual in advance of generating full scale was submitted to the Committee Report. Their knowledge of the business production levels of commercial revenues. following additional review by the group’s allows them to form an opinion if the ## 064 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 065 Corporate governance ### Audit Committee report continued Executive Directors have a close well as protecting staff welfare. External audit continued involvement with all day-to-day The procedure is reviewed annually by the operations. They also meet with staff on Committee to ensure that it remains fit for Non-audit services provided a regular basis to identify and review purpose. No reports of whistleblowing by the external auditors business risks, the controls needed to were received during the year. Staff are The Audit Committee will only approve minimise those risks and the effectiveness regularly reminded of the whistleblowing the provision of non-audit services by of controls in place. Business risks are process as part of ongoing engagement the external auditors where they are monitored and discussed on a regular with staff on compliance issues such as permissible and do not represent a basis at meetings of the leadership and anti-bribery training. threat (by their nature or scale) to this senior management teams. The principal Internal accountability | requirement for independence. The aim | risks faced by the group and other | | | --- | --- | --- | | is to ensure that no material risk is taken | aspects of how they are individually | The Board has overall responsibility for | | of the auditors both advising on and | assessed and managed are set out | the group’s system of risk management | | auditing the same information in the | below and on pages 33 to 35. | and internal control. The Audit Committee | | financial statements. | | reviews the effectiveness of the system | Internal controls at least annually on behalf of the Board The Audit Committee’s approval is Key features of the internal control and, having carried out this review, the required for any fees for non-audit work system are summarised below: Committee continues to believe that paid to the auditors in excess of £10,000 the system is effective in safeguarding in any financial year. However, the group (i) annual budgets and rolling forecasts shareholders’ interests and the group’s recognises that it can receive particular are reviewed and approved by assets. There are some improvement benefit from certain non-audit services the Board; areas, such as more regular reviews of provided by the external auditors due (ii) monthly management accounts are internal controls, in addition to reviewing to their technical skills and detailed reviewed and challenged by policies and procedures, and these will understanding of the group’s business comparison to the budget; be implemented in FY24. The Board and hence some non-audit work agreed with this conclusion. is allowed. (iii) written operational, accounting and employment policies are in place; Review of the Audit No fees were paid for non-audit services Committee’s effectiveness during the year. Separate external firms (iv) the Board actively identifies and are engaged for taxation and Directors’ evaluates the risks inherent in the The Committee has reviewed and remuneration advice. business and ensures that considered the effectiveness of its appropriate controls and procedures performance during the year. The review are in place to manage these risks; included the views of members of the Internal controls and risk Committee and of regular attendees at management (v) expenditure approval limits and the various meetings (including the approval processes are in place to The Board has overall responsibility for Executive Directors). I am satisfied that cover all major commitments; the group’s system of internal controls as the degree of rigour and challenge one critical part of the overall corporate (vi) quality assurance processes are applied in performing the Committee’s governance framework. This includes overseen and audited by the internal responsibilities is appropriate and reviewing the effectiveness of these quality assurance department, with effective and continues to improve. controls and the processes in place for a particular focus on non-financial risk management. In accordance with processes and procedures which Chris Batterham the Internal Control Guidance for drive financial performance; and Audit Committee Chair Directors issued by the Financial 19 October 2023 (vii) compliance with control procedures Reporting Council, there is an ongoing is monitored by the Audit Committee process for identifying, evaluating and through its internal reviews and managing the significant risks faced by external audit findings and its reviews the group. This process was introduced of exceptions. during 2015 and is summarised on pages 33 to 35. The Committee considers that the need for an internal audit function is not currently The role of the Executive Directors is to warranted due to the size and complexity implement the Board’s policies on risk of the business but will reconsider this and control and to provide assurance need not less than annually. on compliance with these policies. The processes and procedures in place Whistleblowing and confidential are designed to manage rather than reporting procedures eliminate risk and operate within the The group operates a confidential Board’s defined risk appetite. reporting and whistleblowing procedure. They therefore can only provide a The policy aims to support the reasonable and not absolute assurance stewardship of the group’s assets and the against material misstatement or loss. integrity of the financial statements as ## 066 Nanoco Group plc – Annual Report and Accounts 2023 ### Remuneration Committee report ## Our Executive team led the ## successful litigation and ## made significant progress ## on our strategic objectives Dr Alison Fielding Remuneration Committee Chair Directors’ remuneration report and to Dear shareholder state whether, in their opinion, those Members parts of the report have been properly I am pleased to present our Directors’  Dr Alison Fielding (Chair) prepared in accordance with the remuneration report for the year ended accounting regulations. Items that  Chris Batterham 31 July 2023. The Committee’s report are audited throughout this report are seeks to deliver an appropriate balance  Dr Christopher Richards clearly marked as audited in the heading between the required regulatory of the section. 5% disclosures, commercial sensitivities 10% and the context for our approach and decisions. Introduction This report is presented in three parts: The Executive team led Nanoco Estimated 15% | | effectively to a number of significant | 55% | | | --- | --- | --- | --- | | (1) Chair’s introduction setting out an | | | allocation | | | successes throughout the year and the | | of time | overview of FY23 and prospective Board remains convinced that retaining matters for FY24; 5% and incentivising them is key to achieving (2) the Directors’ remuneration policy our strategic priorities. All milestones 10% | setting out the framework approved | were achieved for both major | | | --- | --- | --- | | by shareholders at the AGM in | commercial customers, with two | | | November 2021; and | materials now in final production | Performance evaluation | | | validation and discussions ongoing | Succession planning | (3) the Annual report on remuneration, with both customers on new longer and Employee engagement which sets out the actual deeper collaborations. The successful remuneration earned by Directors Diversity conclusion to the Samsung litigation over the year ended 31 July 2023. Governance after a number of years of intense Reward and targets | This Directors’ remuneration report for | activity has put the group in a strong | | --- | --- | | the year ended 31 July 2023 complies | self-funded position to deliver further | | with the requirements of the Listing Rules | commercial success, in addition enabling | | of the UK Listing Authority, Schedule 8 of | the planned major return of capital to | | the Large and Medium-sized Companies | shareholders in early 2024. The financial | | and Groups (Accounts and Reports) | results for the year and delivery of | | Regulations 2008 and the provisions of | personal objectives for the Executive | | the UK Corporate Governance Code | team were strong. | (July 2018). The Regulations require the auditors to report to the Company’s members on certain parts of the ## Nanoco Group plc – Annual Report and Accounts 2023 067 Corporate governance ### Remuneration Committee report continued We have recognised the challenges 2023 incentive outcomes faced by our employees with rising Remuneration at a glance cost of living and have increased base | Annual bonus | | | | Purpose and link to strategy Key features Planned for FY24 Actual in FY23 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | salaries by 5%. In addition, over the | Our remuneration | | | | | | | Considering the performance delivered | past two years, we have increased the | | Salary Basis to recruit and retain | | Reviewed annually. | Executive Directors will receive | CEO appointed September | | | | packages aim to reflect | | talent necessary to deliver | | 3% cost of living increase. The | 2020, salary increase | | in 2023 and reflecting that 80% of the | employer’s direct contribution pension | | | | Considers the role, responsibility | | | | | | | | the business strategy. | | rest of the workforce will | completed 1 August 2022. | | bonus is based on financial KPIs, the | percentage from 5% to 7.5% and this year | | | | and experience of the individual, | | | | | | the calibre of our | | | | receive 5%. | | | Committee determined that 95%, | we will introduce a workplace health | | | | corporate and individual | | All three Executives had the | | | | Executives, maintain | | | performance, and market | | same cost of living increase as | | 95% and 98% of the maximum bonus | programme for all staff that has an | | | | | | | | | | | | | comparators by size and | | all other Nanoco sta (6.0%). | | should be paid to the CEO, CFO and | equivalent cost of 1% of salary. | | | | | | | | | | close alignment to | | | complexity; and other Nanoco | | | CTO respectively. A detailed description salary increases. All staff participate in the Company ## of performance against the targets is shareholder value and bonus scheme, which resulted in Benefits and Provide a market-competitive Pension contributions equal to Unchanged. 7.5% of salary. set out on page 79. Given the group’s ## payments of up to £4,000 per employee, support the commitment pensions benefits and pensions those for all sta. stronger financial position, a proportion pro-rated for start of employment and package and promote the Life assurance. Unchanged. Eight times salary for ## of the annual bonuses will be paid in to our strategic priorities.“ wellbeing of employees. part-time hours. Executives, four times salary for cash with the remainder in deferred other sta. share options. Workplace health programme. Plan to introduce in FY24. None. Remuneration and its Long Term Incentive Plan: 2020 outcome strategic context Annual bonus Incentivises delivery of Target opportunity is 75% of Maximum opportunity remains FY23 bonus earned: Regarding longer-term performance, | | | annual key financial and | salary and maximum is 125% | 125% of salary for CEO, CTO | | | --- | --- | --- | --- | --- | --- | | | Our remuneration policy seeks to ensure | | | |  CEO 95% of maximum | | market disappointment in the value of | | strategic goals that support | of salary. | and CFO. | | a clear link between Executive Directors’ | the final Samsung settlement has led to | | the enhancement of | | |  CTO 98% of maximum | | --- | --- | --- | --- | --- | --- | | | pay, the delivery of the group’s strategy | | Performance measures are a | Financial targets 80% of | | | a depressed share price since early in | | shareholder value. | | | | | | | | mix of challenging financial and | maximum and personal |  CFO 95% of maximum | to be a sustainable production company, 2023. This has potentially been extended personal strategic targets. strategic targets 20% of and enhancement of shareholder value. and exacerbated by the distraction of maximum. The Remuneration Committee seeks to Up to 100% of earned bonus the requisitioned General Meeting that can be paid in Deferred Bonus ensure that the Directors’ remuneration sought to remove the Board. As a result Plan options. arrangements continue to be aligned to of the depressed share price, the the calibre of individuals, to the strategic Subject to malus and long-term options, granted to the clawback provisions. direction of the group and to our Executive team in 2020 as an incentive stakeholder philosophy. LTIP To reflect stakeholder Awards of 150% for Performance measures for the LTIP awards made in 2020 linked to the Samsung litigation, lapsed | | | philosophy, provide a | each Executive. | three-year period ending 31 | lapsed with nil value as | | --- | --- | --- | --- | --- | --- | | as at 31 July 2023 with nil value. | The Committee has always shown | | | | | | | | long-term retention | | July 2026 will be absolute TSR | share price targets were | Up to 250% in exceptional leadership in restraint of Executive and mechanism and align with (50%) and revenue (50%). not achieved. In assessing whether the outcomes circumstances such as Board remuneration, reflecting the stage shareholders. generated by the annual bonus and LTIP recruitment. 25% of the award will vest at of development of the business. Nanoco scorecards were fair in the context of threshold, increasing on a Three-year performance period. Executives have relatively low base straight-line basis to 100% for broader performance, the Committee salaries compared to benchmarks and Performance measures stretch. There is nil vesting took into account the transformational minimal benefits in kind. Short-term reviewed annually. below the threshold level. litigation success, the underlying incentives reflect challenging annual Subject to malus and financial performance of the group targets and have typically preserved clawback provisions. and the wider stakeholder experience Nanoco’s cash by being paid in Deferred (including, but not limited to, the Shareholding To align Directors to Minimum shareholding Unchanged. Unchanged. Bonus Plan Options that create further shareholder experience). After due requirement shareholder interests. requirement for all Executives clear alignment with shareholders’ 200% of salary. consideration, the Committee felt that interests. Long-term incentives are linked the formulaic outcome was an Post employment To further align Directors to To retain up to 200% of salary in Unchanged. Unchanged. directly to shareholder value in the form appropriate reflection of performance shareholder interests. shareholdings for one year post of options with stretching share price and employment Reduces to 100% of delivered. It has, therefore, not exercised revenue targets. salary in second year. discretion in relation to incentive outcomes during the year. Recovery To ensure recovery of Possible in the event of material Unchanged. Unchanged. provisions Deferred Bonus Plan awards misstatement, material Remuneration commencing if required. misconduct or a material 1 August 2023 Wider workforce corporate failure. Remuneration commencing 1 August Nanoco’s workforce is critical to its 2023 is detailed in the table on the Non-Executive Director fees will remain at their previous levels with no cost of living increase. The second increase in success. As a responsible business, our opposite page. the Chairman’s underlying fees that was agreed in 2019 to reflect comparative rates of pay will remain on hold. aim is to pay our staff at the median level for comparable national roles, and we Further information is set out on page 84. performed a benchmarking exercise in As a Committee, we believe that ongoing dialogue with our major shareholders is of key importance. Should you have any the prior year to review this. We are also queries or feedback in relation to the Directors’ remuneration report, please contact me through the Company Secretary. a living wage employer. Dr Alison Fielding Remuneration Committee Chair 19 October 2023 ## 068 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 069 Corporate governance ### Directors’ remuneration report ### Directors’ remuneration policy Directors’ remuneration policy continued This part of the report sets out the group’s forward-looking Directors’ remuneration policy that was subject to a binding vote at Element and purpose Operation Maximum opportunity Performance measures the AGM on 30 November 2021 with 99% of votes cast in favour. The policy is scheduled to continue in operation for three years Annual bonus Performance targets are set annually and Maximum annual bonus opportunity is Stretching performance including FY24 and will be subject to renewed shareholder approval at the AGM in 2024. The Directors’ remuneration policy is pay-out levels are determined after the year 125% of salary based on performance targets are set each year, Rewards and incentivises not audited. end following the Committee’s assessment as shown below: reflecting the group strategy. the achievement of annual of actual performance against set targets. objectives which are aligned Below threshold 0% Ordinarily, at least 80% will be with key financial and Up to 100% of any bonus earned can be paid in subject to achievement of Threshold 25% | Element and purpose Operation Maximum opportunity Performance measures | | | | | | strategic goals that support | deferred shares or options under the Deferred | | financial and/or corporate | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | the enhancement of | Bonus Plan (“DBP”) that will vest after two years. | On-target 60% | measures and the balance | | Base salary | Normally reviewed annually and applied | | No maximum. Annual increase normally | | N/A | | | | | | | | | | | | shareholder value. | | | will be based on challenging | | | from 1 August (can be varied). | | in line with the wider workforce. Potential | | | | Deferred share option awards may incorporate | Maximum 100% | | | Core element of fixed remuneration | | | | | | | | | personal objectives. | | | | | further increases: | | | | the right to receive (in cash or shares) the value | | | | that provides the basis to recruit | Consideration is given to the following: | | | | | | | On-target performance pays out at | | | | | | | | | | of the dividends that would have been paid on | | The Committee retains | | and retain talent necessary to | | | |  on promotion or changes in scope or | | | | 60% (and not 50%) as the Committee | | | | |  the role, responsibility and | | | | | vested shares; this may assume the reinvestment | | discretion to apply dierent | | deliver the business strategy. | | | | responsibility; | | | | includes an element of stretch when | | | | | experience of the individual; | | | | | of dividends into shares on such terms as the | | weightings in relevant | setting targets.  an individual’s performance in a role; Committee determines. circumstances, and to  corporate and individual override formulaic outturns performance;  where there has been a change in Personal bonus element is only payable if at where circumstances require. market practice; or least one financial target is achieved.  market comparators by size and complexity; and  if there is a change in the size and/or Long Term Incentive Plan Under the LTIP, awards of conditional shares, The maximum value of shares over Vesting of LTIP awards complexity of the business. (“LTIP”) restricted stock or nil-cost options (or similar which an individual can be granted is subject to meeting  other Nanoco salary increases. cash equivalent) can be made with vesting, an award in respect of a financial performance targets set To reflect stakeholder Benefits The group provides life assurance No absolute maximum. The value N/A dependent on the achievement of performance year is normally 150% of base salary, by the Committee. philosophy, provide a | | of eight times salary, for all Executives. | of benefits is set at a level which | | conditions, normally over a three-year | although this limit may be increased | | | --- | --- | --- | --- | --- | --- | --- | | Provide a market-competitive | | | longer-term retention | | | Performance targets are | | | in addition, post year end the Group | the Committee considers to be | | performance period. | to 250% of base salary in exceptional | | | benefits package and promote | | | mechanism and provide | | | reviewed regularly to | | | has introduced a workplace health | appropriately positioned, taking | | | circumstances. The percentage of | | | the wellbeing of employees. | | | alignment with shareholders. | There will be no retesting of performance | | ensure relevance and | | | programme for all employees. | into account relevant market factors | | | maximum awards for the dierent | | | | | | | after the end of the performance period. | | financial measures which | | | | based on the nature and location of | | | levels of performance would be no | | | | Directors are reimbursed for out-of- | | | | | link to creating shareholder | | | | the role, the level of benefits provided | | Vested awards are normally subject to a | greater than: | | | | pocket expenses incurred wholly and | | | | | value (such as share price, | | | | to other employees in the group | | two-year holding period. | | | | | necessarily on group business. | | | | Below threshold 0% | revenue and EPS) and/or | and individual circumstances. | | LTIP awards may incorporate the right to | | the achievement of | | --- | --- | --- | --- | | Benefits are reviewed periodically, | | Threshold 25% | | | | receive (in cash or shares) the value of the | | strategic milestones. | taking individual circumstances into dividends that would have been paid on On-target 60% consideration. Benefits provided may The targets and their the shares that vest; this may assume the include, for example, medical insurance, Maximum 100% weightings may vary each reinvestment of dividends into shares on relocation expenses, expatriate year based on group such terms as the Committee determines. On-target performance pays out at allowances and travel expenses. strategic priorities. The 60% (and not 50%) as the Committee Committee retains discretion Retirement benefits The group currently operates a salary Executive pension contributions are set N/A includes an element of stretch when to override formulaic outturns | | sacrifice pension arrangement under | at the same percentage of salary as all | setting targets. | | | --- | --- | --- | --- | --- | | Provide market-competitive | | | | where circumstances require. | | | which employees may elect to sacrifice | other sta (currently 7.5% of salary). | | | post-employment benefits to salary and the group pays an amount Shareholding requirement In service requirement N/A N/A recruit and retain Directors of the The policy sets an overall contribution equal to the amount of the salary calibre required for the business. limit of up to 10% of base salary (in To align Directors to Shareholding of at least 200% of base salary. sacrifice, together with the employer addition to the amount of any salary shareholder interests. 50% of vested shares under the DBP or LTIP National Insurance saved, into a private sacrifice and employer NIC saved). (post tax) are to be retained until the pension scheme. shareholding requirement has been met. Executive Directors are also eligible Post-employment Executive Directors’, upon ceasing employment N/A N/A to participate in the group’s defined shareholding requirement with the Company, are required to retain their contribution scheme (or other appropriate shareholdings, up to 200% of salary, for one pension plan). In circumstances where To further align Directors year post employment. This reduces to 100% the lifetime allowance is protected, to shareholder interests. of salary in the second year post employment. Executive Directors are permitted to Shares will be subject to this requirement only take an equal cash supplement if they are acquired from employee share plan (not counted towards bonus or awards granted on or after 1 August 2021. LTIP opportunity). ## 070 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 071 Corporate governance ### Directors’ remuneration report continued ### Directors’ remuneration policy continued Directors’ remuneration policy continued Notes to the policy table Remuneration outcomes in different performance scenarios Application of clawback and malus to variable remuneration The charts below set out an illustration of the remuneration policy for FY24. The charts provide an illustration of the proportion of total remuneration made up of each component of the remuneration policy and the potential value of each component. Under the Deferred Bonus Plan (“DBP”), during the two-year deferral period, the Committee has the right to reduce any deferred bonus awards which have not yet been released in the event of a material misstatement of the group’s financial results, material Five scenarios have been illustrated for each Executive Director: misconduct on the part of the participant, a material corporate failure as determined by the Board, a material failure of risk Below threshold Fixed remuneration management by the group, or in the event of serious reputational damage (i.e. a malus provision). For up to two years following performance No annual bonus pay-out the payment of a cash bonus award, the Committee may also require the repayment of some or all of the award in these circumstances (i.e. a clawback provision). The same provisions apply to awards under the 2015 LTIP at any time prior to the No vesting under the LTIP end of the holding period for LTIP awards. Threshold performance Fixed remuneration Explanation of performance measures chosen 25% annual bonus pay-out (31.25% of salary) Selected performance measures for the annual bonus and LTIP awards reflect the group’s strategy. Stretching performance 25% vesting under the LTIP (37.50% of salary) targets are set each year by the Committee taking into account a number of different factors. Target performance Fixed remuneration Annual bonus 60% annual bonus pay-out (75% of salary) Ordinarily, at least 80% of the potential maximum annual bonus will be subject to achievement of a combination of financial and corporate measures, with the remainder based on challenging personal objectives. The Committee will disclose the metrics 60% vesting under the LTIP (90% of salary) and performance against these on a retrospective basis to the extent that these are not commercially sensitive. The personal Maximum performance Fixed remuneration bonus element is only payable if at least one financial target is achieved. 100% annual bonus pay-out (125% of salary) LTIP 100% vesting under the LTIP (150% of salary) In line with the prior year, the Committee has opted for any potential LTIP award in FY24 to be based on a combination of revenue Maximum + 50% share Fixed remuneration targets and total shareholder returns (“TSR”). Both metrics are closely aligned to long-term shareholder interests in that revenue price increase 100% annual bonus pay-out (125% of salary) growth will lead to a valuable self-financing organic business and TSR is a direct measure of increases in shareholder value. It is the Committee’s view that these metrics are the most appropriate performance measure at present for determining LTIP vesting 100% vesting under the LTIP (150% of salary) plus an assumed 50% increase in share price from grant date for the awards for the reasons given above. The Committee intends to review each year the performance metrics for future awards taking into account the business priorities and strategy at that time. Brian Tenner £ Dr Nigel Pickett £ Liam Gray £ The Committee also retains the discretion to adjust or set different performance measures or targets where it considers it appropriate to do so (for example, to reflect a change in strategy, a material acquisition and/or a divestment of a group business 1,500k 1,200k 800k or a change in prevailing market conditions) and to assess performance on a fair and consistent basis from year to year. £1,333,613 Operation of the LTIP and DBP £678,930 1,200k The LTIP and DBP are operated by the Committee in accordance with their respective rules. These include the ability to adjust £949,048 900k 600k the number of shares subject to awards in the event of a variation of share capital, demerger, delisting, special dividend, rights £1,114,988 issue or other event which may, in the opinion of the Company, affect the current or future value of shares. The “market value” of a £567,630 49% share for the purposes of determining the number of shares subject to the LTIP or DBP award will be the average share price over £793,466 the three dealing days following the announcement of results preceding the grant date. The Committee can determine that an 900k 49% alternative basis should apply but this would still be by reference to market prices such as the average price over the three-day 39% 49% 39% period leading up to an award at a different date. All members of staff are eligible to participate in both schemes. £794,338 600k 39% 400k £404,390 £565,280 Early vesting of awards 33% 600k 33% As described on pages 75 and 76, awards under the DBP and LTIP may vest earlier than anticipated in “good leaver” 28% £513,769 circumstances. £261,555 33% 27% £365,617 33% 27% 21% 33% 27% 21% On a change of control of the Company or other relevant corporate event (such as a demerger, delisting, special dividend 28% 300k 21% 200k 28% 28% or other event which may affect the value of an award), the extent to which unvested awards will vest will be determined in £313,363 18% 300k £233,000 £159,530 18% 18% accordance with the rules of the relevant plan. 7% 4% 3% 2% 2% 7% 4% 3% 2% 2% 7% 4% 3% 2% 2% Awards under the DBP will vest in full in the event of a takeover, merger or other relevant corporate event. 93% 57% 37% 26% 22% 93% 57% 37% 26% 22% 93% 57% 37% 26% 22% Awards under the LTIP may vest early on a takeover, merger or other relevant corporate event. The Committee will determine the level of vesting, taking into account the extent to which the performance conditions are satisfied and the perceived value 0 0 0 created as a result of such an event. Such vesting would ordinarily be on a time pro-rata basis, although the Committee has discretion not to apply time pro-rating. | | | | Target | | | | | Target | | | | | Target | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Threshold | | Maximum | | | Threshold | | Maximum | | | Threshold | | Maximum | | | | performance | performance | performance | performance | | performance | performance | performance | performance | | performance | performance | performance | performance | | | How the Executive Directors’ remuneration policy relates to the group | Below threshold | | | | Maximum + 50% | Below threshold | | | | Maximum + 50% | Below threshold | | | | Maximum + 50% | | | | | | | share price increase | | | | | share price increase | | | | | share price increase | The remuneration policy summarised previously provides an overview of the structure that operates for the Executive Directors. The same broad structure also operates for the members of the senior management team and all other members of staff with varying levels of participation in the LTIP depending on seniority. Staff other than Executives can choose to take some or all of Key: l Fixed pay l Pension l Annual bonus l LTIP their annual bonus as a participation in the DBP with a 50% uplift in the number of options on the value deferred. ## 072 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 073 Corporate governance # Directors' remuneration report continued # Directors' remuneration policy continued # Remuneration outcomes in different performance scenarios continued Fixed pay currently comprises the following elements from 1 August 2023. | | Current base salary | Benefits^{1} | Pension^{2} | Total | | --- | --- | --- | --- | --- | | Chief Executive Officer – Brian Terrier | £300,245 | – | £22,518 | £322,763 | | Chief Technical Officer – Dr Nigel Pickett | £213,665 | – | £16,025 | £229,690 | | Chief Financial Officer – Liam Gray | £152,852 | – | £11,464 | £164,316 | 1 No benefits are currently provided to the Executive Directors other than under the group life assurance scheme, the value of which in the case of the Executive Directors cannot be identified. The Executive Directors will be eligible for the group health wellbeing programme that will be implemented in FY24 but the value will not be known until it is finished. 2 Based on 75% employer pension contributions/cash supplement in lieu of pension which applies for the year ended 31 July 2024 (2023: 7.5%). With the exception of the final scenario (which assumes a 50% increase in share price from grant date of LTIP), the values illustrated assume a constant share price from the time of grant of LTIPs and do not take into account share price fluctuation or dividend equivalents that may be received under the share plans. The ultimate amounts received by the Directors may be higher or lower than the amounts illustrated above. # Remuneration policy for Non-Executive Directors | Purpose and link to strategy | Operation | Other items | | --- | --- | --- | | To enable the group to attract and retain Non-Executive Directors of the required calibre by offering market-competitive rates. | The Chairman's fee is determined by the Committee and those of other Non-Executive Directors by the Board. Fees take into account several factors, including the size and complexity of the business, fees paid at companies of a similar size and complexity, and the expected time commitment and contribution for the role. The Committee receives independent benchmark advice from Deloitte on Non-Executive Director fees. Overall fees paid to Non-Executive Directors will remain within the limits set by the Company's Articles of Association. | Non-Executive Directors are provided with Directors' and officers' insurance and indemnity protection and are eligible to be reimbursed for any reasonable hotel and travelling expenses and other reasonable expenses incurred in the performance of their duties. The Non-Executive Directors do not participate in the group's annual bonus, share plans or pension schemes. | # Remuneration policy on recruitment When hiring a new Executive Director, the Committee will seek to align the remuneration package with the above policy. When determining appropriate remuneration arrangements, the Committee may include other elements of pay which it considers are appropriate and necessary in the circumstances. However, this discretion is capped and is subject to the limits referred to below: - — base salary will be set at a level appropriate to the role and the experience of the appointee. We may agree future increases up to a market rate, in line with increased experience and/or responsibilities, subject to good performance; - — benefits and pension contributions will only be provided in line with the above policy; - — the Committee will not offer non-performance related incentive payments (for example a "guaranteed sign-on bonus"); - — other elements may be included in the following circumstances: - — an interim appointment being made to fill an Executive Director role on a short-term basis; - — if exceptional circumstances require the Chairman or a Non-Executive Director to take on a short-term Executive function; - — if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term incentive award for that year as there would not be sufficient time to assess performance. Subject to the limit on variable remuneration set out below, the quantum in respect of the months employed during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis; and - — if the Director will be required to relocate in order to take up the position, it is the group's policy to allow reasonable relocation, travel and subsistence payments. Any such payments will be at the discretion of the Committee; # Directors' remuneration policy continued # Remuneration policy on recruitment continued - — the Committee may also alter the performance measures, perform if the Committee determines that the circumstances of the recruit alterations will be clearly explained in the next Directors' remuneration; - — the maximum level of variable remuneration which may be granted salary, in line with the policy set out on pages 70 and 71. The Committee may make payments or awards in respect of hiring an on leaving a previous employer. In doing so, the Committee will take on conditions attached to the forfeited arrangements and the time over will generally seek to structure buyout awards or payments on a comp such payments or awards are excluded from the maximum level of var ordinarily be granted on the basis that they are subject to forfeiture or joining the group, although the Committee will retain discretion not to Any share awards referred to in this section will be granted as far as and subject to the limits referred to above, recruitment awards may Where a position is filled internally, any ongoing remuneration obligat to continue in accordance with their terms. Fees payable to a newly appointed Chairman or Non-Executive Direct appointment and based on current market rates of pay for equivalent # External appointments The group recognises that Executive Directors may be invited to be this can help broaden the skills and experience of a Director. Subject normally permitted to accept external appointments and may retain potential conflict of interest arises and provided that the Director is currently no such appointments. # Payment for loss of office The group's policy is that Executive Directors' service contracts should notice. This policy was implemented during FY21 with notice periods to Executives. The duration of Directors' service contracts is disclosed on payments for loss of office will be approached are set out below: | Element | Policy | | --- | --- | | **Payment in lieu of notice** | The group has discretion to make a payment in line for the unexpired period of notice, up to a maximum | | **Annual bonus** | At the Committee's discretion, on an individual b number of factors, such as the circumstances of the period. Any bonus will normally be pro-rated Committee retains discretion to pay the annual b bonus can, at the discretion of the Committee, be | | **DBP** | Determined in accordance with the rules of the D Unvested awards will normally lapse on cessation if a participant is deemed to be a 'good leaver' redundancy or the sale of his employer, the Com vest on cessation or at the normal vesting date. The Committee, taking into account, unless the C from the date of grant to the date of cessation re during such period as the Committee determines Awards (in the form of nil-cost options) which have may be exercised if a participant is a good leaver exercised for such period as the Committee deter | 074 Narciss Group plc – Annual Report and Accounts 2023 Corporate governance # Directors' remuneration report continued # Directors' remuneration policy continued Payment for loss of office continued | Element | Policy | | --- | --- | | LTIP | Determined in accordance with the rules of the shareholder-approved LTIP. Unvested awards will normally lapse on cessation of employment. However, if a participant is deemed to be a good leaver, the Committee shall determine whether the award is released on the normal release date or the date of cessation (or on some other date). The extent of vesting will be determined by the Committee taking into account the extent to which the performance condition is satisfied and, unless the Committee determines otherwise, the period of time elapsed from the date of grant to the date of cessation relative to the performance period. Awards may then be exercised during such period as the Committee determines. If a participant leaves for any reason (other than summary dismissal) after an award has vested but before it has been released (i.e. during the holding period), his award will ordinarily continue to the normal release date when it will be released to the extent it vested. The Committee retains discretion to release awards when the participant leaves. If the participant is summarily dismissed, their award will lapse. Awards (in the form of nil-cost options) which have vested and been released but remain unexercised at the date of cessation may be exercised if a participant is deemed to be a good leaver. Awards may then be exercised for such period as the Committee determines. | | Mitigation | The Committee's practice is that if an Executive Director's employment is terminated, any compensation payment will be calculated in accordance with normal legal principles including the application of mitigation to the extent appropriate to the circumstances of the termination. | | Other payments | In appropriate circumstances, payments may also be made in respect of accrued holiday, outplacement and legal fees. | Where a buyout award has been made, the leaver provisions would be determined at the time of the award. The Committee reserves the right to make additional exit payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim arising in connection with the termination of a Director's office or employment. Where the Committee retains discretion, it will be used to provide flexibility in certain situations, taking into account the particular circumstances of the Director's departure and performance. There is no entitlement to any compensation in the event of Non-Executive Directors' fixed-term agreements not being renewed or the agreement terminating earlier. # Consideration of employees' pay The Committee generally considers pay and employment conditions elsewhere in the group when considering the Directors' remuneration. When considering base salary increases, the Committee reviews overall levels of base pay increases offered to other employees. Employees are not actively consulted on Directors' remuneration. Employee share ownership is fundamental to the group's culture and is reflected in the universal participation in both of our share incentive plans. # Existing contractual arrangements The Committee retains discretion to make any remuneration payment and/or payment for loss of office outside the policy in this report: where the terms of the payment were agreed before the policy came into effect, provided that they are in line with the Directors' remuneration policy approved at the 2021 AGM; where the terms of the payment were agreed at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration of the individual becoming a Director of the Company; and to satisfy contractual commitments under legacy remuneration arrangements. For these purposes, "payments" includes the satisfaction of awards of variable remuneration and, in relation to an award over shares, the terms of the payment are agreed at the time the award is granted. # Consultation with shareholders The Committee considers shareholder feedback received on remuneration matters, as well as any additional comments received during any other meetings with shareholders. The Committee consulted with major shareholders in respect of the changes to the remuneration policy that was approved at the 2021 AGM. 076 Nancico Group plc - Annual Report and Accounts 2023 # Annual report on remuneration This report sets out details of the amounts earned by Directors during the period to implement the policy during FY24. This part of the report will be submitted to the Committee. This report contains unaudited information except where stated that: # Remuneration Committee The Committee comprises Dr Alison Fielding, who is Chair of the Committee, and the Board of Directors of whom is considered to be independent. The Committee may invite the Committee to the Committee meetings, including the Chief Executive Officer, Chief Financial Officer, and the Board of Directors of whom present when their own remuneration is being discussed. The Committee may be responsible for developing policy on Executive remuneration and for supporting the management, as well as reviewing the performance of the Executive Remuneration Committee can be found in the Investors section of the Company. The Committee met five times during the year; its meetings are minutes. # Advisers to the Committee The Chief Executive Officer is consulted on the remuneration of those who are not entitled to Executive Director or employee is present or takes part in discussions with the Committee on remuneration. During the year, the Committee was assisted in its work. | Adviser | Details of appointment | Services provided by the adviser | Fee | | --- | --- | --- | --- | | Deloitte LLP ("Deloitte") | Appointed by the Remuneration Committee in June 2015. | Various advice on Executive remuneration. | The Committee has to be financed by the Committee (20% of the total) for the five years. | Deloitte is a member of the Remuneration Consultants Group and, as well as the Board of Directors of whom to Executive remuneration consulting in the UK. The Remuneration Committee is also a member of the Board of Directors of whom reviewing the appointment of Deloitte. The Committee is satisfied with the objective and independent. # Single total figure of remuneration for 2023 – (audited information) The remuneration of the Directors who served on the Board of Directors of whom (footnotes for both tables are below the second table): | | Base salary and fees £'000 | Benefits initial £'000 | Annual bonus in cash £'000 | Annual bonus in cash £'000 | | --- | --- | --- | --- | --- | | Executive Directors | | | | | | Brian Terrier | 292 | – | 228 | – | | Dr Nigel Pickett | 207 | – | 168 | – | | Liam Gray | 148 | – | 117 | – | | Total Executive Directors | 647 | – | 513 | – | | Non-Executive Directors | | | | | | Dr Christopher Richards | 100 | – | – | – | | Dr Alison Fielding | 46 | – | – | – | | Chris Batterham | 46 | – | – | – | | Henry Turcan | 8 | – | – | – | | Total Non-Executive Directors | 200 | – | – | – | | Total | 847 | – | 513 | – | Corporate governance ### Directors’ remuneration report continued ### Annual report on remuneration continued Annual report on remuneration continued | Single total figure of remuneration for 2023 – (audited information) continued | | | | | | | | | | | | | | | | Individual elements of remuneration for the year ended 31 July 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | The remuneration of the Directors who served on the Board of Nanoco Group plc during the year to 31 July 2022 was as follows: | | | | | | | | | | | | | | | | Base salary | | | Base salary | | | Benefits | Annual bonus | | Annual bonus | | Long-term | | | | | Total fixed | Total variable | Executive Directors’ base salaries for FY23 were set as disclosed in the FY22 Directors’ remuneration report taking into account | | | | and fees | 1 | in kind | 2 | in cash | | in shares | incentives | Pension | 3 | Total 2022 | remuneration | | remuneration | | the second, deferred, tranche of the increase for Brian Tenner’s salary previously agreed, Liam Gray’s strong performance in role £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 since his appointment to the Board, and in the case of each Executive Director the increase for the wider workforce. Accordingly, Executive Directors the salaries were set as: Brian Tenner, £291,500 (FY22: £250,000); Dr Nigel Pickett, £207,442 (FY22: £195,700); and Liam Gray, £148,400 (FY22: £120,000). Brian Tenner 250 — — 238 — 15 503 265 238 Dr Nigel Pickett 196 — — 184 — 12 392 208 184 Annual bonus 4 Liam Gray 87 — — 85 — 5 177 92 85 For the year ended 31 July 2023, the maximum bonus for Dr Nigel Pickett, Brian Tenner and Liam Gray was 125% of salary. The annual bonuses comprise two elements: financial corporate objectives (80% of award or 100% of salary) and personal Total Executive Directors 533 — — 507 — 32 1,072 565 507 objectives (20% of award or 25% of salary). Bonuses for personal objectives are only payable if at least one financial corporate Non-Executive Directors objective is achieved. Dr Christopher Richards 100 — — — — — 100 100 — Maximum financial target performance was achieved during the year and hence bonuses were also payable in respect of Dr Alison Fielding 46 — — — — — 46 46 — personal targets. Performance against financial and personal targets is shown in the tables below with the financial and corporate measures and their weighting as a percentage of maximum award for the year ended 31 July 2023: Chris Batterham 46 — — — — — 46 46 — | | 5 | | Measure and weighting as a | Bonus earned as a | | --- | --- | --- | --- | --- | | Henry Turcan | | 40 — — — — — 40 40 — | | | | | | | percentage of maximum award Threshold performance level Maximum performance level Performance achieved | percentage of maximum award | Total Non-Executive Revenue and other operating Directors 232 — — — — — 232 232 — income (64%) £2.7m £3.5m £5.8m 64.0% Total 765 — — 507 — 32 1,304 797 507 Adjusted LBITDA (16%) Loss of £2.2m Loss of £1.7m Loss of £0.2m 16.0% 1 If less than a year was served, salary or fees are from the date of appointment or to the date of retirement. The Executive Directors’ salaries are shown The Committee concluded that for the assessment of the financial metrics, the performance achieved should be taken from the before any salary sacrifice pension contributions. statutory accounts. 2 The only benefit provided to the Executive Directors is life cover which is contained within a policy covering all employees such that it is not possible to identify the proportion of the premium in respect of either Directors individually or as a whole. The personal objectives and amounts payable in respect of Brian Tenner, Dr Nigel Pickett and Liam Gray are set out in the table 3 The pension figure represents the cash value of Company pension contributions and/or cash in lieu of pension contributions. This does not include the below. Specific bonus targets have not been disclosed by the Committee where they are considered to be commercially amount of the salary sacrifice paid as a pension but does include the employer National Insurance saved that is paid into a private pension scheme. sensitive. The current stage of the group’s development means certain retrospective information could still give competitors 4 Liam Gray was appointed to the Board on 8 November 2021 on an annualised salary of £120,000. The figure above in FY22 discloses his salary between insight into the strategic plans of the business, which is not in the interest of shareholders. the date of his appointment and 31 July 2022. It is the Board’s intention that payment of the bonus will be split between cash (67%) and deferred share options (33%) granted 5 Henry Turcan was a representative of the shareholder Lombard Odier Asset Management, and Nanoco paid £8,000 (2022: £40,000) for these services direct to Lombard Odier Asset Management. Henry Turcan resigned from the Board on 12 September 2022. under the DBP, which will vest after a period of two years. DBP awards are not subject to any further performance condition and are subject to the “leaver” provisions in the policy and the DBP rules. Weighting Achievement (% of maximum (% of maximum Director Measure bonus opportunity) bonus opportunity) Brian Tenner Financial and corporate measures 80 80% Personal objectives 20 15% Confidential commercial objective None (0%) Develop post-trial business strategy Achieved (2.5%) Drive all Samsung litigation activities Achieved (7.5%) Win additional Tier 1 JDA Partial (5.0%) Dr Nigel Pickett Financial and corporate measures 80 80% Personal objectives 20 18.125% Deliver additional R&D revenue Achieved (2.5%) Focused expansion of IP portfolio Partial (5.625%) Support all Samsung litigation activities Achieved (7.5%) Confidential commercial objective Achieved (2.5%) Liam Gray Financial and corporate measures 80 80% Personal objectives 20 15.25% Complete transition of CFO responsibilities Partial (3.75%) Development of support services Partial (3.25%) Development of tax strategy Partial (3.25%) Outperform FY23 overhead and cash targets Achieved (5%) ## 078 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 079 Corporate governance ### Directors’ remuneration report continued ### Annual report on remuneration continued Annual report on remuneration continued Individual elements of remuneration for the year ended 31 July 2023 continued Statement of Directors’ shareholding and share interests (audited information) No long-term incentives or DBP’s vested during the year ended 31 July 2023. The threshold level of performance for the LTIP Directors’ interests in share options to acquire ordinary shares of ten pence in the Company, including options held under the awards granted in October 2020 and which vested by reference to performance to the end of FY23 was not achieved, Deferred Bonus Plan, were as follows: and the awards have lapsed. | | | | | Exercised | Granted | | At | | --- | --- | --- | --- | --- | --- | --- | --- | | | Exercise | | At | during | during | 31 July | | | Share options Date granted | price | 1 August 2022 | | the year Lapsed | the year | 2023 | | LTIP awards granted in FY23 1 Dr Nigel Pickett 22 Oct 2012 57.00p 750,000 — (750,000) — — Awards to the Executive Directors made on 25 October 2022 were as follows: 3 | | | | | | | | 22 Nov 2016 | | Nil 66,576 (66,576) — — — | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Percentage | | Face value at | | Face value at grant | | | | | | | | 1 | | 1 | | | | 3 | | | | of salary | | grant date | | less exercise price | Performance period | 1 Nov 2019 | Nil 437,681 (437,681) — — — | | | Director Type of award | % Number of options | | £’000 | | £’000 | Years | | 3 | | | | | | | | | | 10 Dec 2019 | | Nil 437,681 (437,681) — — — | | Brian Tenner Share award 150% 1,192,716 437 437 3 | | | | | | | | 2 | | | | | | | | | | 21 Oct 2020 | | Nil 1,647,668 — (1,647,668) — — | | Dr Nigel Pickett Share award 150% 848,780 311 311 3 | | | | | | | | 3 | | | | | | | | | | 9 Nov 2021 | | Nil 399,929 — — — 399,929 | | Liam Gray Share award 150% 607,201 223 223 3 | | | | | | | | 2 | | | | | | | | | | 9 Nov 2021 | | Nil 927,488 — — — 927,488 | 2 1 Dec 2021 Nil 463,744 — — — 463,744 2 LTIP granted 25 October 2022 Threshold target Maximum target 27 Oct 2022 Nil — — — 848,780 848,780 3 | Share price (average for three months to 31 July 2025) £0.55 £0.70 | | | | 27 Oct 2022 | | Nil — — — 501,421 501,421 | | --- | --- | --- | --- | --- | --- | --- | | | 2 | | | | 3 | | | Revenue | | Confidential Confidential | Brian Tenner 1 Nov 2019 | | Nil 521,634 (521,634) — — — | | 3 10 Dec 2019 Nil 521,634 (521,634) — — — Vesting ratio 25% 100% 2 | | 21 Oct 2020 | | Nil 2,485,956 — (2,485,956) — — | | --- | --- | --- | --- | | 1 The face value of the awards is calculated based on a share price of £0.3667, being the three-day average share price to 25 October 2022 used to | | 3 | | | | 9 Nov 2021 | Nil 452,555 — — — 452,555 | | determine the number of shares under award. 2 9 Nov 2021 Nil 1,184,834 — — — 1,184,834 2 Given the group is entering a new stage in its development, the Directors consider that the revenue targets are commercially sensitive and hence are not being disclosed at this time. However, in order to maintain transparency, the targets will be disclosed at the same time as the actual outcome is 2 1 Dec 2021 Nil 592,417 — — — 592,417 assessed following the end of the performance period. 2 27 Oct 2022 Nil — — — 1,192,716 1,192,716 3 Payments made to former Directors and payments for loss of office during the year (audited information) 27 Oct 2022 Nil — — — 649,072 649,072 2 No payments for loss of office were made during the year. Michael Edelman, the former CEO, was employed during the year as a Liam Gray 21 Oct 2020 Nil 543,891 — (543,891) — — special adviser, on an annual salary of $35,000. His employment ceased on 13 July 2023 and his pay was pro-rated accordingly 3 9 Nov 2021 Nil 35,157 — — — 35,157 to 13 July 2023. 2 9 Nov 2021 Nil 533,175 — — — 533,175 2 1 Dec 2021 Nil 266,588 — — — 266,588 2 27 Oct 2022 Nil — — — 607,201 607,201 3 27 Oct 2022 Nil — — — 253,161 253,161 1 Vested but unexercised share options. 2 Unvested share options still subject to performance conditions. 3 Deferred Bonus Plan awards. Director shareholdings In order to align the interests of Executive Directors with those of shareholders and to demonstrate the Executive Directors’ ongoing personal financial commitment to the business, Executive Directors are expected to build up a shareholding equivalent to 200% of annual salary for all Executive Directors. Executive Directors are required to retain at least 50% of any post-tax shares that vest under any share incentive plans until this shareholding is reached. Dr Nigel Pickett holds shares substantially in excess of the shareholding guideline (c. 1,038% of salary using the three-month average closing share price to the end of July 2023). Brian Tenner, having joined the Company in August 2018, is building up a holding which currently stands at 68% of salary (or 130% assuming 50% of Deferred Bonus Plan awards are retained until the minimum shareholding is achieved). Liam Gray, having joined the Board in November 2021, is building up a holding which currently stands at 6% of salary (24% assuming 50% of all Deferred Bonus Plan awards are retained until the minimum shareholding is achieved). Non-Executive Directors are not subject to the shareholding requirement. ## 080 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 081 Corporate governance ### Directors’ remuneration report continued ### Annual report on remuneration continued Annual report on remuneration continued | Director shareholdings continued | | | | | | Unaudited information continued | | --- | --- | --- | --- | --- | --- | --- | | Directors’ interests in the shares of the Company, including family and beneficial interests, at 31 July 2023 were: | | | | | | Ten-year view of CEO remuneration | | | | Ordinary shares of 10p each | | | | CEO remuneration 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 | | | 31 July | | 31 July | 31 July | 31 July | | Total remuneration | | | 2023 | 2023 | | | 2022 | 2022 | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | 1 | | 2 | | | | Number | | | % | Number | | | % | (£’000) | | 293 635 406 327 312 505 323 298 | | 503 660 | | Current Directors | | | | | | | | | Annual bonus | | | | | (% of max vesting) 56 56 40 — — 52 — 43 75 95 Dr Christopher Richards 841,996 0.26 769,270 0.24 LTIP (% of Dr Nigel Pickett 11,770,911 3.63 11,272,575 3.50 max vesting) — 100 — — — — — — — — Brian Tenner 1,157,834 0.36 605,888 0.19 1 The previous CEO’s (Dr Michael Edelman) remuneration was paid in US Dollars but reported in Sterling in this table for the years 2013 to 2020. Liam Gray 48,931 0.02 48,931 0.02 The exchange rate used for this purpose varied during the year. Dr Alison Fielding 279,697 0.09 279,697 0.09 2 Brian Tenner was appointed CEO on 1 September 2020, having previously been CFO and COO. There was no change in Brian Tenner’s remuneration Chris Batterham 194,111 0.06 194,111 0.06 at that time to reflect the change in position with the proposed increase being made in two deferred tranches on 1 August 2021 and 1 August 2022. Having regard to the proportion of 2021 for which Brian Tenner was CEO, his remuneration as a Director for the full year is included for that year, and Henry Turcan — — — — the remuneration of Dr Michael Edelman for the part of the year when he was CEO is not included. Total for current Directors 14,293,480 4.42 13,170,472 4.10 Percentage change in the remuneration of the Board 1 Henry Turcan resigned from the Board on 12 September 2022, having previously been a representative of LOAM. He held no shares directly at the point The table below shows the percentage change in each Director’s salary, benefits and annual bonus between the current and he left the Board. previous financial year, and the average percentage change in the same remuneration over the same period in respect of the employees of the Company on a full-time equivalent basis. The average employee change has been calculated by reference to None of the Directors in office as at 31 July 2023 had any interests at that date in shares of any other group company. the mean of employee pay, excluding new starters in the year. Henry Turcan was appointed during the year ended 31 July 2022 In July 2023, Dr Nigel Pickett received 498,336 shares and Brian Tenner received 551,946 shares as a result of options exercised in and resigned during the year ended 31 July 2023 and, accordingly, has been excluded from the table below. July 2023. There were no other changes in Directors’ shareholdings between 31 July 2023 and the publishing date of these accounts. Average Brian Dr Nigel Liam Dr Christopher Dr Alison Christopher employee Tenner Pickett Gray 2 Richards Fielding Batterham The market price for Nanoco shares as at 31 July 2023 was 18.3 pence per share; the highest and lowest prices during the year | were 55.8 pence and 17.0 pence respectively. | | 1 | | | --- | --- | --- | --- | | | Salary/fees | | FY23 9% 17% 6% 70% 0% 0% 0% | | Details of share options are set out in note 24 to the financial statements. | | | FY22 4% 31% 16% N/A 30% 30% 30% | FY21 7% (8%) (9%) N/A (13%) (13%) (13%) Unaudited information FY20 1% 1% (2%) N/A (2%) (1%) (1%) Historical comparative TSR performance graph Taxable benefits FY23 N/A N/A N/A N/A N/A N/A N/A The performance graph below shows the Company’s total shareholder return (“TSR”) against the FTSE SmallCap over the period FY22 N/A N/A N/A N/A N/A N/A N/A from 1 August 2013 to 31 July 2023. In the opinion of the Board, the FTSE SmallCap is the most appropriate index against which the FY21 N/A N/A N/A N/A N/A N/A N/A TSR of the Company should be measured because it represents a broad equity market index. FY20 N/A N/A N/A N/A N/A N/A N/A Total shareholder return Annual bonus FY23 27% 48% 38% 108% N/A N/A N/A The graph shows the percentage return of an investment in the Company’s shares on 1 August 2013 compared with the FY22 0% 100% 100% N/A N/A N/A N/A percentage return of an investment notionally invested in the FTSE SmallCap index. FY21 100% 0% 0% N/A N/A N/A N/A FY20 0% (100%) (100%) N/A N/A N/A N/A 1 The Non-Executive Directors’ fees were reduced by 35% between 1 April 2020 and 31 March 2021, and deferred by 35% with effect from 1 April 2021. This deferral was repaid in July 2022. 2 The increases in salary and bonus for Liam Gray for FY23 are calculated by reference to the increase between the values included in the single total figure of remuneration for FY22 and FY23. Therefore, those increases reflect that for FY22 the relevant values related to a part-year only. The data above is distorted by a number of factors including joining dates, changes in roles and salary and by pay cuts taken by Directors as part of Company actions to manage the Covid-19 pandemic. From April 2020, some but not all staff had 20% pay cuts for six months. Executive Directors and other members of the Leadership Team had 20% pay cuts for a full twelve months. The increases in Executive pay in FY22 are therefore primarily or wholly the result of the end of the temporary Covid-19 pandemic pay cut. ## 082 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 083 Corporate governance # Directors' remuneration report continued # Annual report on remuneration continued # Unaudited information continued # Relative importance of spend on pay The following table sets out the percentage change in dividends and the overall expenditure on pay (across the whole group). | | Year ended 31 July 2023 £'000 | Year ended 31 July 2022 £'000 | % change | | --- | --- | --- | --- | | Dividends | — | — | 0% | | Overall expenditure on pay | 3,225 | 2,827 | 14% | | Average headcount | 42 | 42 | 0% | # Implementation of policy for the year commencing 1 August 2023 # Base salary Base salaries are reviewed annually with effect from 1 August. For the year commencing 1 August 2023, the workforce had an increase of 5%. The Executive Directors had an increase of 3%. | | 2023 | 2022 | % change | | --- | --- | --- | --- | | Chief Executive Officer – Brian Tenner | £300,245 | £291,500 | 3% | | Chief Technical Officer – Dr Nigel Pickett | £213,665 | £207,442 | 3% | | Chief Financial Officer – Liam Gray | £152,852 | £148,400 | 3% | # Changes to Non-Executive Directors' fees There is no increase to the Non-Executive Directors' fees. | | 2023 | 2022 | | --- | --- | --- | | Chairman fee | £100,000 | £100,000 | | NED base fee | £41,000 | £41,000 | | Chair of Committee fee | £5,000 | £5,000 | # Pension The Company operates a salary sacrifice pension arrangement. For the year commencing 1 August 2023, employer pension contributions above the amount of any salary sacrifice (and the associated employer National Insurance contribution savings) have remained at 7.5% of salary for the whole workforce, including the Executive Directors. # Annual bonus For FY24, the maximum annual bonus potential will remain at 125% of base salary for Executive Directors. Up to the full amount of any such bonus earned can be paid as deferred shares under the DBP vesting after two years with any balance paid in cash. This reflects our stakeholder philosophy, provides a longer-term retention mechanism and provides alignment with shareholders. Consistent with the FY23 annual bonus, performance will be assessed on the basis of a balanced scorecard approach in respect of performance measures. The balance between corporate financial objectives (80%) and personal objectives (20%) will be unchanged. The corporate financial measures for FY24 will include annual revenue and Adjusted EBITDA weighted 60% 20% respectively. Any personal bonus is only payable if at least one of the financial targets is achieved. The Committee will disclose the metrics and performance against these on a retrospective basis to the extent that these are not commercially sensitive. Clawback will apply to any cash bonus paid and malus provisions to any unvested deferred bonus award. # LTIP The Committee intends to make awards of approximately 150% of salary to the CEO, CTO and CFO after the announcement of the group's full-year results for the year ended 31 July 2023 (subject to market conditions at the time of award). The Committee will agree targets if and when any LTIP awards are made during FY24. All awards will continue to be in line with the approved remuneration policy. This will include a two-year post-vesting holding period. # Annual report on remuneration continued # Unaudited information continued # Statement of voting The group is committed to ongoing dialogue with its shareholders and shareholders as possible submit their votes in time for any shareholders in respect of the resolutions to approve the Directors' remuneration policy 30 November 2021 and to approve the Directors' remuneration report 20 December 2022. # Resolution To approve the Directors' remuneration policy # Resolution To approve the Directors' remuneration report # Directors' contracts It is the group's policy that Executive Directors should have contracts | | Date of contract | Date of report | | --- | --- | --- | | Brian Tenner | 20 August 2018 | 20 August 2018 | | Dr Nigel Pickett | 27 June 2006 | 27 June 2006 | | Liam Gray | 8 November 2021 | 8 November 2021 | All Directors will offer themselves for re-election at each AGM in accordance with the contract contracts are available for inspection at the registered office of the Board. | | Date of letter of appointment | | --- | --- | | Dr Christopher Richards (Chairman) | 28 October 2019 | | Dr Alison Fielding | 20 March 2019 | | Chris Batterham | 12 March 2019 | # Non-Executive Directors All Non-Executive Directors are appointed for an initial three-year term. The Directors' appointments may be terminated on not less than three months. On behalf of the Board # Dr Alison Fielding Remuneration Committee Chair 19 October 2023 084 Narciss Group plc – Annual Report and Accounts 2023 Corporate governance ### Directors’ report The Directors present their report and the audited financial statements for Disclosures reported elsewhere in the Annual Report Acquisition of the Company’s Directors and their interests the group and Parent Company for the own shares The strategic review of the business of the Company and its subsidiaries is given on The Directors who held office throughout the year and their interests are shown in year ended 31 July 2023. pages 6 to 40. Certain information required for disclosure in this report is provided in The Company made no purchases of its the Remuneration report. As at 31 July 2023, none of the Directors had any interests other appropriate sections of this Annual Report. These are set out in the table below: own shares in the year under review. As in shares of any other group company. Financial instruments at 31 July 2023, the authority given by the No Director had an interest in any contract that was significant in relation to the | | Disclosure requirement Pages | shareholders at the 2021 Annual General | | | --- | --- | --- | --- | | Details of the group’s financial risk | | | group’s business at any time during the year. | | | Financial results and dividends 30 to 32 | Meeting is for the Company to make | | management objectives and policies market purchases of up to £3,224,335 of Directors are formally subject to re-election at intervals of not more than three years are disclosed in note 3 and 27 to the Board and Committee meetings and Directors’ attendance 49 the nominal value of its ordinary shares but voluntarily submit themselves for re-election each year. financial statements. Directors’ biographical details and date of appointment 47 at a price per share of not less than In the case of each Director in office at the date the Directors’ report is approved: | | Corporate governance 48 to 50 | 10 pence, and not more than 5% above | | | --- | --- | --- | --- | | | | the average of the middle market |  so far as the Director is aware, there is no relevant audit information of which the | | Research and development | Approach to risk management and principal risks 33 to 35 | | | | | | quotations for ordinary shares of the | group and Company’s auditors are unaware; and | | The principal activity of the group is | Research and development activities 29 | | | Company for the five business days  they have taken all the steps that they ought to have taken as a Director in order research and development with the goal Directors’ remuneration 70 to 85 immediately preceding the day of to make themselves aware of any relevant audit information and to establish that to transition to a commercial production Greenhouse gas emissions, employee engagement, disability, gender and human rights 40 to 45 purchase. This authority is being the group and Company’s auditors are aware of that information. company, a review of which is included proposed for renewal at the 2023 Statement on disclosure to the external auditors 87 in the Chairman’s and Chief Executive Annual General Meeting. Officer’s statements on pages 5 to 7 and Statement of Directors’ responsibilities 89 Directors’ indemnity insurance 9 to 17 respectively. Future developments 7 and 17 Share capital and funding The group has maintained insurance in the form of a qualifying third party indemnity Total research and development Going concern statement 37 provision throughout the year for its Directors and Officers against the consequences spend was £1.8 million (2022: £1.8 million). As at 31 July 2023, share capital Disclosures on financial instruments (note 27 to the consolidated financial statements) 122 to 125 of actions brought against them in relation to their duties for the group. This provision No development expenditure was comprised 324.4 million ordinary shares was in force through the financial year and remains in force as at the date of | capitalised in the year (2022: £nil) for | | of 10 pence each (2022: 322.4 million). | | | --- | --- | --- | --- | | | The disclosures are, accordingly, incorporated into this report by reference. | | approval of the financial statements. | | the reasons provided in note 3(h) to | | There is only one class of share and all | | | the accounts. | | shares are fully paid. Full details of the | | | | Requirements of the Listing Rules | group’s and Company’s share capital | Substantial shareholders | movements during the year are given in Dividends The following table provides references to where the information required by the The Company is aware that the following had an interest in 3% or more of the issued note 22 to the financial statements. Listing Rule 9.8.4R is disclosed: ordinary share capital of the Company at 31 July 2023: The Directors do not recommend Pursuant to the general provisions of the payment of an ordinary dividend Listing Rule requirement Location Number % of Articles of Association and prevailing | (2022: £nil). | | | | of ordinary | issued | | --- | --- | --- | --- | --- | --- | | | Information required in relation to the publication | legislation, there are no specific | | | | | | | | | shares at | share | | | of unaudited financial information Not applicable | restrictions on the size of a holding. | Substantial shareholders | 31 July 2023 | capital | The Directors are not aware of any Details of any long-term incentive schemes Remuneration report Hargreaves Lansdown Asset Management 53,149,546 16.38 restrictions on the transfer of ordinary Directors who held office during the year and their shares in the Company other than Lombard Odier Asset Management 47,262,703 14.57 interests in shares and share options in the group Remuneration report certain restrictions which may from Interactive Investor 29,363,356 9.05 time to time be imposed by law and Arrangements where a Director has waived historical Remuneration report on Tariq Hamoodi 13,084,542 4.05 regulations, e.g. insider trading laws, | or future emoluments from the Company | Chairman’s fees | | | | --- | --- | --- | --- | | | | and pursuant to the Listing Rules of the | Dr Nigel Pickett 11,770,911 3.63 | | Details of business relationships with suppliers, | | Financial Conduct Authority whereby | | HSDL, stockbrokers 11,463,620 3.53 customers and others Strategic report certain employees of the Company Barclays Smart Investor 10,866,886 3.35 require prior approval from the Company Details of any non-pre-emptive issues of equity to deal in the Company’s securities. Oryx International Growth Fund Limited 9,834,000 3.03 for cash Not applicable The Company is not aware of any Details of any non-pre-emptive issues of equity There were no notified significant changes in the holdings between 31 July 2023 and agreements between shareholders that for cash by any unlisted major subsidiary No such share allotments the date the Annual Report and Accounts was signed. may result in restrictions on voting rights Details of UK Parent participation in a placing by and the transfer of securities. a listed subsidiary No such share participations Donations Details of shares under option are Details of any contract of significance in which provided in note 24 to the financial No political donations were made in the year (2022: £nil). Charitable donations of £nil a Director is or was materially interested No such contracts statements. were made in the year (2022: £nil). Details of rules regarding the appointment and replacement of Directors Remuneration report Compliance with the UK Corporate Foreign branches Governance Code Contracts of significance between the Company The group has just one foreign location, (or a subsidiary) and a controlling shareholder No such contracts The statements of compliance with a subsidiary in the United States, which the principles of the UK Corporate provides management services to the Details of a waiver of dividends by a shareholder No such waivers Governance Code published by the UK business. Board statement in respect of relationship agreement FRC in 2018 are set out on page 53. with the controlling shareholder No such agreements ## 086 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 087 Corporate governance ### Directors’ report continued Statement of Directors’ responsibilities in respect of the financial statements | | six successive months without leave, and | | The directors are responsible for |  select suitable accounting policies | | | --- | --- | --- | --- | --- | --- | | Additional information | his alternate Director (if any) shall not | Independent auditors | preparing the Annual Report and | and then apply them consistently; | Directors’ confirmations | | for shareholders | during such period have attended in his | | Accounts 2023 and the financial | | | | | | Mazars LLP were appointed during the | |  state whether applicable international | The directors consider that the Annual | | | stead, and the Directors resolve that his | | statements in accordance with | | | | With regard to the appointment and | | prior year following an external tender | | accounting standards in conformity | Report and Accounts 2023 and | | | office be vacated; (e) if he shall be | | applicable law and regulation. | | | | replacement of Directors, the Company | | process. Mazars LLP have indicated | | with the requirements of the | accounts, taken as a whole, is fair, | removed from office by notice in writing is governed by its Articles of Association, their willingness to continue in office. Company law requires the directors to Companies Act 2006 and UK adopted balanced and understandable and served upon him signed by all his | the UK Corporate Governance Code | | | prepare financial statements for each | international financial reporting | provides the information necessary for | | --- | --- | --- | --- | --- | --- | | | co-Directors, but so that if he holds an | Ordinary resolutions to re-appoint | | | | | 2018, the Companies Act 2006 and | | | financial year. Under that law the | standards have been followed, | shareholders to assess the group’s and | | | appointment to an executive office | Mazars LLP as auditors and to authorise | | | | | related legislation. | | | directors have prepared the group | subject to any material departures | company’s position and performance, | | | which automatically determines, as a | the Directors to agree their audit fee will | | | | | | | | and the company financial statements | disclosed and explained in the | business model and strategy. | | The Articles themselves may be amended | result, such removal shall be deemed an | be proposed at the forthcoming Annual | | | | | | | | in accordance with international | financial statements; | | | by special resolution of the shareholders. | act of the Company and shall have | General Meeting. | | | Each of the directors, whose names | accounting standards in conformity with The Articles provide that Directors may effect without prejudice to any claim for  make judgements and accounting and functions are listed in the Corporate the requirements of the Companies Act | be appointed by an ordinary resolution | damages for breach of any contract of | | | estimates that are reasonable and | Governance Report confirm that, to the | | --- | --- | --- | --- | --- | --- | | | | Annual General Meeting notice | 2006. Additionally, the Financial Conduct | | | | of the Company’s members or by a | service between him and the Company; | | | prudent; and | best of their knowledge: | Authority’s Disclosure Guidance and | resolution of the Directors, provided | or (f) if he ceases to be a Director by | The Annual General Meeting of the | | | | | --- | --- | --- | --- | --- | --- | | | | | Transparency Rules require the directors |  prepare the financial statements on |  the group and company financial | | that, in the latter instance, a Director | virtue of any provision of the Companies | Company will be held on 7th December | | | | | | | | to prepare the group financial | the going concern basis unless it is | statements, which have been | | appointed in this way retires and stands | Act or becomes prohibited by law from | 2023, at the Company’s headquarters at | | | | | | | | statements in accordance with UK | inappropriate to presume that the | prepared in accordance with | | for election at the first Annual General | being a Director. | The Conference Centre, The Heath | | | | | | | | adopted international financial | group and company will continue | international accounting standards | | Meeting following his appointment. | | Business and Technical Park, Runcorn | | | | | | The powers of the Directors are | | reporting standards. | in business. | in conformity with the requirements | WA7 4QX. Shareholders will have the | The Articles also provide that at every | determined by applicable legislation | | | | of the Companies Act 2006 and UK | | --- | --- | --- | --- | --- | --- | | | | option to attend in person or through | The company has also prepared | The directors are responsible for | | | Annual General Meeting at least one-third | and the Company’s Articles of Association. | | | | adopted international financial | | | | teleconference, with the teleconference | financial statements in accordance | safeguarding the assets of the group | | | of the Directors retire by rotation and set | As provided in those Articles, the Directors | | | | reporting standards, give a true and | | | | details to be provided. The notice | with UK adopted international financial | and company and hence for taking | | | out the circumstances in which and how | may exercise all the Company’s powers | | | | fair view of the assets, liabilities and | | | | convening the AGM, together with an | reporting standard’s | reasonable steps for the prevention and | | | they may be re-elected. The Company’s | provided that the Articles or applicable | | | | financial position of the group and | | | | explanation of the resolutions to be | | detection of fraud and other irregularities. | | | members may remove a Director by | legislation do not stipulate that any | | Under company law, directors must not | | company, and of the profit of the | proposed at the meeting, will be sent passing an ordinary resolution of which such powers must be exercised by the approve the financial statements unless The directors are also responsible for group; and to shareholders separately from special notice has been given. The office Company’s members. The Directors they are satisfied that they give a true keeping adequate accounting records this document.  the Directors’ report includes a of a Director shall be vacated in any of have been authorised to issue and allot and fair view of the state of affairs of the that are sufficient to show and explain fair review of the development and the following events: (a) if (but in the case ordinary shares, pursuant to the Articles, group and company and of the profit the group’s and company’s transactions performance of the business and the of a Director holding any executive office and have authority to make market Post-balance sheet events or loss of the group for that period. and disclose with reasonable accuracy position of the group and company, subject to the terms of any contract of purchases of shares. These powers are In preparing the financial statements, at any time the financial position of the together with a description of the After the year end, we signed an service between him and the Company) referred to shareholders at each Annual the directors are required to: group and company and enable them to principal risks and uncertainties agreement to hedge the second notification in writing, signed by the General Meeting for renewal. Any shares ensure that the financial statements and that it faces. tranche of proceeds from the Director or otherwise authenticated in purchased may be cancelled or held the Directors’ Remuneration Report Samsung settlement due to be received such manner as the other Directors may as treasury shares. comply with the Companies Act 2006. By order of the Board in February 2024. The hedge means accept, is received by the Company from Nanoco will receive £48.8 million in return the Director that he is resigning or retiring Brian Tenner Employment policies for selling $71.75 million, which is the net from office as a Director, and such Chief Executive Officer receipt after deducting withholding tax. resignation or retirement has taken effect The group is committed to ensuring 19 October 2023 in accordance with its terms, or if he shall the health and safety of its employees On behalf of the Board in writing offer to resign or retire and the in the workplace. This includes the Directors shall resolve to accept such provision of regular medical checks. Brian Tenner offer; (b) if he becomes bankrupt or has The group supports the employment of Chief Executive Officer a receiving order made against him or disabled people where possible through 19 October 2023 makes any arrangement or composition recruitment, by retention of those who with his creditors generally in satisfaction become disabled and generally through of his debts or shall apply to the court for training, career development an interim order under section 253 of the and promotion. Insolvency Act 1986; (c) if a registered medical practitioner who is treating the The group is committed to keeping Director gives a written opinion to the employees as fully informed as possible Company stating that he has become with regard to the group’s performance physically or mentally incapable of and prospects and seeks their views, acting as a Director and may remain so wherever possible, on matters which for more than three months; (d) if he is affect them as employees. absent from meetings of the Directors for ## 088 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 089 Financial statements ### Independent auditors’ report to the members of Nanoco Group plc evidence we have obtained is sufficient  Evaluating the appropriateness of the Opinion and appropriate to provide a basis for directors’ disclosures in the financial Key audit matters continued our opinion. statements on going concern and  We have audited the financial Key Audit Matter How our scope addressed this matter viability. statements of Nanoco Group Plc | | | | Accounting for Samsung contracts | Our audit procedures included, but were not limited to: | | --- | --- | --- | --- | --- | | (the ‘parent company’) and its | Conclusions relating to | Based on the work we have performed, | | | | subsidiaries (the ‘group’) for the year | | we have not identified any material | As explained in Note 6 to the financial |  Reviewing the signed contracts and management’s paper, discussing | going concern ended 31 July 2023 which comprise uncertainties relating to events or statements, the Group settled its ongoing with management and those charged with governance to obtain In auditing the financial statements, the Consolidated Statement of conditions that, individually or collectively, litigation with Samsung on a no-fault basis sufficient understanding of the contracts and the proposed accounting we have concluded that the directors’ Comprehensive Income, the may cast significant doubt on the through the agreement to sell certain and tax implications; use of the going concern basis of Consolidated Statement of Changes group’s and the parent company’s ability intellectual property and license the remaining  Agreeing the cash flows to contractual terms and conditions; accounting in the preparation of the in Equity, the Company Statement to continue as a going concern for a Intellectual property portfolio. financial statements is appropriate. of Changes in Equity, the Group and period of at least twelve months from  Challenging management’s proposed accounting treatment including In addition to having highly material and Company Statements of Financial when the financial statements are relevant judgments based on the legal and commercial substance of Our audit procedures to evaluate the pervasive impacts on the Group’s financial Position, the Group and Company authorised for issue. the contracts, ensuring they are in line with the requirements of relevant directors’ assessment of the group’s and statements for both the current and subsequent Cash Flow Statements, and notes accounting standards and our knowledge of the industry; the parent company’s ability to continue | | | Our responsibilities and the | accounting periods, the contracts required | | | --- | --- | --- | --- | --- | | to the financial statements, | to adopt the going concern basis of | | | | | | | responsibilities of the directors with | significant judgement and estimation by |  Using the assistance of internal tax specialists to review the tax | | including a summary of significant | accounting included but were not | | | | | | | respect to going concern are described | management in the application of the relevant | considerations made regarding this transaction to ensure that they | | accounting policies. | limited to: | | | | | | | in the relevant sections of this report. | accounting standards, specifically IFRS 15 | complied with the relevant tax legislation; | |  The financial reporting framework that | | | Revenue from contracts with customers and IAS | |  Undertaking an initial assessment In relation to Nanoco Group Plc’s  Agreeing the amounts presented in the financial statements to the has been applied in their preparation 12 Income taxes and therefore we deemed the at the planning stage of the audit to reporting on how it has applied the UK underlying accounting records and relevant third-party evidence; is applicable law and UK-adopted accounting for the Samsung contract to be a identify events or conditions that may Corporate Governance Code, we have international accounting standards key audit matter  Challenging management’s assessment in relation to the recognition of cast significant doubt on the group’s nothing material to add or draw and, as regards the parent company revenue for both the current and subsequent periods and assessing the and the parent company’s ability to attention to in relation to the directors’ Refer to Note 2 on page 100 for further financial statements, as applied in performance obligations associated with the license revenue. continue as a going concern; statement in the financial statements information on the key judgements applied by accordance with the provisions of about whether the director’s considered management in their assessment of the terms  Assessing the classification of the related balances in the financial  Obtaining an understanding of the Companies Act 2006. it appropriate to adopt the going and accounting implications associated with statements for appropriateness in line with IAS 1 Presentation of financial the relevant controls relating to the In our opinion, the financial statements: concern basis of accounting. the contracts. Refer to Note 6 on page 109 for statements; and directors’ going concern assessment; the disclosure of the impact of the transactions  give a true and fair view of the state  Evaluating the adequacy and clarity of the related financial statements  Making enquiries of the directors to on both the current and future accounting of the group’s and of the parent disclosures including the impact of these contracts on the Group’s going understand the period of assessment Key audit matters periods. company’s affairs as at 31 July 2023 concern and viability assessments. considered by them, the assumptions Key audit matters are those matters and of the group’s profit for the year they considered and the implication Our observations that, in our professional judgement, were then ended; of those when assessing the group’s of most significance in our audit of the Based on our audit procedures, we consider judgements made by and the parent company’s future  have been properly prepared financial statements of the current management in determining the accounting treatment and the associated financial performance; in accordance with UK-adopted period and include the most significant note disclosures in relation to both the licensing and sale of certain Intellectual international accounting standards;  Challenging the appropriateness of assessed risks of material misstatement Property to be appropriate. | and as regards the parent company | the directors’ key assumptions in their | (whether or not due to fraud) we | | | | | --- | --- | --- | --- | --- | --- | | financial statements, as applied in | | | Valuation of Share Based Payments | Our audit procedures, but were not limited to: | | | | cash flow forecasts, as described in | identified, including those which had | | | | | accordance with the provisions of | note 2c, by reviewing supporting and | the greatest effect on: the overall audit | | | | | | | | During the year to 31 July 2023, the group | |  Reviewing management’s valuation of the share options expected to vest | | the Companies Act 2006; and | contradictory evidence in relation to | strategy; the allocation of resources in | | | | | | | | recognised a charge of £953k relating to the | | in the future and challenged the logic behind this valuation accordingly; | | | these key assumptions and assessing | the audit; and directing the efforts of the | | | | |  have been prepared in accordance | | | Long Term Incentive and Deferred Bonus plans | | |  Challenging the valuation methodology adopted and its consistency with the directors’ consideration of severe engagement team. These matters were with the requirements of the for employees of the group. As at year end, the requirements of IFRS 2; | | but plausible scenarios. This included | addressed in the context of our audit of | | | | --- | --- | --- | --- | --- | | Companies Act 2006. | | | share-based payment reserve was £5,610k | | | | assessing the viability of mitigating | the financial statements as a whole, and | | | | | | | (2022: £4,916k). |  Engaging our internal valuation expert to evaluate the reasonableness | | | actions within the directors’ control; | in forming our opinion thereon, and we | | | of the key assumptions such as expected volatility and dividend yield used Basis for opinion The valuation of share-based payments do not provide a separate opinion on in the fair valuation of the share options; and  Testing the accuracy and functionality is complex and is subject to significant these matters. We conducted our audit in accordance of the model used to prepare the management estimates and judgement and  Testing the mathematical accuracy of the calculation provided by management. with International Standards on Auditing directors’ forecasts; We summarise below the key audit we therefore deem this to be a key audit matter. (UK) (ISAs (UK)) and applicable law. Our  Assessing the appropriateness of share-based payment disclosures in the matters in forming our opinion above,  Assessing the historical accuracy of responsibilities under those standards Therefore, there is a risk that the share-based financial statements. together with an overview of the forecasts prepared by the directors; are further described in the “Auditor’s payment schemes are not correctly recognised principal audit procedures performed Our observations | responsibilities for the audit of the | | | in accordance with IFRS 2 Share-based | | | --- | --- | --- | --- | --- | | |  Considering the consistency of the | to address each matter and our key | | | | financial statements” section of our | | | payment and that the vesting conditions are | Based on our audit procedures, we consider the methodologies and | | | directors’ forecasts with other areas | observations arising from those procedures. | | | | report. We are independent of the group | | | not accurately reflected. | assumptions made by management in the share-based payment valuation | of the financial statements and These matters, together with our findings, and the parent company in accordance under IFRS 2 to be reasonable. our audit; Refer to the accounting policies included within were communicated to those charged with the ethical requirements that are note 3(r) to the financial statements and the  Reviewing contracts and confirming with governance through our Audit relevant to our audit of the financial disclosures included within note 24. contractual cashflows included within Completion Report. statements in the UK, including the FRC’s the directors assessment; Ethical Standard as applied to listed entities and public interest entities and  Evaluating the availability of sufficient we have fulfilled our other ethical liquidity and compliance with loan responsibilities in accordance with these covenants; and requirements. We believe that the audit ## 090 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 091 Financial statements ### Independent auditors’ report to the members of Nanoco Group plc continued Our responsibility is to read the other  Directors’ statement with regards the Our application of materiality and an overview of the scope of our audit information and, in doing so, consider Matters on which we are required appropriateness of adopting the whether the other information is to report by exception going concern basis of accounting The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. materially inconsistent with the financial and any material uncertainties These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and In light of the knowledge and statements or our knowledge obtained in identified, set out on page 37; extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect understanding of the group and the the course of audit or otherwise appears of misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, parent company and their environment  Directors’ explanation as to its to be materially misstated. If we identify we determined materiality for the financial statements as a whole as follows: obtained in the course of the audit, assessment of the entity’s prospects, such material inconsistencies or we have not identified material the period this assessment covers and Group materiality Parent company materiality apparent material misstatements, we are misstatements in the: why they period is appropriate, set out required to determine whether this gives | Overall materiality £360,000 £205,000 | | | | | on page 37; | | --- | --- | --- | --- | --- | --- | | | | | rise to a material misstatement in the |  strategic report or the directors’ | | | How we determined it We determined overall materiality for the group | | This was determined at 0.5% of total assets capped | financial statements themselves. If, | report; or |  Directors’ statement on fair, balanced | | | using a benchmark of approximately 0.71% of | at component materiality. | based on the work we have performed, | | and understandable; |  information about internal control and total assets. we conclude that there is a material risk management systems in relation  Board’s confirmation that it has misstatement of this other information, Rationale for We have considered total assets to be the key We have considered the value of total assets to be the to financial reporting processes and carried out a robust assessment of the we are required to report that fact. | benchmark applied | metric for determining materiality given the group’s | critical component for determining materiality given | | about share capital structures, given | emerging and principal risks, set out | | --- | --- | --- | --- | --- | --- | | | focus on continued growth through its intangible | the parent company’s focus on continued growth of | We have nothing to report in this regard. | in compliance with rules 7.2.5 and 7.2.6 | on page 33; | | | asset portfolio for the group and investment in | the group through its investment in subsidiaries, therefore | | of the FCA Rules. | |  The section of the annual report that subsidiaries for the parent company. Therefore, this is considered most relevant measure of the Opinions on other matters We have nothing to report in respect of describes the review of effectiveness this is considered most relevant measure of the underlying position of the group. prescribed by the Companies Act the following matters in relation to which of risk management and internal underlying position of both the group. | | | | 2006 | the Companies Act 2006 requires us to | | control systems; and, set out on | | --- | --- | --- | --- | --- | --- | --- | | Performance | Performance materiality is set to reduce to | Performance materiality is set to reduce to an | | report to you if, in our opinion: | | page 33; | | materiality | an appropriately low level the probability that | appropriately low level the probability that the | In our opinion, the part of the directors’ | | | | | | | | remuneration report to be audited has | |  adequate accounting records have |  The section describing the work of the | | | the aggregate of uncorrected and undetected | aggregate of uncorrected and undetected | | | | | | | | | been properly prepared in accordance | | not been kept by the parent company, | audit committee, set out on page 61. | | | misstatements in the financial statements exceeds | misstatements in the financial statements exceeds | | | | | | | | | with the Companies Act 2006. | | or returns adequate for our audit have | | | | materiality for the financial statements as a whole. | materiality for the financial statements as a whole. | | | | | not been received from branches not | | | In our opinion, based on the work | | Responsibilities of Directors | | --- | --- | --- | --- | --- | | We set performance materiality at £180,000, | On the basis of our risk assessments, together with | | visited by us; or | | | which represents 50% of overall materiality. | our assessment of the company’s overall control | undertaken in the course of the audit: | | | As explained more fully in the Statement  the parent company financial environment, we set performance materiality at of directors’ responsibilities in respect of  the information given in the strategic statements and the part of the approximately 50% of our overall materiality, the financial statements set out on page report and the directors’ report for the directors’ remuneration report to be being £102,500. 89, the directors are responsible for the financial year for which the financial audited are not in agreement with the | | | | statements are prepared is consistent | | preparation of the financial statements | | --- | --- | --- | --- | --- | --- | | Reporting threshold We agreed with the directors that we would report | | We agreed with the directors that we would report to | | accounting records and returns; or | | | | | | with the financial statements and | | and for being satisfied that they give a | | | to them misstatements identified during our audit | them misstatements identified during our audit above | | | | | | | | those reports have been prepared |  certain disclosures of directors’ | true and fair view, and for such internal | | | above £10,800 as well as misstatements below | £6,150 as well as misstatements below that amount that, | | | | | | | | in accordance with applicable | remuneration specified by law are not | control as the directors determine is | | | that amount that, in our view, warranted reporting | in our view, warranted reporting for qualitative reasons. | | | | | | | | legal requirements; | made; or | necessary to enable the preparation of | for qualitative reasons. financial statements that are free from  the information about internal  we have not received all the material misstatement, whether due to As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud information and explanations we control and risk management systems fraud or error. or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the require for our audit; or in relation to financial reporting directors made subjective judgements, such as assumptions on significant accounting estimates. In preparing the financial statements, processes and about share capital  a corporate governance statement | | structures, given in compliance with | | the directors are responsible for | | --- | --- | --- | --- | | We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial | | has not been prepared by the parent | | | | rules 7.2.5 and 7.2.6 in the Disclosure | | assessing the group’s and the parent | | statements as a whole. We used the outputs of our risk assessment, our understanding of the group and the parent company, | | company. | | | | Guidance and Transparency Rules | | company’s ability to continue as a going | their environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient sourcebook made by the Financial concern, disclosing, as applicable, coverage across all financial statement line items. Conduct Authority (the FCA Rules), Corporate governance statement matters related to going concern and Our group audit scope included an audit of the group and the parent company financial statements. Based on our risk using the going concern basis of is consistent with the financial The Listing Rules require us to review the assessment, Nanoco Group Plc, Nanoco Technologies Limited and Nanoco Limited were subject to a full scope audit performed accounting unless the directors either statements and has been prepared directors’ statement in relation to going by the group audit team. Nanoco Employee Trust was subject to audit procedures over account balances and/or disclosures as intend to liquidate the group or the in accordance with applicable legal concern, longer-term viability and that the component was not deemed individually financially significant enough to require a full scope audit for group reporting parent company or to cease operations, requirements; and part of the Corporate Governance purposes. The remaining two components, Nanoco Tech Limited and Nanoco Life Services limited and were subject to analytical or have no realistic alternative but to  information about the parent Statement relating to Nanoco Group procedures and review of financial information at group level. The audit of the component financial information was performed do so. company’s corporate governance Plc’s compliance with the provisions of by the same group engagement team under the group engagement partner’s direct supervision. code and practices and about its the UK Corporate Governance The group audit team also tested the consolidation process and carried out analytical procedures to confirm our conclusion that Statement specified for our review. administrative, management and there were no significant risks of material misstatement of the aggregated financial information. supervisory bodies and their Based on the work undertaken as part committees complies with rules 7.2.2, of our audit, we have concluded that 7.2.3 and 7.2.7 of the FCA Rules. Other information each of the following elements of the Corporate Governance Statement is The other information comprises the information included in the annual report and accounts other than the financial statements materially consistent with the financial and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements statements or our knowledge obtained does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any during the audit: form of assurance conclusion thereon. ## 092 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 093 Financial statements Independent auditors’ report to the members of Nanoco Group plc continued Consolidated statement of comprehensive income for the year ended 31 July 2023 | | company is in compliance with laws | collusion, forgery, intentional omissions, | | | | | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | Auditor’s responsibilities for the | and regulations, and discussing their | misrepresentations or the override of | | | 2023 | (restated) | | | | | | | Notes | £’000 | | £’000 | | audit of the financial statements | policies and procedures regarding | internal controls. | | | | | | | | compliance with laws and regulations; | | Revenue 4 5 , 61 8 2 , 4 67 | | | | | | Our objectives are to obtain reasonable | | The risks of material misstatement that | | | | | | 1 assurance about whether the financial  Inspecting correspondence with had the greatest effect on our audit Cost of sales (8 47) (932) statements as a whole are free from relevant licensing or regulatory are discussed in the “Key audit matters” Gross profit 4,7 7 1 1,535 material misstatement, whether due to authorities including Patent section of this report. regulations within countries in which Other operating income fraud or error, and to issue an auditor’s A further description of our report that includes our opinion. the group operates; Government grants 5 230 3 61 responsibilities is available on the Reasonable assurance is a high level of  Reviewing minutes of directors’ Financial Reporting Council’s website at Profit on sale of IP 6 68,687 — assurance but is not a guarantee that meetings in the year; and www.frc.org.uk/auditorsresponsibilities. an audit conducted in accordance with Operating expenses This description forms part of our ISAs (UK) will always detect a material  Discussing amongst the engagement 1 Research and development expenses 6 (1, 295) (1, 258) auditor’s report. misstatement when it exists. Misstatements team and internal experts the laws Administrative expenses (5 7, 4 01) (5 , 40 9) | can arise from fraud or error and are | and regulations listed above, and | | | | --- | --- | --- | --- | | considered material if, individually or in | remaining alert to any indications | Other matters which we are | Operating profit/(loss) 6 1 4 ,99 2 (4,7 7 1) | | the aggregate, they could reasonably | of non-compliance. | required to address | | – Before share-based payments and non-recurring items (2 ,91 5) (4, 152) be expected to influence the economic | | We also considered those laws and | Following the recommendation of the | | | --- | --- | --- | --- | | decisions of users taken on the basis | | | – Share-based payments 24 (95 3) (619) | | | regulations that have a direct effect | audit committee, we were appointed by | | of these financial statements. on the preparation of the financial – Profit on sale of IP 6 68,687 — the board of directors on 21 June 2022 The extent to which our procedures statements, such as tax legislation, to audit the financial statements for the – Litigation costs 6 (4 9, 3 3 7) — are capable of detecting irregularities, pension legislation, the Companies year ending 31 July 2022 and subsequent – EGM requisition 6 (490) — | including fraud is detailed below. | Act 2006 and listing rules. | financial periods. The period of total | | | --- | --- | --- | --- | | | | uninterrupted engagement is 2 years, | Finance income 8 38 — | | Irregularities, including fraud, are | In addition, we evaluated the directors’ | | | covering the years ending 31 July 2022 instances of non-compliance with laws and management’s incentives and Finance expense 8 (5, 457) (4 5 0) to 31 July 2023. and regulations. We design procedures opportunities for fraudulent manipulation Profit/(loss) before taxation 9, 5 7 3 (5,221) | in line with our responsibilities, outlined | of the financial statements, including the | The non-audit services prohibited by the | | | --- | --- | --- | --- | | | risk of management override of controls, | | Taxation 9 1, 512 524 | | above, to detect material misstatements | | FRC’s Ethical Standard were not provided | | | in respect of irregularities, including fraud. | and determined that the principal risks | to the group or the parent company and | | Profit/(loss) after taxation 11,0 85 (4 , 69 7) were related to posting manual journal we remain independent of the group Based on our understanding of the Other comprehensive income/(loss) — — entries to manipulate financial and the parent company in conducting group and the parent company and performance, management bias our audit. Total comprehensive profit/(loss) for the year 11,0 85 (4 , 69 7) their industry, we considered that through judgements and assumptions non-compliance with the following laws Our audit opinion is consistent with our Profit/(loss) per share in significant accounting estimates, and regulations might have a material additional report to the audit committee. and revenue recognition which we Basic profit/(loss) for the year 10 3.44p (1 . 52p) effect on the financial statements: pinpointed to the occurrence of employment regulations, health and Diluted profit/(loss) for the year 10 3. 32p (1. 5 2p) service and license revenue. Use of the audit report safety regulations, anti-money 1 The comparative balances for cost of sales and research and development expenses have been restated for the year ended 31 July 2022. Refer to note laundering regulations, compliance Our procedures in relation to fraud This report is made solely to the 2b of the accounting policies for more information. The restatement has no impact on the reported loss or net assets. with the Data Protection Act, Patent included but were not limited to: company’s members as a body in regulations and compliance with The profit for the current year and loss for the prior year arises from the group’s continuing operations and is attributable to the accordance with Chapter 3 of Part 16 of  Making enquiries of the directors and London Stock Exchange rules for equity holders of the Parent. the Companies Act 2006. Our audit work management on whether they had premium listed companies. has been undertaken so that we might knowledge of any actual, suspected The notes on pages 99 to 126 form an integral part of these financial statements. state to the company’s members those To help us identify instances of non- or alleged fraud; matters we are required to state to them compliance with these laws and  Gaining an understanding of the in an auditor’s report and for no other regulations, and in identifying and internal controls established to purpose. To the fullest extent permitted assessing the risks of material mitigate risks related to fraud; by law, we do not accept or assume misstatement in respect to non- responsibility to anyone other than the compliance, our procedures included,  Discussing amongst the engagement company and the company’s members but were not limited to: team the risks of fraud; as a body for our audit work, for this  Gaining an understanding of the legal  Addressing the risks of fraud through report, or for the opinions we have formed. and regulatory framework applicable management override of controls by to the group and the parent company, performing journal entry testing; and Valerie Levi (Senior Statutory Auditor) the industry in which they operate,  Agreeing a sample of revenue for and on behalf of Mazars LLP and the structure of the group, and transactions to relevant support. Chartered Accou ntants and Statutory considering the risk of acts by the Auditor group and the parent company which The primary responsibility for the One St Peter’s Square were contrary to the applicable laws prevention and detection of irregularities, Manchester and regulations, including fraud; including fraud, rests with both those M2 3DE charged with governance and  Inquiring of the directors, management 19 October 2023 management. As with any audit, there and, where appropriate, those remained a risk of non-detection of charged with governance, as to irregularities, as these may involve whether the group and the parent ## 094 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 095 Financial statements ### Consolidated statement of changes in equity Group and Company statements of financial position for the year ended 31 July 2023 at 31 July 2023 Registered no. 05067291 | | | | | | | | | | | | | Retained | | | | | 31 July 2023 | | 31 July 2023 | | 31 July 2022 | | 31 July 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Reverse | Share-based | | | | | | | earnings/ | | | | | | Group | Company | | | Group | Company | | | | Share | Share | acquisition | | | payment | | Merger | Shares held | | accumulated | | | | | Notes | | £’000 | | £’000 | | £’000 | | £’000 | | | capital | premium | | reserve | | | reserve | reserve | | by EBT | | | losses) | Total | | | | | | | | | | | | Group | £’000 | £’000 | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | Assets | | | | | | | | | | Non-current assets At 1 August 2021 3 0, 5 70 1 1 7, 2 9 2 (77 ,868) 4, 318 (1 , 242) — (70,0 1 8) 3,0 52 Tangible fixed assets 11 304 — 98 — Loss for the year — — — — — — (4 , 69 7) (4 , 6 97) Right of use assets 12 2,075 — 56 — Other comprehensive income — — — — — — — — Intangible assets 13 96 6 — 1 , 616 — Total comprehensive loss — — — — — — (4 , 69 7) (4, 69 7) Deferred tax asset 9 2 ,573 — — — Foreign withholding tax receivable 9 1,75 6 — — — Issue of share capital on placing 1 ,52 8 4 ,1 27 — — — — — 5,655 Investment in subsidiaries 14 — 41,700 — 40,747 Costs of share placing — (2 74) — — — — — (2 74) 7, 6 7 4 41,700 1 ,7 70 40,747 Issue of share capital on exercise of options 146 — — (2 1) — — — 125 Current assets Inventories 15 308 — 1 74 — Share-based payments — — — 61 9 — — — 61 9 Trade and other receivables 16 3 3 ,9 8 6 52,876 1,6 64 175 At 31 July 2022 32, 24 4 1 2 1 ,14 5 (77 ,868) 4 ,9 1 6 (1 , 242) — (7 4,715) 4,4 80 Foreign withholding tax receivable 9 592 — — — Profit for the year — — — — — — 11,08 5 11 ,085 Income tax receivable 9 — — 524 — Other comprehensive income — — — — — — — — Cash and cash equivalents 17 8, 207 105 6 , 76 2 5,497 43 ,093 52,981 9, 1 2 4 5,672 Total comprehensive profit — — — — — — 11,08 5 11 ,085 Capital reduction — (1 2 1 ,14 5) — — — — 12 1 ,1 4 5 — Total assets 5 0, 767 94,681 1 0, 8 94 46,419 Issue of capital to EBT on option exercise 199 — — (2 59) — (10 5) 60 (1 0 5) Liabilities Current liabilities Share-based payments — — — 953 — — — 953 Trade and other payables 18 (2,783) (1,153) (1,510) (638) At 31 July 2023 32,443 — (77,868) 5,6 10 (1 ,2 42) (1 05) 57 ,575 1 6 , 41 3 Loans 19 (4 ,0 0 4) (4,004) — — Lease liabilities 21 (4 56) — (15 3) — Income tax liability 9 (7 70) — — — ### Company statement of changes in equity Provisions 23 — — (172) — for the year ended 31 July 2023 Deferred revenue 20 (6 ,1 23) — (56 0) — Retained | | | | Share-based | | | | Capital | | earnings/ | | | | (1 4 ,1 3 6) (5,157) (2, 3 95) (638) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share | Share | | payment | | redemption | | (accumulated | | | | | | | | capital | premium | | reserve | | | reserve | | | losses) | Total | Non-current liabilities | | | Company | £’000 | £’000 | | | £’000 | | £’000 | | | £’000 | £’000 | | | Loans 19 (5 57) — (3 ,9 1 9) (3,392) At 1 August 2021 30,570 117,292 4,318 4,402 (119,978) 36,604 Lease liabilities 21 (1 , 415) — (16) — Loss for the year and total comprehensive loss for the year — — — — (340) (340) Provisions 23 (4 45) — (4 0) — Deferred revenue 20 (17,801) — (4 4) — Issue of share capital on placing 1,528 4,127 — — — 5,655 | Costs of share placing — (274) — — — (274) | | (2 0, 21 8) — (4 ,0 19) (3,392) | | --- | --- | --- | | Issue of share capital on exercise of options 146 — (21) — — 125 | Total liabilities (34 , 3 54) (5,157) (6 , 41 4) (4,030) | | | Share-based payments — — 619 — — 619 | Net assets 1 6 , 41 3 89,524 4, 480 42,389 | | | At 31 July 2022 32,244 121,145 4,916 4,402 (120,318) 42,389 | Capital and reserves | | Share capital 22 32,443 32,443 32, 24 4 32,244 Profit for the year and total comprehensive profit for the year — — — — 46,182 46,182 Share premium 22 — — 1 21 ,1 4 5 121,145 Capital reduction — (121,145) — (4,402) 125,547 — Reverse acquisition reserve 22 (77 ,868) — (77 ,868) — Issue of capital to EBT on option exercise 199 — (259) — 60 — Share-based payment reserve 24 5,6 10 5,610 4 ,9 1 6 4,916 Share-based payments — — 953 — — 953 Merger reserve 25 (1, 24 2) — (1 , 242) — Capital redemption reserve 25 — — — 4,402 At 31 July 2023 32,443 — 5,610 — 51,471 89,524 Shares held by EBT 26 (1 05) — — — Retained earnings/(accumulated losses) 26 57 ,575 51,471 (7 4,715) (120,318) Total equity 1 6 , 41 3 89,524 4, 480 42,389 The Parent Company’s result for the year ended 31 July 2023 was a profit of £46,182,000 (2022: loss of £340,000). There was no other comprehensive income in either the current or prior year. The notes on pages 99 to 126 form an integral part of these financial statements. The financial statements on pages 95 to 126 were approved by the Board of Directors on 17 October 2023 and signed on its behalf by: Dr Christopher Richards Brian Tenner Chairman Chief Executive Officer 19 October 2023 19 October 2023 ## 096 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 097 Financial statements ### Group and Company cash flow statements Notes to the financial statements for the year ended 31 July 2023 | | 31 July 2023 | | 31 July 2023 | | 31 July 2022 | | 31 July 2022 | | 1. Reporting entity | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Group | Company | | | Group | Company | | | | Notes | | £’000 | | £’000 | | £’000 | | £’000 | Nanoco Group plc (the “Company”), a public company limited by shares, is on the premium list of the London Stock Exchange. | Profit/(loss) before tax 9, 5 7 3 46,182 (5,221) (340) office is Science Centre, The Heath Business and Technical Park, Runcorn WA7 4QX. The Company is registered in England. Adjustments for: These group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “group” Net finance expense 8 5 , 419 5,337 450 396 and individually as “group entities”) for the year ended 31 July 2023. (Profit)/loss on exchange rate translations 1 ,747 (10) (21 1) 19 The financial statements of the Group for the year ended 31 July 2023 were authorised for issue by the Board of Directors on Depreciation of tangible fixed assets 11 76 — 105 — 19 October 2023 and the statements of financial position were signed on the Board’s behalf by Dr Christopher Richards and Depreciation of right of use assets 12 555 — 366 — Brian Tenner. Amortisation of intangible assets 13 279 — 498 — The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company’s income statement. Profit on disposal of intangible assets 6 (68,68 7) — — — Impairment of intangible assets 13 92 — 858 — The significant accounting policies adopted by the group are set out in note 3. Reversal of impairment — — — (76) Share-based payments 24 95 3 — 61 9 — (Profit)/loss on disposal of tangible fixed assets 11 8 — (3 6) — Changes in working capital: (Increase)/decrease in inventories (13 4) — (6 4) — (Increase)/decrease in trade and other receivables 282 (52,701) (1 41) — Increase/(decrease) in trade and other payables 970 316 (1 0 5) 116 (Decrease)/increase in provisions (1 76) — 212 — Increase/(decrease) in deferred revenue 23, 320 — 20 5 — Cash (outflow)/inflow from operating activities (2 5,7 23) (876) (2, 4 6 5) 115 Foreign withholding tax paid (2 , 6 41) — — — Research and development tax credit received 524 — 688 — Net cash (outflow)/inflow from operating activities (27 ,840) (876) (1 , 777) 115 Cash flow from investing activities Purchases of tangible fixed assets 11 (30 5) — (4) — Purchases of intangible fixed assets 13 (76) — (11 4) — Proceeds from sale of tangible fixed assets 15 — 36 — Proceeds from sale of intangible fixed assets 34 ,509 — — — Interest received 8 38 — — — Net cash inflow/(outflow) from investing activities 3 4 ,1 8 1 — (82) — Cash flow from financing activities Proceeds from placing of ordinary share capital 199 199 5, 655 5,655 Costs of financing/placing — — (2 74) (274) Payment of lease liabilities (capital) (4 63) — (5 06) — Payment of lease liabilities (interest) (86) — (8 3) — Interest paid (4, 72 8) (4,725) (3) — Net cash (outflow)/inflow from financing activities (5,078) (4,526) 4 ,789 5,381 Increase/(decrease) in cash and cash equivalents 1, 263 (5,402) 2 ,9 3 0 5,496 Cash and cash equivalents at the start of the year 6 ,76 2 5,497 3, 813 1 Effects of exchange rate changes 182 10 19 — Cash and cash equivalents at the end of the year 17 8, 207 105 6 , 76 2 5,497 The notes on pages 99 to 126 form an integral part of these financial statements. ## 098 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 099 The Company is incorporated and domiciled in England, UK. The registered number is 05067291 and the address of its registered 2. Basis of preparation (a) Statement of compliance The group’s and Parent Company’s financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and UK-adopted IFRSs as issued by the International Accounting Standards Board for the year ended 31 July 2023. (b) Basis of measurement The Parent Company and group financial statements have been prepared on the historical cost basis, except for the revaluation of financial assets classified as “fair value through other comprehensive income” or “fair value through profit or loss”, which are reported in accordance with the accounting policies below. In order to more fairly represent the cost of sales of the group, we have reclassified certain employee costs from administrative expenses to cost of sales for the comparative period. Total impact of the reclassification is an increase to cost of sales of £512,000 with an equal and opposite reduction in administrative expenses. There is no impact on reported loss or net assets of this reclassification. (c) Going concern All of the following matters are taken into account by the Directors in forming their assessment of going concern. The group’s business activities and market conditions are set out on pages 9 to 27. The principal risks and uncertainties are shown on pages 33 to 35 while the group’s financial position is described in the Financial review on pages 30 to 32. Furthermore, note 27 summarises the group’s financial risk management objectives, policies and processes. The group funds its day-to-day cash requirements from existing cash reserves. For the purposes of their going concern assessment and the basis for the preparation of the 2023 Annual Report, the Directors have reviewed the same trading and cash flow forecasts and sensitivity analyses that were used by the group in the viability assessment described on p36, with the going concern assessment covering the period to November 2024. The same base case and downside sensitivities were also used with the addition of an extreme downside where no uncontracted revenue was included and the group contracted to become an IP shell. The base case represents the Board’s current expectations. Assumptions in the base case are: | minimal sales of nanomaterials beyond current contracts. Commercial services contracts are based on the existing pipeline of opportunities or agreements already in place; | modest demand for commercial production materials in CY24 with a subsequent slow ramp-up in demand; | a further extension to the services and supply contract with the European electronics customer; | no revenue is assumed from other business lines though some small scale commercial deals are currently under discussion; | small expansion of our self-funded research activities and continued maintenance costs to support our IP portfolio; | Board, plc and other costs reflect the current inflationary environment; and | the installed cost base is capable of supporting significant increases in revenue above those assumed in the base case so there is no immediate requirement for short-term increases or new capital expenditure. The downside case then flexes those assumptions as follows: | a full-year delay in small scale commercial production revenues (into CY25); and | no new business from other customers once existing active engagements end. Financial statements # Notes to the financial statements continued # 2. Basis of preparation continued # (a) Going concern continued The extreme downside case then flexes those assumptions further as follows: I all commercial agreements come to an end; I no revenues other than those already contracted; and I the group ceases all operations. As the IP sold in the year was non-core and unrelated to current and forecast revenue streams, there is no impact on future cash flows other than the inflow from the sale. All three cases above produce cash flow statements that demonstrate that the group has sufficient cash throughout the period of the forecast, being a period to November 2024. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements. The financial statements do not reflect any adjustments that would be required to be made if they were prepared on a basis other than the going concern basis. # (d) Functional and presentational currency These financial statements are presented in Pounds Sterling, which is the presentational currency of the group and the functional currency of the Company. All financial information presented has been rounded to the nearest thousand. # (e) Use of estimates and judgements The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements. In the process of applying the group's accounting policies, management has made the following estimates and judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements. # Estimates # Samsung licence of IP Judgement is required in reviewing the terms of the licence agreement with Samsung as to whether the associated revenue should be recognised at a point in time or over time, and if over time, over what period. The Directors reviewed the contract in detail and analysed the terms against the specific requirements of IFRS 15 in relation to licences. They concluded that the company had an ongoing performance obligation in regards to the licence and therefore the revenue should be recognised over time. It was determined that the appropriate period for revenue recognition was the average remaining life of the relevant IP of 8.8 years. This is a significant estimate and sensitivity analysis is included in note 6. # Equity-settled share-based payments The group has historically issued LTPs to incentivise employees. The determination of share-based payment costs requires the selection of an appropriate valuation method, consideration as to the inputs necessary for the valuation model chosen, and judgement regarding when and if performance conditions will be met. Inputs required for this arise from judgements relating to the future volatility of the share price of Nanoco and comparable companies, the Company's expected dividend yields, risk-free interest rates and expected lives of the options. The Directors draw on a variety of sources to aid in the determination of the appropriate data to use in such calculations. The share-based payment expense is most sensitive to non-market vesting assumptions. Further information is included in note 24. # Deferred tax The Company recognises deferred tax assets only to the extent that it is probable that future taxable profits, feasible tax planning strategies and deferred tax liabilities will be available against which the tax losses can be utilised. Estimation of the level of future taxable profits is therefore required in order to determine the appropriate carrying value of the deferred tax asset. The Company has recognised £2.2 million of deferred tax assets in the year (2022: £n) which represents the proportion of accumulated losses that are expected to be utilised in the medium term. Additional information is included in note 9. # Judgements # Recoverability of investment and inter-company receivable Judgement is required to assess the carrying value of the Company investment and inter-company receivable at each reporting date. Indicators of potential impairment noted in IAS 36 (paragraph 12) include, but are not limited to, situations where the carrying amount of the net assets of the entity is more than its market value and where significant changes with an adverse effect on the entity have taken place during the year. 100 Nancico Group plc - Annual Report and Accounts 2023 # 2. Basis of preparation continued # (a) Use of estimates and judgements continued # Judgements continued Recoverability of investment and inter-company receivable continued The Directors consider there are no indicators of impairment in the year. Limited (owned by Nanoco Tech Limited), this holds the majority of the The recoverable amount of intercompany receivables is measured under amount. The value of the required provision is set such that the recoverable # Revenue recognition Judgement is required in reviewing the terms of development agreement that are consistent with the economic substance of the agreement should be recognised. Judgements are required to assess the stage of contractual milestones have been achieved. Management judgement rights under licence agreements have been delivered so as to enable complicated where a contract may have different elements which may. Further information is included in note 3(a). # Impairment of intellectual property As the group generates IP as part of early stage research projects, the impairment exists where the carrying value of an asset exceeds its net costs of disposal and its potential value in use. A regular review is under value to Nanoco and should be allowed to lapse. As a consequence, it is not possible to be able to pay any loss of the asset. The company has been fully impaired in these financial statements. Judgements are 6% which includes the progress with testing and certification and progress arrangements with third parties. The group does not believe that any management has adopted the prudent approach of amortising potential than the life of the patent to reflect obsolescence risk in rapidly changing the same rule is adopted unless the remaining life of the patent is shortened to the remaining life of the patent. # Research and development Careful judgement by the Directors is applied when deciding whether to be seen met. This is necessary as the economic success of any product or viability has been proven and commercial supply agreements are likely. Information available at each reporting date which includes the progress of the example, establishment of commercial arrangements with third parties, development of new products are continuously monitored by the Directors. # 3. Significant accounting policies The accounting policies set out below are consistent with those of the group entities. # (a) Basis of consolidation The group financial statements consolidate the financial statements (subsidiaries) drawn up to 31 July each year. Subsidiaries are all entities over which the group has the power over to direct the relevant activities of the investee, exposure, or rights, to the ability to use its power over the investee to affect its returns. All of the Group are fully consolidated from the date control passes. During the year, the purpose of awarding shares to employees on exercise of options is the EBT is an independent legal entity and not owned by the group, as such, it is deemed to be controlled by the group and is consolidated. The acquisition method of accounting is used to account for the acquisition are measured as the fair value of the assets given, equity, date of exchange, plus costs directly attributable to the acquisition. Liabilities assumed in a business combination are initially measured at any minority interest. Financial statements ### Notes to the financial statements continued 3. Significant accounting policies continued 3. Significant accounting policies continued (a) Basis of consolidation continued ## 102 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 103 The difference between the cost of acquisition of shares in subsidiaries and the fair value of the identifiable net assets acquired is capitalised as goodwill and reviewed annually for impairment. Any deficiency in the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the consolidated statement of comprehensive income. In the consolidated financial statements, the assets and liabilities of the foreign operations are translated into Sterling at the exchange rate prevailing at the reporting date. Income and cash flow statement items for group entities with a functional currency other than Sterling are translated into Sterling at monthly average exchange rates, which approximate to the actual rates, for the relevant accounting periods. The exchange differences arising on translation are recognised in other comprehensive income. See note 3(b). All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Subsidiaries’ accounting policies are amended where necessary to ensure consistency with the policies adopted by the group. (b) Foreign currency transactions Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies (including those of the group’s US subsidiary) are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (c) Segmental reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. As at the reporting date, the Company operated with only a single segment, being the research, development and manufacture of products and services based on high performance nanoparticles. (d) Revenue recognition Revenue comprises the fair value of the sale of products and services to external customers, net of value added tax or other sales taxes or duties, rebates, discounts and returns. Revenue is recognised according to the five-step model set out in IFRS 15 as follows: 1. identify the contract(s) with a customer; 2. identify the performance obligations in the contract; 3. determine the transaction price; 4. allocate the transaction price to the performance obligations in the contract; and 5. recognise revenue when (or as) the entity satisfied a performance obligation. Products sold Revenue from the sale of products is recognised at the point of transfer of control, which is generally on shipment or delivery of the product. This is dependent on the delivery terms agreed with the customer. At this stage the group has completed its performance obligations. The supply and delivery of products are not deemed to be separable performance obligations as the customer is obliged to make use of the group’s delivery arrangements in most cases. Rendering of services Revenues from development programmes are recognised over time on a cost to cost method whereby cost is used to measure progress and costs are incurred evenly throughout the period. Licences Licences grant customers access to the group’s technology over a set length of time. Therefore, revenue related to the granting of a licence is recognised over the same period of time. The length of time to which the licence, and therefore the revenue, relates varies by customer and agreement. (e) Government grants Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment. Government grants of a revenue nature are recognised as other operating income in the consolidated statement of comprehensive income. Government grants of an expense nature are recognised as a credit to administrative expenses in the consolidated statement of comprehensive income. Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset. (f) Cost of sales Cost of sales comprises the materials, direct labour, duty, freight, and employee and employee-associated costs incurred in the generation of revenue from products sold and research and development services supplied. Revenue from royalties and licences, which comprises payments from customers to gain preferential treatment in terms of supply or pricing, does not have an associated cost of sale. (g) Deferred revenue and accrued income When either party to a contract has performed, the contract balance is presented in the statement of financial position as accrued income or deferred revenue, depending on the relationship between the completion of the performance obligations and the customer’s payment. Accrued income represents consideration earned through the completion of performance obligation, or part performance where revenue is recognised over time, that is not yet due for payment. Deferred revenue represents advanced consideration received from customers, for which the corresponding performance obligation has not been performed or is only part performed where revenue is recognised over time. (h) Research and development Research costs are charged in the consolidated statement of comprehensive income as they are incurred. Development costs will be capitalised as intangible assets when it is probable that future economic benefits will flow to the group. Such intangible assets will be amortised on a straight-line basis from the point at which the assets are ready for use over the period of the expected benefit, and will be reviewed for impairment at each reporting date based on the circumstances at the reporting date. The criteria for recognising expenditure as an asset are: | it is technically feasible to complete the product; | management intends to complete the product and use or sell it; | there is an ability to use or sell the product; | it can be demonstrated how the product will generate probable future economic benefits; | adequate technical, financial and other resources are available to complete the development, use and sale of the product; and | expenditure attributable to the product can be reliably measured. Development costs are currently charged against income as incurred since the criteria for their recognition as an asset are not met, the exception being the costs of filing intellectual property as these are considered to generate probable future economic benefits and are capitalised as intangible assets (see note 13). (i) Finance income and expense Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through the consolidated statement of comprehensive income. Interest income is recognised as interest accrues using the effective interest rate method. Finance expense comprises interest expense on borrowings and lease liabilities. All borrowing costs are recognised using the effective interest method. (j) Income tax Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current income tax assets (including research and development income tax credit) and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions: | where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; and | in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Financial statements ### Notes to the financial statements continued 3. Significant accounting policies continued 3. Significant accounting policies continued (j) Income tax continued (m) Impairment of non-financial assets continued ## 104 Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc – Annual Report and Accounts 2023 105 Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer of economic benefits in the future is uncertain. Deferred income tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the group to make a single payment. (k) Property, plant and equipment Property, plant and equipment assets are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended. Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component. The following bases and rates are used to depreciate classes of assets: Laboratory infrastructure – straight line over five years or the remainder of the lease period (if shorter) Fixtures and fittings – straight line over five years Office equipment – straight line over three years Plant and machinery – straight line over five years The carrying values of tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively. A tangible fixed asset item is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the consolidated statement of comprehensive income in the period of derecognition. Assets under construction, which principally relate to leasehold improvements and plant and machinery, are not depreciated until such time as they are available for use. If there are indications of impairment in the carrying value, then the recoverable amount is estimated and compared to the carrying amount. The recoverable amount is determined as the value that will ultimately be capitalised as an asset, based upon IAS 16 recognition and capitalisation criteria. (l) Intangible assets Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill provided they are separable and their fair value can be measured reliably. This includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Where consideration for the purchase of an intangible asset includes contingent consideration, the fair value of the contingent consideration is included in the cost of the asset. Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight-line basis over those lives. The nature of those intangibles recognised and their estimated useful lives are as follows: Patents – straight line over ten years (m) Impairment of non-financial assets At each reporting date the group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an assessment of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the group reviews the potential markets for the asset, and considers the possibility of short to medium-term commercial success being derived from the asset. In determining fair value less costs of disposal, an appropriate valuation model is used and these calculations are corroborated by valuation multiples or other available fair value indicators. Impairment losses on continuing operations are recognised in the consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated statement of comprehensive income unless the asset is carried at a revalued amount, in which case the reversal is treated as a valuation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Impairment charges have been posted during the year in relation to intangible assets. See the relevant note for more information. (n) Investments in subsidiaries Investments in subsidiaries are stated in the Company statement of financial position at cost less provision for any impairment. (o) Inventories Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items. (p) Financial instruments Financial assets and financial liabilities are recognised when the group becomes party to the contractual provisions of the relevant instrument and derecognised when it ceases to be party to such provisions. Such assets and liabilities are classified as current if they are expected to be realised or settled within twelve months after the balance sheet date. Financial assets and liabilities are initially recognised at amortised cost and subsequently measured at amortised cost including directly attributable transaction costs. The group has the following categories of financial assets and liabilities: Receivables (i) Trade and other receivables Trade receivables, which generally have 30 to 60-day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount. The time value of money is not material. For trade receivables and contract assets, the group applies the IFRS 9 simplified approach in calculating ECLs. Therefore, the group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The group has established a provision matrix that is based on shared credit risk characteristics, its historical credit loss experience and days past due, adjusted for forward-looking factors specific to the debtors and the economic environment. The amount of the provision is recognised in the balance sheet within trade receivables. Movements in the provision are recognised in the profit and loss account in administrative expenses. (ii) Cash, cash equivalents and short-term investments Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short-term investments comprise deposits with maturities of more than three months, but no greater than twelve months. Financial liabilities at amortised cost (i) Trade and other payables Trade and other payables are non-interest bearing and are initially recognised at amortised cost. They are subsequently measured at amortised cost using the effective interest rate method. (ii) Loans and convertible loan notes Obligations for loans and borrowings are measured initially at fair value and subsequently interest-bearing loans are measured at amortised cost. Convertible loan notes are presented as financial liabilities as rights of the note holder to convert the loan notes into equity are within the control of the Company. (q) Share capital Proceeds on issue of shares are included in shareholders’ equity, net of transaction costs. The carrying amount is not remeasured in subsequent years. (r) Share-based payments Equity-settled share-based payment transactions are measured with reference to the fair value at the date of grant, recognised on a straight-line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest. Fair value is measured using a suitable option pricing model. Financial statements # Notes to the financial statements continued # 3. Significant accounting policies continued # (a) Share-based payments continued At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the consolidated statement of comprehensive income, with a corresponding entry in equity. Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative. Where awards are granted to the employees of the subsidiary company, the fair value of the awards at grant date is recorded in the Company's financial statements as an increase in the value of the investment with a corresponding increase in equity via the share-based payment reserve. Where awards relating to services within the year have not been issued and therefore the fair value has not been calculated at the year end, an estimate, based on the current share price, is made of the cost incurred to date and a true-up is performed once the valuation is complete. # (b) Defined contribution pension scheme The group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period. # (c) Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provision is not made for future operating losses. Provisions are discounted where the impact is deemed to be material. Where obligations are covered by "no win, no fee" funding arrangements, the liability is recognised in full at the point when the group becomes liable, i.e. when the outcome is known. # (d) Alternative performance measurements Items of income and expenditure which are material and non-recurring are presented separately in the consolidated statement of comprehensive income. The separate reporting of such items helps to provide an indication of the underlying performance of the group and hence allows the user of the accounts a fuller understanding of that performance. # (e) Contingent assets and liabilities A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group. Contingent assets are not recognised but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable. Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events not wholly within the control of Nancico. Additionally, contingent liabilities may be present obligations that arise from past events but which are not recognised because it is not probable that an outflow of resources will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised in the consolidated statement of financial position but are disclosed and explained in the notes. # (f) IFRS 16 Leases IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and the lessee. It eliminates the classification of leases as either operating leases or financial leases and introduces a single lease accounting model requiring lessees to recognise a lease liability reflecting the future lease payments and a right of use asset for lease contracts. The group has applied the modified retrospective transition approach, with recognition of transitional adjustments on the date of initial application (1 August 2019), without restatement of comparative figures. Lease payments for low value or short-term leases where the group has elected not to recognise a right of use asset and lease liability are charged as an expense on a straight-line basis. At the date of commencement of property leases, the group determines the lease term to be the full term of the lease, assuming that any option to break or extend is not likely to be exercised. Leases are regularly reviewed and will be revalued if it becomes likely that a break clause or option to extend will be exercised. The weighted average incremental borrowing rate applied at the date of transition was 3.75%. For new leases entered into in the year ended 31 July 2023, the weighted average incremental borrowing rate applied was 8.00% (2022: 4.25%). # 3. Significant accounting policies continued # (a) IFRS 16 Leases continued The group recognises a right of use asset at the lease commencement amount as if IFRS 16 had been applied since the commencement date of initial application. Subsequent to measurement, right of use asset term of the lease or over the remaining economic life of the asset if The lease liabilities are measured at the present value of the remaining borrowing rate as at initial application or commencement date if later a similar borrowing could be obtained over a similar term in a similar an approximation with consideration given to the Bank of England b specific adjustment. Subsequently, the lease liability is increased by the lease payments made. It is remeasured if there is a modification, a ch # (b) New accounting standards and interpretations The following standards have been issued but have not been applied. These amendments to standards and interpretations had no significant IFRS standards effective from 1 January 2023 (EU endorsed and UK o IFRS 17 Insurance Contracts IAS 1 Amendment: Disclosure of Accounting Policies IAS 8 Amendment: Definition of Accounting Estimates IAS 1 Amendment: Classification of Liabilities as Current or Non-curr IAS 12 Amendment: Deferred Tax Related to Assets and Liabilities An IFRS standards effective from 1 January 2023 (EU endorsed, not UK o IFRS 17 Amendment: Initial Application of IFRS 17 and IFRS 9 – Comp IFRS standards effective from 1 January 2023 (not yet EU endorsed) IAS 12 Amendment: International Tax Reform – Pillar Two Model Rule The amendments to standards and interpretations noted above are financial statements. # 4. Segmental information # Operating segments During the years ended 31 July 2023 and 2022, the group operated a manufacture of products and services based on high performance are reviewed by the chief operating decision maker (i.e. the Board) to information is available. All revenues have been generated from cont # Analysis of revenue Products sold Rendering of services Licenses There was one material customer who generated product and service amounting to £2,089,000. £2,963,000 of the licence income related to Revenue from the provision of services delivered over time totaled £ transferred at a point in time amounted to £867,000 (2022: £782,000) 106 Nancico Group plc – Annual Report and Accounts 2023 Financial statements # Notes to the financial statements continued # 4. Segmental information continued # Operating segments continued The group operates in a number of countries across the world, although all are managed in the UK. The group's revenue per country based on the customer's location is as follows: | | 31 July 2023 £'000 | 31 July 2022 £'000 | | --- | --- | --- | | **Revenue** | | | | USA | 59 | 27 | | Japan | 447 | 244 | | UK | 1 | 1 | | Singapore | — | 3 | | Holland | 1,423 | 1,474 | | France | 385 | 348 | | Taiwan | 323 | 351 | | Canada | 9 | 19 | | Poland | 8 | — | | South Korea | 2,963 | — | | | **5,618** | **2,467** | All of the group's assets are held in the UK and all of its capital expenditure arises in the UK. The profit before taxation and attributable to the single segment was £9,573,000 (2022: loss of £5,221,000). # 5. Other operating income | | 31 July 2023 £'000 | 31 July 2022 £'000 | | --- | --- | --- | | Government grants | 230 | 361 | Grants of £230,000 (2022: £361,000) are included in other operating income. There are no unfulfilled conditions or other contingencies attached to these grants. # 6. Operating profit/(loss) | | 31 July 2023 £'000 | 31 July 2022 £'000 | | --- | --- | --- | | Operating profit/(loss) is stated after charging/(crediting): | | | | Depreciation of tangible fixed assets (see note 11) | 76 | 105 | | Depreciation of right of use assets (see note 12) | 555 | 349 | | (Profit)/loss on disposal of fixed assets | 8 | (36) | | Amortisation of intangible assets (see note 13) | 279 | 498 | | Impairment of intangible assets (see note 13) | 92 | 859 | | (Profit) on disposal of intangible assets | (68,687) | — | | Settled litigation costs | 49,337 | — | | Requisitioned general meeting | 490 | — | | Lease costs of low value/short life lease obligations | 7 | 11 | | Staff costs (see note 7) | 3,480 | 2,552 | | Foreign exchange losses/(gains) | 1,747 | (92) | | Research and development expense | 1,802 | 1,770 | | Share-based payments | 953 | 619 | | Employers tax on Share-based payments | (225) | 264 | 1. Included within research and development expense are staff costs totalling £1,77,000 (2022: £1,439,000) also included in note 7 included in research and development expenses are £507,000 (2022: £512,000) included in cost of sales. 108 Narciss Group plc – Annual Report and Accounts 2023 # 6. Operating profit/(loss) continued On 3 February 2023, the group signed agreements with Samsung for remaining IP. The two contracts also ended the litigation against Samsung's fault basis. The information and tables below set out the impact of IP. # Income statement impact for FY23 Revenue (licence fee income) Administrative costs (litigation costs) Profit on disposal of intangible assets Unrealised foreign exchange loss on accrued income Net operating profit Interest payable on loan notes # Profit before tax The sale of IP was recognised in full in FY23 as a profit on disposal of IP in full in FY23 as an administrative expense. The profit on disposal of IP was £356,000 of net book value at the time of sale and £24,000 of IP registered. The IP licence income will be recognised as revenue over the average period of 3 February 2023. This is estimated to be 8.8 years from 3 February 2023. The revenue recognition period included in FY23. The following table demonstrates the extent of the patient portfolio. Remaining patient life at start of licence 7 years 8 years 9 years 10 years The following table sets out the balance sheet impact of the agreement. # Balance sheet impact Proceeds receivable (debtors due within one year) Deferred income (due within one year) Deferred income due after more than one year Disposal of intangible assets Litigation fees payable Financial liability Withholding tax asset Cash # Net assets The second tranche of license fee of $32.5 million, including above in performance obligation is only part complete and the payment is not in the payment and the income deferred until recognised over time. The figure of the tax treatment is disclosed in note 9. During the year a small group of activist shareholders called a general accounting their own six nominees instead. The group incurred costs in the matter of which £348,000 was included in accruals at 31 July 2023. Financial statements # Notes to the financial statements continued # Auditors' remuneration | | 31 July 2022 £'000 | 31 July 2022 £'000 | | --- | --- | --- | | Audit services: | | | | – Fees payable to Company auditors for the audit of the Parent and the consolidated accounts | 102 | 41 | | – Auditing the accounts of subsidiaries pursuant to legislation | 60 | 44 | | **Total auditors' remuneration** | **162** | **85** | # 7. Staff costs The group's costs for employees, including Directors, during the year were as follows: | | 31 July 2022 £'000 | 31 July 2022 £'000 | | --- | --- | --- | | Wages and salaries | 3,022 | 2,241 | | Social security costs | 340 | 226 | | Defined contribution pension costs | 118 | 85 | | | **3,480** | **2,552** | | Share-based payments | 953 | 619 | | Social security costs on share-based payments | (225) | 264 | | **Total staff costs** | **4,208** | **3,435** | | Directors' remuneration (including benefits in kind) included in the aggregate remuneration above comprised: | | | | Emoluments for qualifying services | 1,401 | 797 | Emoluments for Directors of the group (excluding social security costs and long-term incentives, but including benefits in kind) disclosed above include £542,000 paid to the highest paid Director (2022: £265,000). Details of the compensation of key management personnel are described in note 29. The group made contributions to money purchase pension schemes for two current Directors (2022: two). Aggregate gains made by Directors during the year following the exercise of share options were £357,000 (2022: £n). An analysis of the highest paid Director's remuneration is included in the Directors' remuneration report. The monthly average number of employees during the year (including Directors) was as follows: | Group | 31 July 2022 Number | 31 July 2022 Number | | --- | --- | --- | | Directors | 6 | 7 | | Laboratory and administrative staff | 36 | 35 | | | **42** | **42** | # 8. Finance income and expense | Group | 31 July 2022 £'000 | 31 July 2022 £'000 | | --- | --- | --- | | **Finance income** | | | | Interest receivable | 38 | – | | **Finance expense** | | | | Loan note interest | (643) | (433) | | Loan note success fee | (4,725) | – | | Unwinding interest on lease liabilities | (86) | (14) | | Other interest payable | (3) | (3) | | | **(5,419)** | **(450)** | The loan note success fee was a one-off interest payment to the loan note holders on the successful conclusion to the Samsung litigation. 110 Narciss Group plc – Annual Report and Accounts 2023 # 9. Taxation The tax credit is made up as follows: Group - Current income tax - UK corporation tax - Research and development income tax credit receivable - Foreign taxation - Adjustment in respect of prior years Deferred tax - Origination and reversal of temporary differences - Adjustments in respect of prior periods - Total income tax credit - The tax assessed for the year varies from the standard rate of corporate income. Group - Profit/(loss) before taxation - Tax at standard rate of 21% (2022: 19%) - Effects of: - Expenses not deductible for tax purposes - Capital allowances in excess of depreciation - Additional deduction for research and development expenditure - Surrender of research and development relief for repayable tax credit - Research and development tax credit receivable - Share options exercised (CTA 2009 Pt 12 deduction) - Losses (Recognised)/Not Recognised - Foreign tax credits - Adjustment in respect of prior years - Tax charge/(credit) in income statement - The group has accumulated losses available to carry forward against - Deferred tax liabilities/(assets) provided/(recognised) at a standard Accelerated capital allowances - Short-term temporary differences - Tax losses Foreign withholding tax receivable – current Foreign withholding tax receivable – non-current Total foreign withholding tax receivable The group also has deferred tax assets, measured at a standard rate of 21% (2022: 19%) and tax losses of £5,326,000 (2022: £10,246,000) which have not been recited. Future taxable profits will be available against which the assets can be withholding tax incurred on license income that will be recovered through the Financial statements # Notes to the financial statements continued # 10. Earnings per share | Group | 31 July 2023 €'000 | 31 July 2022 €'000 | | --- | --- | --- | | Profit/(loss) for the financial year attributable to equity shareholders | 11,085 | (4,697) | | Share-based payments | 953 | 619 | | Profit/(loss) for the financial year before share-based payments | 12,038 | (4,078) | | **Weighted average number of shares** | | | | Ordinary shares in issue | 322,472,939 | 308,610,928 | | Options exercisable at the reporting date | 195,000 | — | | Options not yet exercisable at the reporting date | 11,720,600 | — | | Diluted weighted average number of shares | 334,388,539 | — | | **Adjusted profit/(loss) per share before share-based payments (pence)** | **3.73** | **(1.32)** | | **Basic profit/(loss) per share (pence)** | **3.44** | **(1.52)** | | **Diluted adjusted profit/(loss) per share before share-based payments (pence)** | **3.60** | **—** | | **Diluted profit/(loss) per share (pence)** | **3.32** | **—** | Diluted loss per share has not been presented for 2022 as the effect of share options issued is anti-dilutive. Adjusted profit/(loss) per share and diluted adjusted profit/(loss) per share are non-GAAP measures included for reference. # 11. Tangible fixed assets | Group | Laboratory infrastructure €'000 | Office equipment, fixtures and fittings €'000 | Plant and machinery €'000 | Total €'000 | | --- | --- | --- | --- | --- | | **Cost** | | | | | | At 1 August 2021 | 3,380 | 466 | 8,020 | 11,866 | | Additions | — | — | 4 | 4 | | Disposals | (42) | (67) | (796) | (905) | | At 31 July 2022 | 3,338 | 399 | 7,228 | 10,965 | | Additions | 25 | 50 | 230 | 305 | | Disposals | (1,825) | (88) | (1,385) | (3,298) | | **At 31 July 2023** | **1,538** | **361** | **6,073** | **7,972** | | **Accumulated depreciation** | | | | | | At 1 August 2021 | 3,380 | 432 | 7,855 | 11,667 | | Charged during the year | — | 23 | 82 | 105 | | Disposals | (42) | (67) | (796) | (905) | | At 31 July 2022 | 3,338 | 388 | 7,141 | 10,867 | | Charged during the year | 4 | 8 | 64 | 76 | | Disposals | (1,825) | (86) | (1,364) | (3,275) | | **At 31 July 2023** | **1,517** | **310** | **5,841** | **7,668** | | **Net book value** | | | | | | **At 31 July 2023** | **21** | **51** | **232** | **304** | | At 31 July 2022 | — | 11 | 87 | 98 | The aggregate original cost of tangible assets now fully depreciated but considered to be still in use is £7,458,000 (2022: £10,668,000). # Capital commitments At 31 July 2023, the group had capital commitments amounting to £nil in respect of orders placed for capital expenditure (2022: £nil). # 12. Right of use assets # Right of use assets # Cost At 1 August 2022 Additions Disposals At 31 July 2023 # Accumulated depreciation At 1 August 2022 Charged during the year Disposals At 31 July 2023 # Net book value At 31 July 2023 At 1 August 2022 # Lease liabilities Opening liabilities at 1 August 2022 Additions Lease payments Interest charge # Closing liabilities at 31 July 2023 A provision for dilapidations of £445,000 is recognised in relation to the The group had undiscounted future lease payments due as follows: | | Within 1 year €'000 | 1 to €'000 | | --- | --- | --- | | **31 July 2023** | **509** | | | 31 July 2022 | 156 | | The group has several lease contracts that include extension and term to be exercised by management to provide flexibility in managing the leased-asset. Management exercises judgement in determining whether these ext Set out below are the undiscounted potential future rental payments and termination options that are not included in the lease term. 31 July 2023 Extension options expected to be exercised Extension options expected not to be exercised Total 31 July 2022 Extension options expected not to be exercised Extension options expected to be exercised Total 112 Nancico Group plc – Annual Report and Accounts 2023 Financial statements # Notes to the financial statements continued # 12. Right of use assets continued # Capital commitments At 31 July 2023, the group had capital commitments amounting to £nil in respect of new leases (2022: £2,119,000). # 13. Intangible assets | Group | Patents £'000 | | --- | --- | | **Cost** | | | At 1 August 2021 | 7,668 | | Additions | 115 | | Disposals | (3,004) | | At 31 July 2022 | 4,779 | | Additions | 76 | | Disposals | (1,034) | | **At 31 July 2023** | **3,821** | # Accumulated amortisation | At 1 August 2021 | 4,810 | | --- | --- | | Charged during the year | 498 | | Impairment charge | 859 | | Disposals | (3,004) | | At 31 July 2022 | 3,163 | | Charged during the year | 279 | | Impairment charge | 92 | | Disposals | (679) | | **At 31 July 2023** | **2,855** | # Net book value | **At 31 July 2023** | **966** | | --- | --- | | At 31 July 2022 | 1,616 | Contingent consideration of $150,000 is payable in respect of a purchase of patents made during a previous period. The amount is payable if the group reaches a revenue target in a future reporting period. Intangible assets are amortised on a straight-line basis over ten years. Amortisation provided during the period is recognised in administrative expenses. The group does not believe that any of its patents in isolation are material to the business. The aggregate original cost of intangible assets now fully depreciated but considered to be still in use is £1,470,000 (2022: £1,988,000). The group continues to undertake annual reviews to identify patents which are deemed insufficiently certain to recover their carrying value and should therefore be allowed to lapse. The lapses in the current year related to patent applications where a grant was no longer deemed to be likely. As a consequence, patents with a value of £92,000 (2022: £859,000) have been fully impaired in these financial statements. The impairment charge is recognised within administrative expenses. # 14. Investment in subsidiaries | Company | Shares £'000 | Share Impairment £'000 | Loans £'000 | Loan Impairment £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | | **At 1 August 2021** | 63,235 | (24,006) | 25,074 | (24,175) | 40,128 | | Increase in respect of share-based payments | — | — | 619 | — | 619 | | **At 31 July 2022** | 63,235 | (24,006) | 25,693 | (24,175) | 40,747 | | Increase in respect of share-based payments | — | — | 953 | — | 953 | | **At 31 July 2023** | **63,235** | **(24,006)** | **26,646** | **(24,175)** | **41,700** | # 14. Investment in subsidiaries continued # By subsidiary Nanoco Tech Limited Nanoco Life Sciences Limited Nanoco Technologies Limited # At 31 July 2023 Accounting standards (IAS 36 Impairment of Assets) require investment carried at the lower of cost or recoverable value. Recoverable value (effectively net sale proceeds) and value in use. Indicators of patents are not limited to, situations where the carrying amount of the net as significant changes with an adverse effect on the entity have taken Consistent with IAS 36 and the indicator of impairment noted above the Directors have used the Company's market capitalisation as at 3 volatility of the share price during the year; the Directors do not believe has occurred as yet to merit an upwards revision in the value of the The investment balance with Nanoco Technologies Limited arises due immediate intention for this to be repaid. Loans to subsidiary undertakings carry no interest and are repayable given in note 28. | Subsidiary undertakings | Country of incorporation | Principal act | | --- | --- | --- | | Nanoco Life Sciences Limited | England and Wales | Research | | Nanoco Tech Limited | England and Wales | Holding co | | Nanoco Technologies Limited^{1} | England and Wales | Manufactu | | Nanoco 2D Materials Limited | England and Wales | Research | | Nanoco US Inc.^{2} | USA | Managem | All subsidiaries incorporated in England and Wales are registered at Runcorn WA7 4QX. Nanoco US Inc. is registered at 33 Bradford Street With the exception of the two companies footnoted below, all other 1. Share capital is owned by Nanoco Tech Limited. 2. Nanoco US Inc. is a wholly owned subsidiary of Nanoco Tech Limited. It was form staff to the rest of the group. # 15. Inventories # Finished goods Raw materials and consumables # Total A total of £626,000 (2022: £296,000) was included in cost of sales with inventories are stated net of an allowance of £111,000 (2022: £126,000) allowance was due to utilisation in the year. 114 Nanoco Group plc – Annual Report and Accounts 2023 Financial statements # Notes to the financial statements continued # 16. Trade and other receivables | | 31 July 2023 Group £'000 | 31 July 2023 Company £'000 | 31 July 2023 Group £'000 | 31 July 2022 Company £'000 | | --- | --- | --- | --- | --- | | Trade receivables | 87 | — | 975 | — | | Accrued income | 33,139 | — | 143 | — | | Prepayments | 430 | — | 248 | 29 | | Inter-company short-term loan to subsidiary | — | 67,220 | — | 66,813 | | Less impairment provision | — | (14,490) | — | (66,813) | | Other receivables | 330 | 146 | 298 | 146 | | | **33,986** | **52,876** | **1,664** | **175** | The impairment of the short-term loan is explained in note 14. The quantum of this provision will be reviewed at each reporting date. Trade receivables are non-interest bearing and are generally due and paid within 30 to 60 days. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. An expected credit loss of £nil (2022: £10,000) has been recognised at the year end. Accrued income includes the second tranche of the consideration on the sale of IP to Samsung of $42.5 million (£33.0 million) which is due in Feb 24. The $32.5 million second tranche of the license income, also due in Feb 24 has not been recognised at 31 July 23. Other receivables include an amount of £146,000 (2022: £146,000) relating to consideration due on shares awarded as part of the Deferred Bonus Plan. Trade receivables are denominated in the following currency: | | 31 July 2023 Group £'000 | 31 July 2023 Company £'000 | 31 July 2022 Group £'000 | 31 July 2022 Company £'000 | | --- | --- | --- | --- | --- | | US Dollars | 87 | — | 963 | — | | Sterling | — | — | 12 | — | | | **87** | **—** | **975** | **—** | At 31 July, the ageing analysis of trade receivables was as follows: | | Not yet due £'000 | Due £'000 | Post due 90 days to 120 days £'000 | Post due + 120 £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | | 2023 | 58 | 29 | — | — | 87 | | 2022 | 497 | 477 | 1 | — | 975 | # 17. Cash and cash equivalents | | 31 July 2023 Group £'000 | 31 July 2023 Company £'000 | 31 July 2022 Group £'000 | 31 July 2022 Company £'000 | | --- | --- | --- | --- | --- | | Cash and cash equivalents | 8,207 | 105 | 6,762 | 5,497 | Under IAS 7, cash held on long-term deposits (being deposits with original maturity of greater than three months and no more than twelve months) that cannot readily be converted into cash must be classified as a short-term investment. There were no such deposits at 31 July 2023 (2022: none). An analysis of cash, cash equivalents and deposits by denominated currency is given in note 27. # 18. Trade and other payables # Current - Trade payables - Other payables - Accruals - Inter-company payable The Directors consider that the carrying amount of trade and other payables period taken is 67 days (2022: 46 days). Interest is not charged on interest. # 19. Loans Convertible Series A loan note 2028 Accrued interest on Convertible Series A loan note 2028 Loan notes (net of costs) Accrued interest on loan notes The loan note issued by Nanoco 2D Materials Limited is unsecured, but accrued interest in 2028 unless options to convert into shares of that amount to convert the loan note into shares of the subsidiary in certain circumstances. On 26 July 2021, there was a non-dilutive loan note subscription with £161,000 of £3.15 million on a loan note price of £4.50 million. The loan note and an arrangement fee of 14% of the nominal amount and are reported. 70 pence represents a discount to the nominal value of £1 equivalent. The loan notes at any time prior to their maturity at 80% of nominal value and 100% at any time in year three. Following the successful outcome, a success bonus of £4,725,000, 105% of the nominal value of the loan, arising from financing activities other than described in this note. # Movement in loans At 1 August 2021 Accrued interest on loan note Reclassification to current liabilities Interest on convertible loan At 31 July 2022 Accrued interest on loan note Success fee due following Samsung agreement Success fee paid Interest on convertible loan At 31 July 2023 116 Nanoco Group plc – Annual Report and Accounts 2023 Financial statements # Notes to the financial statements continued # 20. Deferred revenue | | 31 July 2023 Group £'000 | 31 July 2023 Company £'000 | 31 July 2023 Group £'000 | 31 July 2022 Company £'000 | | --- | --- | --- | --- | --- | | **Current** | | | | | | Uphord licence fees | 6,123 | — | 103 | — | | Milestone payments | — | — | 457 | — | | | **6,123** | **—** | **560** | **—** | | **Non-current** | | | | | | Uphord licence fees | 17,801 | — | 44 | — | | | **23,924** | **—** | **604** | **—** | Deferred revenue arises under IFRS where upfront licence fees are accounted for on a straight-line basis over the initial term of the contract or where performance criteria have not been satisfied in the accounting period. | | 2023 £'000 | 2022 £'000 | | --- | --- | --- | | Opening deferred revenue | 604 | 399 | | Revenue deferred | 26,843 | 1,825 | | Revenue booked current year | (3,523) | (1,620) | | Closing deferred revenue | **23,924** | **604** | # 21. Lease liabilities | | 31 July 2023 Group £'000 | 31 July 2023 Company £'000 | 31 July 2022 Group £'000 | 31 July 2022 Company £'000 | | --- | --- | --- | --- | --- | | **Current** | | | | | | Property leases | 448 | — | 153 | — | | Equipment leases | 8 | — | — | — | | Total current | **456** | **—** | **153** | **—** | | **Non-current** | | | | | | Property leases | 1,399 | — | 16 | — | | Equipment leases | 16 | — | — | — | | Total non-current | **1,415** | **—** | **16** | **—** | # 22. Issued equity capital On 18 July 2023, the Company undertook a capital reduction which cancelled the share premium reserve. | Group | Number | Share capital £'000 | Share premium £'000 | Revenue acquisition reserve £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | | Allotted, called up and fully paid ordinary shares of 10p | | | | | | | At 1 August 2021 | 305,699,102 | 30,570 | 117,292 | (77,868) | 69,994 | | Shares issued on placement | 15,284,340 | 1,528 | 3,853 | — | 5,381 | | Shares issued on exercise of options | 1,462,302 | 146 | — | — | 146 | | At 31 July 2022 | 322,445,744 | 32,244 | 121,145 | (77,868) | 75,521 | | Capital reduction | — | — | (121,145) | — | (121,145) | | Shares issued on exercise of options | 1,985,206 | 199 | — | — | 199 | | **At 31 July 2023** | **324,430,950** | **32,443** | **—** | **(77,868)** | **(45,425)** | The balances classified as share capital and share premium include the total net proceeds (nominal value and share premium respectively) on issue of the Company's equity share capital, comprising ordinary shares. 118 Nancoco Group plc – Annual Report and Accounts 2023 # 22. Issued equity capital continued The retained loss and other equity balances recognised in the group and other equity balances of Nancoco Tech Limited immediately before ended 31 July 2009. The consolidated results for the period from 1 August 2009 to 31 July 2022 are those of Nancoco Tech Limited. However, the equity structure appearing on the equity shares of Nancoco Tech Limited is not a separate structure of the legal parent, including the equity instruments issued in the transaction. The effect of using the equity structure of the legal parent is not a separate structure of the legal parent capital in the form of a reverse acquisition reserve. # 23. Provisions # At 1 August 2022 Provided during the period Utilised during the period # At 31 July 2023 The provision relates to the potential dilapidation costs from the exit liability, there is uncertainty in estimating the provision. The extent and estimate applied across the group's lease portfolio based on past and expected timing of activity, for which there is a high level of uncertainty. During the year, part of the provision was utilised against the exit of # 24. Share-based payment reserve Group and Company At 1 August 2021 Share-based payments Exercise of share options At 31 July 2022 Share-based payments Exercise of share options # At 31 July 2023 The share-based payment reserve accumulates the corresponding amounts. Movements in the reserve are disclosed in the consolidated statement. A charge of £953,000 has been recognised in the statement of compliance. # Share option schemes The group operates the following share option schemes, all of which schemes insofar as the share options being issued meet the EMI criteria. Issued that do not meet EMI criteria are issued as unapproved share performance conditions. # Nancoco Group plc Long Term Incentive Plan ("LTIP") Grant in May 2014 Share options were granted to certain staff on 23 May 2014. The exercise price on the three days preceding the issue of the share option was taken into account the terms and conditions upon which the share option years from the date of grant and are exercisable until the tenth annual performance conditions. Vesting of the award was subject to the end of vesting. No options were granted to Executive Directors. Financial statements # Notes to the financial statements continued # 24. Share-based payment reserve continued # Share option schemes continued # Nanoco Group plc 2015 Long Term Incentive Plan ("LTIP") Grants in December 2015 (fully lapsed), April 2016 (fully lapsed), November 2017 (fully lapsed), November 2018 (fully lapsed), October 2020 (fully lapsed), November 2021, December 2021 and October 2022 Following approval of the new scheme at the 2015 AGM, share options have been granted to Executive Directors and key staff on a number of occasions at nil cost, and have an exercise price of £n1. The fair value benefit is measured using a stochastic model, taking into account the terms and conditions upon which the share options are issued. In each case, the options vest at the end of the three-year performance period subject to meeting the performance criteria (as detailed in the Directors' remuneration report) in each reporting period and are exercisable after a two-year holding period until the tenth anniversary of the award. # Deferred Bonus Plan ("DBP") On 22 November 2016, awards in the form of nil-cost options were granted to the Executive Directors in respect of 50% of their bonuses for the year ended 31 July 2016 which are delivered in the form of a share award under the DBP. The awards vested during FY19, after the required two-year holding period. On 31 October 2019 and 10 December 2019, awards in the form of nil-cost options were granted to the Executive Directors in respect of 100% of their bonuses for the year ended 31 July 2019 which were delivered in the form of a share award under the DBP. The awards vested during FY22, after the required two-year holding period. On 9 November 2021, awards in the form of nil-cost options were granted to the Executive Directors and certain other employees in respect of 100% of their bonuses for the year ended 31 July 2021 which are delivered in the form of a share award under the DBP. The awards will vest in FY24, after the required two-year holding period. On 27 October 2022, awards in the form of nil-cost options were granted to the Executive Directors and certain other employees in respect of 100% of their bonuses for the year ended 31 July 2022 which are delivered in the form of a share award under the DBP. The awards will vest in FY25, after the required two-year holding period. The following tables illustrate the number and weighted average exercise prices of, and movements in, share options during the year. | Group and Company | 2023 total Number | 2022 total Number | | --- | --- | --- | | Outstanding at 1 August | 19,820,352 | 20,580,246 | | Granted during the year | 5,314,890 | 6,806,783 | | Exercised during the year | (1,985,206) | (1,462,302) | | Forfeited during the year | (237,388) | (260,466) | | Expired during the year | (2,853,193) | (1,921,403) | | Lapsed during the year | (8,143,855) | (3,922,506) | | Outstanding at 31 July 2023 | 11,915,600 | 19,820,352 | | Exercisable at 31 July 2023 | 195,000 | 5,048,399 | 1. For the share options exercised during the prior year, the exercise price payable was the nominal value of the shares issued of 10p. # Weighted average exercise price of options | Group and Company | 2023 Pence | 2022 Pence | | --- | --- | --- | | Outstanding at 1 August | 8.9 | 28.8 | | Granted during the year | — | — | | Exercised during the year | — | — | | Expired during the year | 57.0 | 50.0 | | Lapsed during the year | 0.2 | 60.3 | | Outstanding at 31 July 2023 | 1.0 | 8.9 | 120 Nanoco Group plc – Annual Report and Accounts 2023 # 24. Share-based payment reserve continued # Weighted average exercise price of options continued The weighted average exercise price of options granted during the year was £n1–89 per cent. The price of options exercisable at 31 July 2023 was £4 pence (2022: 35 pence). For the share options outstanding as at 31 July 2023, the weighted average share price was £1,550,000 per cent. The aggregate fair value of options issued in the year was £1,550,000 per cent. The following table lists the inputs to the models used for the years ended 31 July 2023: # Group and Company Expected volatility Risk-free interest rate Expected life of options (years average) Weighted average exercise price Weighted average share price at date of grant Expected dividends Model used The expected life of the options is based on historical data and is not available. The expected volatility reflects the assumption that the historical value is not necessarily be the actual outcome. Certain awards are subject to a holding period after vesting. A finer period is the lack of marketability of the shares. # Sensitivity analysis to movement in non-market vesting assumptions The following table demonstrates the sensitivity to a reasonably positive rate. The variables held constant, of the group's share based payment or # Increase/decrease in vesting % 100% 60% 25% 0% # 25. Merger reserve and capital redemption reserve # Merger reserve Group # At 1 August 2021, 31 July 2022 and 31 July 2023 The merger reserve arises under section 612 of the Companies Act 2021. The Nonaco Technologies Limited as part of a simple group reorganisation. # Capital redemption reserve Company # At 1 August 2021 and 31 July 2022 Capital reduction # At 31 July 2023 The capital redemption reserve arises from the off-market purchase cancellation. On 18 July 2023, the Company undertook a capital reduction. Financial statements # Notes to the financial statements continued # 26. Movement in retained earnings/(accumulated losses) | Group | Profit and loss £'000 | Foreign currency translation revenue £'000 | Treasury shares £'000 | Shares held by EBT £'000 | Total (accumulated losses)/retained earnings £'000 | | --- | --- | --- | --- | --- | --- | | At 1 August 2021 | (70,002) | 4 | (20) | — | (70,018) | | Loss for the year | (4,697) | — | — | — | (4,697) | | Other comprehensive income | — | — | — | — | — | | At 31 July 2022 | (74,699) | 4 | (20) | — | (74,715) | | Profit for the year | 11,085 | — | — | — | 11,085 | | Capital reduction | 121,145 | — | — | — | 121,145 | | Issue of shares to EBT | — | — | — | (199) | (199) | | Shares utilised by EBT to satisfy options | 60 | — | — | 94 | 154 | | **At 31 July 2023** | **57,591** | **4** | **(20)** | **(105)** | **57,470** | Profit and loss represents the cumulative profit/(loss) attributable to the equity holders of the Parent Company. During the year a new Employee Benefit Trust ("EBT") was established by the Company for the purpose of satisfying employee share options when exercised. At 31 July 2023 1,050,282 shares in the Company were held by the EBT and were distributed to employees post year end following the exercise of share options in the year (2022: nil). In addition there are 12,222 (2022: 12,222) treasury shares not held by the EBT. | Company | Accumulated losses £'000 | Treasury shares £'000 | Total (accumulated losses)/retained earnings £'000 | | --- | --- | --- | --- | | At 1 August 2021 | (119,958) | (20) | (119,978) | | Loss for the year | (340) | — | (340) | | At 31 July 2022 | (120,298) | (20) | (120,318) | | Profit for the year | 46,182 | — | 46,182 | | Capital reduction | 125,547 | — | 125,547 | | Exercise of share options | 60 | — | 60 | | **At 31 July 2023** | **51,491** | **(20)** | **51,471** | # 27. Financial risk management # Overview This note presents information about the group's exposure to various kinds of financial risks, the group's objectives, policies and processes for measuring and managing risk, and the group's management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the group's risk management framework. The Executive Directors report regularly to the Board on group risk management. # Capital risk management The Company reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the group will be able to continue as a going concern while maximising the return to stakeholders. The capital structure of the group consists of equity attributable to equity holders of the Parent, comprising issued share capital, reserves and accumulated losses as disclosed in notes 22 to 26 and in the group statement of changes in equity. At 31 July 2023 total equity was £16,413,000 (2022: £4,480,000). The Company is not subject to externally imposed capital requirements. # Liquidity risk The group's approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group's reputation. The group manages all of its external bank relationships centrally in accordance with defined treasury policies. The policies include the minimum acceptable credit rating of relationship banks and financial transaction authority limits. Any material change to the group's principal banking facility requires Board approval. The group seeks to mitigate the risk of bank failure by ensuring that it maintains relationships with a number of investment-grade banks. 122 Narciss Group plc – Annual Report and Accounts 2023 # 27. Financial risk management continued # Categorisation of financial instruments Financial assets/liabilities # 31 July 2023 - Cash and cash equivalents - Trade receivables - Other receivables - Inter-company short-term loan to subsidiary - Less impairment provision - Trade and other payables - Lease liabilities - Loan notes and accrued interest - Inter-company payable Financial assets/liabilities # 31 July 2022 - Cash and cash equivalents - Trade receivables - Other receivables - Inter-company short-term loan to subsidiary - Less impairment provision - Trade and other payables - Lease liabilities - Loan notes and accrued interest - Inter-company payable The values disclosed in the above table are carrying values. The Board and liabilities approximates to their fair value. The main risks arising from the group's financial instruments are credit and agrees policies for managing each of these risks which are summed up. # Credit risk The group's principal financial assets are cash, cash equivalents and cash balances by only depositing surplus liquid funds with multiple coils. The maximum exposure to credit risk in relation to cash, cash equivalents is a short date. The group trades only with recognised, creditworthy third parties. Re- and ongoing basis with the result that the group's exposure to bad debt is carrying amount as disclosed in note 16, which was neither past due nor ultimately overseen by the CFO and are managed on a day-to-day basis to be deemed appropriate for the customer. # Foreign currency risk The group is exposed to currency risk on sales and purchases that are not functional currency of the Company. These are primarily US Dollars (US) are limited. Financial statements # Notes to the financial statements continued # 27. Financial risk management continued # Foreign currency risk continued Almost all of the Company's revenue is denominated in USD. The group purchases some raw materials, certain services and some assets in USD which partly offsets its USD revenue, thereby reducing net foreign exchange exposure. The group may use forward exchange contracts as an economic hedge against currency risk, where cash flows can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain. There were no open forward contracts as at 31 July 2023 or at 31 July 2022. After the year end, the group took out a one-off hedge at a rate of GBP1 USD1.22, against the second tranche of proceeds from the Samsung agreements which means the net cash receipt of $71.75 million will be converted to £58.8 million. The split of group assets between Sterling and other currencies at the year end is analysed as follows (Company assets are all in Sterling): | Group | 31 July 2023 | | | | 31 July 2022 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | GBP £'000 | EUR £'000 | USD £'000 | Total £'000 | GBP £'000 | EUR £'000 | USD £'000 | Total £'000 | | Cash and cash equivalents | 7,948 | 1 | 258 | 8,207 | 6,547 | 30 | 185 | 6,762 | | Trade receivables | — | — | 87 | 87 | 12 | — | 963 | 975 | | Accrued income | 97 | — | 33,042 | 33,139 | 143 | — | — | 143 | | Trade payables | (775) | (5) | (84) | (864) | (614) | (1) | (7) | (622) | | | 7,270 | (4) | 33,303 | 40,569 | 6,088 | 29 | 1,141 | 7,258 | All other categories of assets and liabilities in the statement of financial position are denominated in Sterling. # Sensitivity analysis to movement in exchange rates The following table demonstrates the sensitivity to a reasonably possible change in the Sterling rate against other currencies used within the business, with all other variables held constant, of the group's loss before tax (due to foreign exchange translation of monetary assets and liabilities) and the group's equity: | Increase/decrease | Impact on loss before tax and group equity 2023 £'000 | Impact on loss before tax and group equity 2022 £'000 | | --- | --- | --- | | 10% | 3,700 | 132 | | 5% | 1,753 | 62 | | (5%) | (1,586) | (56) | | (10%) | (3,027) | (108) | # Interest rate risk As the group's borrowing is in the form of loan notes with a fixed rate of return and are held at amortised cost, interest rate risk is limited to the reduction of interest received on cash surpluses held at bank which receive a floating rate of interest. The group's financial instruments with interest rate risk exposure and maximum exposures are set out below: | Group | 31 July 2023 | | | 31 July 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Fixed rate £'000 | Floating rate £'000 | Total £'000 | Fixed rate £'000 | Floating rate £'000 | Total £'000 | | Cash and cash equivalents | — | 8,207 | 8,207 | — | 6,762 | 6,762 | | Loan notes | 4,561 | — | 4,561 | (3,919) | — | (3,919) | | Company | — | — | — | — | — | — | | Cash and cash equivalents | — | 105 | 105 | — | 5,497 | 5,497 | | Loan notes | 4,004 | — | 4,004 | (3,392) | — | (3,392) | The exposure to interest rate movements is immaterial. # 27. Financial risk management continued # Maturity profile Set out below is the maturity profile of the group's financial liabilities and discounted payments, including contractual interest. 2023 # Financial liabilities Trade and other payables Lease liabilities Loans (including contractual interest) 2022 # Financial liabilities Trade and other payables Lease liabilities Loans (including contractual interest) Trade and other payables are due within three months. As all financial assets are expected to mature within the next twelve months, it is not possible to be presented. # 28. Related party transactions # The group There were no sales to, purchases from or, at the year end, balances # The Company The following table summarises inter-company balances at the year # Long-term loans owed to Nanoco Group plc by: Nanoco Life Sciences Limited Nanoco Technologies Limited Less provision against debt owed by Nanoco Life Sciences Limited Less provision against debt owed by Nanoco Technologies Limited # Short-term loan owed to Nanoco Group plc by: Nanoco Technologies Limited Less impairment provision # Inter-company payable by Nanoco Group plc to: Nanoco Tech Limited Nanoco US Inc. 124 Nanoco Group plc – Annual Report and Accounts 2023 Financial statements ### Notes to the financial statements continued Investor information | 28. Related party transactions continued | Directors | Legal adviser | | --- | --- | --- | | | Dr Christopher Richards Non-Executive Chairman | Reed Smith LLP | | | Brian Tenner Chief Executive Officer | The Broadgate Tower | 20 Primrose Street Dr Nigel Pickett Chief Technology Officer London EC2A 2RS Liam Gray Chief Financial Officer Dr Alison Fielding Senior Independent and Investor relations Non-Executive Director MHP Communications Chris Batterham Non-Executive Director 60 Great Portland Street London W1W 7RT Secretary Liam Gray Joint corporate brokers Peel Hunt LLP Registered office 100 Liverpool Street Science Centre London EC2M 2AT The Heath Business and Technical Park Turner Pope Investments Heath Road South Runcorn WA7 4QE 8 Frederick’s Place London EC2R 8AB Website Registrar www.nanocotechnologies.com Neville Registrars Independent auditors Neville House Steelpark Road Mazars LLP Halesowen B62 8HD 1 St Peter’s Square Manchester M2 3DE Nanoco Group plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on Arena Extra White Smooth, ® an FSC certified material. This document was printed by Pureprint Group using its environmental print technology, with 99% of dry waste diverted from landfill, minimising the impact of printing on the environment. The ® printer is a CarbonNeutral company. Both the printer and the paper mill are registered to ISO 14001. ## 126 Nanoco Group plc – Annual Report and Accounts 2023 CBP021436 1 The movement in the long-term loan due from Nanoco Technologies Limited relates to the recharge in respect of the expense for share-based payments for staff working for Nanoco Technologies Limited and is included in investments. 2 The movement in the short-term loan due from Nanoco Technologies Limited relates to transfers of cash balances between the entities for the purposes of investing short-term funds and the funding of trading losses. There are no formal terms of repayment in place for these loans and it has been confirmed by the Directors that the long-term loans will not be recalled within the next twelve months. Long-term loans to subsidiaries are classed as investments. None of the loans are interest bearing. There is no controlling party of the group or Company. 29. Compensation of key management personnel (including Directors) Company 2023 £’000 2022 £’000 Short-term employee benefits 753 644 Pension costs 56 39 Cash bonus 549 — Share-based payments 283 624 1,641 1,307 The key management team comprises the Executive Directors and one member of staff (2022: one) who are not Directors of the Company. The staff member of the team is the Operations Director. 30. Reconciliation of net debt Liabilities from financing activities Group Loans £’000 Lease liabilities £’000 Total liabilities from financing activities £’000 Cash and cash equivalents £’000 Total net debt £’000 At 1 August 2021 (3,487) (678) (4,165) 3,813 (352) Financing cash flows — 589 589 2,930 3,519 New leases — (67) (67) — (67) Foreign exchange adjustments — — — 19 19 Interest expense (432) (13) (445) — (445) At 31 July 2022 (3,919) (169) (4,088) 6,762 2,674 Financing cash flows 4,725 549 5,274 1,263 6,537 New leases — (2,165) (2,165) — (2,165) Foreign exchange adjustments — — — 182 182 Interest expense (5,367) (86) (5,453) — (5,453) At 31 July 2023 (4,561) (1,871) (6,432) 8,207 1,775 Company Loans £’000 Cash and cash equivalents £’000 Total net debt £’000 Net debt at 1 August 2021 (2,996) 1 (2,995) Financing cash flows — 5,496 5,496 Interest expense (396) — (396) Net debt as at 31 July 2022 (3,392) 5,497 2,105 Financing cash flows 4,725 (5,402) (677) Foreign exchange adjustments — 10 10 Interest expense (5,337) — (5,337) Net debt at 31 July 2023 (4,004) 105 (3,899) Nanoco Group plc – Annual Report and Accounts 2023 Nanoco Group plc The Science Centre The Heath Business and Technical Park Runcorn WA7 4QX