British tech firm Nanoco plans to buyback half of its shares following Samsung settlement
British nanotechnology company Nanoco has swung to a profit after shipping its first commercial orders and settling a major intellectual property (IP) lawsuit with Samsung.
Nanoco recorded an operating profit of £2.4m for the half-year ended January 2024, compared to a loss of £2.1m in the same period the previous year. This was due to the completion of its initial shipment of its first-generation materials used in cameras in November last year.
The Cheshire-based company produces quantum dots, tiny materials used in televisions, medical devices and facial recognition applications, among others. Nanoco is one of only a few companies globally capable of manufacturing quantum dots on a mass scale.
Its profit was driven by recurring IP licence revenue and favourable currency exchange rates when converting settlement funds. Last year, Nanoco won an IP lawsuit against the Korean tech giant Samsung, which must now buy a licence to use Nanoco’s semiconductor adjacent products in its LED televisions.
The companies reached a $150m (£117.5m) settlement in February 2023. Nanoco said it would aim to return £30m of this to shareholders through a tender offer at 24p per share and £3m via a share buyback. In comparison, the company’s market capitalisation is £72m.
Nanoco will retain the rest of the funds to invest in improving its operational capability and gross margins, as well as continuing to defend and leverage its IP.
The London-listed stock fell around 3.8 per cent on Wednesday afternoon but has risen nearly 20 per cent over the past year.
Brian Tenner, chief executive officer of Nanoco, said: “Delivering our first ever commercial orders was a huge achievement for the whole Nanoco team. Sales volumes of first generation materials are expected to grow gradually over time to deliver a cash breakeven position during CY25. Adoption of the technology in mobile phones would lead to further significant growth.
“Our current two global customers – both leading suppliers to the electronics industry – are a testament to Nanoco’s leadership in novel nanomaterials. Our key display and sensing IP was emphatically validated in the recent Samsung litigation.
“We are pleased to be returning £33m of value to shareholders while retaining funds for the compelling use cases we have previously outlined. Having spent five years fighting for financial survival, we have now been able to make some cautious but important strategic investments in new capabilities and our resilience as a supply chain partner.
“These will accelerate our development plans and commercial progress, as well as allowing us to self-fund IP licensing efforts. The combination of a fully funded business with commercial traction is a strong foundation on which to build,” Tenner added.
Founded in the UK in 2001, the startup now has a headcount of around 50 employees. As of February 2024, it had a market cap of £65m.
Nanoco expects to have repaid debts of £5m by the end of the financial year 2024 while planning to expand its commercial business operations, including commissioning a wafer device fab.
Investment bank Cavendish has maintained a 60.2p price target and reiterated its financial year 2024 forecasts.
“Operationally, the company has achieved strong progress over the past six months,” analysts said. “We maintain the view that Nanoco is approaching an inflection point of accelerating commercial revenue,” they added.