Nanoco CFO discusses award-winning IR efforts
Nanoco Group’s technologies are used in everything from high-definition televisions to LED lighting, solar panels and bio-imaging (cellular analysis, diagnostic and surgical applications).
It specializes in the development, manufacture and supply of quantum dots and other semiconductor nanomaterials, without the use of carcinogenic cadmium or other heavy metals. The dots are ‘fluorescent semiconductor nanoparticles typically between 10 and 100 atoms in diameter’ – or ‘about 1/1000th the width of a human hair,’ the company says.
All this can make for a rather technical story so keeping it clean and simple was one motivation behind the firm’s new-look annual report – which, in turn, was key to the firm’s winning entry for the best IR by a small-cap company (under €250 mn) trophy at the inaugural IR Magazine Awards – Small Cap Europe.
Here, Nanoco CFO David Blain talks to IR Magazine about redesigning the report, small-cap challenges and Mifid II.
Describe your new report in three words:
Colorful, simple, clear.
Why did you decide now was the time to redesign the annual report, and how did you go about it?
Communicating our story with clarity has always been a top priority for Nanoco. Our business is continuously developing and so should our annual report. This year we wanted to inject even more life into the document with color, while simultaneously adding more best practice structure and content to it.
In this year’s report, we wanted to present a stronger investment case, clearly showcase our lead product and create simple graphics to get our messages across effectively.
We have used Design Portfolio as our chosen corporate communications partner for a number of years and, as always, it began by providing us with consultation on the latest best practice in annual reporting, in addition to conducting a full benchmarking exercise on our latest report versus the FTSE 350. The results of this fed into an extensive opportunities document for Nanoco, which helped to define our communications objectives and the design of the report.
We use our annual report as more than just a compliance document and therefore we were pleased with the strength of our investment case and how we articulated our story.
What challenges did you face during the revamp process, how did you overcome them and is there anything you would do differently next time?
In relation to the design, the key challenge was simple but important. We had the vision of our quantum dots flowing into a television and creating bright vivid colors – the challenge was to avoid the TV looking like it was going up in smoke! The final concept was great and works well throughout the report.
For Nanoco, when talking about the successes of the year, we aren’t always able to name our customers for legal reasons. Therefore, it was more important than ever to highlight the strengths of our product and the marketing opportunities available to a wide range of potential partners (even if we can’t name them).
The annual report was prepared over three months and I would advise anyone to allow plenty of time in order to get a good final report. The beauty of using a specialist consultancy is that the account management team should be very good at keeping you on track!
How would you describe your budget for the project? How long did it take you and how many people were involved? Were other departments involved in this project?
I am a true Yorkshireman, so the budget was tight – it was also done at a time when our cash resources were very tight. The majority of the report was done by two finance people internally with HR, environmental health & safety and marketing contributing to specific sections. Design Portfolio then provided wider support.
Your award entry talks about the sustainability section of the report. Is this something you’re finding investors want to hear more about? If so, what sort of questions are you getting on ESG issues and how do you handle them?
Our extended sustainability section focuses on our employees and their well-being. The tech industry is highly competitive and while questions about social and environmental issues are not often directly asked by investors, it is important we attract and retain the best talent. These issues indirectly impact shareholders and so it was important that we address them within the report.
Of course, we are committed to protecting the environment in which our activities are conducted. This commitment is directly expressed in our decision to develop our products to be free of toxic heavy metals like cadmium, which is still widely used by our competitors in their quantum dot products.
What are the top three issues you’ve been asked about by investors and analysts over the past 12 months?
The key issues raised over the last 12 months are: one, details on our new US partner announced in early February 2018. This new nanoparticle vertical is a game changer for Nanoco. Two, how the commercialization of our display vertical is progressing. Three, cash and cash requirements for the near term. The balance sheet and future funding have now been resolved with an equity raise last year plus the funding our new US partner is providing for the expansion of our Runcorn manufacturing facility.
Finally, there’s a lot of talk about the adverse ways in which Mifid II is going to impact small-cap companies. Is this something you’ve felt yet or are anticipating? So far, we have seen some impact [from Mifid II] as some of our investors and potential investors are unable to receive research from our house broker. But we pre-empted this potential impact and have in place ‘paid for’ research with Edison that all investors and interested parties can access.
We already have an IR person who is the intermediary for corporate access and the liaison with analysts and investors. We expect this role to become increasingly important post-Mifid.
We anticipate that next year the impact of Mifid will worsen as fund management businesses reassess what they are paying for and we would expect more cuts to their research budgets which will further impact the broking firms – potentially resulting in some causalities and less research coverage from others.