Nanoco Group plc (GXG.DU) Earnings Call Transcript & Summary

Good morning to anyone listening in today. And hello to anyone who's watching this on our website later on today or in the days ahead. My name is Brian Tenner, I'm the Chief Executive of Nanoco Group plc. I'm joined today by Liam Gray, our CFO, and we've added a couple of extra slides to this results deck just to take new people to the story through opinion of what we're about. And also this morning, there's a short about Nanoco video that has been posted on LinkedIn. So feel free to look at that to get some more background information on the company. If we now turn to Slide #5, where we've got the first of these 2 slides introducing Nanoco. Before I get into this, I should point out what Nanoco do is at the high-tech end of things, and there are a lot of technical phrases used throughout this presentation. We've tried to put them into layman's English, but some of the phrases and terms actually need to stay in their original technical form, and so to help listeners ears and readers, there's actually a glossary explaining what some of those terms are on Slide #32 in the appendix to this deck. So if you find that there's term you don't understand, have a quick look in the glossary and see if it's defined there. So turning -- Nanoco, who we are and what we do. We were founded in 2001 by Dr. Nigel Pickett, who's still our CTO today and Professor Paul O'Brien. The company was spun out from Manchester University. We are a material science company, and I'll explain a bit more about that later on. We are the leader in the R&D, scale up and manufacturing and licensing of high-performing semiconductor nanoparticles. We've got a big IP portfolio, and that was recently validated by the U.S. Patent Trial and Appeal Board. Our headquarters and our production facility are based in Runcorn in the U.K. And today, we have around 50 staff, 30% of whom have PhDs, and we employed people from 8 different countries. And lastly, on this page, what we do is we make quantum dots that are cadmium free and, importantly, cadmium free quantum dots are non-toxic. You can see in the picture on the bottom right, the sample of the sorts of materials that we make that could be used in any display application. If we go to the page to Slide #6. So you might be asking yourself the question, okay, so what is a quantum dot. So at a very basic level, they are a fluorescent semiconductor nanoparticle. That means they're typically 1 to 10 nanometers in size and I have to confess when I heard 1 to 10 nanometers, I was thinking, what does that actually mean? So in layman's terms, that means they're 100,000 times thinner than a human hair or if you took Planet Earth and reduced it to the nanoscale, it would actually fit inside that red image on the top left of this screen. So basically, they are very, very small. So what's good about them? What do they do? Well, depending on the size that you make the quantum dot, that actually then dictates what sort of energy it emits. So if you look on the right-hand side in the graphic, the smallest quantum dot, so 2 nanometers in size. If it's excited with energy, it will actually emit a really clear blue light. At 5 nanometers, it will emit green, red at 10 nanometers and so on and so forth. Again, the thing about the quantum dot is they're very good at absorbing energy, and they're then very good at converting it and emitting a very specific wavelength of light or electromagnetic energy, which is obviously very useful in displays. So where are they used? Well, through our dot-only strategy and focusing on near-term value opportunities where we are aiming to have our materials employed is in the 2 areas of displays, and that's using the visible spectrum, the examples, I was giving above and also in sensors, whether that's machine vision or devices that need to see because of the Internet of Things. That's where they're using sensors. And the sensors, the applications range from the near infrared. So just becoming invisible, past visible light, less than 1,000 nanometers going out into something called SWIR, shortwave infrared, which is anything above 1,000 nanometers to about 3,000 nanometers. So that's a little bit of an introduction and a refresher for those who are already familiar with the story. I'll turn the page now. I'll actually get into the interim results for the first half of financial year 2024. So I'm now looking at Slide #8. During the first half, we got 2 products into commercial production, the first commercial production orders in our history. And we also signed 2 new joint development agreements with 2 global customers. Each one of those looking at 2 second-generation materials for using infrared sensor and those 2 JDAs over the last 2 years as well. We also delivered all of the milestones under the previous JDAs with those 2 customers and with the initial milestones in those new JDAs. In my time with Nanoco in 5 years, we have never missed a single milestone no matter how technically challenging or difficult to achieve for the 2 existing customers and equally when we were working with the U.S. customer and others in the past. Also during the first half of the year, we received the final litigation proceeds from our litigation and settlement with Samsung. We've begun investing some of those funds for growth of the business, and that includes building a new device lab in our facility in Runcorn. And then lastly, we started the process and it's now under way to return value to shareholders because we gave that undertaking last year that we would make a material return from some of the proceeds from the Samsung litigation to the shareholders. So in summary, what has happened during the first half of the financial year is, Nanoco has now become a fully funded high-tech business with commercial traction with customers and products actually in commercial production. For now I will turn the page, I'll give you a little bit of an overview of our markets and the opportunities that we see there. So I'm now looking at Slide #10. If you look at the picture on the top right, what you can see is the current market for cameras and image sensors today and how that grows or expected to grow in the period to 2028. That's equivalent to around 40% a year compound annual growth rate. The reason I've highlighted cameras and images is that's the specific part of the CIS market, where our technology is applicable by putting quantum dots either onto those image sensors or onto those camera modules. The images on the bottom left give you some examples of that. You can see on fintech security, for example, adopting quantum dots in a mobile handset will significantly enhance the security of all those sorts of transactions not just financial ones. But I guess people are now using their mobiles for more health-related things where you want as good security as you can possibly get. And those are just some examples of the applications. The list of applications could actually fill this page if we wanted to. So quantum dots do have multiple potential end-use applications, but it is fair to say that we do need to achieve a breakthrough adoption of the technology. But as I'll explain that shortly, we believe QD CMOS sensors are very well positioned for that breakthrough adoption. And actually, market forecast, independent market forecasts are predicting that quantum dots on CMOS sensors will actually make it into move mass market mobile phones during calendar year 2026. And that is the single biggest driver on that growth in those markets, you can see on the top right. If we go over the page then to Slide #11. And here, what I'm addressing is, well, why would you use quantum dots, what is the case for using quantum dots and sensing applications. And what we've got is 2 columns of information. Left-hand side is those are the problems and issues, if you like, that need to be addressed by the industry, and the column on the right shows the solutions to those problems. And they're a very, very good fit. So one of the first problems with silicon today is that it's very, very poor efficiency in terms of absorbing electromagnetic energy that falls on it. It typically absorbs 6% to 7%. If you just put a layer of quantum dots on top of that, that efficiency increases to 60%. So you get 10x more data, which is obviously a good thing. If you then look at silicon, silicon effectively becomes translucent once you get to around 1,000 nanometers. What that means is anything falling on it just passes through it. It doesn't capture it at all. So that efficiency would actually fall to 0. Whereas again, if you put quantum dots on to the silicon, you can actually extend the visible range for silicon, a long way item to the shortwave infrared. So way past a 1,000 nanometers. Why is that important? Eye safety, is the simple answer. Eye safety and interference. So the further you go into the infrared, the better it is for the user, the better it is for your eyes, the better it is to be able to see through things. The third problem that silicon has is it gets a lot of interference from sunlight. And a really simple example of this is, if you think any of you driving down the road when the sun is going down, if you're driving west, basically the sun can blind you. Well, the sun can do exactly the same thing to a sensor in a car. If the sun is going down and the sunlight is hitting the sensor at the right angle and just like your eyes, the sensors can actually have a real problem seeing through that. And obviously, if it's being used in a vehicle, that's a big deal. Whereas if you use quantum dots on the silicon, you can actually tune the quantum dot, pair it up with a laser so that it's actually operating in gaps in the spectrum emitted by sunlight. What that means is you're getting rid of the interference. Another problem of silicon is that because of that low efficiency and some of those other problems, it actually requires a higher powered laser and in a mobile device, obviously, that's got a clear impact on batteries and battery life. Whereas if you apply quantum dots, you can actually use a less powerful laser and, hence, enhance the life of the battery. The last point to make about silicon, and it's less of a silicon problem and more of the alternatives to silicon. So the alternative is something called an InGaAs sensor. That's indium gallium arsenide. They are incredibly expensive. So one sensor can be as much as $10,000. That's obviously far too expensive to go into any consumer application and indeed even an automotive application. I don't think it will -- if you need 10 or 20 sensors in a car, $10,000 is far too expensive. Whereas a silicon sensor enhanced with quantum dots, the price point for that is actually targeted at the consumer market and, again, forecast range between $5 to $10 for a single sensor. So again, you can see that QD CMOS sensor is targeted very firmly at the mass market or the consumer market. In terms of the end of the differentiation that Nanoco brings to those problems and those solutions, we already have a number of validated materials, i.e., already in production. We can tune materials to any wavelength that a customer wants them to be tuned to. We already outside of those production materials also have a wide range of materials that have passed proof of concept. Our technology is protected by the IP moat that sits around us. And again, and this is very rare, we actually already have installed the production capacity to make material at the high volumes demanded by consumer electronics. So if you're on to a mobile phone, what we would call high volume, i.e., hundreds of millions of units, we already have the production capacity and capability in place for that. And last, but by no means least, operating and consumer electronics is an incredibly challenging pastime from the point of view of quality and quality control, and we already operate our plants to the quality standards required by consumer electronics. So any customer coming to Nanoco is getting that leap for overhead start because we've already got the production capacity and we've already passed the quality audits and inspections with a number of customers. If we go over the page to Slide 12. This is just a short update on what's been happening with our range of materials. And the columns across the top A, B, C, those are the different underlying materials. So Type A material is made from lead sulfides. Type B is indium arsenide. Type C is indium antimonide. And we use this chart just a plot how our materials are moving through a development cycle, which can typically be anywhere up to 5, 6 years in some external industries, it's actually longer. What you can see on there is the 2 green dots at the bottom of that table, those are the 2 materials that went into commercial production fully validated in the first half of this financial year. If you go up to the optimization route, I mentioned earlier, we signed 2 JDAs, each lasting 2 years long for 2 different customers for 2 different materials each. Those are those materials there. So indium arsenide second generation materials that actually are higher performing than lead sulphide, can operate at higher temperatures and they've got faster response time. So that's the next generation of our product development cycle. And then the top row is that's where we've got products that are still at, what we would call, a development stage. So while we've proven that they can be made -- proven that they can actually pass some performance characteristics, they're not yet at the optimization stage. But it's that pipeline that means that as more and more products fall through to the bottom line and get into commercial production, we won't just be dependent on one product, there will be a continuous pipeline of products to feed in to support our future. And all of this, all of those products have the capability to address the potential mass market for an adoption of shortwave infrared in 2026. But now I go over the page to Slide 13, and now I'm going to be talking about the display market rather than the sensing market. People will be familiar with the 2 charts at the top of this page. Top left shows the total TV or flat panel TV market. The gray bar is non-QD TVs. The mauve color is Samsung QD TVs. And then the piece for us to focus on is that bluish bar in the middle. So that's TVs that do contain quantum dots, but that are not made by Samsung. And you can see that it is expected to grow significantly over time. It equates to around 20% compound annual growth rate. If you look at the table on the right-hand side, this is other types of device. Now it actually looks like the other types of devices are going to be bigger than TVs. But the important thing when it comes to display is the area of the display. So in simple terms, a single 65-inch TV can actually generate -- it's the same area as about 80 smartphones or 800 smart watches. So that table on the top right, those are devices. In area terms by 2030, you're talking about like the equivalent of 30% of the TV market. So the number of units is important, but the critical thing is the area being covered by quantum dots. The QD share TV market is forecast to grow to 34%. You can see some images on the bottom left on the other sorts of small devices that are represented in that top right chart, whether they're smartwatches, headsets or smartphones. And also, one of the key things in display, and it was one of our original designing USPs, Nanoco make cadmium free quantum dots. So they are nontoxic. And it is clear, both in the European Union and in other companies around the world that the toxicity issues associated with cadmium are growing in profile and growing in concern. All of that will help Nanoco with its IP around cadmium free quantum dots. I go over the page to Page #14. Again, here, making the case for quantum dots in the same way that we did for sensing applications. Gamut, that's color gamut. So that's a range of colors in the spectrum. There are different internationally recognized standards for it while it was called DCI-P3, P3 it's a digital cinema initiative, and quantum dots in a TV can actually address between 95% and more likely 100% of that color spectrum. So it gets the full color gamut. In terms of clarity, a number of TV technologies at very, very high intensity are peak brightness. The color start to wash out, whereas the nature of quantum dots is that they maintain their integrity and still keep emitting the very, very clear color that they've been tuned to emit -- to look at that washout. In terms of the supply chain, because film QDs can actually just form another layer in an existing TV stack, there's no disruption to the existing supply chain. If you look at then some of the recent developments in MicroLED screen. There, the application technology will be through effectively a very large and expensive inkjet printers. But again, that's another new technology for the deposition of quantum dots. So basically, the quantum dots do fit into the supply chain very well. In terms of efficiency, quantum dots are an extremely good absorber, a broadband observer, as I mentioned earlier. And they then don't convert that energy efficiently into whatever it is you're asking it to whether it's color or an electrical signal. The reason that's important is other aspects and features inside, not just mobile devices, but even TVs, et cetera. They're all very power hungry. So anything that's saving the energy is a good thing to offset some of those other power hungry features. And lastly, in terms of form factor because of the nature of quantum dots and how they're deposited, they're actually applicable to all counter displays. And that includes new form factors that you see emerging such as car screens or dash -- curved screens or dashboards in cars that placed in a couple of different dimensions and go the entire width of the car. Again, in terms of the differentiation, we then bring to that because there are other companies who make quantum dots are cadmium free. We previously had a business unit that was looking at the in vivo use of cadmium-free quantum dots, and we got all the way through to trials in animals, but not in people, proving that our quantum dots R&D suitable for use in vivo whereas there's no way you would ever put a cadmium product inside someone's body. We already today have production-ready, red and green dots that could, in a very short period of time, go into an actual display applications. Our quantum dots are applicable across multiple technologies, and I'll talk about those in a second. Again, the same IP that protects our sensing materials, particularly second and third-generation sensing materials also protects all of our display materials. And like sensing, we already have in place high-volume capacity in our facility in Runcorn. And that's one of the things that we managed to hold on to during the years of austerity when we were cost cutting. And again, that facility operates to very high quality control standards. Go over now to Page 15, the last one I'll talk about on display industry. This is a bit of a road map or a technology road map for the end devices. You can see on the left-hand side that -- and that was a very basic quantum dot film TV. The second one, the change there is that the backlight is coming from OLED rather than from an LED. We already have existing QD materials that can service both of those spaces. The license that we signed with Samsung, which is a nonexclusive license addresses their use of our technology and our IP in those 2 areas. If you look then on the 2 areas on the right-hand side, so you've got QD micro-OLED or micro-LED, that's what that funny little symbol means, it mean micro. And then on the extreme right, you've got QD EL. EL is electroluminescence, that's direct stimulation of quantum dot by electricity. And today, most of our R&D work that we're doing in display, and that is a small portion of our overall R&D, which is focused on sensing is actually focused on micro LED. We're currently self-funding that work, again, using some of the proceeds from the litigation, but we are working with a number of potential customers, and if we can pass enough of the proof-of-concept tests, then we would be hopeful of signing up to some sort of further development and then actual supply agreement for our materials. In terms of quantum dot EL on the right-hand side, that is very challenging. There is an awful lot of work to be done in that area. We are not currently spending time or resources on that because we don't see it as a near-term value opportunity. I should say, though, that our IP, which actually covers the manufacture mass production of quantum dots is actually applicable across all 4 of those technology areas that you see above. That takes us neatly on then to Slide 17, where I'll just very briefly update on IP and IP licensing activities. And we've explained before that IP, if you want to get value from it, it requires 2 fundamentals. One of those is a commanding IP portfolio. And the second thing is a large and valuable addressable market. If you've got both of those, then you have the opportunity to generate value from your IP portfolio. I should say, though, that Nanoco as an organic commercial business, our primary focus is on those areas of the business, and we use our IP to actually leverage gains in those areas rather than purely being an IP licensing company. We are a practicing entity, and we're focused on commercial income. The next 2 pages just very quickly address those 2 criteria, the commanding IP portfolio and the valuable addressable market. In terms of the commanding IP portfolio, we've got validated patents, the PTAB, U.S. Patent Trial and Appeal Board, which is the appeal court, if you like, in the U.S. patent office. That validated all 5 patents that we brought in the litigation against Samsung. And it's worth noting that each of those patents survived multiple different challenges. If you multiply the number of claims by the number of challenges that were survived, you would get into the hundreds, if not thousands of challenges, all of which were survived. In terms then of those patents, did we retain them? Do we still control them? We retained 4 of the 5 validated patents, the fifth patent was sold to Samsung. I should say, of the 47 claims that were brought, 46 of them were in the 4 patents that we retained. So the patent that we sold was only one of the 47 claims. So we still retain, we control, and we can license as we see fit those patents and claims to anyone we want. In terms of other patents. There were other patents that we could have brought in the litigation. But as we've explained in the past, you cannot in any kind of litigation, litigate on too many patents. You need to narrow it down to a very small number. So we had, if you like, a number of other patents in reserve that are relevant to display that could have been used, can be used going forward in licensing discussions that we didn't use there. So again, in our annual report in account, you can see a chart that sets out those other patents. In terms of patent lives, it's important that they actually have an extensive life left. The trial patents, the 4 trial patents, the last of those expires in 2028. However, we do have lives going out to 2033 and beyond for those other patents I've mentioned. And it's also worth noting that we continue to work and expand our IP portfolio on new patents that can often have significantly longer lives. And then the last point about the commanding patent portfolio is that the Samsung license in itself, the fact that Samsung agreed to that settlement is telling the market very clearly that they felt they needed access to Nanoco's IP. The size of that settlement is also a very clear market sign. It's one of the largest settlements ever achieved without actually going to trial and taking those risks in trial, et cetera, and the long drawn-out process. So in summary, what does this mean? There's a big green tech sitting beside that criteria of commanding patent portfolio. We obviously have a command portfolio. And equally, there are meaningful remaining lives. If we go to Slide 19, the second criteria that you need to generate value. This is the valuable addressable market. If you look at where that red dot is in that chart, that's the position as of the end of last, last calendar year. And you can see that the blue area is very small. So what that means is today, the impacted market, i.e., quantum dot TVs outside of Samsung is relatively small. It's also worth noting that the vast majority of those QD TVs in that blue area today still contain cadmium, which is less relevant, I won't say irrelevant, but less relevant for some of our IP. So what that means is that today, that valuable addressable market is not there. It's relatively small, but you can see over time that valuable addressable market is forecast to grow significantly, rising from around 2 million TVs today to around 70 million TVs by 2030. It's also the case that this analysis of TVs does not include anything for micro LED. So given the number of companies, both TV companies and technology companies investing in micro LED technology, there is the potential for acceleration in that market growth. If we go with the page to Page 20 and it's just worth pointing out some facts that emerged during our litigation against Samsung. If you imagine that any product, any technology want to surround it all 360 degrees with a moat, a defensive moat, so basically, you are secure. And what this chart on the left-hand side demonstrates is how much money, Samsung paid third parties for access to or to acquire their IP portfolios for using cadmium free QDs in their TVs. And what you can see is almost 2/3 of all the external payments. Again, the footnote explains what those are in some detail and where they come from. Almost 2/3 came to Nanoco. That for us, creates an opportunity to leverage that validated IP that we have for commercial advantage. And what do I mean by commercial advantage? If someone wants to be secure, have a secure IP moat around the technology, they should come to Nanoco either for development agreements for supply of materials, and if neither of those is possible, then the fallback is an actual license. Because as I said, we are focused on our commercial and organic activities. The funds that we've retained from the litigation will allow us to support these IP licensing activities, but it is worth emphasizing that meaningful results will take time. The Samsung process took 5 years. And by meaningful results, what I mean is Nanoco is not interested in turning up and getting $1 million to drop a lawsuit and clear off. We actually want to generate long-term commercial advantage for the company, and that is a task that will take time. So just to summarize on the IP, what we're doing is, we are focusing on generating commercial, organic, sustainable, medium-term value from our IP. And that also, as I said, can mean that we will consider licensing our technology to other parties. If I now hand you over to Liam to take you through the financials.

Thank you, Brian. Let me move on to the financial highlights slide. You'll see that revenue is up 150% on the comparative prior period. And this has been driven by the licensing agreement with Samsung, which has contributed GBP 3 million, GBP 4 million in revenue. Our adjusted EBITDA is a positive GBP 0.7 million, which compares with the loss in the prior period of GBP 1.1 million. And the movement is due to the higher revenue figure, the majority of which has no significant associated costs. As I've mentioned previously, we have been investing in our capabilities, and we're taking on additional space to our site in Runcorn to facilitate our new device lab. We have also increased our head count for this expansion, and this does mean our cost base has increased from around GBP 0.5 million per month to around GBP 0.6 million. It's worth noting that this is still significantly below with our head count previously, and any investments are carefully assessed to make sure they will deliver future commercial and operational value. Moving on to hedge, we top out on the receivable from Samsung that generated a positive GBP 2.5 million at the period end, and this was realized in February when we transferred the cash from USD into GBP. At the period end, we did have cash of GBP 59.3 million, and the cash we are retaining in the business will support our continued operations through to cash flow breakeven and the investments we are making will improve our commercial and operational capabilities. Finally, and I don't think it's possible to oversee this, our cash position approved we got a robust supplier in very complex supply chains. And we can and will continue to deliver to our customers without a question existing around our short-term viability. If we move on to next slide. This is our summary income statement. Whilst our revenue is up GBP 2.4 million, the main driver of this is GBP 3 million contribution from the licensing agreement. If we excluded this, revenue was down by GBP 0.6 million, and this is due to the gap between complete and previous R&D contracts and the commencement on new agreements with both the Asian Chemicals customer and STMicroelectronics. Sales of products will be in line with the prior period. While operating income here reflects the grants income on both grants, one of which was for an indium antimonide project and the other is for quantum dot computer applications are now complete. Both our R&D investments and other admin expenses have increased by GBP 0.3 million each and is reflecting investments in our capabilities, which includes increases in lab space and our head count increasing. We are now up to 50 employees and that includes our new device R&D team. This comes down to an EBITDA of GBP 0.7 million compared to a loss of GBP 1.1 million in the prior period. We'll come on to the license on the next slide. These items, which includes a GBP 2.5 million benefits to hedge, contributing an operating profit of GBP 2.4 million compared to the loss in the prior period of GBP 2.1 million. Just a note, the tax charge is the amortization of an old tax asset. So moving on to the adjusted EBITDA slide, which is Slide 24. As adjusted EBITDA is in statutory metric, the slide shows the reconciliation between operating profit and adjusted EBITDA in the period, and the movement to the GBP 1.7 million presented on the previous slide. If we start with our operating profit of GBP 2.4 million, we then add depreciation and amortization charges, both of which are in line with the prior period. H2 depreciations are expected to be slightly higher, given the additional space we've taken on and the equipment we've purchased, which is currently undergoing commissioning on our new lab. We then have the gain on the hedge of GBP 2.5 million, which at the period end was unrealized and was realized in February '24. And we have some other small [indiscernible] differences of GBP 0.2 million, which relates to other trading balances in foreign currencies. This then gets us back to the adjusted EBITDA of GBP 0.7 million. So move on to next slide, Slide 25. This slide brings out the movements in cash between the closing balance of GBP 8.2 million at the 31st July '23 and the GBP 59.3 million at the 1st of January 2024. Obviously, we received the litigation proceeds, totaling GBP 58.8 million, and that's translating to full USD 75 million at an exchange rate of GBP 1.275, which is the period end rate. This actually is a benefit to the hedge, which is then realized per period end. Withholding tax of GBP 2.6 million was paid at source and has been recognized in asset on our balance sheet, and it will be released in line with the IP license revenue. We then have our adjusted EBITDA of GBP 0.7 million and upwards working capital movements, the main elements of which is the GBP 3 million release of the license revenue with the license agreement. With actual CapEx, as mentioned previously, linked to our device lab and some small product adjustments gets us back to our GBP 59.3 million closing balance. In the next slide, Slide 26 shows our anticipated use of cash in the second half of FY '24. We started the period with GBP 59.3 million and we then have the tender on buyback process, which will return up to GBP 33 million to shareholders. As mentioned, the benefits to hedge has been recognized in February, and we'll repay any outstanding debts before the end of the financial year. We then do have some cash burn in costs associated with the return of capital, some of this still on capital expenditure and the cash used by the organic business whilst we answer that to cash flow breakeven. This means we should turn to debt-free with around GBP 21 million of cash in the bank. So moving on to our financial summary, Slide 27. We still expect services and material revenue to be in line with FY '23 whilst H1 of FY '24 was behind the prior period. We are going to make this shortfall up in H2. The Samsung IP license income will generate GBP 6 million per annum for another 8 years, but this has also been prepaid, so there's no future associated cash inflows. Our cash cost base has increased to GBP 7.2 million, and this reflects our investments in our footprint, creates our device lab, investments in our equipment to improve our product offering both to existing and new customers and our investments in people to be able to operate the lab and support the operations. All investments are supposed to incentive to ensure we're utilizing the resources we have to a large extent and only investing where we deem them important to the business. On cash, our net monthly cash balance is around GBP 0.3 million to GBP 0.4 million per month. I mean, plan to spending around GBP 2.0 million in capital projects in FY '24, around half of which we'll even spend in each one. And finally, as you, the most shareholders, are aware, the process to return up to GBP 33 million to shareholders is underway. And with that, I'll pass it back to Brian.

Thanks, Liam. So if we turn over to Slide #29, just for an outlook, our priorities actually for the rest of this calendar year. So what we're expecting to say before the end of this year is more low volume production orders for those materials that are already in commercial production. We are also working hard to deliver new materials development contracts, whether that is in sensing or the display customers that I mentioned earlier that we were doing some early work with. During this coming year, we're also going to commission that wafer device fab, which is a critical investment for us, because it actually takes us closer to what our customers are actually trying to do with our materials. So it will give us a better understanding of their needs. It will also significantly accelerate how long our product development life cycle takes. So whether that's a 30%, 40% improvement, a reduction in the product development cycle. As everyone knows in high-tech industries, time to market is a critical metric. In the rest of this year, we're obviously going to complete the return of value, the tender itself should complete in April, depending on the level of spend, then the buyback authority, we've been in place for the remaining GBP 3 million last until the end of this year. We've also mentioned in our interim results announcement that in line with good corporate governance, our Chairman, Chris Richards, will be stepping down at the next AGM, and that chair succession process will now be run by our Senior Independent Director, Dr. Alison Fielding and that will be completed during this coming year and started soon. And lastly, we will be increasing our profile of the business, having spent a number of years keeping our heads down to actually get out there and point out our capabilities with strong IP and just making our presence felt. Because what you as investors in Nanoco and potential investors going forward, and I have is a U.K. high-tech business that is fully funded with commercial tractions dealing with some of the biggest and most respected companies as our customers in the whole world. And yes, so I'll leave it at that, and I'll hand you back to our operator, Laura, who will explain how to ask questions.

[Operator Instructions] We'll now take our first question from Edward Stacey with Cavendish.

The question is about the new facilities that you're installing up at Runcorn because I see in the release, it talks about a significant increase of capacity, but I guess it's not capacity that does the same thing as your existing capacity. In terms of all the testing and stuff, what is it you will now be able to do that STMicro or whichever customers, they wouldn't be able to do for themselves, why are you having the testing facility in there? And then just adjacent to the same question, I think you've got all the equipment for quite a low cost in terms of -- compared to how much new capability you're adding there the actual CapEx isn't much. So if you could just remind us how that came about. That's it.

Okay. Thanks for those, Ed. It's Brian here. I'll take those 2. So in terms of the device facility, the small pilot line fab that we're putting into Runcorn and what that will allow us to do bluntly previously, we made a vile of quantum dots in liquid form in order to find out how it performs in a device, so on a sensor, on a silicon wafer, we actually, with both of our large customers at the moment, we would actually have to send that material around the world. And they would then do some testing on it inside one of those customers. They actually then sent it to another part of the world for further testing and in some cases, it then have to go to a third location in a different part of the world. All of that takes time. Whereas by being able to make devices inside our own facility in Runcorn, we can literally walk from the development lab, walk 50 meters, maybe 25 meters and actually put the material on to these new devices. So instead of waiting for maybe 1 or 2 months, for feedback on a new chemistry or a new recipe, we can actually get feedback in 1 or 2 weeks. So that's the point I was making about the significantly accelerated development because the truth is, in these sorts of activities, it's the number of reactions literally that you do that has a direct correlation with how quickly you succeed. If you're only doing one new recipe a week, then that's the speed you'll go at. If you're doing 5 a week, then that's the speed you'll go at. So it significantly enhances that. But it also means that instead of going to a customer or a potential customer and saying, here are some quantum dots, why don't you see what you can do with them? We will actually be able to go to those customers who are semiconductor companies and, say, we've already applied these quantum dots to a silicon wafer to a semiconductor, this is what you get when you invest in our quantum dots. So it will actually enhance or make easy our engagement with potential new customers because instead of saying, "Here's what quantum dots do," what we'll be actually able to say to them is, "Here is what newer devices will do if you use our technology." So again, that is a significant addition to our skill set. So that's the primary reason why where you've set that fab up. If I move on to your question about, yes, it didn't cost a lot of money. If we bought all this stuff new, you were talking more than $10 million, and we paid significantly less than that. This actually connects to why we've actually created the facility. Some of our customers actually want us to be able to provide this service. So we have been able to source equipment at a very competitive price to help us provide this service to customers because between 2 technologies and a supply chain, there's always going to be an interface and the question is who manages that interface. So for us, in the past, we did the chemistry and then handed all the physics over to the next part of the supply chain, our customer. Now with our new facility, we can bridge some of that gap ourselves. And while we won't be going to commercial production levels on 300-millimeter wafers, we can actually sample 200 and in some cases, 300-millimeter wafers at a sample level. And those who follow the industry will know that those 200- and 300-millimeter wafer sizes are very important because the vast majority of commercial fabs around the world operate at that scale. So that's the background to the amount of equipment. What it would have cost if we had to pay top dollar for it and if it was brand new and why we've got that new fab and the sorts of services that we're now able to offer new customers and the benefits it gives us as a supplier.

[Operator Instructions] I will now take our next question from Ian Ridsdale with Edison.

It's Dan Ridsdale from Edison. I just had a question, so that you're having your next low volume commercial order this year. Can you talk, I guess, the earliest possible time scale that you'd get the first commercial order from your Asian partner. What's the possible time scale for that one? And I've got a follow-up as well.

Okay. And so on the Asian customer, when we are -- so these are second-generation materials, the 2-year development program should take us through if we're successful and the targets in the development program to achieve this to having a material that the only step needed to take to get to commercial production is scaling up. Scaling up is a thing. And what it means is you're going forward, you've demonstrated something at small scale, but actually, you need to be able to make a lot more material for consumer electronics, mass market devices. . So the 2-year development program takes us through to the point of scale up. Scale up could take 6, maybe 9 months, that's our experience in the past, so long scale up takes because we're good at it, we're relatively fast at it. So if we signed that agreement in '23, it ends in '25, scale up complete in '26. So you could be in a position where you can actually make a commercial product during 2026 for that Asian customer. And of course, the new device fab may accelerate that process.

Great. And so I guess the second agreement [indiscernible]?

Yes, so it's 2 years to get through to, yes, being ready for scale up. And again, slightly different materials, slightly different wavelengths, slightly different approaches. These are not just -- we're not selling bananas. To both of these guys, they are different materials. So similar time frame, but still with the opportunity to aggressively push it with the new fab .

No. Great. I've got one follow-up for me. With the focus on display really on micro LED, you talked about the sort of generation 1 quantum dot TVs in the field and having product-ready in that. Is that -- just trying to calibrate your readiness of that product. Is that something that we -- is that something that could happen -- might happen? Just trying to sort of understand whether we should be holding a candle for that or not?

So there, the big question is customer coming to us and saying, yes, they want to ditch cadmium. They want to use cadmium free. How they're prepared to pay for IP-protected production rather than production from one of our competitors. If you think back to that Samsung competitive moat, I showed you, they had access to some people's IP, but it clearly wasn't enough. So the big thing there is customer deciding actually Nanoco is who I want to supply these materials. In terms of our capacity and capability, if you just think of our history in 2014, 2015, we put in place the capacity to service and do a tech transfer to Dye to actually service all of Samsung's demands. We have retained a significant part of that capacity in-house. It's still there in Runcorn. So if a customer turned up and said, "Right, I want to take one of your current products, your green, your red or both." It might take a couple of months to make sure that it hits the exact wavelength that they need, but you can move to commercial production very quickly. And I think we've said in the past, we could deliver enough material for 1 million to 2 million 65-inch TVs or 80 million smartphones or a few hundred million smart watches. So we do have significant capacity in place, but the rate determining step down is that a customer needs to decide for those reasons that have given that Nanoco is the right person for them to buy material from.

And we will now take a follow-up question from Edward Stacey with Cavendish.

Just a quick follow-up and relates to one of the questions that you just answered about the 2026 time lines for getting consumer devices into the market. Just wondered if there's any milestones that we would see during this calendar year, does the end customer sort of announce in 2024, what they're going to do in 2026? Are you able to tell us what type of device or what type of capability you'll be giving to the device? Or do we have to be a bit more patient and wait until a bit nearer the actual launch of the device into the market. Just wondered if there's any time line things for us to look out for in the nearer term. That's it.

Okay. And so answering that question, it's a bit like a [indiscernible], there's positives and negatives. So if you look at our technology, we refer to it as a platform technology. The truth is, if you put our quantum dots into any sensor, it can be used in and I'm not exaggerating 20, 30, 40, maybe 50 different end applications. That's a great advantage for us because if it takes you 5 years to develop a material each time for those 50 different applications, you're going to be doing an awful lot of material development for an awfully long time. So the fact that you can develop a material in that 5 years that can then be used across so many different applications is a great strength of our business model business case. However, the downside to it is, being candid today, because there are so many different applications and because so many operators in consumer electronics are very tight-lipped about their applications and capabilities until they're launched, we genuinely today do not know the first end user, if you like, for our technology. We know from looking at an STMicro's website and some of our other customer websites, the sort of customers they deal with. All of the big mobile handset companies, all the big display companies and all of the consumer electronics companies, they're all in there as their big customers. So they've got an attractive customer portfolio, but we can't pinpoint which one is going to use this technology. And again, some of these companies, as I said, they tend to tell you that a new device has got that new technology when they've actually launched the device on the market. So I think we were asked the question recently, is it possible that our commercial production that we fulfilled in November is in the market. It's very possible that it's not yet in the market because our customer has to process that material, make their devices, which then need to be put into possibly another module and then into the end device. What I can say, though, Ed, is that independent industry forecasts are looking at that 2026 adoption for SWIR technology in mobile phones. So that's the data and the information that we have. But again, just to emphasize, because of the investments required to be made by customers in this technology, but buying the quantum dots is relatively inexpensive part of the technology, buying the capital equipment to incorporate the dots into the device is much, much more significant. None of our customers are getting into this. They've said this directly to us to be able to sell 1 million or 2 million units. These are very, very large scale. I think anyone who follows semiconductor, it's all about volumes. Customers are aiming for hundreds of millions of units. But obviously, new technology starts with low-volume orders and low-volume applications, which then gain market credibility and traction, and that then leads to the bigger mass market devices. So again, while it's not guaranteed to get you there, the fact that the customers getting into this are interested in hundreds of millions of devices, tells you where they want to get to and where they're pushing to get these into mass-market mobile phones.

There are no further questions in queue. I will now hand it back to Brian Tenner for closing remarks. Over to you. Thank you.

Okay. Thanks again, Laura. So I'll just leave you with that 1 liner that I tried to leave you with earlier. Investors today in the Nanoco, our future investors, what you're looking at is what we think is a very rare based, which is a fully funded tech company that already has commercial traction that's dealing with some of the biggest and most respected customers and companies in the world and we're fully protected with our own 360-degree IP moat. And that's what I'd like to leave you with. Thanks very much.