REG - C4X Discovery - Full Year Results
14/12/2023 07:15
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RNS Number : 7157W C4X Discovery Holdings PLC 14 December 2023
This announcement contains inside information
C4X Discovery Holdings plc
("C4XD", "C4X Discovery" or the "Company")
Full Year Results
Evolution of strategy as immuno-inflammation company to deliver greater value
to shareholders
14 December 2023 - C4X Discovery Holdings plc (AIM: C4XD), a pioneering Drug
Discovery company, today announces its full year audited results for the year
ended 31 July 2023.
Dr Clive Dix, CEO of C4X Discovery, said: "This year has seen C4XD evolve
significantly to build on its proven strengths and expertise and focus on
immuno-inflammation. The licensing of our NRF-2 programme to AstraZeneca
reinforced our confidence in our ability to discover high value new small
molecule drugs in the space and the strategic divestment of our Orexin-1
programme further streamlined our portfolio and provided further resources to
pursue this more defined path to value. The market potential in
immuno-inflammation is large and growing, reflecting the need for better
treatments. With a robust balance sheet, focused strategy and streamlined
portfolio, we believe we are strongly positioned in immuno-inflammation and
excited about the future."
Operational highlights (including post-period events)
· New strategic focus as an immuno-inflammation company.
· C4XD signed an exclusive worldwide licensing agreement with
AstraZeneca in November 2022, worth up to $402 million, for its NRF2 Activator
programme.
· α4β7 integrin inhibitor programme for inflammatory bowel
disease ("IBD") delivered compounds showing improved activity at a lower dose
compared to example competitor compounds in a pharmacodynamic model after oral
dosing.
· C4XD internal portfolio expanded in inflammatory diseases and new
programmes identified progressing towards Lead Optimisation and beyond.
· Launch of PatientSeek, C4XD's precision medicine platform for
optimised patient selection.
· Indivior acquired C4XD's oral Orexin-1 receptor antagonist,
C4X_3256 (INDV-2000), for substance use disorder under an asset purchase
agreement for £15.95 million (recognised post period).
· Sanofi is progressing C4XD's IL-17A inhibitor programme for
inflammatory diseases towards the next milestone.
· MALT-1 inhibitor programme moving forward to identification of
candidate shortlist molecules as partnering process initiated.
· Executive changes: Clive Dix's appointed at interim Executive
Chairman & CEO as Eva-Lotta Allan steps down as Chair and Dr Nick Ray
appointed as Chief Scientific Officer.
Financial highlights
· Revenue of £1.7 million (2022: £2.7m).
· Total loss after tax of £11.1 million or 4.42 pence per share
(2022: £8.2m or 3.57 pence per share).
· R&D expenses increased by 16% to £10.9 million (2022:
£9.4m), reflecting focused investment in key Drug Discovery programmes.
· Net assets of £6.5 million (2022: £11.8m).
· Net cash as at 31 July 2023: £4.2 million (31 July 2022:
£5.1m).
· Post-period, payment of £15.95 million received from Indivior
for the outright acquisition of Orexin-1 Receptor Antagonist Programme.
Analyst Webcast Today
Dr Clive Dix, Chief Executive Officer, and members of the management team will
host a live webcast for analysts at 9:30am GMT today to discuss the results.
The webcast can be accessed online at:
https://www.lsegissuerservices.com/spark/C4xDiscoveryHolding/events/add39e84-79c5-41b8-a497-f14f787e5d1d
(https://www.lsegissuerservices.com/spark/C4xDiscoveryHolding/events/add39e84-79c5-41b8-a497-f14f787e5d1d)
A copy of the final results presentation will be released later this morning
on the Company website at www.c4xdiscovery.com (http://www.c4xdiscovery.com)
.
Contacts
C4X Discovery Holdings
Mo Noonan, Communications +44 (0)787 6444977
Panmure Gordon (UK) Limited (NOMAD and Broker)
Freddy Crossley, Emma Earl (Corporate Finance) +44 (0)20 7886 2500
Rupert Dearden (Corporate Broking)
C4X Discovery Media - ICR Consilium
Mary-Jane Elliott, Chris Gardner, Matthew Neal +44 (0)203 709 5700
Notes to Editors:
About C4X Discovery
C4X Discovery ("C4XD") is a pioneering Drug Discovery company combining
scientific expertise with cutting-edge Drug Discovery technologies to
efficiently deliver world leading medicines, which are developed by our
partners for the benefit of patients. We have a highly valuable and
differentiated approach to Drug Discovery through our enhanced DNA-based
target identification and candidate molecule design capabilities, generating
small molecule drug candidates across multiple disease areas including
inflammation, oncology, neurodegeneration and addictive disorders. Our
commercially attractive portfolio ranges from early-stage novel target
opportunities to late-stage Drug Discovery programmes ready for out-licensing
to partners and we have three commercially partnered programmes with one
candidate in clinical development.
We collaborate with leading pharmaceutical and life sciences companies to
enrich our expertise and take our assets through pre-clinical and clinical
development. Through early-stage revenue-generating licensing deals, we
realise returns from our high value pre-clinical assets which are reinvested
to maximise the value of our Drug Discovery portfolio. For further
information see www.c4xdiscovery.com (http://www.c4xdiscovery.com)
Executive Chairman & CEO Statement
Growth, focused approach and evolution
"Our focused immuno-inflammation strategy will allow us to garner greater
value for our programmes as we extend the development pathway and create new
innovative therapies for patients."
The last twelve months have been a period of evolution for the business. To
ensure we continue to deliver a strong performance, the Board and senior
management continually assess whether the Company's strategy is in line with
its expertise and market opportunities. With a successful track record of
three programmes out-licensed to world-leading pharmaceutical companies, and
the majority of our portfolio already focused on immuno-inflammatory diseases,
we announced in our half year results in April 2023 our strategic decision to
focus on immuno-inflammation as a company. This is an area where we already
have proven drug discovery and development expertise as well as an expert team
of scientists who understand this disease area. This evolution of our approach
enables us to harness our skillset more fully and take the development of our
programmes further towards and into the clinic, providing greater value for
shareholders.
Millions of people's lives are impacted by immuno-inflammatory diseases every
year. For some, even the simplest of normal every day activities become
impossible, restricting what they can do and how they can live their lives
without excruciating pain, or being dismissed as minor afflictions, impacting
both their physical and psychological health. These poorly understood diseases
are a growing burden on healthcare systems, with an increasing prevalence
combined with an ageing population. We believe that through our unique
approach to small molecule drug discovery and our track record in developing
viable immuno-inflammation candidates, we will be able to offer new innovative
and safe therapies for these patients in the future.
In line with our new strategy to become an immuno-inflammatory therapeutics
company, we were proud to announce in July 2023 Indivior PLC's ("Indivior")
outright £15.95 million asset acquisition of C4XD's oral Orexin-1 receptor
antagonist programme for the treatment of substance abuse disorder. This
divestment enables us to further streamline our portfolio whilst crystallising
value early for the programme. Indivior's decision validates our expertise to
produce valuable, commercially relevant, small-molecule drug candidates as
well as the high value of our molecules. This non-dilutive funding in
combination with potential preclinical milestone payments from our licensing
deals with Sanofi and AstraZeneca provide the runway to advance our newly
focused portfolio towards, and potentially into, the clinic.
In June 2023, with the new strategy in place, Eva-Lotta Allan took the
decision to step down as Chair after five years of service. This change at the
Board level has opened the door to bringing in a new CEO, with strong
leadership skills and a track record of building a company with products that
have entered clinical development. The Nomination Committee has been tasked
with running the process for the new CEO search. In the meantime, I have taken
on the role of both interim Executive Chairman and CEO to ensure a smooth
transition. Thereafter, I expect to take a Non-Executive Board role to ensure
continuity and to support the delivery of our vision and strategy to develop
new therapies that will improve the lives of patients living with
immuno-inflammatory diseases. Once the CEO is in place, we will assess and
commence the appointment of Chairman for the Company.
Another key appointment to ensure delivery of our new strategy was the
appointment of Nick Ray as our Chief Scientific Officer in January 2023.
Having been at C4XD for seven years, and with expertise in medicinal
chemistry, structural analysis and computational chemistry/cheminformatics,
Nick has already shown strong leadership across the scientific teams as we
take these programmes further into development.
Internal portfolio
Our internal portfolio will now focus on the discovery and development of
novel oral small molecule medicines to treat patients across a range of
immuno-inflammatory diseases.
Our lead internal programme, focused on oral small molecule inhibitors of
α4β7, has the potential to expand patient access to α4β7 inhibitor therapy
for the treatment of inflammatory bowel disease ("IBD"). This programme is
making significant headway through late-stage discovery and progressing
towards preclinical studies, with the aim of delivering a low dose
Best-In-Class therapy.
We have a portfolio of early-stage discovery immuno-inflammatory projects
which are progressing through the required studies to assess scientific
potential. Our rigorous project initiation process assesses the contributions
that our proprietary platforms, Conformetrix and PatientSeek, can provide,
together with a thorough analysis of the commercial viability of a small
molecule approach for any target under consideration. Once through this phase
successfully and heading towards or into Lead Optimisation, we will provide
greater detail. This way, we ensure that only the best projects with strong
scientific and commercial attributes will become C4XD portfolio programmes. We
still anticipate moving two of these early evaluation projects into Lead
Optimisation by the end of 2024.
Partnered portfolio
In November 2022, we out-licensed our NRF2 Activator programme to AstraZeneca
for up to $402 million. C4XD has received an upfront payment of $2 million and
the deal terms highlight the potential for C4XD to receive up to $400 million
in development and commercial milestones, including potential preclinical
milestone payments ahead of the first clinical trial. If successful, we will
also receive mid-single digit royalties upon commercialisation. AstraZeneca is
developing the programme further with the aim to commercialise an oral therapy
for the treatment of inflammatory and respiratory diseases with a lead focus
on chronic obstructive pulmonary disease (COPD), a market worth close to $20
billion and rising.(1)
Having received the first milestone payment of €3 million in July 2022
from our out-licensing agreement worth up to €414 million with Sanofi for
our IL-17A oral inhibitor programme, the programme continues to make strong
progress. Under the license, Sanofi is developing the programme with the aim
to commercialise an oral therapy for the treatment of inflammatory diseases, a
multi-billion dollar market, with the IL-17 pathway implicated in psoriasis,
psoriatic arthritis and ankylosing spondylitis.
In February 2023, we added to our pioneering technology, Conformetrix, with
the launch of our patient stratification platform, PatientSeek. We have always
believed in a science first approach but by having access to the right tools
available to our scientists, we can advance our programmes smarter and with
more accuracy. PatientSeek has the ability to optimise patient selection with
the potential to match the most effective treatments with groups of patients
who are most likely to benefit thereby ensuring the right drug is given to the
right patient, based on their genetics. We are working with organisations such
as Sano Genetics, to access comprehensive data from immuno-inflammatory
patients and bring precision medicine approaches to our drug development
programmes.
With the evolution of our strategy to take our internal portfolio further
along the development pathway, it is incredibly important to appreciate the
continued support of our shareholders. In August 2022, through an investor-led
fund raise, we raised £5.7 million which has allowed us to make these
important changes that we believe will deliver greater long-term value for
C4XD's highly prized portfolio of small molecule programmes in
immuno-inflammation.
Finally, none of this progress can happen without the C4XD team. Often changes
such as these have a more immediate impact internally for those working on the
programmes and I am grateful for their continued belief and commitment to
C4XD's vision. We truly have a great and highly skilled team that will make
this vision a success.
Outlook and summary
We have made excellent progress this year, including partnering our NRF2
programme with AstraZeneca, and continuing key studies to advance our internal
portfolio. The decision to focus on immuno-inflammatory diseases sets a
defined path forward, allowing us to take our portfolio further into the
development pathway. This, we believe, will allow us to garner greater value
for our programmes as we extend the partnering timeline with the potential of
including clinical data where suitable. With a newly focused
immuno-inflammation strategy, a robust balance sheet and streamlined
portfolio, C4XD is in a strong position, and we are excited for our future.
Clive Dix
Executive Chairman & CEO
13 December 2023
1.
https://www.transparencymarketresearch.com/chronic-obstructive-pulmonary-disease-copd-treatment-market.html
(https://www.transparencymarketresearch.com/chronic-obstructive-pulmonary-disease-copd-treatment-market.html)
Financial Review
Strong investor support for new immuno-inflammation strategy
"C4XD has a robust balance sheet following the divestment of our Orexin-1
programme to Indivior and when combined with potential milestones from our
partnered programmes provides a clear runway for the development of our
portfolio of immuno-inflammation programmes."
Revenue for the 12 months ended 31 July 2023 was £1.7 million (2022: £2.7m).
The revenue recognised in the current year includes deferred revenues relating
to the ongoing research workplan with Sanofi and upfront payment of $2 million
by AstraZeneca for C4XD's NRF2 Activator programme. Revenue of £15.95 million
from the agreement with Indivior for the outright acquisition of Orexin-1
Receptor Antagonist Programme executed on 31 July 2023 was subject to certain
performance obligations which were met on 4 August 2023 resulting in this
revenue being recognised shortly after the year end.
R&D expenses, which comprise invoiced material costs, payroll costs and
software costs, have increased by 16% to £10.9 million for the year ended 31
July 2023 (2022: £9.4m). This reflects focused investment in key Drug
Discovery programmes as outlined in the Executive Chairman & CEO
Statement.
Administrative expenses increased during the year to £4.2 million (2022:
£3.7m) as a result of the continued investment in people and infrastructure.
Cost inflation is understandably starting to have an impact on the business
too with suppliers starting to pass on increased costs.
This year the R&D income tax credit receivable is £2.3 million (2022:
£2.4m) and is reflective of the continuing investment in R&D costs over
the last 12 months.
The loss after tax for the year ended 31 July 2023 was £11.1 million (2022:
£8.2m). This equates to a basic and diluted loss per share of 4.42 pence per
share (2022: 3.57 pence per share).
The Company had net assets at 31 July 2023 of £6.5 million (2022: £11.8m).
Cash and cash equivalents of £4.2 million (2022: £5.1m) were improved post
balance sheet by the receipt of £15.95 million from Indivior for the outright
acquisition of C4XD's Orexin 1 programme.
Both cash and costs continue to be prudently and tightly managed.
Notwithstanding a consolidated operating loss for the year ended 31 July 2023
of £13.4 million (2022: loss of £10.5m) and net cash used in operating
activities of £5.9 million (2022: £12.1m), these financial statements have
been prepared on a going concern basis. The Directors consider this to be
appropriate for the following reasons:
The Board has prepared a number of cash flow forecasts for the period to 31
July 2025. Base case scenario shows that cash resources are maintained
throughout the period to July 2025 whilst severe but plausible downside
scenario shows cash resource to April 2025, both being more than 12 months
from the date of signing the financial statements.
Should the company not receive any revenues from existing or new deals in the
forecast period, a cash shortfall will arise in early 2025. The Board
considers they are able to take reasonable mitigating action, which includes
but is not limited to a reduction in expenditure on certain discretionary
research programmes to focus purely on commercialising earlier stage drug
molecules, and reducing other discretionary administrative expenditure. This
would enable the Group and Company to continue to operate within its existing
cash resources during the forecast period without the need for additional
funding.
Brad Hoy
Chief Financial Officer
13 December 2023
Portfolio Review
Streamlined portfolio focused on immuno-inflammatory diseases
Small molecule focus
We are focused on the discovery and development of small molecule therapeutics
for the treatment of a range of immuno-inflammatory diseases. Our Conformetrix
technology for the elucidation of ligand shape in the physiologically-relevant
solution state plays a key role in guiding our team of industry-experienced
medicinal chemists to identify novel chemical space, whilst our biologists
have decades of experience in designing effective assay cascades to support
the prosecution of time- and cost-effective drug discovery campaigns. All wet
laboratory science is conducted through a worldwide network of tested and
trusted CROs, employing the right CRO at the right time for the right activity
whilst maintaining flexibility and cost-effectiveness.
Internal portfolio
Inflammation (α4β7 Integrin Inhibitor)
Programme transitioned into Lead Optimisation
C4XD's oral α4β7 integrin inhibitor programme has identified multiple series
of novel, potent and selective α4β7 integrin inhibitors for the treatment of
IBD. Effective antibody therapy (Vedolizumab, 'Entyvio') against this target
is already approved, removing the clinical target risk, but an effective oral
therapy remains highly sought after. During 2023, Morphic Therapeutics
reported positive topline data from a Phase 2a clinical study in adults with
moderate to severe ulcerative colitis (UC) at a dose of 100 mg twice daily
(BID). C4XDs programme is targeting a more optimal dosing regimen.
Oral bioavailability has been demonstrated and there is particular focus on
improving PK properties to achieve a good oral half-life. C4XD has compounds
that match or exceed both whole blood potency and selectivity over the related
integrin a4b1 when compared to examples from current clinical patent estates,
with correspondingly improved activity at a lower dose when profiled in a
T-cell gut-homing pharmacodynamic model. In parallel, we are using the
PatientSeek platform to identify stratification signals in IBD patients that
could inform the clinical development path for the α4β7 programme.
Haematological cancer (MALT-1 Inhibitor)
In partnering process
MALT1 is one of the key regulators of B-cell receptor (BCR) and T-cell
receptor (TCR) signalling. Mutations that lead to constitutive activation of
MALT1 are associated with aggressive forms of non-Hodgkin B-cell lymphoma and
inhibition of MALT1 has potential therapeutic applicability as a mono therapy
for MALT1-driven cancers such as activated B-cell diffuse large B-cell
lymphoma (ABC-DLBCL) and in combination with BTK and Bcl inhibitors across
multiple haematological indications, as well as broader potential in solid
tumours and inflammation.
Our Conformetrix technology has yielded multiple structurally distinct series.
Profiling of a Lead compound in a mouse xenograft study has shown equivalent
efficacy at equivalent dose to the Johnson & Johnson clinical compound
JnJ-67856633 (in Phase 1) and the programme is progressing to complete the
datapack on a set of preclinical candidate molecules.
New discovery early-stage programmes
Expansion of Pipeline
As we look to scale our portfolio, investigation of a number of targets across
a range of immuno-inflammatory diseases are being resourced to identify those
with the highest potential to warrant increased commitment of resources to
progress novel series into Lead Optimisation and beyond. These programmes
target clear unmet medical need, combined with significant commercial
potential and a unique opportunity to produce valuable chemical equity through
interpretation of conformational insight via C4XD's Conformetrix technology.
Additionally, we are using our PatientSeek platform to inform our target
selection choices, based on identification of patient stratification
opportunities. Details of each programme will be provided once they have
matured to Lead Optimisation stage.
Partnered portfolio
Inflammation (NRF2 Activator)
Programme continues to move forward under a license agreement with AstraZeneca
C4XD signed an exclusive worldwide licensing agreement with AstraZeneca in
November 2022, worth up to $402 million, for C4XD's NRF2 Activator programme.
AstraZeneca will develop and commercialise an oral therapy for the treatment
of inflammatory and respiratory diseases with a lead focus on chronic
obstructive pulmonary disease (COPD). Under the terms of the agreement, C4XD
has received an upfront payment of $2 million, with the potential to receive a
further $400 million in preclinical development, clinical development and
commercial milestones, as well as tiered mid-single digit royalties upon
commercialisation.
Inflammation is a key driver in many pathological conditions. NRF2 plays a
pivotal role in controlling the expression of antioxidant genes that
ultimately exert anti-inflammatory functions. Targeting the NRF2 pathway to
reduce inflammatory damage offers the potential for a new approach to treat a
variety of inflammatory diseases. Interest in this therapeutic approach across
the industry covers multiple therapeutic areas including chronic obstructive
pulmonary disease, atopic dermatitis, IBD, pulmonary arterial hypertension and
sickle cell disease.
Inflammation (IL-17A Inhibitor)
Sanofi-led programme making significant progress
Under the exclusive worldwide licensing agreement worth up to €414 million,
Sanofi continues to make strong preclinical progress towards the second
milestone; C4XD received the first milestone payment of €3 million in July
2022. The small molecules in C4XD's oral IL-17A inhibitor programme can
selectively block IL-17 activity whilst maintaining molecular size of the
molecule in the traditional "drug-like" range. Sanofi has development and
commercial rights to the programme and is continuing to work with C4XD in the
next discovery phase, utilising our Conformetrix technology, interpretation
and application to compound design as the programme progresses towards the
clinic.
Consolidated statement of comprehensive income
for the year ended 31 July 2023
Notes 2023 2022
£000 £000
Revenue 4 1,710 2,699
Cost of sales (38) (130)
Gross profit 1,672 2,569
Research and development expenses (10,894) (9,426)
Administrative expenses (4,192) (3,665)
Operating loss 5 (13,414) (10,522)
Finance income 7 22 -
Finance costs 7 (24) (12)
Loss before taxation (13,416) (10,534)
Taxation 8 2,305 2,374
Loss for the year and total comprehensive loss for the year (11,111) (8,160)
Loss per share
Basic loss for the year 9 (4.42)p (3.57)p
Diluted loss for the year 9 (4.42)p (3.57)p
The Loss for the year arises from the Group's continuing operations and is
attributable to the equity holders of the parent.
There were no other items of comprehensive income for the year (2022: £nil)
and therefore the loss for the year is also the total comprehensive loss for
the year.
Both basic and diluted loss per share are reported due to the effect of
exercisable share options and warrants in issue.
Consolidated statement of changes in equity
for the year ended 31 July 2023
Issued equity capital Share premium Warrant Reserve Share-Based Payment Reserve Merger reserve Capital contribution reserve Retained earnings reserve Total
£000 £000 £000 £000 £000 £000 £000 £000
At 31 July 2021 4,302 53,043 979 1,191 920 195 (41,344) 19,286
Loss for the year and total comprehensive loss for the year - - - - - - (8,160) (8,160)
Exercise of options 3 15 - - - - - 18
Exercise of warrants 11 297 (11) - - - 11 308
Share-based payments - - 352 - - - 352
Transactions with owners 14 312 (11) 352 - - 11 678
At 31 July 2022 4,316 53,355 968 1,543 920 195 (49,493) 11,804
Loss for the year and total comprehensive loss for the year - - - - - - (11,111) (11,111)
Issue of share capital 228 5,467 - - - - - 5,695
Expenses of placing - (287) - - - - - (287)
Exercise of options 1 5 - - - - - 6
Share-based payments - - - 425 - - - 425
Transactions with owners 229 5,185 - 425 - - - 5,839
As at 31 July 2023 4,545 58,540 968 1,968 920 195 (60,604) 6,532
Company statement of changes in equity
for the year ended 31 July 2023
Issued equity capital Share premium Warrant Reserve Share-Based Payment Reserve Retained earnings reserve Total
£000 £000 £000 £000 £000 £000
At 31 July 2021 4,302 53,043 979 1,162 13 59,499
Loss for the year and total comprehensive loss for the year - - - - - -
Exercise of options 3 15 - - - 18
Exercise of warrants 11 297 (11) - 11 308
Share-based payments - - 352 - 352
Transactions with owners 14 312 (11) 352 11 678
At 31 July 2022 4,316 53,355 968 1,514 24 60,177
Loss for the year and total comprehensive loss for the year - - - - (3,810) (3,810)
Issue of share capital 228 5,467 - - - 5,695
Expenses of placing - (287) - - - (287)
Exercise of options 1 5 - - - 6
Share-based payments - - - 425 - 425
Transactions with owners 229 5,185 - 425 - 5,839
As at 31 July 2023 4,545 58,540 968 1,939 (3,786) 62,206
Statements of financial position
at 31 July 2023
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
Notes £000 £000 £000 £000
Assets
Non-current assets
Tangible Fixed Assets 10 39 - 47 -
Right of Use Assets 10 402 - 707 -
Intangible assets 11 54 - 61 -
Goodwill 12 1,192 - 1,192 -
Investments in and loans to subsidiaries 13 - 62,206 - 60,183
1,687 62,206 2,007 60,183
Current assets
Trade and other receivables 14 572 - 3,069 -
Income tax asset 15 2,305 - 4,427 -
Cash and cash equivalents 16 4,220 - 5,079 -
7,097 - 12,575 -
Total assets 8,784 62,206 14,582 60,183
Liabilities
Current liabilities
Trade and other liabilities 17 1,828 - 2,049 6
Lease liabilities 18 337 - 305 -
2,165 - 2,354 6
Non-Current liabilities
Lease liabilities 18 87 - 424 -
87 - 424 -
Total liabilities 2,252 - 2,778 6
Net assets 6,532 62,206 11,804 60,177
Capital and reserves
Issued equity capital 19 4,545 4,545 4,316 4,316
Share premium 19 58,540 58,540 53,355 53,355
Share-based payment reserve 20 1,968 1,939 1,543 1,514
Warrant reserve 21 968 968 968 968
Merger reserve 22 920 - 920 -
Capital contribution reserve 23 195 - 195 -
Retained earnings 24 (60,604) (3,786) (49,493) 24
Total equity 6,532 62,206 11,804 60,177
The Company has elected to take the exemption under Section 408 of the
Companies Act 2006 not to present the parent company's statement of
comprehensive income. The parent company had a loss of £3,810,000 for the
year ended 31 July 2023 (2022: loss of £nil). Current year's loss in its
entirety was as a result of the provision for impairment of the Company's
investment in its subsidiary as described in the note 13.
Approved by the Board and authorised for issue on 13 December 2023.
Clive Dix
Chief Executive Officer
13 December 2023
Registered number: 09134041
Cash flow statements
For the year ended 31 July 2023
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
Notes £000 £000 £000 £000
Profit / (loss) after interest and tax (11,111) (3,810) (8,160) -
Adjustments for:
Depreciation of tangible fixed assets 10 26 - 23 -
Depreciation of right-of-use assets 10 305 - 212 -
Amortisation of intangible assets 11 7 - 8 -
Net foreign exchange differences (89) - - -
Provision for impairment of investments in subsidiaries 13 - 3,810 - -
Share-based payments 20 425 - 352 -
Finance income 7 (22) - - -
Interest payments on leases 25 24 - 12 -
Taxation 8 (2,305) - (2,374) -
Changes in working capital:
(Increase)/decrease in trade and other receivables 14 2,497 - (2,495) 6
Increase/(decrease) in trade and other payables 17 (211) (6) 338 6
Cash (used in) / generated from operating activities (10,454) (6) (12,084) 12
Research and development tax credit received 4,427 - - -
Net cash (used in) / from operating activities (6,027) (6) (12,084) 12
Cash flows from investing activities
Increase in investment in and loans to subsidiaries - (5,408) - (338)
Purchases of tangible fixed assets 10 (18) - (37) -
Finance income 7 22 - - -
Net cash from / (used in) investing activities 4 (5,408) (37) (338)
Cash flows from financing activities
Payment of lease liabilities 25 (329) - (229) -
Proceeds from issues of ordinary share capital 19 5,701 5,701 326 326
Expenses of share capital issue 19 (287) (287) - -
Net cash from financing activities 5,085 5,414 97 326
Net decrease in cash and cash equivalents (938) - (12,024) -
Net foreign exchange differences 79 - - -
Cash and cash equivalents at the start of the year 5,079 - 17,103 -
Cash and cash equivalents at the end of the year 4,220 - 5,079 -
Cash, cash equivalents and deposits at the end of the year 16 4,220 - 5,079 -
Notes to the financial statements
1. Reporting entity
C4X Discovery Holdings plc (the "Company") is an AIM listed company
incorporated, registered and domiciled in England and Wales within the UK.
These Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group" and individually as "Group
entities") for the year ended 31 July 2023.
The financial statements of the Company and the Group for the year ended 31
July 2023 were authorised for issue by the Board of Directors on 13 December
2023 and the statement of financial position was signed on the Board's behalf
by Clive Dix.
The significant accounting policies adopted by the Group are set out in note
3.
2. Basis of preparation
Statement of accounting compliance
The Group's and parent company's financial statements have been prepared in
accordance with UK adopted international accounting standards as they apply to
the financial statements of the Group for the period ended 31 July 2023.
Basis of measurement
The Company and Group financial statements have been prepared on the
historical cost basis.
The methods used to measure fair values of assets and liabilities are
discussed in the respective notes in note 3 below.
Going concern
Group has reported consolidated operating loss for the year ended 31 July 2023
of £13.4 million (2022: £10.5m), revenues of £1.7 million (2022: £2.7m)
and net cash used in operating activities of £6.0 million (2022: £12.1m).
The Directors have prepared both the consolidated and Company financial
statements on a going concern basis, which the Directors believe to be
appropriate for the following reasons.
The Group has executed an asset purchase agreement for Indivior PLC to acquire
the proprietary rights to C4XD's oral Orexin-1 receptor antagonist for
substance use disorder on 31 July 2023 with payment of £15.95 million being
settled in full in August 2023. The Group had cash and cash equivalents at 31
July 2023 of £4.2 million (2022: £5.1m) and at 31 October 2023 had cash
resources of £16.0 million.
The Board has prepared cash flow forecasts covering at least 12 months from
the date of signing the financial statements, including base case forecast
with further milestone payments received from the partnered programs and
severe but plausible downside scenario.
The base case cash flow forecast, which assumes partnered programmes progress
to deliver next milestone payments, show that no additional funding will be
required in the forecasted period. The severe but plausible downside scenario
reflects a case with no income modelled, receipt of research and development
tax credits from HMRC 11 months after the year end, a 10% increase in Contract
Research Organisations (CRO) costs for continuing programmes, and worse than
anticipated inflationary impacts on other costs including scientific,
operational and staff costs. The base case and severe but plausible downside
cash flow forecasts, which both assume no further fund raising, indicate that
the Group and Company have sufficient cash resources to meet their liabilities
as they fall due for at least 12 months from the date of approval of these
financial statements.
In terms of the period beyond the 12 month going concern assessment period,
the severe but plausible downside scenario, indicates that existing cash
resources would be exhausted in approximately April 2025. The nature of the
Group's business model and its research intensive operations create a
requirement for additional funding until the Group is generating a higher
level of revenue from partnered programmes. However, the Board have a
reasonable expectation they will be able to raise further equity financing to
support their ongoing research activities. The Board also have a reasonable
expectation that further milestone payments will be achieved within the
forecast period. There can be no guarantees that either of these events will
occur and they are therefore not reflected in the Board's severe but plausible
downside cash flow forecast.
Assessment of expenditure and timing of revenue or fundraising is continually
and diligently monitored and, if potential delays were identified, the Board
consider they would be able to take additional, reasonable mitigating actions.
This includes but is not limited to a reduction in expenditure on platform
development activities to focus purely on commercialising earlier stage drug
molecules, and reducing other discretionary administrative expenditure, which
would enable the Group and Company to continue to operate within its existing
cash resources for an extended period.
Based on the above factors the Board are satisfied that the Group and Company
have adequate resources to enable the Group and Company to continue
discharging their liabilities and realising their assets for at least 12
months from the date of approval of these financial statements. Accordingly,
they continue to adopt the going concern basis in preparing the Group and
Company financial statements.
Functional and presentational currency
These financial statements are presented in Pounds Sterling, which is also the
functional currency of the Company and its subsidiaries. All financial
information presented has been rounded to the nearest thousand.
Use of judgements and estimates
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.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
Judgements
Judgements made in applying the Group's accounting policies that have the most
significant impact on the amounts recognised in the financial statements are:
Revenue recognition
When determining the correct amount of revenue to be recognised, the Group
includes making certain judgements when determining the appropriate accounting
treatment of key customer contract terms in accordance with the applicable
accounting standards.
In the prior year, C4XD has recognised revenue from a non-sales based
milestone received from Sanofi, along with revenue in respect of the ongoing
research work plan. In the current year, further revenue from the ongoing
research work plan has been recognised.
Whether the non-sales based milestones under the Sanofi contract will be met
and the associated payments become due is highly susceptible to factors
outside of the Group's influence, principally because they involve the
judgement of third parties like Regulatory Authorities. The revenue associated
with these milestones should be recognised at the date that the uncertainty
surrounding each milestone resolves and given the nature of the milestones the
Group would expect this to be on the date that each milestone is met. On that
basis, the revenue associated with the first milestone achieved has been
recognised in full in the prior year.
With respect to the research work plan, the Group has recognised revenue as
follows. The cost has been established by taking the total number of days
spent on the project in the year by its employees and multiplying this by the
average FTE cost established at initiation of the project. A commercial margin
was then applied to the cost of these employees to calculate the revenue and
this was then released from deferred income and recognised as revenue.
£42,000 has been released from deferred income and recognised as revenue in
the year in respect of the research work plan (2022: £144,000).
When this deal was signed with Sanofi in the year ending 31 July 2021, for the
worldwide licensing of C4XD's IL-17A oral inhibitor programme, judgement was
required in identifying the number of performance obligations in the contract,
specifically whether the transfer of intellectual property and the delivery of
research services represented different performance obligations. The Group
applied the guidance in IFRS 15 by considering whether the licence was
distinct from the promise to provide ongoing research services through the
duration of the research work plan set out in the agreement. As such, revenue
recognised from the delivery of research services is recorded over time and
this resulted in £0.5 million of revenue being deferred. The alternative
judgement could have been that the transfer of intellectual property and the
delivery of research services is one performance obligation which would have
resulted in the upfront payment of £6 million being recognised over the
length of the research work plan estimated at 18 months at the time. The Group
concluded that these were separate performance obligations as both the
intellectual property and the research work programme could be sold separately
and the customer can benefit from each on its own or together with readily
available resources, so they are capable of being distinct and they are set
out as separate promises in the contract.
Additional judgement was required in determining whether the transfer of
intellectual property gave the customer use at a time which the licence was
granted or a right to access. Management determined that the customer received
the right to the drug molecule on the date that the IP was transferred over
and therefore the cash payment received constituted handing over control of
the IP to Sanofi and was not dependent on any future outcomes. The impact of
this judgement resulted in recognising revenue in full of £5.5 million in the
year ending 31 July 2021, being the residual balance of the upfront payment
after allocating revenue to the other performance obligation. Alternatively,
management could have assessed the transfer of intellectual property as a
right to access of the licence agreement date which would have resulted in
deferring £2.75 million from the year ending 31 July 2021 into the year
ending 31 July 2022.
On 25 November 2022, C4XD entered a worldwide license agreement with
AstraZeneca for C4XD's NRF2 Activator programme. Judgement was required in
identifying the number of performance obligations in the contract,
specifically whether the transfer of intellectual property, provision of
ad-hoc consulting and technical scientific support and facilitation of the
completion of on-going research represented different performance obligations.
The Group applied the guidance in IFRS 15 by considering whether these three
performance obligations were distinct from each other. It was determined that
the revenue from provision of consulting and technical support is to be
recorded over time and consideration allocated to it was calculated on a
cost-plus margin basis using the FTE rate that was defined in the agreement.
Total consideration of £15,500 was initially deferred and then recognised in
the second half of the current period. The alternative judgement could be that
the transfer of intellectual property and the delivery of consulting and
support services is one performance obligation which would result in the
upfront payment of £1.7 million being recognised over the time together with
provision of consulting and technical support, however, this would still
result in £1.7 million being recognised in the current period given the
delivery of the consulting and support services was also completed within the
financial year. In respect of facilitation of the completion of on-going
research, C4XD was deemed to be an agent in this transaction on the basis that
C4XD performance obligation is to arrange for the services to be provided and
not to provide services itself and therefore C4XD should recognise revenue on
the net basis. In the current period no revenues were recorded in respect of
this performance obligation.
On 31 July 2023, C4XD entered into an asset purchase agreement for Indivior to
acquire the proprietary rights to C4XD's oral Orexin-1 receptor antagonist.
Judgement was required in identifying the number of performance obligations in
the contract as well as the appropriate date for revenue to be recognised. It
was determined that the contract only had one performance obligation to sell
the asset. After applying the guidance of IFRS 15, it was determined that
the revenue should be recognised at a point in time as none of the criteria
for recognising revenue over time were satisfied. The revenue will therefore
be recognised on the closing date, 4 August 2023, when in line with the
agreement the control over the asset passes to Indivior.
Research and development
Careful judgement by the Directors is applied when deciding whether the
recognition requirements for capitalisation of research and development costs
have been met. In particular, judgement is required over whether technical
viability is proven and whether economic benefits will flow to the entity. The
Directors consider that these factors are uncertain until such time as
commercial supply agreements are considered likely to be achieved. Judgements
are based on the information available at each reporting date which includes
the progress with testing and certification and progress on, for example,
establishment of commercial arrangements with third parties. In addition, all
internal activities related to research and development of new products are
monitored by the Directors. Further information is included in note 3.
Estimates
The key sources of estimation uncertainty that have a significant risk of
causing material adjustment to the carrying amount of assets and liabilities
within the next financial year are discussed below.
· Revenue recognition
Estimation is involved in determining the correct amount of revenue to
recognise. This can be split into two components:- (i) the allocation of the
transaction price between performance obligations and (ii) the timing of
revenue recognition in respect of the delivery of services, particularly where
there is an expectation that the customer will not fully exercise their rights
to services.
The following describes estimations made in connection with the revenue
deferred from the contract with Sanofi signed in the year ending 31 July 2021
which has impact on the current year where part of the deferred revenue was
recognised. Firstly, the allocation of the transaction price for the revenue
relating to the ongoing research services for Sanofi was calculated on a
cost-plus margin basis. The existing salaries of five full time equivalents
("FTE") which were available under the terms of the contract were combined and
a commercial margin was applied to the cost of these employees. In calculating
the cost, an average FTE day rate was taken and multiplied by the total number
of days expected to be worked over an 18-month period from the date of signing
the agreement which resulted in £0.5 million of revenue being spread over the
length of the research work programme.
To arrive at the commercial margin used, management reviewed the results from
comparable drug discovery services, both emerging and well-established CROs,
to understand the margins that they are achieving. The Company's platform is
unproven and unvalidated commercially as a stand-alone paid-for drug discovery
software and consequently any paid-for commercial access to the software
would, at this stage, effectively be beta-testing and therefore attract a
margin at the lower range of those achieved by other providers.
The allocation of the transaction price for the revenue relating to the
consulting and support activities for AstraZeneca was also calculated on a
cost-plus margin basis. In this case the FTE rate was already defined in the
agreement for the work in excess of the fixed number of hours allowed under
the agreement.
· Investments in and loans to subsidiaries
Loans to subsidiaries are tested for impairment using an expected credit loss
model. This requires estimation of the probability of default, the exposure at
default and the loss given default in order to calculate the expected credit
loss of the loans to subsidiaries. The key judgement made by management in the
expected credit loss calculations are the definition of default and the
probability assumptions of the future cashflows and the timing of the
cashflows. The definition of default and the probability sensitivities are
disclosed in Note 13.
The recoverable amount of the Parent's investment in subsidiary is tested for
impairment when indicators of impairment (or reversal of impairment) are
identified. The potential recoverable amounts have been determined based on a
value in use model. As the recoverable amount is less than the carrying
amount, the provision of £3,810,000 was recorded in the current year (2022:
£nil). These calculations require the use of estimates both in arriving at
the expected future cash flows and the application of a suitable discount rate
in order to calculate the present value of these cash flows. Cash flow
estimates include signing future licence agreements and the receipt of further
milestone licence payments, the timing of which are uncertain. These estimates
were benchmarked against the Group's own experience of such deals and external
sources of information within the industry. The assumptions and related
sensitivity analysis in these calculations are included in note 13.
3. Significant accounting policies
The accounting policies set out below are consistent with those of the
previous financial year and are applied consistently by Group entities.
Basis of consolidation
The Group financial statements consolidate the financial statements of C4X
Discovery Holdings plc and the entities it controls (its subsidiaries) drawn
up to 31 July each year.
All business combinations are accounted for by applying the acquisition method
as at the acquisition date, which is the date on which control is transferred
to the Group.
The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets
acquired and liabilities assumed.
Transaction costs related to the acquisition, other than those associated with
the issue of debt or equity securities, that the Group incurs in connection
with a business combination are expensed as incurred.
Subsidiaries are all entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. All C4X Discovery Holdings plc's
subsidiaries are 100% owned. Subsidiaries are fully consolidated from the date
control passes.
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.
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 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.
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 Group operated with only a single segment.
Revenue
IFRS 15 establishes principles for reporting useful information to users of
financial statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity's contracts with customers. The
standard establishes a five-step principle-based approach for revenue
recognition and is based on the concept of recognising an amount that reflects
the consideration for performance obligations only when they are satisfied and
the control of goods or services is transferred.
All of the Group's contract revenue is generated from licences and
services.
Management reviewed the contracts where the Group received consideration in
order to determine whether or not they should be accounted for in accordance
with IFRS 15. To date, the Group has entered into four contracts - the two of
which were signed in the current year - that generate revenue and fall within
the scope of IFRS 15.
As set out in more detail within note 2, it was determined that there were two
performance obligations within the Sanofi contract, the first to being the
transfer of IP and the second being the provision of research services through
the 'research work programme'. The contract with AstraZeneca had three
performance obligations - the transfer of IP, provision of consulting and
technical scientific support and facilitation of the completion of on-going
research. The contract with Indivior was determined to have single performance
obligation, being sale of the asset.
Contract revenue is recognised at either a point-in-time or over time,
depending on the nature of the services and transfer of goods.
Revenue generated from the sale of a right-to-use licence to a customer is
determined to be recognised at a point in time when a promise to provide the
customer with the right to use the entity's IP is satisfied. Management
determined that the customer receives the right to the drug molecule on the
date that the IP is transferred over and therefore the cash payment received
constitutes handing over control of the IP to customer and is not dependent on
any future outcomes. The general guidance is applied on performance
obligations satisfied at a point in time to determine the point in time at
which the licence transfers to the customer. In this scenario, the point of
time was deemed to be the effective date that all of the intellectual property
was transferred over to customer. The allocation of the transaction price to
the sale of right-to-use licences was the remainder of the payments received
less consideration allocated to other performance obligations.
The contracts with Sanofi and AstraZeneca also include future milestone
payments which are contingent on the various future events such as passing
clinical trials testing at a future point in time. As there can be significant
variability in final outcomes, the Group applies a constraint when measuring
the variable element within revenue, so that revenue is recognised at a
suitably cautious amount. The objective of the constraint is to ensure that it
is highly probable that a significant reversal of revenue will not occur when
the uncertainties are resolved. The constraint is applied by making suitably
cautious estimates of the inputs and assumptions used in estimating the
variable consideration. The constraints applied in recognising revenue mean
that the risk of a material downward adjustment to revenue in the next
financial year is low. The company recognised the first of these milestones
from the contract with Sanofi in the prior year when it was achieved and no
further milestones were achieved in the current year.
Royalty payments will be received by the Group if the drugs are marketed and
sold by Sanofi or AstraZeneca respectively. Revenue on royalty payments are
recognised when they are earned which for the Group will be when the drugs
have been developed and a set number of products sold. At this point, the
royalty rate owed to Group will be applied to the portion of the net sales of
royalty-bearing products that fall within the indicated range as set out in
the sales agreement.
Revenue generated from services agreements is determined to be recognised over
time when it can be determined that the services meet one of the following:
(a) the customer simultaneously receives and consumes the benefits provided by
the entity's performance as the entity performs; (b) the entity's performance
creates or enhances an asset that the customer controls as the asset is
created or enhanced; or (c) the entity's performance does not create an asset
with an alternative use to the entity and the entity has an enforceable right
to payment for performance completed to date.
The Sanofi and AstraZeneca contracts both include a separate performance
obligation to deliver services. It was determined that the services provided
under the terms of these contracts meet criteria (a) above on the basis that
the customer receives and uses the benefit as the work on any new compounds is
evolved and is therefore a separate performance obligation and revenue should
be recognised over time. The allocation of the transaction price for the
revenue relating to the services has been calculated on a cost-plus margin
basis. Contract with Indivior did not meet criteria for recognition over time
and thus the revenue will be recognised at the point in time when control over
the asset is transferred.
Deferred Revenue
Deferred revenue includes amounts that are receivable or have been received
per contractual terms but have not been recognised as revenue since
performance obligations have not yet occurred or have not yet been completed.
The Company classifies non-current deferred revenue for any transaction which
is expected to be recognised beyond one year.
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 Group utilises the government's R&D tax credit scheme for all
qualifying UK R&D expenditure. The credits are accounted for under IAS 12
and presented in the profit and loss as a deduction from current tax expense
to the extent that the entity is entitled to claim the credit in the current
reporting period.
Leases
The Group applies the leasing standard IFRS16, to all contracts identified as
leases at their inception, unless they are considered short-term or where the
asset is of a low underlying value.
The Group has lease contracts in relation to property and office equipment. At
inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
As a lessee
At commencement or on modification of a contract that contains a lease
component, the Group allocates the consideration in the contract to each lease
component on the basis of its relative stand-alone prices. However, for leases
of property the Group has elected not to separate non-lease components and
account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date, at which point the Group assesses the term for which it is
reasonably certain to hold that lease. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on
which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case, the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the
following:
• Fixed payments, including in-substance fixed payments;
• Variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional renewal period
if the Group is reasonably certain to exercise an extension option, and
penalties for early termination of a lease unless the Group is reasonably
certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents right-of-use assets that do not meet the definition of
investment property in 'property, plant and equipment' and lease liabilities
in 'loans and borrowings' in the statement of financial position. On a
significant event, such as the lease reaching its expiry date or the likely
exercise of a previously unrecognised break clause, the lease term is
re-assessed by management as to how long we can be reasonably certain to stay
in that property, and a new lease agreement or modification (if the change is
made before the expiry date) is recognised for the re-assessed term.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for leases of low-value assets and short-term leases. Assets which
fall into this category include office equipment. The Group recognises the
lease payments associated with these leases as an expense on a straight-line
basis over the lease term. The value of these leases is less than £1,000 per
annum.
Finance income and costs
Finance income comprises interest income on funds invested. Interest income is
recognised as interest accrues using the effective interest rate method.
Finance costs comprise interest payments on right-of-use leases.
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 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 nor 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 substantially
enacted by the reporting date and which are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
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 or
economic benefits in the future are uncertain.
Tangible fixed assets
Owned assets
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.
Leased assets
Assets funded through finance leases and similar hire purchase contracts and
those previously classified as operating leases are now recognised in the
consolidated statement of financial position under IFRS 16 Leases as a right
of use asset. The lease note illustrates the recognition and subsequent
measurement of leased assets under IFRS 16.
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:
Building improvements - straight-line over remainder of lease period
Office equipment, fixtures and fittings - straight-line over three years
Right-of-use assets - straight-line from the commencement date to the end of the lease term
The carrying values of property, plant and equipment 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 property, plant and equipment 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.
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 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 20 years
IP assets - straight line over five years
Software - straight line over five years
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment.
Impairment of assets
At each reporting date the Group reviews the carrying value of its plant,
equipment, intangible assets and goodwill 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 Group makes an assessment of the asset's recoverable amount.
An asset's recoverable amount is the higher of an assets 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
determining fair value less costs of disposal, an appropriate valuation model
is used, 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 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.
The carrying values of plant, equipment, intangible assets and goodwill as at
the reporting date have not been subjected to impairment charges.
Investments in subsidiaries
Investments in subsidiaries are stated in the Company's statement of financial
position at cost less provision for any impairment.
Trade and other receivables
Trade receivables, which generally have 30-to-60-day terms, are measured at
amortised cost. Loss allowances for trade receivables are measured at an
amount equal to a lifetime expected credit loss ("ECL"). Lifetime ECLs are the
ECLs that result from all possible default events over the expected life of
the receivables. ECLs are a probability weighted estimate of credit losses.
Credit losses are measured as the present value of all cash shortfalls. The
gross carrying amount of trade receivables are written off to the extent that
there is no realistic prospect of recovery.
Cash, cash equivalents and short-term investments and cash on deposit
Cash and cash equivalents comprise cash at hand and deposits with maturities
of three months or less. Short-term investments and cash on deposit comprise
deposits with maturities of more than three months, but no greater than 12
months.
Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised
at fair value. They are subsequently measured at amortised cost using the
effective interest rate method.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and 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.
The expense relating to any provision is presented in the consolidated
statement of comprehensive income, net of any expected reimbursement, but only
where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risk specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as a
finance cost.
There were no provisions at 31 July 2023 (2022: £nil).
Financial instruments
i) Recognition and initial measurement
At the year end, the Group had no financial assets or liabilities designated
at fair value through the consolidated statement of comprehensive income
(2022: £nil).
Trade receivables and debt securities are initially recognised when they are
originated. All other financial assets and liabilities are initially
recognised when the Group becomes a party to the contractual provisions in the
instrument.
A financial asset (unless it is a trade receivable without a significant
financing component) or a financial liability is initially measured at fair
value plus, for items not measured at fair value through profit and loss
("FVTPL"), transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing component is
measured at the transaction price.
ii) Classification and subsequent measurement
Financial assets
On initial recognition a financial instrument is classified as measured at:
amortised cost, fair value through other comprehensive income ("FVOCI") or
FVTPL. Financial assets are not reclassified subsequent to their initial
recognition unless the Group changes its business model for managing financial
assets.
A financial asset is measured at amortised cost if it meets both the following
conditions and is not designated as FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on a specified date to cash
flows that are solely the payment of principal and interest on the principal
outstanding.
On initial recognition of an equity investment that is not held for trading
the Group may irrevocably elect to present subsequent changes in the
investment's fair value in OCI. This election is made on an
investment-by-investment basis.
Financial assets at amortised cost are subsequently measured at amortised cost
using the effective interest method. The amortised cost is reduced by
impairment losses.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A
financial liability is classified as FVTPL if it is held-for-trading, it is a
derivative or it is designated as such on initial recognition. Other financial
liabilities are subsequently measured at amortised cost using the effective
interest method. Interest expense is recognised in profit or loss.
At the year end, the Group had no financial assets or liabilities designated
at FVOCI (2022: £nil).
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.
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 Group's estimate of shares that will
eventually vest. Fair value is measured using a suitable option pricing model.
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 a 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.
Warrant reserve
It was determined that the warrants constitute equity on a basis that these
must be settled exchanging a fixed amount of cash for a fixed number of equity
instruments. Proceeds from issuance of warrants, net of issue costs are
included in the warrant reserve. The warrant reserve is distributable and will
be transferred to retained reserves upon exercise or lapse of warrants.
Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the Group in an independently
administered fund. The amounts charged against profits represent the
contributions payable to the scheme in respect of the accounting period.
New accounting standards and interpretations
A number of new standards, amendments to standards and interpretations have
been endorsed by the UK and are effective for annual periods commencing on or
after 1 January 2023 or ending 31 July 2024 or thereafter and have not been
applied in preparing these consolidated financial statements and those are
summarised below. None of these are expected to have a significant effect on
the consolidated financial statements of the Group in the period of initial
application.
The following standards and interpretations have an effective date after the
date of these financial statements.
UK effective date
Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction (Amendments to IAS 12)
Definition of Accounting Estimates (Amendments to IAS 8) 1 January 2023
Disclosure of Accounting policies (Amendments to IAS 1 and IFRS Practice 1 January 2023
Statement 2)
IFRS 17 Insurance Contracts 1 January 2023
Amendments to IAS 1 Presentation of Financial Statements 1 January 2024
International Tax Reform-Pillar Two Model Rules (Amendments to IAS 12) 1 January 2023
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) 1 January 2024
Research partnerships
The costs and revenues related to research partnerships are shared between the
parties in accordance with the terms of the agreement.
4. Segmental information
The Group operated as one single operating segment for the current and prior
financial years. This is the level at which operating results are reviewed by
the Chief Operating Decision Market (considered to be the Board of Directors)
to assess performance and make strategic decisions about the allocation of
resources.
Revenue from contracts with customers
2023 2022
£000 £000
Revenue recognised at a point in time
- Right-to-use licence revenue 1,652 -
- Milestone revenue - 2,555
Revenue recognised over time
- Research services revenue 42 144
- Consultancy services 16 -
Total revenue 1,710 2,699
Revenue in the current period is generated from the contracts with Sanofi and
AstraZeneca.
The revenue from the right-to-use licence agreement with AstraZeneca was
recognised at a single point in time when transfer of intellectual property
was completed. The revenue from provision of consulting and technical support
services under the same agreement was recognised over time when the services
were provided.
The revenue attributed to the delivery of research services was generated from
the contract with Sanofi and is recognised over time. The progress is measured
based on costs incurred to date as compared with the total projected costs for
both the current and prior periods.
In the prior period, the milestone revenue from the contract with Sanofi was
determined to have one performance obligation and was recognised at a point in
time. The revenue attributed to the delivery of research services was
recognised on the same basis as in the current period.
Contract balances
Receivable balances in respect of contracts with customers are as follows:
2023 2022
£000 £000
Trade receivables - 2,555
Contract liabilities represent the Group's obligation to provide services to a
customer for which consideration has been invoiced. Contract liabilities are
included within deferred revenue on the Consolidated Statement of Financial
Position:
2023 2022
£000 £000
Deferred revenue - short term 207 250
Deferred revenue - long term - -
Total deferred revenue 207 250
Remaining performance obligations under the contract with Sanofi represent the
value of partially satisfied performance obligations within contracts with an
original expected contract term that is greater than one year and for which
fulfilment of the contract has started as of the end of the reporting period.
The total remaining consideration allocated to remaining performance
obligations at 31 July 2023 was £207,000 (2022: £250,000). The Group expects
to recognise the remaining performance obligations as revenue and will do so
based upon costs incurred to date as compared with the total projected costs.
Less than 1 year Greater than 1 year Total
£000 £000 £000
Remaining performance obligations 207 - 207
Impairment losses recognised on receivables arising from contracts with
customers are £nil (2022: £nil).
Typical payment terms are 60 days after the occurrence of the relevant
milestone.
5. Operating loss
31 July 2023 31 July 2022
The Group £000 £000
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment (see note 10) 26 23
Depreciation on right-of-use assets (see note 10) 305 212
Amortisation of intangible assets (see note 11) 7 8
Foreign exchange (gains)/losses 154 149
Research and development expense* 10,894 9,426
Auditor's remuneration
Audit services:
-Fees payable to Company auditor for the audit of the parent and the 220 200
consolidated accounts
Fees payable in respect of the audit of subsidiary companies:
-Auditing the accounts of subsidiaries pursuant to legislation 60 50
-Other services 23 9
Total auditor's remuneration 303 259
*Included within research and development expense are staff costs totalling
£3,480,085 (2022: £2,734,000) also included in note 6.
6. Staff costs and numbers
31 July 2023 31 July 2022
£000 £000
Wages and salaries 4,262 3,445
Social security costs 542 430
Pension contributions 614 524
Share-based payments 425 309
5,843 4,708
Directors' remuneration (including benefits-in-kind) included in the aggregate
remuneration above comprised:
Emoluments for qualifying services 904 807
Directors' emoluments (excluding social security costs but including benefits
in kind) disclosed above include £242,000 paid to the highest paid Director
(2022: £204,000).
Retirement benefits are accruing to six Directors (2022: seven Directors).
The average number of employees during the year (including Directors) was as
follows:
31 July 2023 31 July 2022
The Group Number Number
Directors 8 8
Technological staff 34 32
Administrative staff 7 8
49 48
Additional information on the emoluments and compensation, including cash or
non-cash benefits, of the Directors, together with information regarding the
share options of the Directors, and details of contributions paid to a pension
scheme on their behalf, is included within Tables 1 and 2 on page 41, which
forms part of these audited financial statements.
7. Finance income and costs
31 July 2023 31 July 2022
The Group £000 £000
Finance income
Bank interest receivable 22 -
22 -
Finance costs
Interest on lease liabilities 24 12
24 12
8. Income tax
The tax credit is made up as follows:
31 July 2023 31 July 2022
The Group £000 £000
Current income tax
Research and development income tax credit receivable (2,305) (2,365)
Adjustment in respect of prior years - (9)
(2,3205) (2,374)
Deferred tax
Charge for the year - -
Total income tax credit (2,305) (2,374)
The tax assessed for the year varies from the standard rate of corporation tax
as explained below:
31 July 2023 31 July 2022
The Group £000 £000
Loss before taxation (13,416) (10,534)
Tax at average effective rate of 21.00% (2022: 19.00%) (2,817) (2,001)
Effects of:
Additional deduction for research and development expenditure under SME scheme (1,984) (1,752)
Surrender of research and development relief for receivable tax credit under 3,752 3,099
SME scheme
Research and development tax credit receivable under SME scheme (2,305) (2,365)
Tax losses carried forward for which no deferred tax asset is recognised 955 590
Non-deductible expenses 1 -
Capital allowances in excess of deprecation and share based payment charges 93 64
carried forward for which no deferred tax asset is recognised
Adjustment in respect of prior years - (9)
Tax credit in income statement (2,305) (2,374)
The government enacted a change in the main corporation tax rate from 19% to
25% from 1 April 2023. The tax rate of 21% used above is therefore the average
corporation tax rate applicable in the United Kingdom.
The Group qualifies for HMRC's SME R&D tax relief scheme which for the
current and prior year allows it to deduct an extra 130% (to 31 March 2023) /
86% (from 1 April 2023) of its qualifying costs against its tax position. As
the group is loss making it has elected to claim a receivable tax credit under
the scheme of £2,305,000 instead of carrying forward the research and
development relief as additional tax losses. These adjustments are included in
the tax reconciliation.
The Group has accumulated losses available to carry forward against future
trading profits. The estimated value of the deferred tax asset, measured at a
standard rate of 25% (2022: 25%), is £6,270,000 (2022: £5,107,000), of which
£nil (2022: £nil) has been recognised. Tax losses have not been recognised
as an asset as it is not yet probable that future taxable profits will be
available against which the unused tax losses can be utilised.
The Group also has a deferred tax liability being accelerated capital
allowances, for which the tax, measured at a standard rate of 25% (2022: 25%)
is £9,000 (2022: £12,000).
The Group has a deferred tax asset for share-based payments, for which the
tax, measured at a standard rate of 25% (2022: 25%), is £492,000 (2022:
£386,000).
The net deferred tax asset of £483,000 (2022: £374,000) has not been
recognised as it is not yet probable that future taxable profits will be
available against which the unused tax losses can be utilised.
9. Earnings per share
31 July 2023 31 July 2022
The Group £000 £000
Loss for the financial year attributable to equity shareholders (11,111) (8,160)
Weighted average number of shares
Ordinary shares in issue for purposes of basic EPS 251,102,072 228,675,845
Effect of potentially dilutive ordinary shares:
Number of share options and warrants 855,664 12,231,972
Ordinary share in issue for purposes of diluted EPS 251,957,736 240,907,817
Basic loss per share (pence) (4.42) (3.57)
Diluted loss per share (pence) (4.42) (3.57)
The number of exercisable share options and warrants above are those deemed to
be potentially dilutive in nature as their exercise price is less than the
average share price for the period. As the group made a loss in the current
and comparative period the effects of these potential ordinary shares are not
dilutive.
10. Tangible fixed assets
Office equipment, fixtures and fittings Building improvements Right-of-use assets Total
The Group £000 £000 £000 £000
Cost
At 31 July 2021 252 38 548 838
Additions 37 - 542 579
Disposals (11) - - (11)
At 31 July 2022 278 38 1,090 1,406
Additions 18 - - 18
Disposals (14) - (253) (267)
As at 31 July 2023 282 38 837 1,157
Depreciation
At 31 July 2021 219 38 171 428
Provided during the year 23 - 212 235
Eliminated on disposal (11) - - (11)
At 31 July 2022 231 38 383 652
Provided during the year 26 - 305 331
Eliminated on disposal (14) - (253) (267)
As at 31 July 2023 243 38 435 716
Net book value
As at 31 July 2023 39 - 402 441
At 31 July 2022 47 - 707 754
The Company has no tangible fixed assets.
The Group recognises right-of-use assets with respect to its property leases.
11. Intangible assets
Patents IP assets Software Total
The Group £000 £000 £000 £000
Cost
At 31 July 2021 138 600 50 788
Additions - - - -
At 31 July 2022 138 600 50 788
Additions - - - -
As at 31 July 2023 138 600 50 788
Amortisation
At 31 July 2021 69 600 50 719
Provided during the year 8 - - 8
At 31 July 2022 77 600 50 727
Provided during the year 7 - - 7
As at 31 July 2023 84 600 50 734
Net book value
As at 31 July 2023 54 - - 54
At 31 July 2022 61 - - 61
Patents are amortised on a straight-line basis over 20 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.
IP assets and software are amortised on a straight-line basis over five years.
Amortisation provided during the period is recognised in administrative
expenses.
For impairment reviews see note 12.
The Company has no intangible assets.
12. Goodwill
Purchased goodwill Total
The Group £000 £000
Cost
At 31 July 2021, 31 July 2022 & 31 July 2023 1,192 1,192
Impairment
At 31 July 2021 - -
Provided during the year - -
At 31 July 2022 - -
Provided during the year - -
As at 31 July 2023 - -
Net book value
As at 31 July 2023 1,192 1,192
At 31 July 2022 1,192 1,192
The Group has determined that for the purposes of goodwill and other
intangibles (see note 11) impairment testing, the UK Operations represents the
lowest level within the entity that goodwill and other intangibles are
monitored for internal management purposes. This is consistent with the one
operating segment analysis within Note 4. Therefore, the Group only has one
cash-generating unit ("CGU").
Management assesses goodwill and other intangibles for impairment annually at
the year-end date.
For both the current and prior year, impairment reviews were performed by
comparing the carrying value of the cash-generating unit with their
recoverable amount.
The recoverable amount of the cash-generating units has been determined based
on their fair value less costs to disposal. As there is only one CGU, the
Group has determined its market capitalisation at the year-end date to be a
good basis in determining the value of the underlying CGU. The market
capitalisation at the year-end date was £51 million (2022: £61m).
The assessment by the Board determined that the recoverable amount of the CGU
exceeded their carrying value, and therefore no impairment was required.
(2022: no impairment)
The Directors are satisfied that no reasonably possible change in this
estimate would result in the recognition of an impairment within the next
twelve months and accordingly the carrying value of goodwill and other
intangibles are not considered a significant estimate as at 31 July 2023.
The Company has no goodwill.
13. Investment in and loans to subsidiaries
Investment in subsidiary Loans to group undertakings Total
The Company £000 £000 £000
Cost
At 31 July 2022 3,385 56,798 60,183
Additions 425 5,408 5,833
As at 31 July 2023 3,810 62,206 66,016
Provision
At 31 July 2022 - - -
Provided during the year 3,810 - 3,810
As at 31 July 2023 3,810 - 3,810
Net book value
As at 31 July 2023 - 62,206 62,206
At 31 July 2022 3,385 56,798 60,183
By subsidiary
C4X Discovery Limited 62,206
C4X Drug Discovery Limited -
Adorial Limited -
As at 31 July 2023 62,206
Subsidiary undertakings Country of incorporation Principal activity Class of 31 July
shares held 2022
C4X Discovery Limited* England and Wales Research and development 100%
Ordinary
C4X Drug Discovery Limited** England and Wales Dormant company 100%
Ordinary
Adorial Limited* England and Wales Dormant company Ordinary 100%
Adorial Technologies Limited* England and Wales Dormant company Ordinary 100%
Adorial Pharma Limited* England and Wales Dormant company 100%
Ordinary
*The registered office address is Manchester One, 53 Portland Street,
Manchester M1 3LD.
**The registered office address is C/O Schofield Sweeney Springfield House, 76
Wellington Street, Leeds, West Yorkshire LS1 2AY.
Investment in subsidiary
The recoverable amount has been determined based on a probability adjusted
value in use cashflow model. An impairment has been recorded of £3,810,000
(2022: £nil) as the recoverable amount has been determined to be below the
carrying value of the investment in the subsidiary. We note that there is high
estimation uncertainty and judgement involved in the preparation of the cash
flow forecast and it is sensitive to changes in key assumptions.
The key assumptions of the value in use model include:
· The discount rate of 17.3% used in the risk-adjusted model is
estimated using pre tax rates that reflect current market assessment of the
time value of money and the risks specific to the CGU. To determine the
appropriate discount rate the CGU's post tax weighted average cost of capital
is adjusted to reflect the risk already factored into the probabilities but
reflecting other inherent risks in the cash flows for example in relation to
uncertainty in the timing of projected cashflows. The recoverable amount of
the investment was determined based on a probability adjusted value in use
cashflow model. For the year ending 31 July 2022, the recoverable amount was
determined based on a value in use model using a single set of cash flows. As
such the discount rate used in the prior year is not directly comparable.
· The probabilities of success at each stage of the drug discovery
programme, which are derived from industry standards with reference to life
science valuation consultancy publications and proprietary intelligence data
providers' analysis. These do not account for variations in target, modality,
disease area or partners expertise
· Only the potential progression of partnered programmes, one of
the two most advanced programmes and a minimal early portfolio are modelled.
· Later stage milestones, including sales and royalties, are
excluded from the model.
· The timing and quantum of the cash inflows relating to partnering
agreements and milestone payments are modelled on basis of existing licenses.
Loans to group undertakings
There are no formal terms for the repayment of inter-company loans, none of
which bear interest and all of which are repayable on demand however the
Directors do not expect this amount to be settled within the next 12 months
therefore have classified this as a non-current receivable.
The recoverable amount of loans to subsidiaries is determined by using an
expected credit loss model which takes into account the probability of
default, the exposure at default and the loss given default at the year end.
The company defines default in this context as the performance of the
subsidiary against its business plan and forecasts and progress of pipeline
programmes towards commercialisation.
The Company does not expect this amount to be recalled within the next 12
months. The Company has considered how it expects to recover the loan
receivable and the recovery period of the loan in calculating the expected
credit loss.
The Company has assessed the expected credit loss by looking at the future
cashflows of the subsidiary in order to determine the loss given default. As
the loan is held at 0% interest, the effective rate of return (ERR) is deemed
to be 0%.
The potential recoverable amount has been determined based on probability
weighted cashflow model. These calculations require the use of estimates in
arriving at the expected future cash flows. Cash flow estimates include
signing future licence agreements and the receipt of further milestone licence
payments, the timing of which are uncertain. These estimates were benchmarked
against the Group's own experience of such deals and external sources of
information within the industry.
The key judgement made by management in the expected credit loss calculations
is the definition of default, and the probability assumptions of the future
cashflows and the timing of the cashflows in determining the loss given
default. The ECL provision is £immaterial (2022: £immaterial) as the loss
given default is low given the probability weighted cashflows show sufficient
headroom when compared with the total value of the loan. Failure of 3 of the 7
forecast programmes in FY24 would lead to an increase in the ECL provision of
£1.8m.
14. Trade and other receivables
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
£000 £000 £000 £000
Trade receivables 31 - 2,524 -
Prepayments 401 - 398 -
Other receivables 7 - - -
VAT receivables 133 - 147 -
572 - 3,069 -
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value. There is £immaterial (2022: £immaterial)
expected credit loss against other receivables.
There were no revenue-related contract assets (2022: £nil).
Trade receivables are denominated in the following currency:
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
£000 £000 £000 £000
Sterling 31 - 5 -
Euros - - 2,519 -
31 - 2,524 -
The ageing analysis of trade receivables was as follows:
Not Yet Due Due <30 days overdue >30 days overdue Total
£000 £000 £000 £000 £000
As at 31 July 2023 28 3 - - 31
At 31 July 2022 - 2,524 - - 2,524
15. Income tax asset
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
£000 £000 £000 £000
Research and development income tax credit receivable 2,305 - 4,427 -
2,305 - 4,427 -
16. Cash, cash equivalents and deposits
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
£000 £000 £000 £000
Cash and cash equivalents 4,220 - 5,079 -
4,220 - 5,079 -
Cash and cash equivalents at 31 July 2023 include deposits with original
maturity of three months or less of £nil (2022: £nil).
An analysis of cash, cash equivalents and deposits by denominated currency is
given in note 27.
17. Trade and other payables
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
£000 £000 £000 £000
Current Liabilities
Current payables 785 - 949 -
Other payables 185 - 179 6
Deferred revenue 207 - 250 -
Accruals 651 - 671 -
1,828 - 2,049 6
Revenue-related contract liabilities are recognised as deferred revenue and
allocated to the time period in which they are estimated to be recognised as
revenue. Deferred revenue recognised in the year ending 31 July 2023 was
£207,000 (2022: £250,000).
18. Lease liabilities
31 July 2023 31 July 2023 31 July 2022 31 July 2022
Group Company Group Company
£000 £000 £000 £000
Current Liabilities
Lease liabilities 337 - 305 -
337 - 305 -
Non-Current Liabilities
Lease liabilities 87 - 424 -
87 - 424 -
When measuring lease liabilities for leases that were classified as operating
leases, the Group discounted lease payments using its incremental borrowing
rate at the time the lease is initially recognised. The discount rates used
for calculating the present value of lease liabilities range from 4.25% to
5.25%.
Lease liabilities are deemed to be secured against the right-of-use assets to
which they relate.
£000
2023
Balance at 1 August 2022 729
Cash outflow (329)
New leases -
Interest on lease liabilities 24
As at 31 July 2023 424
£000
2022
Balance at 1 August 2021 404
Cash outflow (229)
New leases 542
Interest on lease liabilities 12
At 31 July 729
2022
19. Issued equity capital
Deferred shares Ordinary shares Share capital Deferred shares Warrant reserve Share premium Total
The Company Number Number £000 £000 £000 £000 £000
Allotted, called up and fully paid ordinary shares of 1p
At 31 July 2021 2,025,000 227,812,697 2,277 2,025 979 53,042 58,324
Issue of share capital on exercise of share options - 319,275 3 - - 15 18
Issue of share capital on exercise of warrants - 1,100,000 11 - (11) 297 297
At 31 July 2022 2,025,000 229,231,972 2,291 2,025 968 53,355 58,639
Issue of share capital on placing - 19,781,200 198 - - 4,460 4,658
Issue of share capital on open offer - 3,000,000 30 - - 720 750
Issue of share capital on exercise of share options - 106,425 1 - - 5 6
As at 31 July 2023 2,025,000 252,119,597 2,520 2,025 968 58,540 64,053
The Group £000 £000 £000 £000 £000
Allotted, called up and fully paid ordinary shares of 1p
At 31 July 2021 2,277 2,025 979 53,042 58,324
Issue of share capital on exercise of share options 3 - - 15 18
Issue of share capital on exercise of warrants 11 - (11) 297 297
At 31 July 2022 2,291 2,025 968 53,355 58,639
Issue of share capital on placing 198 - - 4,460 4,658
Issue of share capital on open offer 30 - - 720 750
Issue of share capital on exercise of share options 1 - - 5 6
As at 31 July 2023 2,520 2,025 968 58,540 64,053
The amounts related to issue of share capital on open offer included in the
table above are stated after deduction of expenses related to placing.
During August 2022 £5.7 million (before expenses) was raised via a placing of
22,781,200 ordinary shares at 25 pence each.
The deferred shares of £1 carry no right to participate in dividends in
respect of any financial year, until these shall have been paid to the holders
of the ordinary shares £1 per ordinary share in respect of the relevant
financial year; subject thereto, the deferred shares and the ordinary shares
shall rank equally in respect of any further dividends in respect of the
relevant financial year as if they constituted one class of share.
20. Share-based payment reserve
The Group £000
At 31 July 2021 1,191
Share-based 352
payments
At 31 July 1,543
2022
Share-based 425
payments
As at 31 July 2023 1,968
The Company £000
At 31 July 1,162
2021
Share-based 352
payments
At 31 July 1,514
2022
Share-based 425
payments
As at 31 July 2023 1,939
The share-based payment reserve accumulates the corresponding credit entry in
respect of share-based payment charges. Movements in the reserve are disclosed
in the consolidated statement of changes in equity.
A charge of £425,000 has been recognised in the statement of comprehensive
income for the year (2022: £352,000).
This includes £45,563 (2022: £46,416) of incremental fair value on
replacement of options.
Share option schemes
The Group operates the following share option schemes all of which are
operated as Enterprise Management Incentive ("EMI") schemes insofar as the
share options being issued meet the EMI criteria as defined by HM Revenue
& Customs. Share options issued that do not meet EMI criteria are issued
as unapproved share options but are subject to the same exercise performance
conditions.
C4X Discovery Holdings plc Long Term Incentive Plan ("LTIP")
Grant in August 2012
Share options were granted to staff on 28 August 2012. The options granted are
exercisable in the event of the listing of the Company, its acquisition or at
the absolute discretion of the Board. The exercise price was set at 5.58 pence
(the original exercise price of £60.00 was adjusted for a subdivision of
1,075 share options in C4X Discovery Holdings plc for each share option
originally held in C4X Discovery Limited), being the estimated fair value of
the shares on the day preceding the issue of the share options. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Grant in July 2013
Share options were granted to staff on 4 July 2013. The options granted are
exercisable in the event of the listing of the Company, its acquisition or at
the absolute discretion of the Board. The exercise price was set at 5.58 pence
(the original exercise price of £60.00 was adjusted for a subdivision of
1,075 share options in C4X Discovery Holdings plc for each share option
originally held in C4X Discovery Limited), being the estimated fair value of
the shares on the day preceding the issue of the share options. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Grant in May 2014
Share options were granted to staff on 27 May 2014. The options granted are
exercisable in the event of the listing of the Company, its acquisition or at
the absolute discretion of the Board. The exercise price was set at 5.58 pence
(the original exercise price of £60.00 was adjusted for a subdivision of
1,075 share options in C4X Discovery Holdings plc for each share option
originally held in C4X Discovery Limited), being the estimated fair value of
the shares on the day preceding the issue of the share options. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Grant in November 2019
Share options were granted to staff and Directors on 29 November 2019 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price was set at
16.2 pence, being the average five-day volume weighted average price of the
ordinary shares to 29 November 2019. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in December 2019
Share options were granted to staff on 1 December 2019 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 42.0
pence, based on the last 200-day moving average prior to 1 December 2019. The
fair value benefit is measured using a Black Scholes model, taking into
account the terms and conditions upon which the share options were issued.
Grant in February 2020
Share options were granted to staff on 10 February 2020 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 27.8
pence, based on the last 200 day moving average prior to 10 February 2020. The
fair value benefit is measured using a Black Scholes model, taking into
account the terms and conditions upon which the share options were issued.
Grant in June 2020
Share options were granted to staff on 2 June 2020 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 15.5 pence,
based on the last 200 day moving average prior to 2 June 2020. The fair value
benefit is measured using a Black Scholes model, taking into account the terms
and conditions upon which the share options were issued.
Cancellation and regrant of existing options in July 2020
A number of unvested share options were cancelled and reissued to staff and
Directors on 28 July 2020. The regrant brings the strike price of the share
options into line with the current market price of the Company's shares and
should now deliver a viable incentive and reward package to the employees and
Directors of the Company. The regrant options have an exercise price of 16
pence, being the closing price of the Ordinary Shares on 28 July 2020. The
options can be exercised at any time between three years and 10 years of them
being granted. The fair value benefit is measured using a Black Scholes model,
taking into account the terms and conditions upon which the share options were
issued.
The Group designated the new equity instruments as replacements for the
cancelled equity instruments and as such, modification accounting has been
applied. As the new options have an increased fair value compared to the
previous awards, the incremental fair value of £154,571 is recognised over
the modified three-year vesting period, in addition to the amount recognised
based on the grant date fair value of the original instruments, which
continues to be recognised over the remainder of the original vesting period.
The charge in the current year on the new options amounted to £46,416 (2022:
£46,342).
Grant in December 2020
Share options were granted to staff and Directors on 14 December 2020 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price was set at
20.0 pence, being the average five-day volume weighted average price of the
ordinary shares to 11 December 2020. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in May 2021
Share options were granted to staff on 05 May 2021 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 41.34 pence,
being the average five-day volume weighted average price of the ordinary
shares to 05 May 2021. The fair value benefit is measured using a Black
Scholes model, taking into account the terms and conditions upon which the
share options were issued.
Grant in September 2021
Share options were granted to staff on 16 September 2021 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 32
pence, being the average five-day volume weighted average price of the
ordinary shares to 16 September 2021. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in February 2022
Share options were granted to staff and directors on 01 February 2022 pursuant
to the EMI 2014 Plan. The options granted are exercisable, at any time between
three years and 10 years of them being granted. The exercise price was set at
36 pence, being the average five-day volume weighted average price of the
ordinary shares to 1 February 2022. The fair value benefit is measured using a
Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in May 2022
Share options were granted to staff on 03 May 2022 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 32.8 pence,
being the average five-day volume weighted average price of the ordinary
shares to 03 May 2022. The fair value benefit is measured using a Black
Scholes model, taking into account the terms and conditions upon which the
share options were issued.
Grant in December 2022
Share options were granted to staff on 15 December 2022 pursuant to the EMI
2014 Plan. The options granted are exercisable, at any time between three
years and 10 years of them being granted. The exercise price was set at 21.122
pence, being the average five-day volume weighted average price of the
ordinary shares to 15 December 2022. The fair value benefit is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the share options were issued.
Grant in January 2023
Share options were granted to staff on 9 January 2023 pursuant to the EMI 2014
Plan. The options granted are exercisable, at any time between three years and
10 years of them being granted. The exercise price was set at 17.58 pence,
being the average five-day volume weighted average price of the ordinary
shares to 9 January 2023. The fair value benefit is measured using a Black
Scholes model, taking into account the terms and conditions upon which the
share options were issued.
Share options are awarded to management and key staff as a mechanism for
attracting and retaining key members of staff. The options are granted at no
lower than either: (i) market price on the day preceding grant; or (ii) in the
event of abnormal price movements at an average market price for the week
preceding grant date. Options may be granted at prices higher than the market
price on the day preceding grant where the Board believes it is appropriate to
do so. These options vest over a three-year period from the date of grant and
are exercisable until the tenth anniversary of the award. Exercise of the
award is subject to the employee remaining a full-time member of staff at the
point of exercise. The fair value benefit is measured using a Black Scholes
valuation model, taking into account the terms and conditions upon which the
share options were issued.
The following tables illustrate the number and weighted average exercise
prices of, and movements in, share options during the year.
2023 2022
The Group and Company Number Number
Outstanding at 1 August 12,875,898 9,937,747
Granted during the year 156,750 3,824,000
Exercised during the year - (425,700)
Forfeited during the year (105,000) (460,149)
Lapsed/cancelled - -
Outstanding at 31 July 12,927,648 12,875,898
Exercisable at 31 July 5,455,676 161,250
During the year ended 31 July 2023, no options were exercised (2022: 425,700
exercised).
Weighted average exercise price of options
2023 2022
The Group and Company Pence Pence
Outstanding at 1 August 25.55 18.61
Granted during the year 20.41 35.86
Exercised during the year - 5.58
Forfeited during the year 25.14 25.13
Lapsed/cancelled during the year - -
Outstanding at 31 July 23.87 25.55
A total of 156,750 share options were granted during the year (2022:
3,824,000). The range of exercise prices for options outstanding at the end of
the year was 5.58 pence - 42.00 pence (2022: 5.58 pence - 42.00 pence).
For the share options outstanding as at 31 July 2023, the weighted average
remaining contractual life is 7.3 years (2022: 8.3 years).
The following table lists the inputs to the models used for the years ended 31
July 2023 and 31 July 2022.
The Group and Company 2023 2022
Expected volatility (%) 52.5% - 72.86% 52.5% - 71.5%
Risk-free interest rate (%) 0.35%-3.46% 0.35%-1.78%
Expected life of options (year's average) 3 years - 6.5 years 3 years - 6.5 years
Weighted average exercise price (pence) n/a n/a
Weighted average share price at date of grant (pence) 20.41 35.86
The expected life of the options is based on historical data and is not
necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual
outcome.
No other features of options granted were incorporated into the measurement of
fair value.
21. Warrant reserve
The Group and Company £000
At 31 July 979
2021
Warrant -
premium
Exercise of warrants (11)
At 31 July 968
2022
Warrant -
premium
Exercise of warrants -
As at 31 July 2023 968
The warrants are exercisable at 28p (2022: 28p) per ordinary share and are to
be exercised within 5 years of being issued.
During the year no warrants were exercised (2022: 1,100,000).
The following tables illustrate the number and movements in, warrants during
the year.
2023 2022
The Group and Company Number Number
Outstanding at 1 August 96,790,716 97,890,716
Granted during the year - -
Exercised during the year - (1,100,000)
Lapsed/cancelled - -
Outstanding at 31 July 96,790,716 96,790,716
Exercisable at 31 July 96,790,716 96,790,716
22. Merger reserve
The Group £000
At 31 July 2021, 31 July 2022 & 31 July 2023 920
The merger reserve arises as a result of the reverse acquisition requirements
of IFRS 3 meaning the consolidated accounts are presented as a continuation of
the C4X Discovery Limited accounts along with the share capital structure of
the legal parent company (C4X Discovery Holdings plc).
23. Capital contribution reserve
The Group £000
At 31 July 2021, 31 July 2022 & 31 July 2023 195
24. Retained earnings
The Group £000
At 31 July (41,344)
2021
Loss for the year (8,160)
Warrant reserve movement 11
At 31 July (49,493)
2022
Loss for the year (11,111)
Warrant reserve movement -
As at 31 July 2023 (60,604)
The Company £000
At 31 July 13
2021
Loss for the year -
Warrant reserve movement 11
At 31 July 24
2022
Loss for the year (3,810)
Warrant reserve movement -
As at 31 July 2023 (3,786)
25. Leases
Leases as lessee (IFRS16)
The Group leases premises under non-cancellable operating lease agreements.
Right‑of‑use assets related to leased properties that do not meet the
definition of investment property are presented as property, plant and
equipment (note 10).
Land and
Buildings Total
Group Group
£000 £000
2023
Balance at 1 August 2022 707 707
Depreciation charge for the year (305) (305)
Additions to right-of-use assets - -
Derecognition of right-of-use assets (253) (253)
Depreciation eliminated on derecognition of right-of-use assets 253 253
402 402
2022
Balance at 1 August 2021 377 377
Depreciation charge for the year (212) (212)
Additions to right-of-use assets 542 542
Derecognition of right-of-use assets - -
Depreciation eliminated on derecognition of right-of-use assets - -
707 707
Amounts recognised in income statement
31 July 2023
Interest on lease liabilities 24 24
24 24
31 July 2022
Interest on lease liabilities 12 12
12 12
Amounts recognised in statement of cash flows
31 July 2023
Lease payments 329 329
329 329
31 July 2022
Lease payments 229 229
229 229
26. Commitments
At 31 July 2023, the Group had capital commitments amounting to £nil in
respect of orders placed for capital expenditure (2022: £nil).
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 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 Group 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 retained
earnings as disclosed in notes 19 to 24 and in the Group statement of changes
in equity.
Total equity was £6,532,000 at 31 July 2023 (£11,804,000 at 31 July 2022).
The Group 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.
At the reporting date the Group was cash positive with no outstanding
borrowings.
Categorisation of financial instruments
Loans and receivables Financial liabilities at amortised cost Group Company
Financial assets/(liabilities) £000 £000 £000 £000
31 July 2023
Trade receivables 31 - 31 -
Inter-company loan to subsidiary - - - 62,206
Cash, cash equivalents and deposits 4,220 - 4,220 -
Trade and other payables* - (970) (970) -
Lease liabilities - (424) (424) -
4,251 (1,394) 2,857 62,206
31 July 2022
Trade receivables 2,524 - 2,524 -
Inter-company loan to subsidiary - - - 56,798
Cash, cash equivalents and deposits 5,079 - 5,079 -
Trade and other payables* - (1,128) (1,128) -
Lease liabilities - (729) (729) -
7,603 (1,857) 5,746 56,798
*Excluding accruals and deferred revenue.
The values disclosed in the above table are carrying values. The Board
considers that the carrying amount of financial assets and liabilities
approximates to their fair value.
The main risks arising from the Group's financial instruments are credit risk
and foreign currency risk. The Board of Directors reviews and agrees policies
for managing each of these risks which are summarised below.
Credit risk
The Group's principal financial assets are cash, cash equivalents and
deposits. The Group seeks to limit the level of credit risk on the cash
balances by only depositing surplus liquid funds with multiple counterparty
banks that have investment grade credit ratings.
The Group trades only with recognised, creditworthy third parties. Receivable
balances are monitored on an ongoing basis with the result that the Group's
exposure to bad debts is not significant. The Group's maximum exposure is the
carrying amount of trade receivables as disclosed in note 14, which was
neither past due nor impaired. All trade receivables are ultimately overseen
by the Chief Executive Officer and are managed on a day-to-day basis by the
finance team. Credit limits are set as deemed appropriate for the customer.
The maximum exposure to credit risk in relation to cash, cash equivalents and
deposits is the carrying value at the balance sheet date.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are
denominated in a currency other than the respective functional currency of the
Company and its subsidiaries. Other than Pounds Sterling (GBP), the currencies
that sales and purchases most often arise in are US Dollars (USD) and Euros
(EUR). Transactions in other foreign currencies are limited.
The Group may use forward exchange contracts as an economic hedge against
currency risk, where cash flow 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 and
the Group did not enter into any such contracts during 2023 or 2022.
The split of Group assets between Sterling and other currencies at the
year-end is analysed as follows:
GBP USD EUR 2023 Total GBP USD EUR 2022 Total
The Group £000 £000 £000 £000 £000 £000 £000 £000
Cash, cash equivalents and deposits 2,689 92 1,439 4,220 764 75 4,240 5,079
Trade receivables 31 - - 31 5 - 2,519 2,524
Trade and other payables (785) (155) (30) (970) (905) (162) (61) (1,128)
1,935 (63) 1,409 3,281 (136) (87) 6,698 6,475
Sensitivity analysis to movement in exchange rates
A reasonably possible strengthening (weakening) of the Euro or US Dollar
against Sterling at 31 July would have affected the measurement of financial
instruments denominated in a foreign currency and affected equity and profit
or loss by the amounts shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant and ignores any
impact of forecast sales and purchases.
Profit or loss Equity
Strengthening Weakening Strengthening Weakening
£000 £000 £000 £000
31 July 2023
EUR (10% movement) 157 (128) 157 (128)
USD (10% movement) (7) 6 (7) 6
31 July 2022
EUR (10% movement) 744 (601) 744 (601)
USD (10% movement) (10) 8 (10) 8
Interest rate risk
As the Group has no borrowings the risk is limited to the reduction of
interest received on cash surpluses held at bank which receive a floating rate
of interest. The principal impact to the Group is the result of
interest-bearing cash and cash equivalent balances held as set out below:
31-Jul-23 31-Jul-22
Fixed rate Floating rate Total Fixed rate Floating rate Total
The Group £000 £000 £000 £000 £000 £000
Cash, cash equivalents and deposits - 4,220 4,220 - 5,079 5,079
The Company
Cash, cash equivalents and deposits - - - - - -
As the majority of cash and cash equivalents are held on floating deposit and
the overall level of interest rates is low, the exposure to interest rate
movements is immaterial.
Maturity profile
Set out below is the maturity profile of the Group's financial liabilities at
31 July 2023 based on contractual undiscounted payments including contractual
interest.
Less than One to five Total
one year years
2023 £000 £000 £000
Financial liabilities
Trade and other payables * 970 - 970
Lease liabilities 337 87 424
1,307 87 1,394
2022
Financial liabilities
Trade and other payables * 1,128 - 1,128
Lease liabilities 305 424 729
1,433 424 1,857
*Excluding accruals and deferred revenue. Trade and other payables are due
within three months.
The Directors consider that the carrying amount of the financial liabilities
approximates to their fair value.
As all financial assets are expected to mature within the next 12 months an
aged analysis of financial assets has not been presented.
28. Related party transactions
During the year there were no subscriptions by Directors for ordinary shares
(2022: no subscriptions).
During the year, The Aquarius IV Fund LLP, a fund managed by shareholder
Aquarius Equity Partners Limited, held 2,025,000 deferred shares of £1 each
(2022: £2,025,000).
The Group
There were no sales to, purchases from or, at the year end, balances with any
related party.
The Company
C4X Discovery Holdings plc holds loans due > 1 year from its subsidiary
undertaking C4X Discovery Limited of £62.2 million (2022: £56.8m). No
repayments have been made in the year (2022: none).
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 12 months.
None of the loans are interest bearing.
There are no short term loans owed to C4X Discovery Holdings plc (2022: none).
29. Compensation of key management personnel (including Directors)
2023 2022
£000 £000
Short-term employee benefits 1,667 1,331
Pension costs 222 165
Benefits in kind 12 3
Share-based payments 171 128
2,072 1,627
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