REG - IXICO plc - Financial Results for the year ended 30 Sept 2021
07/12/2021 07:00
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RNS Number : 7524U IXICO plc 07 December 2021
IXICO plc
("IXICO", "the Company" or "the Group")
Financial Results for the year ended 30 September 2021
Notice of AGM
>30% profitability growth despite a challenging business year
Strong cash position and enhanced balance sheet
IXICO plc (AIM: IXI), the AI data analytics company delivering insights in
neuroscience, announces its results for the year ended 30 September 2021,
delivering a year of significant growth in profitability despite notable
headwinds to trading.
Highlights
Financial
· EBITDA* of £1.7 million; 34% increase on prior year (2020: £1.3
million) reflecting solid revenue performance in a challenging trading
environment, careful management of discretionary costs and positive one-time
impacts;
· £9.2 million of revenues (2020: £9.5 million); despite full
year of COVID-19 and revenue being adversely impacted by largest client's
decision to descope its Huntington's disease (HD) Phase III trials;
· Gross margin of 65.6% (2020: 66.6%) reflects sustained strong
margin achievement.
· Operating profit of £1.2 million (2020: £0.9 million);
· Profit per share of 3.30 pence (2020: 2.02 pence);
· Closing cash of £6.7 million (2020: £7.9 million),
incorporating long-term technology investments of £2.2 million (2020: £1.1
million);
· Contracted order book of £18.8 million (2020: £21.7 million)
net of £7.1 million descope of Phase III HD trials in the year; and
· Net assets increase to £11.2 million (2020: £9.1 million)
reflecting strengthened working capital and capitalised investments.
*Earnings before interest, tax, depreciation, and amortisation
Commercial and Operational
· 16 new projects won across 14 clients, 9 of whom are new to
IXICO;
· Equates to £13.8 million of additional multi-year contracts
across all phases of clinical development thereby substantially replenishing
the contracted order book;
· Further strengthened our partnership with the Global Alzheimer's
Platform ('GAP') in their Bio-Hermes program. Sponsors of the study include,
Lilly, AbbVie, Merck, Biogen, Gates Ventures and the Alzheimer's Drug
Discovery Foundation;
· Partnership with Microsoft to support significant investment in
our Azure cloud-based next generation TrialTracker platform to provide
scalable cutting-edge technology underpinning IXICO's proprietary analytics
offering; and
· Appointment of Romina Oxborough as SVP Operations in September
2021, bringing over 20 years of senior clinical trials experience to the
Group, further strengthening our focus on client satisfaction and operational
scale up.
Giulio Cerroni, CEO of IXICO, said: "2021 has been another significant year in
IXICO's development as a premium imaging technology services partner to the
global biopharmaceutical industry. I look back with immense pride on how we
have continued to progress our societal purpose of supporting our clients'
efforts to develop new therapies across a widening range of neurodegenerative
conditions. In delivering strong revenues at continued high gross profit
margins and a record level of EBITDA profitability, we have once again
demonstrated the resilience and value generating potential of our business
model.
The FDA's approval of Aducanumab highlights the importance, and potential
commercial value, of being able to objectively measure small changes in brain
regions when developing drugs to address complex neurological conditions.
IXICO is perfectly placed to support this requirement with our well
established, proprietary imaging data analytics capabilities. This, alongside
our strategy to diversify and build our client base and continue to invest in
our market-leading platform and analysis technologies, provides us with
significant opportunities for long-term growth."
Notice of AGM
IXICO also announces that its 2022 Annual General Meeting ("AGM") will be held
at CCT Venues Smithfield, Two East Poultry Avenue, Smithfield, London EC1A 9PT
on 20 January 2022 at 10.30am.
The full Annual Report and Accounts, along with Notice of AGM, will be posted
to shareholders on 17 December 2021 and at the same time will be made
available on the Company's website in accordance with AIM Rule 20.
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 (MAR)
For further information please contact:
IXICO plc +44 20 3763 7499
Giulio Cerroni, Chief Executive Officer
Grant Nash, Chief Financial Officer
Cenkos Securities plc (Nominated adviser and sole broker) +44 20 7397 8900
Giles Balleny / Max Gould (Corporate Finance)
Michael F Johnson (Sales)
Walbrook PR Ltd +44 (0)20 7933 8780
Paul McManus / Lianne Applegarth /
Alice Woodings IXICO@walbrookpr.com (mailto:IXICO@walbrookpr.com)
About IXICO
IXICO is dedicated to delivering insights in neuroscience. Our purpose is to
advance medicine and human health by turning data into clinically meaningful
information, providing valuable new insights in neuroscience and our goal is
to be a leading proponent of artificial intelligence in medical image
analysis. We will achieve this by developing and deploying breakthrough data
analytics, at scale, through our remote access technology platform, to improve
the return on investment in drug development and reduce risk and uncertainty
in clinical trials for our pharmaceutical clients.
More information is available on www.IXICO.com (http://www.IXICO.com) and
follow us on Twitter @IXICOplc
Chief Executive's Statement
Investing for growth in an attractive healthcare market-supported by long-term
macro growth trends
2021 has been another significant year in IXICO's development as a premium
imaging technology services partner to the global biopharmaceutical industry
and has seen the Group diversify into a broader range of neurological
disorders identified as having a high unmet clinical need. With medical
imaging in clinical trials growing in use, we continue to progress our
societal purpose to advance human health in support of the development of new
therapies by the global pharmaceutical industry.
A breakthrough treatment for the Alzheimer's community
The growing need by the global pharmaceutical industry for new imaging
biomarkers and endpoints to inform and support clinical trial data for
regulatory approval of new treatments, means we are confident about the
long-term growth opportunity for IXICO. For example, we anticipate increased
investments in Alzheimer's disease ('AD') drug development due to the FDA
granting approval on 7 June 2021 for Biogen's ADUHELM™ the first-ever
therapy to address a defining pathology of AD-amyloid beta plaque. In addition
to this milestone announcement by Biogen, several other major pharmaceutical
companies also received FDA Breakthrough Therapy Designation ('BTD') in AD
during 2021 including Eli Lilly for donanemab, EISAI for lecanemab and Roche
for gantenerumab. We anticipate that this will result in an additional impetus
for new AD trials in the coming years and so further expand the market
opportunity for IXICO's specialist neuroimaging services.
A strong financial performance despite challenging conditions
In last year's statement, I indicated that despite the anticipated ongoing
COVID-19 business environment, we looked to 2021 with cautious optimism;
however, we had not foreseen the decision of the Group's largest client to
cease dosing in Phase III and pause dosing in the open label extension trials
in Huntington's disease ('HD') (as announced in March 2021). I am pleased
however to note that the resultant descope to our order book (£7.1 million)
has been more than replaced by the new and expanded contracts signed through
2021 (£13.8 million), consisting of 14 biopharmaceutical companies, of which
9 are new clients to IXICO.
In addition to diversifying the Group's revenue base, most of these new
contracts are at the early-stage of the development programme; setting the
foundation for IXICO to progress with the clinical assets into larger and more
profitable late-stage trials should the trial Investigational New Drug ('IND')
advance along the development cycle in future years.
Across the year the Group delivered £9.2 million of revenues (2020: £9.5
million), a 25% five-year revenue compound annual growth rate ('CAGR'), and
continued its high gross margin performance of 66%. The Group also reported a
fifth consecutive year of improved earnings before interest, tax,
depreciation, and amortisation ('EBITDA') of £1.7 million.
Continued our development of AI algorithms and partnerships
We continue to make significant progress in expanding our portfolio of
proprietary Artificial Intelligence ('AI') algorithms, exemplified by our
scientific collaboration with Takeda, which evidenced how IXICO's AI approach
can increase the number of usable datasets as well as the sensitivity to
measure treatment effects. The Group has established an enviable book of
alliances and collaborative agreements, including the Global Alzheimer's
Platform Foundation® ('GAP') partnership, in which IXICO is applying its
expertise to collect and analyse PET brain scans in GAP's 1,000 subject
Bio-Hermes trial. Our strategic partnership with Microsoft to develop our next
generation Microsoft Azure cloud-based imaging data platform and AI data
analytics platform is also a collaboration of note in support of our
investments to build further scale and efficiencies in our business.
Investing for our future in technology and people
Our consistent strong financial performance in recent years has provided
profits that are being reinvested to support future growth. In addition to
expanding our employee numbers to meet current and future anticipated demand,
we have also made technology asset investments in 2021 in excess of £2.0
million. Most notable are those in our next generation TrialTracker data
management platform, AI algorithm development platform and IT infrastructure.
With £6.7 million of cash at year end, and continuing to be debt free, we
have further strengthened the balance sheet to support continued investment to
build further scale and resilience.
Our delivery performance in 2021 is even more commendable when one considers
that our services have continued to be delivered with all functions operating
remotely and grown staff numbers by 22% to an average of 95 across the year.
In addition, I am also delighted to have strengthened the management team with
the appointment of Romina Oxborough in September 2021 as our SVP, Operations.
Romina has over twenty years of experience in the life sciences and
pharmaceutical sector and has held senior leadership positions focused on
supporting clinical trials and patients' access to medicines. In her role, she
will lead and build on current initiatives to continuously enhance quality and
operational efficiencies in the delivery of our client projects.
In summary, we recognise that in the clinical trials market there is an
intrinsic potential for clients to prematurely terminate clinical trials due
to safety or efficacy issues associated with the IND. However, with an ageing
population and the growing burden on the global healthcare system of diseases
such as AD, the need for new treatments in a wide range of neurological
diseases has never been more pressing. Our robust and strengthened balance
sheet allows us to continue to invest in our technology and people to enable
us to become the partner of choice for current and prospective clients to
realise the medium and long-term opportunity for the scale up of our business.
(1)
https://investors.biogen.com/news-releases/news-release-details/letter-biogens-ceo-aduhelm
Chairman's Statement
Resilience whilst investing in a platform for growth
Overview
IXICO is an Artificial Intelligence data analytics company delivering
intelligent insights in neuroscience.
Our purpose is to advance medicine and human health in neuroscience by
converting raw imaging data, captured as part of the clinical trial process,
into clinically meaningful information. Specifically, this is the ability to
measure accurately changes (which can be very small) in biomarkers relevant to
diseases of the brain. By doing so, our data analytics services provide
objective insights into the efficacy and safety of the drugs being trialled
and so deliver greater efficiency and accuracy to the clinical development
process.
These services are underpinned by our Trial Tracker end-to-end technology
platform. This supports data capture, data management, data analysis and data
reporting on behalf of the clinical trial in a seamless, centralised,
regulatory compliant system.
A year of consolidation
Following four years of significant growth, and a rapid move from annual
losses to double digit profitability margins, the past year has been one of
consolidation for IXICO. The Group has weathered dual headwinds of COVID-19,
which continues to disrupt and delay the initiation of neurological clinical
trials, and the impact of the descoping in March 2021 of our largest client
contract, a Phase III and an open-label extension trial in Huntington's
disease.
Despite these challenges, led by our excellent senior executive team, IXICO
has delivered revenues of £9.2 million, just 4% less than the prior year
while achieving EBITDA profitability at £1.7 million, a 34% increase equating
to an EBITDA margin increase of 4%. Whilst this particularly strong EBITDA is
flattered by several one-time items, it does reflect the resilience the
leadership team has built into the Group as it grows. With the market
opportunity continuing to develop, this ability to weather the challenges of
COVID-19 and such a significant client trial descope, bodes extremely well for
the Group's prospects.
As we move towards the commencement of those neurological trials delayed by
the pandemic, the importance of addressing long-discussed challenges of
diminishing returns and escalating costs within drug development are an acute
topic of focus for the industry. All opportunities to increase clinical
trial efficiency, operate services remotely, increase the objectivity of
measures and improve stratification of patients (particularly in neurological
disease areas) are being pursued. Sitting at the apex of this requirement
within imaging, IXICO offers objective measures, using a remote-based
technology driven model, increasing insights into both the trial patient
population and the efficacy and safety of the drug candidates in a growing
area of unmet clinical need.
Governance and people
During the year, the Group has leveraged the benefits of our ability to work
remotely alongside the cohesion of a single office. We have renegotiated and
extended our lease and reconfigured our office space to support a hybrid,
activity-based-working model. This, alongside regularly communicated
investments in technology, means the Group is positioned to work even more
efficiently on behalf of our clients, while improving the work-life balance of
our employees.
As in most successful, high-growth businesses, IXICO's future depends on our
people and the Board thanks all our employees for their hard work, dedication
and flexibility during unavoidably challenging times. In the past 12 months we
have continued to invest in our team, focussing on our medium and long-term
growth opportunities and on the conviction that investments made now will lead
to greater returns for our shareholders and other stakeholders. We have made
these investments in our workforce while continuing to promote our values -
Aspiration, Ability, Agility and Accountability - to augment our positive,
motivated, and effective culture which aligns our team with our purpose.
Overseeing these decisions and considering the appropriate balance of
investment in a challenging period, the Board has been closely involved,
meeting formally eight times during the year with several additional ad-hoc
meetings to discuss specific topics. As the Group continues to scale, the
Board believes it is most important to develop the technology and
infrastructure to drive long-term sustained growth, rather than focus on
shorter-term growth targets. As such, we recognise there will be periods of
rapid revenue growth and periods of revenue consolidation as the Group scales,
each reflecting the particular successes or failures of neurological clinical
trial programmes within the Group's orderbook, a characteristic inherent to
the clinical trials market.
The Board uses the ten principles outlined in the Quoted Companies Alliance
('QCA') Corporate Governance Code to ensure it maintains appropriate
governance arrangements. The Board conducts itself in a manner which places
IXICO's values and the QCA principles at the core of our culture.
At the 2022 Annual General Meeting ('AGM'), in accordance with the Company's
Articles of Association, Grant Nash and I will stand for re-election,
supported by the Board of Directors' recommendation. As part of a planned
Board succession process, John Bradshaw has announced his intention to retire
from the Board during 2022, having served nearly 9 years as a Director of the
Company. A recruitment process is well progressed in identifying a suitable
successor to John, and I would like to take this opportunity to thank John for
the expertise and wisdom he has invested in IXICO, and, in particular, his
robust and diligent chairmanship of the Audit Committee.
Shareholders
The Group has an impressive list of leading institutions who have joined our
shareholder register over the last few years, and we would like to thank all
our shareholders for their continued support and enthusiasm. During the year,
this list was augmented by CIP Merchant Capital and City Asset Management,
both of which now hold significant shareholdings in the Group.
Outlook
The Board remains focussed on the Group's opportunity to grow and is delighted
with the progress of our various investment initiatives which position us to
capitalise on this opportunity. IXICO's analytical offering has been
strengthened in the year and will be enhanced further during the next 12
months as our new algorithm platform is launched. Alongside this, the launch
of our next generation, Microsoft Azure cloud-based data capture and analysis
platform remains on track for the second half of financial year 2022.
As the Board has communicated over the past few months, companies servicing
the clinical trials market are inherently exposed to the risk of early trial
termination. The trial halt announced in October 2021 does create short-term
challenges that need careful management as we enhance our ability to generate
long-term growth. In the current year, we continue to carefully manage these
challenges while pursuing our focussed investment programme to deliver scale,
efficiency and service offering in a marketplace that continues to expand. We
expect these investments, alongside a better mix of revenues from a more
balanced order book of early phase trials, will lead to a contraction in the
Group's EBITDA in the coming year, but should provide the basis for
accelerated, sustained and profitable growth in the medium and longer terms.
Financial review
Preserving profitable growth in a challenging year for neurological clinical
trial delivery.
In 2021, the Group consolidated the strong financial performance achieved
across recent years despite notable short-term challenges. It did so whilst
significantly progressing its investments for delivering medium and long-term
growth.
This review includes a comparison of the financial KPIs used to measure
progress over the prior year, a summary of which is shown below:
KPI 2021 result 2020 result Movement
Revenue £9.2m £9.5m £0.3m ↓
Gross profit £6.0m £6.3m £0.3m ↓
Gross margin 65.6% 66.6% 100bps ↓
EBITDA profit £1.7m £1.3m £0.4m ↑
Operating profit £1.2m £0.9m £0.3m ↑
Profit per share 3.30p 2.02p 1.28p ↑
Order book £18.8m £21.7m £2.9m ↓
Net assets £11.2m £9.1m £2.1m ↑
Cash £6.7m £7.9m £1.2m ↓
Non-current asset investments £2.6m £1.6m £1.0m ↑
Revenue
Revenue for the year of £9.2 million (2020: £9.5 million) represents a small
year-on-year contraction of 4%. This contraction was driven by significant
client trial descopes impacting the Group's order book and service delivery
demands and by the continued drag on start-up times of new clinical trials
created by COVID-19. These impacts, plus the early termination of a clinical
trial shortly after the financial year end (as announced on 20 October 2021)
are expected to continue to dampen revenue performance over the next 12
months.
Gross profit
The Group reports gross profit of £6.0 million for the year (2020: £6.3
million). This equates to a gross margin of 66% (2020: 67%). This strong gross
profit margin reflects a favourable revenue mix, linked to the proportion of
image analysis associated with Phase III trial service revenues. Looking
forward, the Phase III descopes reported in the year, and the increasing
proportion of early phase trials won during the year (see Order book section
below) mean that gross margins will contract in the short term. Looking to the
medium and longer terms, as the Group secures additional trials, the
operational leverage opportunity within the Group's cost structure means the
potential for sustained mid-to-high 60% gross margins remains strong.
Earnings before interest, tax, depreciation, and amortisation ('EBITDA')
The Group materially increased its EBITDA profit in the year to £1.7 million
(2020: £1.3 million). This was achieved despite the small year-on-year
revenue contraction and reflects:
· careful management of costs following the Phase III descopes
earlier in the year;
· the impact of capitalising costs in the Group's next generation
Trial Tracker platform (thereby reflecting an element of cost that would have
been reported in the Consolidated Statement of Comprehensive Income onto the
Consolidated Statement of Financial Position); and
· a small number of one-time benefits that have supported
profitability in the year.
Looking forward, we expect to see a reduction in EBITDA performance in the
next financial year to reflect the reorientation of the order book to earlier
phase trials, the loss of the one-time beneficial impacts seen in 2021 and the
continued operational investment program pursued by the Group to deliver on
medium and longer-term growth opportunities.
Operating profit
Operating expenditure in the year reflected investment in people and product
development, specifically:
· research and development expenses of £1.2 million (2020: £1.3
million) included the development of new algorithms to support image analysis
in new and existing therapeutic indications. In addition, the Group
capitalised £1.0 million of internal development expenditure primarily in
respect of its next generation Trial Tracker platform (2020: £0.2 million);
· sales and marketing expenses of £1.1 million (2020: £1.6
million) reflecting reduced travel and conference expenditure due to COVID-19
as well as a temporary contraction in the size of the sales team; and
· general and administrative expenses of £2.9 million (2020: £3.2
million) reflecting careful cost management within the business.
The reported operating profit of £1.2 million (2020: £0.9 million) equated
to an operating profit margin of 13% (2020: 9%).
Order book
The Group continues to benefit from a healthy contracted order book. At 30
September 2021 this totalled £18.8 million (2020: £21.7 million), which
takes account of £9.2 million of revenues delivered during the financial
year, £13.8 million of new and expanded multi-year contracts secured during
the year, £7.4 million of trial descopes due to client trial failures, and
£0.1 million negative foreign exchange movement in the year.
The new trials won were across 14 different clients, 9 of whom are new to
IXICO. This broadening and diversifying of the Group's order book is a key
plank in the Group's strategy as the Group seeks to secure additional scale
and resilience. After the year end, the Group was notified of, and announced,
an indefinite halt to a client's clinical trial. This accounted for £3.3
million of the order book as at 30 September 2021, meaning that shortly after
the year end the order book value was reduced to £15.5 million.
Cash
The Group reported operating cash inflows of £0.3 million before tax receipts
in the year (2020: £1.5 million) reflecting the Group's strengthened
profitability partially offset by the timing of trade and other receivables
(which increased by £1.1 million) and trade and other payables (which
decreased by £0.4 million) in the year. Whilst trade receivables increased in
the year the Group had no overdue receivables at the year end and experienced
no bad debts during the year.
The Group had a closing cash balance at 30 September 2021 of £6.7 million
(2020: £7.9 million) with the reduction in cash reflecting £2.2 million of
focussed investment in science and technology assets designed to support
future scalability and improved IT infrastructure of the Group. These
investments were partially offset by £0.6 million of operating cash and
taxation inflows and £0.3 million of cash received from the exercising of
employee share options in the year. This strong, debt-free, cash balance means
the Group is well positioned to continue to invest for growth.
Consideration of the Group as a going concern is discussed in the Directors'
Report in the full annual report.
Non-current asset investments
The Group capitalised £2.6 million of non-current assets in the year to 30
September 2021 (2020: £1.6 million). This notable increase in non-current
assets was primarily driven by the investment of £1.8 million in its next
generation TrialTracker platform (2020: £0.3 million).
The next generation TrialTracker platform provides a completely new iteration
of the Group's TrialTracker system. This TrialTracker version will further
enhance the Group's capabilities to remotely collect, and centrally analyse,
brain scans (or other image types) in support of clinical trials. The platform
is being developed on Microsoft Azure's cloud infrastructure supporting
further improvements in system resilience, security, scalability, and
efficiency.
In addition, the Group extended its office lease, at a materially reduced
rental fee, for a period of 5.5 years. This lease, which was due to end in
March 2022, will now run until September 2026 and constitutes an addition to
right of use assets of £0.4 million.
Net assets
The Group's net asset position increased by £2.1 million to £11.2 million
across the year (2020: £9.1 million). This is reflective of the Group's
ability to turn profitability into operating cash, as well as the Group's
commitment to build its technology assets to meet long-term future growth
demands.
Profit per share
The Group reports a profit per share of 3.30p (2020: 2.02p) reflecting the
continued uplift in financial performance achieved across the year.
The Group is delivering against its growth strategy, is profitable, and is
well capitalised, providing a strong basis to continue to invest to secure and
strengthen its position in an expanding market.
Risk management
The Board holds responsibility for monitoring risks to which the Group is
exposed, and for reviewing and assessing the effectiveness of the internal
control framework used by the Group to manage those risks.
The Group has designed its internal controls with the aim of providing a
proportionate level of assurance for the organisation, taking account of its
size, stage of development and risk exposure. Whilst the Board is confident
that the control framework is fit for purpose, it continues to seek ways to
further mitigate against the risk of material misstatement or loss.
In assessing the risks faced by the Group, a detailed risk identification and
control framework is adopted. It is the responsibility of each department
head to update the risk and control matrix for their area and these are then
consolidated into a single matrix which is reviewed by management on a
quarterly basis. The Board receives a summary of the risk and control matrix
at least every six months. The matrix sets out the current status of controls
in place to manage identified risks and ranks the risks by their potential
impact and likelihood on the Group's operations. This matrix also details the
additional actions which are being implemented to further manage such risks.
The Board reviews and challenges the Executive Directors on this risk and
control matrix as necessary.
Principal risks and uncertainties
The following table presents the principal risks and uncertainties that the
Board considers could have a material impact on the Group's operational
results, financial condition and prospects. This is not an exhaustive list of
risks, and is intended to provide visibility of those risks the Board
considers as potentially the most material based on the information it
currently has available to it.
These risks and uncertainties reflect the business environment within which
the Group operates, together with risks in the execution of its business
strategy. The risks are separated into four specific risk areas being
Strategic, Operational, Financial, and Legal/Compliance & Reputational.
Strategic risks
Principal Risks Risk Context Mitigation Change in the Year
The Group fails to exploit the commercial opportunities available to it and The Board anticipates that its strategic initiatives will lead to increased · Annual review by the Board of Group strategy and budget ↔
does not deliver the full potential for shareholder (and other stakeholder) market penetration and development of new market opportunities for the Group. priorities with progress against strategy.
returns
· Monthly leadership review of delivery of specific strategic
initiatives. Increased focus on medium and long-term strategy to return the Group to double
The nature of the neurological drug development market means that strategic
digit revenue growth.
initiatives will inevitably include a degree of judgement risk. · Board appraisal of significant investments before funds are
committed and subsequent review of each investment's delivery and performance.
· External expertise and advice sought to inform strategic Significant work undertaken to understand the market opportunity in each of
The Group may not execute on its strategic plans as effectively or efficiently initiatives. the therapeutic indications the Group is active in and/or is investing in.
as possible, or its strategic plans may not be the most optimal, thereby
failing to maximise the commercial opportunity available to it. · Orientation and alignment of management to focus on delivery of
the Group's strategic plans.
· Significant focus during the year on the organic strategy of the
Group and ensuring investments made align with the Group strategy for
delivering revenue and value growth across the medium and long term.
COVID-19 pandemic creates strategic, financial and/or operational uncertainty COVID-19 has created a significant downturn in the initiation of new clinical · The Group has worked closely with clients to support adjustments ↔
trials with trial start dates continuing to be pushed back. This has required to their trials due to COVID-19.
impacted the Group's growth during 2021.
The Group's 2022 revenue growth levels are expected to be impacted by
· The Group has been able to leverage its strong order book and COVID-19.
balance sheet position to continue its investment plans.
In addition, the ongoing uncertainty over the duration of the COVID-19 · The Group successfully migrated and equipped all staff to
pandemic and possible future lockdowns globally may disrupt the Group's effectively work remotely. The Group has implemented a hybrid working model to However, the positive level of contract bookings in 2021 means that this risk
strategic plans and/or financial performance in the near term retain the benefits of home working alongside the importance of creating a is well managed and will diminish as COVID-19 vaccination rates continue to
cohesive culture resulting from attending a central office location. increase globally and the pharmaceutical industry increases confidence in the
ability to run clinical trials without risk of interruption in patient visits.
· Detailed and regular forecasting and close management of
expenditure have given the Group confidence in its ability to manage the
COVID-19 impact. The budgeting and forecast processes will continue to assess
risk of client trial dates being pushed out.
· Roll out of vaccination programmes worldwide and an expected
increase in new contracts are resulting in a reduced impact.
Operational risks
Principal Risks Risk Context Mitigation Change in the Year
Failure of IT infrastructure A significant failure of IT infrastructure, or a physical disaster (such as · Investment in IT infrastructure, including use of cloud services, ↓
fire or flood) at the Group's IT hosting centre, might disrupt the Group's implementation of new and upgraded systems and equipment including high
operations. availability storage and full disaster recovery resilience has substantially Likelihood reduced due to investments in improved infrastructure and controls
mitigated the risk of prolonged down time because of hardware failure or a during 2021.
significant adverse event.
The Group is reliant on key individuals to support its operational and service As the Group scales, servicing an increased number of clients and their · Despite the restrictions imposed by COVID-19, the Group has ↓
delivery projects, so the Group risks overreliance on key individuals. continued to invest in its people. During 2021, the Group made specific
investments in its technology team, recruiting highly skilled personnel to The risk of overreliance on several key individuals has been reduced during
support the roll out of the Group's next generation TrialTracker platform in 2021 and is expected to reduce further as 2022 progresses as new recruits gain
2022 and reduce key individual risk associated with the existing TrialTracker experience in the Group's technology platforms.
platform.
A cyber-attack results in a breach of the Group's IT systems Any successful cyber-attack may create operational, financial and/or · Strengthened levels of control exist over the Group's IT ↑
reputational risk for the Group. This risk has become more prevalent during infrastructure, including ongoing investments in improved security, upgraded
COVID-19 with an increased number of cyber-attacks on high-profile businesses, firewalls and training for all staff provided on data security and standard Improved controls and infrastructure reduce the opportunities for a
particularly in the form of ransomware attacks controls such as password protection and policies. cyber-attack to succeed, however the increased prevalence of cyber-attack
attempts across industry (including ransomware attacks) mean that overall,
· The roll out of the next generation TrialTracker platform in 2022 despite investments made, this remains a key risk area.
will further enhance the security of the Group's systems.
· The Group has worked closely with experts in respect of cyber
risk management, ensuring the placement of appropriate covers and focussing on
additional areas for improvement.
· External audits and assessments including penetration tests
provide independent scrutiny of the Group's IT infrastructure.
Financial risks
Principal Risks Risk Context Mitigation Change in the Year
Early termination of a client's clinical trial The Group's client clinical trial contracts bear a risk of early termination · Due to the nature of clinical trials and high failure rates ↔
in the event of: (particularly in neuroscience) there will always be a risk of early
termination of a clinical trial. However, increases in the Group's client and
· an interim data review demonstrating no material benefit of the project diversification dilutes this risk.
trial drug; or
The material descope of its largest client's HD trials will continue to impact
· Commercial contracts can include up-front non-refundable payments, the Group during 2022 and there remains the risk that these trials may be
· a serious adverse event caused by the trial drug. close-out cost recovery and termination notice clauses. further descoped Such a decision would have a further negative material impact
on the Group.
Offsetting this, the Group has successfully grown its order book of new
On 23 March 2021, the Group announced the news that its largest client had contracts across a diversified range of therapeutic neurological indications
communicated the decision to cease dosing on its HD Phase III and open-label with both current and prospective new clients.
extension trials. The significant descope in service requirements on these
trials resulted in a reduced revenue performance compared to the first half of
2021 and negatively impacted 2022 revenue growth expectations.
On 20 October 2021, shortly after the financial year end, the Group announced
the news that a client was indefinitely halting its trial in SCA. The early
termination of this trial had a material impact on the Group's order book and
revenue expectations for 2022.
Loss of a key commercial relationship with a client The Group has material contracts with two clients. There is therefore a risk · Leadership monitors service levels across projects and has dedicated ↔
that, if either client terminated its relationship with the Group, there would additional resources to supporting its largest clients. The strengthening of
be a significant impact on the Group's short and/or medium-term revenue the Group's relationship with these clients will reduce the likelihood of The termination of the HD Phase III and open-label extension trials in March
expectations. relationship damage or loss. 2021 has decreased the Group's reliance on its largest client.
· Further development of the sales pipeline, via the appointment of
additional business development resources, is targeted at new client
acquisition, accelerating the broadening of the client portfolio, and reducing The termination of a trial just after the period end has decreased the Group's
the impact of losing any single client. reliance on its second largest client.
· The Group's strong cash position enables it to continue investing to
ensure it can scale and convert the available medium- and long-term market
opportunity in the neurological disease clinical trials market across a The Group has successfully grown its pipeline of new opportunities with the
broader range of clients. focus in 2022 being on converting new identified opportunities into signed
contracts.
The Group has won and been awarded new trials with its first and second
largest clients during the year showing that its services continue to be
highly regarded by these clients.
Financial risks are set out in further detail under note 23 to the financial The Group is exposed to financial risks typical of all commercial companies. · Standard controls are applied around these risks. ↔
statements and include: These include the risks of a cash shortfall, experiencing a significant client
payment delay, exposure to a foreign currency rate fluctuation which is · The Group has a strong cash position and a client portfolio which No material change in these risks during the year.
Liquidity risks against the interests of the Group and/or the Group fails to plan for tax and includes large, well-funded organisations.
therefore is exposed to tax liabilities beyond the level necessary.
Credit risks · Most contracts are denominated in GBP and currency levels are
forecast and reviewed monthly.
Currency risks
Legal/Compliance & Reputational risks
Principal Risks Risk Context Mitigation Change in the Year
Reputational damage due to error or system failure in delivery of analysis If the Group provided incorrect results while delivering its services to a · Operational checks, frequent data hygiene reports and additional ↓
services clinical trial this may impact on the trial and/or patient outcomes and result pre-transfer QC checks are used to control data error, duplication or transfer
in reputational damage for the Group. issues and to highlight when an analysis fails. Improved controls have reduced risk, with further process improvements and
updates to be implemented in 2022.
· Continued investment in training and automation to scale controls
used to identify potential errors, including the implementation of the SAS
analytics software.
· A significant upgrade to the existing TrialTracker platform is in
progress which will further strengthen system controls in place.
· Continued improvement of internal processes including SOP updates
and wholesale review of department procedures as part of the Group's QMS.
Breach of data protection regulations The Group captures personal data from clinical trial subjects. As such, it is · Data captured from client sites is pseudonymised on receipt into ↓
exposed to data security risks. the Group's TrialTracker platform.
Likelihood reduced as the Group continues to implement further IT
· A combination of security measures including encryption, access infrastructure enhancements and augmented data management policies and
controls and multi-factor-authentication ensures a strong defensive layer is training.
deployed to maintain the integrity and security of sensitive or critical
information.
· Data outputs to clients and key stakeholders are issued following
the application of controls designed to reduce, as far as possible, the
likelihood of unintended release.
· Data protection legislation requirements (such as GDPR) are
integrated within the Group's processing activities and practices.
Corporate Governance Report
The Board has adopted, and complies with, the Quoted Companies Alliance
('QCA') Corporate Governance Code ('Code') and has published a statement on
the Group website that sets out, in broad terms, how the Group complies with
the Code at the date of this report. The Board provides annual updates about
compliance with the Code. The Board is responsible for ensuring that IXICO is
managed for the long-term benefit of all shareholders, through effective and
efficient decision-making. Corporate governance is an important part of the
Board's role by providing oversight and guidance to help manage risk and build
long-term value.
The Code comprises 10 principles, with which companies undertake to comply as
part of their corporate governance arrangements. The Board conducts itself
in a manner which places IXICO's values and the principles of the Code at the
core of the Group's culture.
A summary of how the Group complies with these principles is outlined below
with further detail being available on the Group's website
(https://ixico.com/investors/governance/oversight/
(https://ixico.com/investors/governance/oversight/) ).
Focus Area Governance Principle Group Approach Further Reading
Deliver value in a manner aligned to shareholder and wider stakeholder 1: Establish a strategy and business model which promotes long-term value for The Group delivers insights to biopharmaceutical companies developing drugs to Our 5-point growth plan is provided in the full annual report.
aspirations shareholders address neurological disease. To achieve our business goals, the Group is
investing for growth and has grown profitability in the financial year to 30 Our approach to innovation and recent product launches are provided in the
September 2021 by: full annual report.
· building scale and market presence for our technology solutions;
and
· developing and commercialising new products and services.
These activities promote and are delivering long-term value for shareholders.
2: Seek to understand and meet shareholder needs and expectations The Board is committed to encouraging open communication between itself and Shareholder expectations are discussed further in the full annual report.
shareholders. The Chief Executive Officer and Chief Financial Officer arrange
to meet with major shareholders at least twice a year to update them on
strategy, progress against this strategy and obtain feedback. The Chairman
also makes himself available for discussions with major shareholders as and
when appropriate.
Further, should the Board consider any significant divergence from strategy it
will seek feedback from major shareholders as part of its deliberations.
The Board uses publications on its website and its Annual Report to keep all
shareholders informed of its progress. It uses the AGM to invite feedback from
any shareholder.
The CEO and CFO are responsible for investor relations and any feedback
received from shareholders is communicated to the wider Board.
3: Take into account wider stakeholder and social responsibilities and their The Group is highly conscious of the requirements of its wider stakeholders in Our stakeholders are described in our business model and stakeholder
implications for long-term success supporting its long-term success. It views its wider stakeholders as its engagement in the full annual report..
clients, suppliers, employees and the participants of the clinical trials it
serves. The Board has implemented approaches to support the requirements of
each group and, where it identifies, or is notified of, any risks or concerns
in respect of any of these stakeholder groups, it puts in place actions to
address these.
4: Embed effective risk management, considering both opportunities and The Board has ultimate responsibility for the Group's system of risk The Risk Management Report is discussed above.
threats, throughout the organisation management and internal control and for reviewing its effectiveness.
The Board instils control to the Group's operations by overseeing the
following:
· competent and prudent management;
· sound planning;
· adequate systems of control, including regular review of risk;
· adequate and accurate accounting records; and
· compliance with statutory and regulatory obligations.
Maintain a strong and dynamic management framework that places value on 5: Maintain the Board as a well-functioning, balanced team led by the Chair The Board comprises the Non-Executive Chairman, two Executive Directors and More information on Board membership is provided in the full annual report.
developing the Group in an ethical manner two Non-Executive Directors, one of whom acts as Senior Independent Director.
The Board has an appropriate balance between independence and knowledge of the
Group and its target markets which allows it to discharge its duties and
responsibilities effectively.
The Directors use their independent judgement and challenge matters affecting
the business whether strategic or operational. The Non-Executive Directors are
in regular contact with the Executive Directors and the Chairman has regular
one-to-one meetings with the Chief Executive Officer. The Board has access to
independent external advisers to support it in its decisions, where additional
skills or expertise is deemed necessary.
The Board has procedures in place to deal with a situation in which a Director
has, or may have, a conflict of interest. The Board is aware of other
commitments and interests as they are disclosed by each Board member.
The Board meets formally (either face-to-face or via video conference) not
fewer than four times per year in addition to the annual strategy day.
The Board is also supported by three subcommittees: the Audit Committee, the
Remuneration Committee and the Share Transaction Committee. The Board and
its subcommittees all operate against terms of reference which are summarised
on the Company website (https://ixico.com/investors/governance/
(https://ixico.com/investors/governance/) ).
6: Ensure that between them the Directors have the necessary up-to-date The Board has an effective and appropriate balance of skills and experience Further details of the Board's skills and experience can be found in the full
experience, skills and capabilities and is mindful of the need to continuously review the needs of the business to annual report.
ensure that this remains true, so that the Board can drive performance as well
as comply with regulations.
The Group's Articles of Association require that all Directors must stand for
re-election every three years and that any new Directors appointed during the
year must stand for election at the AGM following their appointment.
7: Evaluate all elements of Board performance based on clear and relevant The Board undertakes self-reviews from time to time in order to assess its
objectives, seeking continuous improvement performance. The Chairman provides leadership to the Board and assesses the
individual Directors to ensure that their contribution is relevant and
effective and that they are committed members of the Board.
8: Promote a corporate culture that is based on ethical values and behaviours The Group operates in a highly regulated environment in accordance with an The Group's values are provided in the full annual report.
Integrated Management System (including ISO 13485:2016) which is subject to
third-party audit. The Group is focussed on a therapeutic area which has a
high unmet medical need, and our employees are motivated to support our
clients in their quest to develop and provide safe, effective treatments for
people living with neurological diseases.
The Group employs a diverse workforce and embraces a culture where employees
are treated equitably within an environment of mutual respect and
understanding.
The eradication of fraud and bribery in the way in which the Group operates is
also of great importance to securing the trust and confidence of its clients
and partners. Therefore, the Group adopts a zero-tolerance position to fraud
and bribery and is committed to pursuing this approach throughout its
operational practices.
9: Maintain governance structures and processes that are fit for purpose and The Board is collectively responsible for the long-term success of the Group. The Group's risk management approach is discussed above.
support good decision-making by the Board Its principal function is to provide the Group with a framework of prudent and
effective controls, which enables risk to be assessed and managed and its
strategy executed. Further details as to how the governance processes are
structured to achieve this are outlined within this Governance Report.
Build trust based on open communication with stakeholders 10: Communicate how the Group is governed and is performing by maintaining a The Group communicates with shareholders (and other stakeholders) via its The full Strategic Report, Directors' report and stakeholder engagement in the
dialogue with shareholders and other relevant stakeholders website, its Annual Report, and the AGM as well as via issuing RNS year can be found in the full annual report. Financial Review can be found
announcements and presenting to major shareholders and analysts. above.
This Governance Report and the wider Strategic and Directors' Reports are
designed to provide full and relevant updates on how the Group is governed and
how it is performing. These are drafted with both shareholders and the wider
stakeholder community in mind.
The Board and its subcommittees
The Board meets at least 4 times per year in accordance with a pre-determined
meeting calendar. The Board is supported by 3 subcommittees: the Audit
Committee, the Remuneration Committee and the Share Transaction Committee. The
subcommittees discharge responsibilities on behalf of the Board and are
entitled to such internal or external advice as is required to allow them to
fulfil their duties.
The table below shows the membership of the Board and each subcommittee as at
the end of 30 September 2021:
Board Audit Committee Remuneration Committee Share Transaction Committee
Charles Spicer (Non-Executive Chairman) Chairman - - -
Giulio Cerroni (Chief Executive Officer) Member - - -
Grant Nash (Chief Financial Officer & Company Secretary) Member & Secretary Secretary Secretary Member & Secretary
Mark Warne (Senior Independent Non-Executive Director) Member Member Chairman Chairman
John Bradshaw (Independent Non-Executive Director) Member Chairman Member -
The Board and its subcommittees receive appropriate and timely information
prior to each meeting including a formal agenda. Any Director may challenge
Group proposals. Decisions are taken democratically after appropriate
discussion. Specific actions arising from Board meetings are agreed by the
Board or relevant subcommittee and are then followed up by the Executive
Directors.
The Board and subcommittees all operate against terms of reference which are
summarised on the Group website (https://ixico.com/investors/governance/
(https://ixico.com/investors/governance/) ).
Audit Committee
The Audit Committee is chaired by John Bradshaw. Mark Warne is a member of the
Committee. The terms of reference of the Audit Committee include the following
responsibilities:
· monitor the integrity of the Group's financial statements and
application of accounting policies;
· review the effectiveness of the Group's internal control and risk
management systems; and
· oversight of the Group's external auditors, including assessment
of their independence from the Group.
Audit Committee meetings are usually held a minimum of twice per financial
year.
The Group auditor only provides audit services to the Group.
Remuneration Committee
The Remuneration Committee is chaired by Mark Warne. John Bradshaw is a member
of the Committee.
The terms of reference of the Remuneration Committee include the following
responsibilities:
· determine and agree with the Board the framework or broad policy
for the remuneration of the Executive Directors and other such members of the
executive management as it is designated to consider;
· approve the design of, and determine targets for, any
performance-related pay schemes and approve the total annual payments made
under such schemes;
· approve all long-term incentive scheme structures and option
schemes;
· approve all option grants for ratification by the Board; and
· within the terms of the agreed policy, determine the total
individual remuneration package of each Executive Director including, where
appropriate, bonuses, incentive payments and share options.
Remuneration Committee meetings are usually held twice per financial year.
Share Transaction Committee
The Share Transaction Committee is chaired by Mark Warne. Grant Nash is a
member of the Committee.
The terms of reference of the Share Transaction Committee include the
following responsibilities:
· review, consider and, where appropriate, approve the exercise of
share options by option holders of the Group and the issuance of shares in
connection with such exercises; and
· review, consider and approve the request to transact shares by
employees or other individuals closely related to the Group in accordance with
the relevant policies of the Group, applicable law and any directions of the
Group's nominated adviser.
The Share Transaction Committee meetings are held on an ad hoc basis as
required.
Consolidated Statement of Comprehensive Income
for the years ended 30 September 2021 and 30 September 2020
2021 2020
Note £000 £000
Revenue 5 9,190 9,532
Cost of sales (3,166) (3,186)
Gross profit 6,024 6,346
Other income 7 448 606
Operating expenses
Research and development expenses (1,240) (1,309)
Sales and marketing expenses (1,146) (1,579)
General and administrative expenses (2,905) (3,208)
Total operating expenses 10 (5,291) (6,096)
Operating profit 1,181 856
Finance income 1 20
Finance expense (22) (18)
Profit on ordinary activities before taxation 1,160 858
Taxation credit 11 415 94
Profit attributable to equity holders for the period 1,575 952
Other comprehensive expense:
Items that will be reclassified subsequently to profit or loss
Foreign exchange translation differences 9 (1)
Total other comprehensive expense 9 (1)
Total comprehensive income attributable 1,584 951
to equity holders for the period
Profit per share (pence) 12
Basic profit per share 3.30 2.02
Diluted profit per share 3.12 2.00
Consolidated Statement of Financial Position
as at 30 September 2021 and 30 September 2020
2021 2020
Note £000 £000
Assets
Non-current assets
Property, plant and equipment 13 1,081 1,014
Intangible assets 14 2,710 796
Total non-current assets 3,791 1,810
Current assets
Trade and other receivables 16 3,194 2,082
Current tax receivables 11 480 259
Cash and cash equivalents 6,684 7,945
Total current assets 10,358 10,286
Total assets 14,149 12,096
Liabilities and equity
Non-current liabilities
Trade and other payables 17 114 167
Provisions 18 - 90
Lease liabilities 19 519 45
Total non-current liabilities 633 302
Current liabilities
Trade and other payables 17 2,217 2,407
Provisions 18 - 100
Lease liabilities 19 78 168
Total current liabilities 2,295 2,675
Total liabilities 2,928 2,977
Equity
Ordinary shares 21 482 471
Share premium 21 84,802 84,499
Merger relief reserve 21 1,480 1,480
Reverse acquisition reserve 21 (75,308) (75,308)
Foreign exchange translation reserve 21 (88) (97)
Capital redemption reserve 21 7,456 7,456
Accumulated losses (7,603) (9,382)
Total equity 11,221 9,119
Total liabilities and equity 14,149 12,096
Company Statement of Financial Position
as at 30 September 2021 and 30 September 2020
2021 2020
Note £000 £000
Assets
Non-current assets
Investments in Group undertakings 15 5,748 5,623
Total non-current assets 5,748 5,623
Current assets
Trade and other receivables 16 3,549 4,255
Cash and cash equivalents 1,845 1,705
Total current assets 5,394 5,960
Total assets 11,142 11,583
Liabilities and equity
Current liabilities
Trade and other payables 17 80 73
Total current liabilities 80 73
Equity
Ordinary shares 21 482 471
Share premium 21 84,802 84,499
Merger relief reserve 21 1,480 1,480
Capital redemption reserve 21 7,456 7,456
Accumulated losses (83,158) (82,396)
Total equity 11,062 11,510
Total liabilities and equity 11,142 11,583
Parent Company Income Statement
As permitted by Section 408 of the Companies Act 2006, the income statement of
the Company is not presented as part of these financial statements. The
Company's loss for the financial year was £966,000 (2020: £1,040,000).
Consolidated Statement of Changes in Equity
for the years ended 30 September 2021 and 30 September 2020
Foreign
Merger Reverse exchange Capital
Ordinary Share relief acquisition translation redemption Accumulated
shares premium reserve reserve reserve reserve losses Total
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 October 2019 469 84,436 1,480 (75,308) (81) 7,456 (10,533) 7,919
Total comprehensive income/(expense)
Profit for the period - - - - - - 952 952
Other comprehensive expense:
Realised losses on foreign exchange - - - - (15) - 15 -
Foreign exchange translation - - - - (1) - - (1)
Total comprehensive income/(expense) - - - - (16) - 967 951
Transactions with owners
Charge in respect of share options - - - - - - 184 184
Exercise of share options 2 63 - - - - - 65
Total transactions with owners 2 63 - - - - 184 249
Balance at 30 September 2020 471 84,499 1,480 (75,308) (97) 7,456 (9,382) 9,119
Total comprehensive income/(expense)
Profit for the period - - - - - - 1,575 1,575
Other comprehensive expense:
Foreign exchange translation - - - - 9 - - 9
Total comprehensive income/(expense) - - - - 9 - 1,575 1,584
Transactions with owners
Charge in respect of share options - - - - - - 204 204
Exercise of share options 11 303 - - - - - 314
Total transactions with owners 11 303 - - - - 204 518
Balance at 30 September 2021 482 84,802 1,480 (75,308) (88) 7,456 (7,603) 11,221
Company Statement of Changes in Equity
for the years ended 30 September 2021 and 30 September 2020
Merger Capital
Ordinary Share relief redemption Accumulated
shares premium reserve reserve losses Total
£000 £000 £000 £000 £000 £000
Balance at 1 October 2019 469 84,436 1,480 7,456 (81,540) 12,301
Total comprehensive expense for the period - - - - (1,040) (1,040)
Transactions with owners
Charge in respect of share options - - - - 184 184
Exercise of share options 2 63 - - - 65
Total transactions with owners 2 63 - - 184 249
Balance at 30 September 2020 471 84,499 1,480 7,456 (82,396) 11,510
Total comprehensive expense for the period - - - - (966) (966)
Transactions with owners
Charge in respect of share options - - - - 204 204
Exercise of share options 11 303 - - - 314
Total transactions with owners 11 303 - - 204 518
Balance at 30 September 2021 482 84,802 1,480 7,456 (83,158) 11,062
Consolidated and Company Statements of Cash Flows
for the years ended 30 September 2021 and 30 September 2020
Group Company
2021 2020 2021 2020
Restated
£000 £000 £000 £000
Cash flows from operating activities
Profit / (loss) for the period 1,575 952 (966) (1,040)
Finance income (1) (20) - (4)
Finance expense 22 18 29 1
Taxation (415) (94) - -
Depreciation 464 356 - -
Amortisation of intangibles 145 82 - -
Disposal of fixed assets - 1 - -
Dilapidation provision release (53) - - -
Impairment of intangible assets - 2 - -
Research and development expenditure credit (160) (162) - -
Share option charge 204 184 78 76
1,781 1,319 (859) (967)
Changes in working capital
(Increase)/decrease in trade and other receivables (1,112) 297 706 455
Decrease in trade and other payables (410) (146) (21) (39)
Cash generated from / (used in) operations 259 1,470 (174) (551)
Taxation received 354 447 - -
Net cash generated from / (used in) operating activities 613 1,917 (174) (551)
Cash flows from investing activities
Purchase of property, plant and equipment (170) (686) - -
Purchase of intangible assets including staff costs capitalised (1,984) (456) - -
Finance income 1 20 - 4
Net cash (used in) / generated from investing activities (2,153) (1,122) - 4
Cash flows from financing activities
Issue of shares 314 65 314 65
Repayment of lease liability (44) (177) - -
Net cash generated from / (used in) financing activities 270 (112) 314 65
Movements in cash and cash equivalents in the period (1,270) 683 140 (482)
Cash and cash equivalents at start of period 7,945 7,264 1,705 2,187
Effect of exchange rate fluctuations on cash held 9 (2) - -
Cash and cash equivalents at end of period 6,684 7,945 1,845 1,705
Notes to the financial statements
For the years ended 30 September 2021 and 30 September 2020
The financial information set out in these results does not constitute the
Group's consolidated statutory accounts for the years ended 30 September 2021
or 2020. Statutory accounts for the year ended 30 September 2020 have been
filed with the Registrar of Companies. The statutory accounts for the year
ended 30 September 2021 will be delivered to the Registrar in due course.
Those accounts have been reported on by the Independent Auditors; their report
for the accounts for both financial years was (i) unqualfied; (ii) did not
include a reference of any matters to which the auditor drew attention by way
of emphasis without qualifying their report; and (iii) did not contain a
statement under 498 (2) or 498 (3) of the Companies act 2006.
Copies of the Annual Report 2021 will be posted to shareholders on or about 17
December 2021.
1. Presentation of the financial statements
a. General information
IXICO plc (the 'Company') is a public limited company incorporated in England
and Wales and is admitted to trading on the AIM market of the London Stock
Exchange under the symbol IXI. The address of its registered office is 4th
Floor, Griffin Court, 15 Long Lane, London EC1A 9PN.
The Company is a parent of a number of subsidiaries detailed in note 15,
together referred to throughout as 'the Group'. The Group is an established
provider of technology-enabled services to the global biopharmaceutical
industry. The Group's services are used to select participants for clinical
trials and assess the safety and efficacy of new drugs in development within
the field of neurological disease.
b. Basis of preparation
The consolidated financial statements have been prepared on a going concern
basis and in accordance with international accounting standards in conformity
with the requirement of the Companies Act 2006.
The consolidated financial statements comprise a Statement of Comprehensive
Income, a Statement of Financial Position, a Statement of Changes in Equity, a
Statement of Cash Flows, and accompanying notes. These financial statements
have been prepared under the historical cost convention modified by the
revaluation of certain financial instruments.
The consolidated financial statements are presented in Great British Pounds
('£' or 'GBP') and are rounded to the nearest thousand unless otherwise
stated. This is the predominant functional currency of the Group, and is the
currency of the primary economic environment in which it operates. Foreign
currency transactions are accounted in accordance with the policies set out
below.
c. Basis of consolidation
The consolidated financial statements incorporate the accounts of the Company
and its subsidiary companies adjusted to eliminate intra-Group balances and
any unrealised gains and losses or income and expenses arising from
intra-Group transactions. The Company's subsidiaries are detailed in note 15.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the Group's
accounting policies.
The Group controls a subsidiary when the Group is exposed to, or has rights
to, variable returns from its involvement with a subsidiary and has the
ability to affect those returns through its power over a subsidiary. In
assessing control, potential voting rights that are currently exercisable or
convertible are taken into account.
The results of subsidiary companies are included in the consolidated financial
statements from the date that control commences until the date that control
ceases. The assets and liabilities of foreign operations are translated into
GBP at exchange rates prevailing at the end of the reporting period. Income
statements and cash flows of foreign operations are translated into GBP at
average monthly exchange rates which approximate foreign exchange rates at the
date of the transaction. Foreign exchange differences arising on retranslation
are recognised directly in a separate translation reserve.
d. Going concern
The ongoing COVID-19 pandemic continues to cause uncertainty across global
markets for the short and medium term. During the year, the Group continued to
react quickly to the changing operational landscape caused by the pandemic,
including a continuous assessment of any financial implications through the
preparation of revised forecasts. The Group also continued to successfully
operate a fully remote model for employees through the year. Whilst there was
a notable contract loss in the year, and a further contract loss shortly after
the period end, there was a significant increase in new trials and contract
wins during the year. These new contract wins significantly diversify the
client base of the Group and reduce the reliance it has on its largest client.
In assessing going concern, management has prepared detailed sensitised
forecasts which consider different scenarios throughout the course of the next
12 months. These include the risk to current projects and expected future
sales pipelines, the ability for participants to attend imaging centres (due
to the ongoing COVID-19 pandemic) and potential delays in new trial start-up
timelines. The Directors have considered these forecasts, alongside the
Group's strong balance sheet and cash balance as well as the ability for the
Group to mitigate costs if necessary.
After due consideration of these forecasts, the Directors concluded with
confidence that the Group has adequate financial resources to continue in
operation for the foreseeable future.
2. New and amended accounting standards and interpretations
a. Adoption of new accounting standards for the year ended 30
September 2021
The Group has adopted all new and amended accounting standards and
interpretations issued by the International Accounting Standards Board
('IASB') that are mandatory for the current reporting period. The standards
and amendments that are now effective and have been adopted by the Group
include:
• Amendments to References to Conceptual Framework in IFRS
Standards
• Definition of Material (Amendments to IAS 1 and IAS 8)
• Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39
and IFRS 7)
There was no impact on the Group's financial statements as a result of
adopting these standards.
b. Accounting developments affecting financial statements in
subsequent periods
At the date of authorisation of these financial statements, several new, but
not yet effective, standards and amendments to existing standards and
interpretations have been published by the IASB. The standards and amendments
that are not yet effective and have not been adopted early by the Group
include:
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37)
• Classification of liabilities as current or non-current
(Amendments to IAS 1)
The Directors anticipate, based on current business processes, that the
introduction of the above standards and amendments will not have a material
impact on the Group and Company financial statements and therefore the impact
of these changes on the financial statements has not been assessed.
3. Significant accounting policies
3.1 Revenue
Revenue is principally derived from service revenue. This revenue is measured
at the fair value of the consideration received or receivable and represents
amounts receivable for services provided in the normal course of business, net
of discounts, VAT and other sales-related taxes.
In determining whether to recognise revenue, the Group follows a 5-step
process:
1. Identifying the contract with a client;
2. Identifying the performance obligations;
3. Determining the transaction price;
4. Allocating the transaction price to the performance obligations;
and
5. Recognising revenue when/as performance obligation(s) are
satisfied.
All services provided to clients are agreed at the inception of a project
through contracts. A critical part of the contract is a detailed schedule of
work that provides the list of services to be provided by the Group. Under the
requirements of IFRS 15 - Revenue from Contracts with Customers, the Group is
required to identify individual and distinct performance obligations within
each contract. This represents a judgement, and the Group has considered
whether each individual service provided meets these requirements in its own
right and in the context of the contract, by assessing in particular the level
of interrelationship between each type of service and the nature of the
contract entered in to with clients. The Group has identified performance
obligations within each of the revenue streams as set out below. The
transaction price associated to each performance obligation is allocated based
on their relative stand-alone selling price. Revenue is recognised once the
performance obligation is met for each distinct service.
Revenue types
The Group's contracts comprise a variety of performance obligations. These
obligations are all considered streams of a single revenue type, being service
revenue. Most of the Group's revenue is recognised at a point in time; the
Group recognises this revenue once control is passed to the client, or once
the service has been delivered on behalf of the client.
The Group's most significant streams of service revenue are outlined below and
have the respective recognition criteria:
Service type Performance obligations Revenue recognition policy
Project & site set up This service type includes the initial project set up documentation, such as Revenue for this service is recognised at a point in time once the Group has
scientific protocols and operational guides, and close out activities such as delivered the relevant material on behalf of the client.
Training materials and delivery scientific reports. Where a tangible product is created, the performance
obligation is met once the item is transferred to the client.
Scientific reports
For training materials and delivery, revenue is recognised at the point in
time when a site has completed its training.
In respect of training, materials are prepared in advance and provided to
clients as tools for site training. Site training is provided either through
live online training or through a self-paced training module. The performance
obligation is met once each individual site has completed the training.
Project management Each contract requires various project management activities. These services The services provided for project and site management represents a provision
are provided throughout the duration of a contract. Site management services of ongoing services. As the fee is charged monthly to the client over the
Site management are provided throughout the duration of a site being operational and would duration for which management services are provided, revenue for these items
typically be shorter than the project management cycle. For both activities, is recognised over a series of points in time across the contract.
the costs and time spent delivering these services are generally spread evenly
over the project lifetime. As such the performance obligation is met when the
specific service is provided each month.
TrialTracker configuration and access The TrialTracker platform delivers a robust and comprehensive set of The deployment of TrialTracker is recognised once the platform is
centralised imaging services designed to efficiently manage the complex appropriately configured and is ready for use through the receipt of images
imaging workflow, including image upload, quality control, reading and from client trial sites.
analysis. The platform also allows for reporting and data transfer. This
involves the initial configuration and deployment of TrialTracker, and the
access granted to client trial sites for upload of clinical information.
The ongoing access fee is charged monthly to the client and so revenue is
recognised over a series of points in time across the contract.
Due to the lack of interrelationship between the 2 distinct services provided,
each are recognised independently. The performance obligations for each are:
1. The performance obligation for deployment is met once TrialTracker
is deployed and granted to the client.
2. The performance obligation for ongoing access to TrialTracker for
the upload of data by client trial sites is recognised over the duration of
the project once TrialTracker is deployed.
Data management and quality control Ensuring data are managed appropriately and that the data are of a high In respect of data quality control, revenue will be recognised at the point in
quality is critical in the delivery of the Group's service. The data time when data is quality checked.
management and imaging teams work in collaboration to ensure ongoing integrity
of data.
The services provided for data management represents a provision of ongoing
services. As the fee is charged monthly to the client over the duration for
The data will go through a series of quality control reviews prior to being which data management is required, revenue for these items is recognised over
used in the Group's performance of reading and analysis. Therefore, the a series of points in time across the contract.
performance obligation is met once the data is quality checked.
Data management is an ongoing service performed throughout the duration of a
project whilst data is being received and managed on a project. The respective
costs and time spent delivering this service is generally spread evenly over
the duration in which data is being managed and as such the performance
obligation is met when the specific service is provided each month.
Data reading and analysis The Group provides data analysis services across a range of biomarkers, Revenue from reading and analysis of clinical data is recognised at the point
providing high-quality, clinically meaningful data. The performance obligation in time when the work is complete.
for these services is met once the analysis is completed.
Licence revenue Revenue relating to licencing is entirely attributable to TrialTracker. Each Revenue for both the licencing and support are recognised on a straight-line
agreement will grant the user rights to access the software for their own use basis over the duration of the contract and is therefore recognised over time.
and receive associated technical support during the licence period. Licence revenue in the current year is not material.
The granting of the licence and its associated support are distinct
performance obligations and are met on a straight-line basis over the contract
term.
Change orders
Throughout the duration of a contract, the client may request additional
services or service changes to be made. For revenue recognition purposes, the
Group treats a change order or contract modification to a client agreement as
a separate contract, if both:
· the scope changes due to the addition of 'distinct' services; and
· the price change reflects the services stand-alone selling prices
('SSP') under the circumstances of the modified contract.
The revenue recognition for the change order is applied in the same way as the
original contract, as detailed above, with the original client agreement
remaining unchanged.
3.2 Other income
Government grants
A government grant is recognised only when there is reasonable assurance that
the Group will comply with any conditions attached to the grant and the grant
will be received. The grants are recognised as income over the period
necessary to match them with the related costs, for which they are intended to
compensate, on a systematic basis. The Group recognises grant income as an
item of other income.
Research and Development Expenditure Credit ('RDEC')
The Group has elected to take advantage of the RDEC introduced in the Finance
Act 2013. A company may surrender corporation tax losses on research and
development expenditure incurred on or after 1 April 2013 for a corporation
tax refund. Relief is given as a taxable credit on 13% (which increased from
12% from 1 April 2020) of qualifying research and development expenditure. The
Group recognises research and development expenditure credit as an item of
other income, taking advantage of the 'above the line' presentation, and is
recognised in the year for which the research and development relates.
3.3 Research and development expenditure
In all instances across the Group, research expenditure is expensed through
the income statement. For development expenditure, items will be expensed
where the recognition criteria for internally generated intangible assets is
not met.
The main criteria used to assess this, as required under IAS 38 - Intangible
Assets, are:
- Demonstrating technical feasibility of completing the intangible
asset;
- Intention to complete the asset;
- Ability to use or sell the asset in order to generate future
economic benefit;
- Availability of adequate technical or other resources to
complete development; and
- Ability to measure reliably the expenditure attributable to the
asset.
It was determined that the Group continued to meet the above criteria in
respect of specific developments to its TrialTracker platform and data
analytics service offering. As a result, associated development costs are
capitalised in the year in relation to TrialTracker and an intangible asset is
recognised as set out in note 14.
3.4 Share-based payments
Equity-settled share-based payments are measured at the fair value of the
equity instruments at the grant date. The fair value determined at the grant
date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of equity
instruments that will eventually vest. At each reporting date, the Group
revises its estimate of the number of equity instruments expected to vest as a
result of the effect of non-market-based vesting conditions.
Any changes that impact the original estimates, for example the effect of
employees who have left the Group in the year and have forfeited their
options, is recognised in the Consolidated Statement of Comprehensive Income
such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
Details regarding the determination of the fair value of equity-settled
share-based transactions are set out in note 22 of the consolidated financial
statements.
3.5 Employee benefits
All employee benefit costs are recognised in the Consolidated Statement of
Comprehensive Income as they are incurred. These principally relate to holiday
pay and contributions to the Group defined contribution plan.
The assets of the Group scheme are held separately from those of the Group in
independently administered funds. The Group does not offer any other
post-retirement benefits.
3.6 Leased assets
A lease is defined as a contract that gives the Group the right to use an
asset for a period of time in exchange for consideration. The Group identifies
from the contract the total length and cost of the lease contract, and
determines whether it meets the definition of a right-of-use asset.
Recognition of a right-of-use asset is met if it is longer than 12 months and
of a high value. For those leases that do not meet these criteria, the rental
charge payable under these leases are charged to the Consolidated Statement of
Comprehensive Income on a straight-line basis over the lease term.
The initial recognition and subsequent measurement of right-of-use asset
leases are:
Initial recognition
At the commencement date, the Group measures the lease liability at the
present value of future lease payments, discounted using the Group's
incremental borrowing rate. The Group also recognises a right-of-use asset
which is measured at cost, which is made up of the initial measurement of the
lease liability, any initial direct costs and an estimate of any costs to
reinstate the asset to its original condition.
Subsequent measurement
The lease liability is reduced for payments made and increased for interest,
and is remeasured for any modifications made to the lease. The right-of-use
asset is depreciated on a straight-line basis over the expected lease term.
The asset is also assessed for impairment when such indicators exist.
On the statement of financial position, right-of-use assets are included in
property, plant and equipment and lease liabilities are shown separately.
3.7 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and, where appropriate, less provisions for impairment. The initial
recognition and subsequent measurement of property, plant and equipment are:
Initial recognition
Property, plant and equipment is initially recognised at acquisition cost,
including any costs directly attributable to bringing the assets to the
location and condition necessary for them to be capable of operating. In most
circumstances, the cost will be its purchase cost, together with the cost of
delivery.
Subsequent measurement
An asset will only be depreciated once it is ready for use. Depreciation is
charged so as to write off the cost of property, plant and equipment, less its
estimated residual value, over the expected useful economic lives of the
assets.
Depreciation is charged on a straight-line basis as follows:
Office buildings over expected lease term
Leasehold improvements shorter of 5 years or the lease term
Fixtures and fittings 3 years
Equipment 3 years
The disposal or retirement of an asset is determined by comparing the sales
proceeds with the carrying amount. Any gains or losses are recognised within
the Consolidated Statement of Comprehensive Income.
3.8 Intangible assets
Acquired intangibles
Intangible assets that are acquired through business combinations are
recognised as intangible assets if they are separable from the acquired
business or arises from contractual or legal rights. These assets will only be
recognised if they are also expected to generate future economic benefits and
their fair value can be reliably measured.
Initial recognition
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
their fair value at the date of acquisition.
Subsequent measurement
Following capitalisation, the intangible assets are carried at cost less any
accumulated amortisation, and where appropriate, less provisions for
impairment.
Intangible assets are amortised using the straight-line method over their
estimated useful economic life as follows:
- Intangibles acquired through business combinations 5 years
- Computer software 3 years
- Data acquisition 5 years
Amortisation is charged to the Consolidated Statement of Comprehensive Income
and is included within cost of sales for those items directly related to
project activities, or otherwise within general and administrative expenses.
Internally generated intangible assets
Intangible assets that are capitalised internally are deemed to have met the
recognition criteria set out in IAS 38. These items relate to research and
development costs and are considered in note 3.3.
Initial recognition
Internally generated intangible assets are initially recognised at cost once
the recognition criteria of IAS 38 are met.
Subsequent measurement
Any assets that are not yet ready for use will be capitalised as assets under
construction and will not be amortised. Once the asset is ready for use,
amortisation will begin. The amortisation rates adopted are based on the
expected useful economic life of the projects to which they relate. The assets
useful economic life is as follows:
Internally generated technology 3 - 10 years
3.9 Impairment of non-current assets
Each category of non-current assets is reviewed for impairment both annually
and when there is an indication that an asset may be impaired, being when
events or changes in circumstances indicate that the carrying value may not be
recoverable. An impairment loss is recognised in the Consolidated Statement of
Comprehensive Income for the amount by which the asset's carrying value
exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less cost to
sell and value in use. Non-financial assets, other than goodwill, which have
suffered an impairment are reviewed for possible reversal of the impairment at
each reporting date.
3.10 Investments in Group undertakings
Investments in Group undertakings are initially recognised at cost and
subsequently measured at cost less any impairment provision. Investments are
subject to an annual impairment review, with any impairment charge being
recognised through the Consolidated Statement of Comprehensive Income.
Additions to investments are amounts relating to share options for the
services performed by employees of the subsidiaries of the Company and are
classified as capital contributions within note 15.
3.11 Trade and other receivables
Trade and other receivables are initially recognised at fair value and
subsequently stated at amortised cost using the effective interest method,
less any expected credit losses. The Group makes use of a simplified approach
in accounting for trade and other receivables as well as contract assets and
records the loss allowance as lifetime expected credit losses. These are the
expected shortfalls in contractual cash flows, considering the potential for
default at any point during the life of the financial instrument. In
calculating, the Group uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses.
The Group assess impairment of trade receivables on an individual basis as
they possess individual credit risk characteristics based on each client.
Refer to note 16 for further information on aging of trade receivables and an
analysis of any expected credit losses.
3.12 Taxation
Current tax
Current tax represents amounts recoverable within the United Kingdom and is
provided at amounts expected to be recovered using the tax rates and laws that
have been enacted at the Statement of Financial Position date.
Research and development credits
The benefit associated with UK-based research and development is recognised
under the UK's Research and Development Expenditure Credit scheme. Details of
the recognition are set out in note 3.3.
Deferred taxation
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements in accordance with
IAS 12 - Income taxes. Deferred tax liabilities are recognised for all taxable
temporary differences. A deferred tax asset is recognised only to the extent
that it is probable that sufficient taxable profit will be available in future
years to utilise the temporary difference. Deferred tax is not accounted for
if it arises from initial recognition of an asset or liability in a
transaction, other than a business combination, that at the time of the
transaction affects neither the accounting, nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the Statement of Financial Position date
and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets and liabilities are offset only when there is a legally
enforceable right to set off current tax assets against current tax
liabilities, they relate to income taxes levied by the same taxation authority
and the Group intends to settle these on a net basis.
3.13 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand with original
maturities at inception of 3 months or less.
3.14 Foreign currency translation
Transactions denominated in foreign currencies are translated into Great
British Pounds at actual rates of exchange prevailing at the date of
transaction. Monetary assets and liabilities expressed in foreign currencies
are translated into Great British Pounds at rates of exchange prevailing at
the end of the financial year. All foreign currency exchange differences are
taken to the Consolidated Statement of Comprehensive Income in the year in
which they arise.
Non-monetary items are not retranslated at year end and are measured at
historical cost (translated using the exchange rates at the transaction date),
except for non-monetary items measured at fair value which are translated
using the exchange rates at the date when fair value was determined.
3.15 Trade and other payables
Trade and other payables are non-interest-bearing and are initially recognised
at fair value and subsequently stated at amortised cost.
3.16 Provisions, contingent assets and contingent liabilities
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of
economic resources will be required from the Group and amounts can be
estimated reliably. The timing of such outflows may still be uncertain. Such
provisions are measured at the estimated expenditure required to settle the
present obligation based on the most reliable estimate available at the
reporting date, discounted to the present value where material.
Any reimbursement that the Group is virtually certain to collect from a third
party in relation to the related provision will be recognised as a separate
asset.
Liabilities are not recognised where the outflow of economic resources is not
probable, but are instead disclosed as contingent liabilities.
3.17 Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
3.18 Financial instruments
Financial assets and financial liabilities are recognised on the Consolidated
Statement of Financial Position when the Group or the Company becomes a party
to the contractual provisions of the instrument. Debt and equity instruments
are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangement.
Further information relating to financial instruments and the policies adopted
by the Group to manage risk is found in note 23.
4. Significant management judgement in applying accounting
policies and estimation uncertainty
When preparing the consolidated financial statements, the Directors make a
number of judgements, estimates and assumptions about the recognition and
measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying the accounting
policies of the Group that have the most significant effect on the
consolidated financial statements.
Determination of acting as agent or principal
The scope of the project or contract terms are reviewed to determine whether
the Group is acting as principal or agent. This determination depends on the
facts and circumstances of each individual project or contract and requires
judgement, which are made in accordance with the applicable standards. The
primary indicator used to determine whether the Group is acting as a principal
is whether control of the good or service is gained prior to the good or
service transferring to the client. If control is gained, revenue is
recognised on a gross basis. If no control is achieved, then revenue is
recognised on a net basis. During the year, the Group entered into a contract
with a client to arrange the delivery of products from a third party to
various client trial sites. The Group determined this was an agency
relationship. If this judgement was incorrect and the Group was acting as
principal, it would result in a material increase in revenue and cost of sales
recognised in the year and a decrease in profit margins achieved.
Capitalisation of internally developed software
Distinguishing the research and development phases of a new software product
and determining whether the requirements for the capitalisation of development
costs are met requires judgement. Management will assess whether a project
meets the recognition criteria as set out in IAS 38 based on an individual
project basis. More detail is included in note 3.3 as to the specific
considerations given to each project when determining whether to capitalise
internally developed software. Where the criteria are not met, the research
and development expenditure will be expensed in the Consolidated Statement of
Comprehensive Income. Where the recognition criteria are met, the items will
be capitalised as an intangible asset.
During the year ended 30 September 2021, total research and development
expenses totalled £2,270,000 (2020: £1,553,000). Of this amount, £1,030,000
(2020: £244,000) was capitalised as an intangible asset. The balance of
expenditure being £1,240,000 (2020: £1,309,000) is recognised in the
Consolidated Statement of Comprehensive Income as an expense.
Recovery of deferred tax assets
Deferred tax assets have not been recognised for deductible temporary
differences and tax losses. The Directors consider that there is not
sufficient certainty that future taxable profits will be available to utilise
those temporary differences and tax losses. Further information on the Group's
deferred tax asset can be found in note 20 of the consolidated financial
statements.
Estimation uncertainty
Information about estimates and assumptions that have the most significant
effect on recognition and measurement of assets, liabilities, income and
expenses is provided below. Changes to these estimations may result in
substantially different results for the year.
Determination of transaction prices in revenue recognition
Client contracts include an agreed work order so the transaction price for a
contract is allocated against each distinct performance obligations for each
service, based on their relative stand-alone selling prices. For legacy
contracts prior to the adoption of IFRS 15, management were required to
estimate the standalone price allocated to each distinct service that were
previously grouped in a single price. For new contracts, the fair value of
individual components is based on actual amounts charged by the Group on a
stand-alone basis. Management have determined that for items recognised on a
straight-line basis, including project, site and data management, the demands
of this on the company are spread evenly over the life of the revenue stream.
This was determined through an understanding of the work required to deliver
the various revenue streams and the obligations within the contract needing to
be met.
Share-based payments
The Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which
they are granted. The fair value of the options granted is measured using an
option valuation model, taking into account the terms and conditions upon
which the options were granted. Details of the estimations used in determining
the fair value of the options in issue are detailed in note 22.
Useful lives of depreciable assets
The useful lives of depreciable assets are determined by management at the
date of purchase based on the expected useful lives of the assets. These are
subsequently monitored and reviewed annually and where there is objective
evidence of changes in the useful economic lives, these estimates are
adjusted. Any changes to these estimates may result in significantly different
results for the period.
5. Revenue
An analysis of the Group's revenue by type is as follows:
2021 2020
£000 £000
Service revenue 9,190 9,532
All material revenue streams derived by the Group relate to the delivery of
services in support of clinical trials. As such, all revenue is deemed to
belong to one stream, being service revenue.
Revenue derived from services provided over time do not constitute a material
portion of revenue and therefore disclosure distinguishing between revenue
recognised at a point in time versus over time is not made.
For the year ended 30 September 2021, revenue includes £438,000 (2020:
£227,000) held in contract liabilities within trade and other payables at the
beginning of the period. This amount includes the satisfaction of performance
obligations relating to legacy contracts whereby TrialTracker deployments and
access are combined in to a single fee, with the access fee being recognised
over the duration of the project. This also includes the completion of
performance obligations for advance payments held at the end of the prior
year. Advance payments are charged to clients to de-risk start-up activities
and are recognised at a point in time once an activities performance
obligation is met.
6. Segmental information
The Board considers there to be only one core operating segment for the
Group's activities. This is based on the Group's development, commercial and
operational delivery teams operating across the entirety of the Group, which
is primarily based in the United Kingdom. The projects undertaken by the Group
are managed by project managers, who receive inputs for each project by other
team members. Performance information is reported as a single business unit to
the management team, who review the Group's management information.
The information gathered for each project is subsequently reported to the
Group's Chief Executive Officer, who is considered to be the chief operating
decision-maker. This information is used for resource allocation and
assessment of performance. Therefore, the entirety of the Group's revenue and
assets can be attributed wholly to this operating segment with reference to
the Consolidated Statement of Comprehensive Income and Consolidated Statement
of Financial Position.
During the year ended 30 September 2021, the Group had two clients (2020: one
client) that exceeded 10% of total revenue. In 2021 the individual percentage
revenue associated with these clients was 55% (£5,012,000) and 14%
(£1,248,000). In 2020, the individual percentage revenue associated with the
largest client was 65% (£6,232,000).
Geographical information
The Group's revenue can be categorised by type of revenue and by country,
based on the location of the contracting client. Sometimes clients of the
Group, which include global pharmaceutical companies with offices in multiple
locations across the world, request the Group to contract directly with their
regional offices in the United Kingdom or European locations. In such
circumstances the associated revenues are reported as being based in the
contracting location even though much of the operational execution of the
contract will include entities of the client based elsewhere in the world.
2021 2020
£000 £000
Switzerland 3,247 4,950
United Kingdom 1,983 1,473
United States of America 1,860 1,995
Netherlands 1,248 370
Ireland 482 522
Other - Europe 370 222
Revenue 9,190 9,532
As the Group is domiciled in the United Kingdom, the entirety of the revenue
originates from this location.
7. Other income
Items of other income principally relate to government grants received,
originating solely in the United Kingdom. Grants are recognised as income over
the period required to match them with the related costs, for which they are
intended to compensate, on a systematic basis.
The Group also recognises Research and Development Expenditure Credit ('RDEC')
as other income.
2021 2020
£000 £000
Grant income 288 444
RDEC 160 162
Other income 448 606
8. Auditor's remuneration
2021 2020
£000 £000
Audit services
- Group and Parent Company 33 33
- subsidiary companies 22 22
Total audit fees 55 55
Audit-related assurance services 6 6
Total auditor's remuneration 61 61
9. Employees and Directors
The average monthly number of persons (including Executive and Non-Executive
Directors) employed by the Group was:
2021 2020
Number Number
Administration 16 15
Operations, research and development 77 67
Average total persons employed 93 82
The Group uses a different metric in the measurement of key performance
indicators, and includes both the number of employees and contractors,
adjusted for the number of hours worked during the year (to account for
part-time employees). This is known as average full-time equivalents, or
FTE's, and for the year ended 30 September 2021, the average number of FTE's
was 95 (2020: 78).
The aggregate remuneration of employees in the Group was:
2021 2020
£000 £000
Wages and salaries 5,778 5,480
Social security costs 625 845
Other pension costs 269 203
Share-based payments charge 204 184
Total remuneration for staff 6,876 6,712
Staff costs capitalised (1,030) (244)
Net staff costs 5,846 6,468
The Group operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Group in
independently administered funds. The amounts outstanding at 30 September 2021
in respect of pension costs were £42,000 (2020: £31,000).
The remuneration of the Group's Directors is set out in the Directors'
Remuneration Report in the full annual report, as well as in note 24 under
related party transactions.
The Company did not directly employ any staff and therefore there is no cost
recognised in respect of staff costs.
10. Operating profit
An analysis of the Group's operating profit has been arrived at after
charging:
2021 2020
£000 £000
Research and development expenses 1,240 1,309
Sales and marketing expenses 1,146 1,579
Operating lease charges: land, buildings and printers 2 21
Depreciation of tangible assets 464 356
Loss on disposal of tangible and intangible assets - 3
Dilapidation provision release (53) -
Amortisation of intangible assets 26 26
Foreign exchange (gain) / loss 28 (17)
Administrative expenses 2,438 2,819
Total operating expenses 5,291 6,096
There is a further amortisation charge of £118,000 (2020: £56,000)
recognised in cost of sales for those items directly related to project
activities. The total amortisation charge for the year is £144,000 (2020:
£82,000).
11. Taxation
The tax charge for each period can be reconciled to the result per the
Consolidated Statement of Comprehensive Income as follows:
2021 2020
£000 £000
Profit on ordinary activities before taxation 1,160 858
Profit before tax at the effective rate of corporation tax
in the United Kingdom of 19% (2020: 19%) 220 163
Effects of:
Expenses not deductible for tax purposes 4 16
Origination and reversal of temporary differences (415) (131)
Research and development uplifts net of losses surrendered for tax credits (319) (145)
Prior period adjustment 95 3
Tax credit for the period (415) (94)
The tax credit for each period can be reconciled as follows:
2021 2020
£000 £000
Small or medium enterprise research and development credit (350) (127)
Deduction for corporation tax on RDEC 30 30
Prior period adjustment (95) 3
Tax credit for the period (415) (94)
The Group has elected to take advantage of the RDEC, introduced in the Finance
Act 2013 whereby a company may surrender corporation tax losses on research
and development expenditure incurred on or after 1 April 2013 for a
corporation tax refund.
The following is a reconciliation between the tax charge and the tax
receivable within the Consolidated Statement of Financial Position:
2021 2020
£000 £000
Current tax receivable at start of period 259 450
Current period credit 575 256
Corporation tax repayment (354) (447)
Current tax receivable at end of period 480 259
The tax credit for each period can be reconciled to the current period credit
recognised in tax receivable within the Consolidated Statement of Financial
Position in each period as follows:
2021 2020
£000 £000
Tax credit for the year 415 94
RDEC gross of corporation tax deduction 160 162
Current period credit 575 256
12. Earnings per share
The calculation of basic and diluted earnings per share ('EPS') of the Group
is based on the following data:
2021 2020
Earnings
Earnings for the purposes of basic and diluted EPS, being net profit 1,575 952
attributable to the owners of the Company (£000)
Number of shares
Weighted average number of shares for the purposes of basic EPS 47,664,319 47,036,398
Effect of potentially dilutive ordinary shares:
- Weighted average number of share options 2,749,423 513,521
Weighted average number of shares for the purposes of diluted EPS 50,413,742 47,549,919
Basic earnings per share is calculated by dividing earnings attributable to
the owners of the Company by the weighted average number of shares in issue
during the year. The diluted EPS is calculated by dividing earnings
attributable to the owners of the Company by the weighted average number of
shares in issue taking into account the share options outstanding during the
year.
The basic and diluted earnings per share for the Group and Company is:
2021 2020
Basic earnings per share 3.30p 2.02p
Diluted earnings per share 3.12p 2.00p
13. Property, plant and equipment
Group
Office Leasehold Fixtures and
building improvement fittings Equipment Total
Cost £000 £000 £000 £000 £000
At 30 September 2019 - 102 5 283 390
Adjustment on transition to IFRS 16 462 - - - 462
Additions - 44 - 549 593
Disposals - - - (1) (1)
At 30 September 2020 462 146 5 831 1,444
Additions 405 39 - 124 568
Dilapidation provision release (90) - - - (90)
At 30 September 2021 777 185 5 955 1,922
Accumulated depreciation
At 30 September 2019 - 2 2 70 74
Charge for the period 191 45 2 118 356
Disposals - - - - -
At 30 September 2020 191 47 4 188 430
Charge for the period 139 51 1 273 464
Dilapidation provision release (53) - - - (53)
At 30 September 2021 277 98 5 461 841
Net book value
At 30 September 2020 271 99 1 643 1,014
At 30 September 2021 500 87 - 494 1,081
The only right-of-use asset is held within the office building category. At 30
September 2021, the carrying amount of the right-of-use asset was £500,000
(2020: £271,000).
Company
At 30 September 2021 and 30 September 2020, the Company had no property, plant
and equipment.
14. Intangible assets
Group
Other acquired intangibles Other internally developed technology Next generation TrialTracker platform Total
£000 £000 £000 £000
Cost
At 30 September 2019 182 161 - 343
Additions 75 195 318 588
Impairment - (4) - (4)
At 30 September 2020 257 352 318 927
Additions 60 179 1,819 2,058
Transfers (107) 107 - -
At 30 September 2021 210 638 2,137 2,985
Accumulated amortisation
At 30 September 2019 34 17 - 51
Amortisation 31 51 - 82
Impairment - (2) - (2)
At 30 September 2020 65 66 - 131
Amortisation 39 105 - 144
At 30 September 2021 104 171 - 275
Net book value
At 30 September 2020 85 393 318 796
At 30 September 2021 106 467 2,137 2,710
Amortisation is charged to the Consolidated Statement of Comprehensive Income
and is included within cost of sales for those items directly related to
project activities, or otherwise within general and administrative expenses.
Internally developed technology
The Group has capitalised research and development costs during the year in
relation to the development of its proprietary TrialTracker software.
Development includes TrialTracker platform upgrades as well as additional
algorithm development. The costs capitalised include time and expenses in
relation to staff costs. In recognising these assets, the Group has applied
the recognition criteria of IAS 38 relating to internally generated intangible
assets, where costs in relation to the development phase must be capitalised
under certain circumstances. More information in relation to this is included
in the accounting policies of the Group in notes 3 and 4.
Assets under construction
Assets that are still under construction undergo an annual impairment test
which is carried out at the end of the reporting period. This impairment test
considers the carrying amount of the asset and compares it with its
recoverable amount, with an impairment being recognised if the recoverable
amount is lower than the carrying amount. Management have determined the
recoverable amount as being the value-in-use, which is calculated using
management expectations of future revenues, discounted at an applicable rate.
There was no indication of impairment at the year end. Whilst the asset
remains under construction, amortisation is not charged.
Company
At 30 September 2021 and 30 September 2020, the Company had no intangible
assets.
15. Investments
The consolidated financial statements of the Group as at 30 September 2021 and
at 30 September 2020 include:
Name of subsidiary Class of share Country of incorporation Principal activities
Directly held:
IXICO Technologies Limited Ordinary United Kingdom Data collection and analysis of neurological diseases
Indirectly held:
IXICO Technologies Inc. Ordinary United States Sales and marketing
The Company and Group has no investments other than the holdings in the above
subsidiaries that are all 100% owned. The carrying amounts of the investments
in subsidiaries for the Company are:
Company
2021 2020
£000 £000
Investments in subsidiary undertakings
At beginning of the period 5,623 5,516
Capital contribution 125 107
Total investments at end of the period 5,748 5,623
The capital contribution represents the charge in the year for share-based
awards issued by the Company to employees of IXICO Technologies Limited and
IXICO Technologies Inc.
16. Trade and other receivables
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Trade receivables 2,613 1,395 - -
Less: expected credit losses - - - -
Net carrying amount of trade receivables 2,613 1,395 - -
Other taxation and social security 11 137 2 19
Prepayments and accrued income 552 550 19 30
Other receivables 18 - - -
Amounts due from subsidiary undertakings - - 3,528 4,206
Trade and other receivables 3,194 2,082 3,549 4,255
All amounts are classified as short-term and are expected to be received
within one year. The average credit period granted to clients ranges from 30
to 90 days (2020: 30 to 90 days).
A provision for expected credit losses is made when there is uncertainty over
the ability to collect the amounts outstanding from clients. This is
determined based on specific circumstances relating to each individual client.
The Directors consider that there are immaterial credit losses (2020:
immaterial credit losses) due to the calibre of customers the Group has and so
the carrying amount of trade and other receivables approximates their fair
value.
Within the Company, there are expected to be immaterial credit losses (2020:
immaterial credit losses) from subsidiary companies due to the level of cash
available in the subsidiaries which would allow the repayment of these
receivables immediately.
As at the year-end, the ageing of trade receivables which are past due but not
impaired is as follows:
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Amounts not past due 2,613 1,372 - -
Past due:
Less than 30 days - 23 - -
Total trade receivables 2,613 1,395 - -
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of financial assets disclosed in note 23.
17. Trade and other payables
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Current liabilities
Trade payables 734 176 15 13
Other taxation and social security 42 171 - -
Contract liabilities 475 761 - -
Accrued expenses 953 1,294 65 60
Other payables 13 5 - -
2,217 2,407 80 73
Non-current liabilities
Accrued expenses 114 167 - -
Total trade and other payables 2,331 2,574 80 73
Trade payables and accrued expenses principally comprise amounts outstanding
for trade purchases and ongoing costs. No interest is charged on the trade
payables. The Group's policy is to ensure that payables are paid within the
pre-agreed credit terms and to avoid incurring penalties and/or interest on
late payments.
The fair value of trade and other payables approximates their current book
values.
Reconciliation of liabilities arising from financing activities
The only liabilities affecting financing activities arise solely from the
recognition of the lease liability:
Total
£000
Lease liability as at 1 October 2019 -
Adoption of IFRS 16 372
Revised lease liability as at 1 October 2019 372
Cash-flow: Repayment of lease (177)
Non-cash: Interest charge 18
Lease liability as at 30 September 2020 213
Lease liability as at 1 October 2020 213
Cash-flow: Repayment of lease (44)
Non-cash: Interest charge 22
Non-cash: Remeasurement following lease modification 406
Lease liability as at 30 September 2021 597
18. Provisions
The provision balance consists of dilapidations and other provisions. The
movements and carrying amounts in the provision account are as follows:
Total
£000
Carrying amount 1 October 2020 190
Release of provisions (190)
Carrying amount 30 September 2021 -
Current -
Non-current -
Part of the prior year provision relates to the office building and was the
estimated cost of returning the property in its original condition at the end
of the lease. Following the renegotiation of the lease agreement in the year,
the requirement to return the property to its original condition is no longer
a contractual obligation.
The remaining part of the provision related to a legal matter which has
successfully concluded during the year.
19. Leases
All lease liabilities are presented in the statement of financial position as
follows:
Group
2021 2020
£000 £000
Current 78 168
Non-current 519 45
597 213
The Group uses leases throughout the business for office space and IT
equipment. With the exception of short-term leases and leases of low value,
each lease is reflected on the balance sheet as a right-of-use asset in
property, plant and equipment and a lease liability.
Each lease generally imposes a restriction that, unless there is a contractual
right for the Group to sublet the asset to another party, the right-of-use
asset can only be used by the Group. For leases over office buildings, the
Group must keep those properties in a good state of repair.
The Group has identified one lease relating to the office building that meets
the definition of a right-of-use asset. There is no option to purchase and
payments are not linked to an index. Following a renegotiation of the lease
agreement in the year, the remaining lease term is 60 months (2020: 17
months). The lease has the ability to be extended at the end of this term and
can be terminated on the break date being after 3.5 years from the date the
lease was renegotiated.
As a result of the lease renegotiation, the lease liability was remeasured at
the modification date, which takes into account payment dates, the incremental
borrowing rate available to the Group, any rent-free periods, and the expected
length of the lease. The remeasurement resulted in an increase to the
right-of-use asset and lease liability.
The Group has elected to not recognise a lease liability for short-term
leases, being 12 months or less, or for leases of low value. Payments for
these are expensed on a straight-line basis.
Right-of-use asset and lease liability
Additional information on the right-of-use asset is as follows:
Asset Depreciation Carrying amount
£000 £000 £000
Office building 777 (277) 500
The various elements recognised in the financial statements are as follows:
2021 2020
£000 £000
Statement of Comprehensive Income
Depreciation charge in the year 139 191
Release of dilapidation provision (53) -
Interest expense on lease liability 22
Low value leases expensed in the year 2 1
Statement of Cash Flows
Capital repayments on lease agreements 44 177
The undiscounted maturity analysis of lease liabilities for the office
building is as follows:
Within 1 year 1 - 2 years 4 - 5 years Total
2 - 3 years 3 - 4 years
30 September 2021
Lease payments 111 155 132 166 133 697
Finance charges (33) (29) (20) (14) (4) (100)
Net present value 78 126 112 152 129 597
30 September 2020
Lease payments 177 45 - - - 222
Finance charges (8) (1) - - - (9)
Net present value 169 44 - - - 213
At 30 September 2021, the Group's commitment to short-term and low-value
leases was £nil (2020: £nil).
20. Deferred tax
Deferred tax asset (unrecognised)
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Tax effect of temporary differences:
Depreciation in excess of tax allowances 891 292 (1) (1)
Accumulated losses (17,098) (12,657) (3,038) (1,966)
Deductible temporary differences (51) (140) (20) (14)
Deferred tax asset (unrecognised) (16,258) (12,505) (3,059) (1,981)
The unrecognised deferred tax asset predominantly arises due to unused tax
losses carried forward that have originated but not reversed at the
Consolidated Statement of Financial Position date from transactions or events
that result in an obligation to pay more tax in the future or a right to pay
less tax in the future.
The unrecognised deferred tax asset is measured on an undiscounted basis at
the tax rates that are expected to apply in the periods in which temporary
differences will reverse. Based on tax rates and laws enacted or substantively
enacted at the latest balance sheet date, the rate when the above temporary
differences are expected to reverse is currently 25% (2020: 19%).
21. Issued capital and reserves
Ordinary shares and share premium
The Company has 1 class of ordinary shares. The share capital issued has a
nominal value of £0.01 and each share carries the right to one vote at
shareholders' meetings and all shares are eligible to receive dividends. Share
premium is recognised when the amount paid for a share is in excess of the
nominal value.
The Group and Company's opening and closing share capital and share premium
reserves are:
Group and Company
Ordinary Share Share
shares capital premium
Number £000 £000
Authorised, issued and fully paid
At 30 September 2020 47,091,292 471 84,499
Share options exercised 1,060,081 11 303
At 30 September 2021 48,151,373 482 84,802
Exercise of share options
During the period, the following share options were exercised:
Key management personnel Other Total Exercise Value
employees price
Date of exercise Shares Shares Shares Pence £
07/01/2021 - 10,039 10,039 49.0 4,919
07/01/2021 - 25,098 25,098 30.5 7,655
07/01/2021 - 10,039 10,039 36.5 3,664
05/02/2021 112,942 - 112,942 30.5 34,447
05/02/2021 43,529 - 43,529 34.0 14,800
04/03/2021 676,582 - 676,582 36.5 246,952
29/06/2021 - 181,852 181,852 1.0 1,819
Total 833,053 227,028 1,060,081 314,256
This resulted in an increase in share capital of £10,601 and an increase in
share premium of £303,655.
Other reserves
Accumulated losses
This reserve relates to the cumulative results made by the Group and Company
in the current and prior periods.
Merger relief reserve
In accordance with Section 612 'Merger Relief' of the Companies Act 2006, the
Company issuing shares as consideration for a business combination, accounted
at fair value, is obliged, once the necessary conditions are satisfied, to
record the share premium to the merger relief reserve.
Reverse acquisition reserve
Reverse accounting under IFRS 3 'Business Combinations' requires that the
difference between the equity of the legal parent and the issued equity
instruments of the legal subsidiary, pre-combination, is recognised as a
separate component of equity.
Capital redemption reserve
This reserve holds shares that were repurchased and cancelled by the Company.
Foreign exchange translation reserve
This reserve represents the impact of retranslation of overseas subsidiaries
on consolidation.
22. Share-based payments
Certain Directors and employees of the Group hold options to subscribe for
shares in the Company under share option schemes. All share options relate to
a single scheme outlined in the EMI Share Option Plan 2014.
The scheme is open, by invitation, to both Executive Directors and employees.
Participants are granted share options in the Company which contain vesting
conditions. These are subject to the achievement of individual employee and
Group performance criteria as determined by the Board. The vesting period
varies by award and the conditions approved by the Board. Options are usually
forfeited if the employee leaves the Group before the options vest.
Total share options outstanding have a range of exercise prices from £0.01 to
£0.70 per option and the weighted average contractual life is 7.7 years
(2020: 7.9 years). The total charge for each period relating to employee
share-based payment plans for continuing operations is disclosed in note 9 of
the consolidated financial statements.
Details of the share options under the scheme outstanding during the period
are as follows:
2021 2020
Number Weighted average exercise price Number Weighted average exercise price
Outstanding at start of the period 4,438,512 £0.17 3,690,572 £0.18
Granted 475,000 £0.52 1,990,000 £0.17
Exercised (1,060,081) £0.30 (188,998) £0.34
Lapsed (37,500) £0.36 (1,053,062) £0.17
Outstanding at end of the period 3,815,931 £0.18 4,438,512 £0.17
Exercisable at end of the period 998,766 £0.07 1,118,581 £0.36
During the year to 30 September 2021, there was 1 issue of share options
awarded (2020: 2 issues of share options). Details of this award is provided
below.
26 July 2021
Share options totalling 475,000 were granted on 26 July 2021 to employees of
the Group with an exercise price of £0.52. In this grant there were 2
conditions attached, each relating to 50% of the options issued, each
representing 237,500 options. The first condition is subject to a level of
profitability being achieved with the second condition being linked to
service. Both conditions will be measured over a 3-year period.
The model used to value the grants was the Monte Carlo method followed by
'Hull White' trinomial lattice and the inputs used were as follows:
5 December 2019 6 July 2020 26 July 2021
Weighted average share price £0.70 £0.70 £0.69
Weighted average exercise price £0.01 £0.70 £0.52
Expected volatility 66.7% 64.4% 62.9%
Expected life 5 years 10 years 10 years
Expected dividend yield 0% 0% 0%
Risk-free interest rate 0.55% -0.05% 0.30%
23. Financial risk management
In common with all other areas of the business, the Group is exposed to risks
that arise from the use of financial instruments. This note describes the
Group's objectives, policies and processes for managing those risks and the
methods used to measure them.
The main risks arising from the Group's financial instruments are liquidity,
interest rate, foreign currency and credit risk. The Group's financial
instruments comprise cash and various items such as trade receivables and
trade payables, which arise directly from its operations.
Categories of financial instruments
Group Company
2021 2020 2021 2020
£000 £000 £000 £000
Financial assets held at amortised cost
Trade and other receivables excluding prepayments 3,331 1,960 3,530 4,225
Cash and cash equivalents 6,684 7,945 1,845 1,705
10,015 9,905 5,375 5,930
Financial liabilities held at amortised cost
Trade and other payables excluding statutory liabilities 1,838 2,003 80 73
Lease liabilities 597 213 - -
2,435 2,216 80 73
Fair value of financial assets and liabilities
There is no material difference between the fair values and the carrying
values of the financial instruments because of the short maturity period of
these financial instruments or their intrinsic size and risk.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its
obligations as they fall due through having insufficient resources. The Group
monitors its levels of working capital to ensure that it can meet its
liabilities as they fall due. Ultimate responsibility for liquidity risk
management rests with the Board, which has built an appropriate framework for
the management of the Group's short-, medium- and long-term funding and
liquidity requirements.
The principal current asset of the business is cash and cash equivalents and
is therefore the principal financial instrument employed by the Group to meet
its liquidity requirements. The Board ensures that the business maintains
surplus cash reserves to minimise any liquidity risk.
The financial liabilities of the Group and Company are all mostly due within 3
months (2020: 3 months) of the Consolidated Statement of Financial Position
date, with the exception of the lease liability. Further analysis of the lease
liability is provided in note 19. All other non-current liabilities are due
between 1 to 5 years after the period end. The Group does not have any
borrowings or payables on demand which would increase the risk of the Group
not holding sufficient reserves for repayment.
Market risk
Interest rate risk management
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rate. The Group operates an interest rate policy designed to minimise interest
costs and reduce volatility in reported earnings.
The Group holds all cash and cash equivalents with institutions with a
recognised high credit rating. Interest rates on current accounts are
floating. Changes in interest rates may increase or decrease the Group's
finance income.
The Group does not have any committed interest-bearing borrowing facilities
and consequently there is no material exposure to interest rate risk in
respect of financial liabilities.
Foreign currency risk management
Foreign currency risk is the risk that the fair value or future cash flows of
a foreign currency exposure will fluctuate because of changes in foreign
exchange rates.
The Group's exposure to the risk of changes in foreign exchange rates relates
to the Group's overseas operating activities, primarily denominated in US
Dollars and Euros. There is also an investment by the Company in a foreign
subsidiary. The Group's exposure to foreign currency changes for all other
currencies is not material.
During the year, the Group has not made use of financial instruments to
minimise any foreign exchange gains or losses, and fluctuations in foreign
exchange movements are reflected in the results from operating activities. The
Group seeks to minimise the exposure to foreign currency risk by matching
local currency income with local currency costs where possible. The Group will
use financial instruments to minimise foreign exchange fluctuations where it
is appropriate to do so.
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities as at 30 September are as follows:
Group Company
2021 2020 2021 2020
US Dollar exposure USD'000 USD'000 USD'000 USD'000
Balance at end of period
Monetary assets 1,224 469 - -
Monetary liabilities (612) (170) - -
Total exposure 612 299 - -
Group Company
2021 2020 2021 2020
Euro exposure EUR'000 EUR'000 EUR'000 EUR'000
Balance at end of period
Monetary assets 450 304 - -
Monetary liabilities (24) (32) - -
Total exposure 426 272 - -
Foreign currency sensitivity analysis
As at 30 September 2021, the sensitivity analysis assumes a +/-10% change of
the USD/GBP and EUR/GBP exchange rates, which represents management's
assessment of a reasonably possible change in foreign exchange rates (2020:
10%). The sensitivity analysis was applied on the fair value of financial
assets and liabilities.
2021 2020
10% weaker(1) 10% stronger 10% weaker 10% stronger
£000 £000 £000 £000
US Dollar (61) 61 (23) 23
Euro (43) 43 (25) 25
(104) 104 (48) 48
(1) 10% weaker relates to the Great British Pound strengthening against the
currency and therefore the Group would be in a weaker monetary position.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
financial assets are cash and cash equivalents and trade and other
receivables. The carrying value of these assets represents the Group's maximum
exposure to credit risk in relation to financial assets.
The Group's credit risk is primarily attributable to its trade receivables.
The amounts presented in the Consolidated Statement of Financial Position are
net of allowances for any expected credit losses, estimated by the Group's
management based on prior experience and their assessment of the current
economic environment, and any specific criteria identified in respect of
individual trade receivables. An allowance for expected credit losses is made
where there is an identified loss event, which, based on previous experience,
is evidence of a reduction in the recoverability of future cash flows. There
are no outstanding expected credit losses identified at 30 September 2021
(2020: nil).
Prior to entering into an agreement to provide services, the Group makes
appropriate enquiries of the counterparty and independent third parties to
determine creditworthiness. The Group has not identified any significant
credit risk exposure to any single counterparty or Group of counterparties as
at the period end.
The Group and Company continually reviews client credit limits based on market
conditions and historical experience. Any provision for impairment, as well as
the ageing analysis of overdue trade receivables, is set out in note 16.
The Group and Company's policy is to minimise the risks associated with cash
and cash equivalents by placing these deposits with institutions with a
recognised high credit rating.
Capital risk management
The Group considers capital to be shareholders' equity as shown in the
Consolidated Statement of Financial Position, as the Group is primarily funded
by equity finance and is not yet in a position to pay a dividend. The Group
had no borrowings at 30 September 2021 (2020: £nil).
The objectives when managing capital are to safeguard the Group's ability to
continue as a going concern in order to provide returns for shareholders and
for other stakeholders. In order to maintain or adjust the capital structure
the Group may return capital to shareholders or issue new shares.
24. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
Remuneration and transactions of Directors and key management personnel
Key management remuneration:
2021 2020
£000 £000
Short-term employee benefits 1,317 1,905
Post-employment benefits 27 27
Other long-term benefits 46 104
Termination benefits - 74
Share-based payments 171 170
Total remuneration 1,561 2,280
Key management includes Executive Directors, Non-Executive Directors and
senior management who have the responsibility for managing, directly or
indirectly, the activities of the Group.
The aggregate Directors' remuneration, including employers' National Insurance
and share-based payments' expense, was £1,028,000 (2020: £1,256,000) and
aggregate pension of £15,000 (2020: £12,000). Further detail of Directors'
remuneration is disclosed in the Directors' Remuneration Report in the full
annual report.
Transactions with group companies
The Company is responsible for financing and setting Group strategy. The
Company's subsidiaries carries out the Group's research and development
strategy, employs all employees, including the Executive Directors, and
manages the Group's intellectual property. As a result, a management charge is
made between the subsidiaries and the Company for the services provided by the
subsidiaries on behalf of the Company. Similarly, as share options are issued
in the Company for employees of the subsidiaries, a charge is made between the
Company and its subsidiaries.
Intercompany balances are unsecured and are interest bearing at 6%, with no
fixed date of repayment but are repayable on demand. The intercompany balance
also includes specific funding provided by the Company, which attracts a 0%
interest rate.
Outstanding balances related to subsidiary undertakings are disclosed in note
16. During the year, the following transactions occurred with related parties:
2021 2020
£000 £000
Charges from subsidiaries:
Management recharge from subsidiaries 611 653
Net interest charged 29 2
Charges to subsidiaries:
Share option charge 125 107
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