REG - IXICO plc - Financial Results for the year ended 30 Sept 2022
07/12/2022 07:00
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RNS Number : 8243I IXICO plc 07 December 2022
7 December 2022
IXICO plc
("IXICO" or the "Group")
Financial Results for year ended 30 September 2022
Board succession planning & Notice of AGM
IXICO plc (AIM: IXI), the AI data analytics company delivering insights in
neuroscience, announces its results for the year ended 30 September 2022.
Highlights:
Financial:
· £8.6 million revenues (2021: £9.2 million) reflects existing and new
client contracts partially offset by material client trial cessations (as
first announced in March 2021);
· Gross margin of 61% (2021: 66%) reflects an increased proportion of
revenues relating to early phase trials;
· EBITDA(1) of £1.5 million (2021: £1.7 million) reflects a fourth
consecutive year of profitability and is in line with market expectations;
· Closing cash of £5.8 million (2021: £6.7 million), incorporating
operating cash(2) inflows of £0.9m (2021: £0.3m) offset by long-term
technology investments of £2.2 million (2021: £2.2 million); and
· Closing balance sheet (net assets) increased to £12.5 million
(2021(3): £11.5 million) as the Group continues investing for the long term
to address the growing neurological clinical trials market opportunity.
Operational & Commercial:
· 2022-2027 5-year strategy 'Precision in Neuroscience' targeting
further market penetration;
· HD-IH consortium agreement with CHDI, UniQure and PTC therapeutics
applying IXICO's AI technology to create the world's leading data set on
quantitative magnetic resonance imaging (MRI) in Huntington's disease;
· Release of IXIQ.Ai analysis platform, to support the requirement for
improved predictive insights from MRI imaging biomarkers across
neurodegenerative therapeutic indications;
· Closing order book of £16.0 million (2021: £18.8 million) future
years' contracted revenues;
· £12.6 million of new client contracts in 2022, including 11 new
projects, further diversifying the order book; and
· End-to-end services delivered to 24 clients across over 10
neurological therapeutic indications.
(1)Earnings before interest, tax, depreciation, and amortisation
(2)Operating cash excluding R&D tax credit inflows
(3)Restated
Giulio Cerroni, CEO of IXICO, said: "2022 has been a year of significant
achievement. Whilst delivering a strong set of financial results, we have
simultaneously enhanced the capabilities and global reach of IXICO as a
specialist Neuroimaging CRO. Building on the resilience demonstrated by the
Group in recent years, our strong balance sheet supports the execution of our
renewed five-year strategic plan to commercialise and deploy a "broad and
deep" portfolio of specialist neuroimaging services. Specifically, this
includes the analysis of neuroimaging biomarkers as objective measures to
improve patient selection, monitor patient safety and determine efficacy of
new potential investigative treatments."
Board Succession planning
In line with current governance best practice guidelines, and as Charles
Spicer has now served for nine years as a Non-Executive Director, the Board
has agreed that Charles will retire from the role of Board Chair during 2023.
Mark Warne, a current Non-Executive Director, will at that time assume the
role of Chair. The Group has initiated a search for a new Non-Executive
director and Charles will remain on the Board for a period of time as deemed
appropriate by the Board to ensure a smooth handover of Board and
sub-committee roles as part of a well-managed governance process.
Giulio Cerroni, CEO of IXICO, said: "I and the rest of the Board are
tremendously grateful for all that Charles has given to IXICO. His
leadership of the Board has been balanced and considered at all times over the
years as he has been a wonderful adviser to me and to my leadership team. I
am delighted that Charles has confirmed he is willing to remain on the Board
whilst we undertake a managed transition of the roles within the Board and I
look forward to continuing to work closely with him and with Mark across
2023."
Notice of AGM
IXICO announces that its 2023 Annual General Meeting ("AGM") will be held at
CCT Venues Smithfield, Two East Poultry Avenue, Smithfield, London EC1A 9PT on
27 January 2023 at 10.30am.
The full Annual Report and Accounts, along with Notice of AGM, will be posted
to shareholders on 16 December 2022 and at the same time will be made
available on the Group'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 (0) 20 3763 7499
Giulio Cerroni, Chief Executive Officer
Grant Nash, Chief Financial Officer
Cenkos Securities PLC (Nominated adviser and sole broker) +44 (0) 20 7397 8900
Giles Balleny / Max Gould (Corporate Finance)
Michael F Johnson / Tamar Cranford Smith (Sales)
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 @IXICOnews
Chair's statement
Focussing on investments and early phase trials is providing a bedrock for a
return to growth
Setting a purpose-driven strategy designed to benefit all stakeholders
Overview
As uncertainty around the globe continues, it is ever more important for
companies to hold themselves accountable to increased investor and societal
scrutiny with interest focussed not just on corporate financial returns but
also on the benefits (or harm) that any company is delivering to society and
the global environment. Businesses are rightly expected to be managed in a
manner accountable to both direct stakeholders (i.e. shareholders, clients,
suppliers and employees) as well as the broader indirect stakeholders. It is
with this perspective that the IXICO Board has sought to direct its governance
activities over the past 12 months.
Given what was a challenging year for IXICO, the Board is particularly pleased
with how the Group has enhanced its focus and purpose. IXICO has invested in
technologies that elevate insights into the safety and efficacy of urgently
needed new drugs in neurological disease areas. This investment enhances the
likelihood of our biopharmaceutical clients bringing disease modifying drugs
to rapidly increasing populations of AD, PD, HD and other rare and orphan
neurological diseases.
Delivering the groundwork for future growth
Despite the cancellation of three large client trials between March 2021 and
January 2022, the Group has delivered a year of stable revenues and continued
strong EBITDA. As importantly, we have further accelerated the
diversification of those clients and projects that constitute our order book,
something the Board identified in 2020 as a key priority to build the project
pipeline that underpins future growth.
Developments and breakthroughs in scientific understanding of neurological
disease in the drug development process continue, but so also do drug
development failures. Neurological clinical trials will fail and so having an
order book sufficiently diversified across projects, clients and trial phases
is essential to deliver sustainable growth and to build operational scale.
The Group has delivered this despite the post-COVID challenges arising from an
increasingly active jobs market and inflationary headwinds. Those companies
that have responded best to such challenges are those that foresaw them and
acted proactively to address them. The Board is proud that IXICO was one
such company.
During the year we further improved our hybrid working model. Recognising
that communication avenues between clients and suppliers are changing, we have
adjusted our commercial approach accordingly. We also appreciate the
pressures experienced by our employees due to the cost-of-living crisis and
are proactively supporting them.
As IXICO continues to scale and implements new market needed solutions in
image biomarker analysis, the Board believes it is most important to expand
our commercial reach to drive increased client diversification and
penetration. Broadening market awareness of the IXICO brand, particularly
across North America, is critical to ensure our market leading offering is
understood and accessible by an increasing share of the available market.
Governance and people
IXICO's future depends on our people and the Board thanks all our employees
for their hard work, dedication and flexibility. As a Group we continue to
promote our values - Aspiration, Ability, Agility and Accountability - to
augment our positive, motivated, and effective culture and align our team with
our purpose.
The Board has been closely involved as the Group has renewed its five-year
strategy for the period 2022-27, meeting formally nine times during the year
with several additional ad-hoc meetings to discuss specific topics. The Group
uses the ten principles outlined in the Quoted Companies Alliance ('QCA')
Corporate Governance Code to ensure it maintains appropriate governance
arrangements and the Board conducts itself in a manner which places IXICO's
values and the QCA principles at the core of our culture.
At the 2023 Annual General Meeting ('AGM'), in accordance with the Company's
Articles of Association, Giulio Cerroni will stand for re-election and Kate
Rogers will stand for election, supported by the Board of Directors'
recommendation.
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.
Outlook
The Board remains focussed on the Group's opportunity to grow and is delighted
with the progress made over the last 12 months in building up its order book
following client trial failures.
We expect to continue this progress over the coming 12 months. While 2023
will see a short-term contraction in revenues as the full impact of recent
client trial failures is felt in the Group's short-term revenues, continued
traction in the market, coupled with successful wins of new early phase
trials, should provide the bedrock for a return to growth over the medium and
long term.
IXICO is well positioned in its market which continues to grow and attract new
investment in the global pursuit of therapies to neurological diseases that
impact the lives of millions of people and impose significant social and
economic burdens. We are a small but important part of the solution to this
high unmet medical need and the Board are proud of the way that the Group
approaches its business activities with this significant responsibility held
firmly at the front of mind.
Charles Spicer
Non-Executive Chair
Chief Executive's Statement
Building on the successes of previous years.
Executing our five year Precision in Neuroscience strategy
A year of achievement
We have delivered 2022 revenues of £8.6 million at a gross margin of over 60%
and achieved EBITDA profitability of £1.5 million, an EBITDA margin of 18%.
We have simultaneously enhanced the capabilities and global reach of IXICO as
a specialist neuroimaging CRO. Building on the resilience demonstrated by the
Group in recent years, our strong balance sheet supports the execution of our
renewed five-year strategic plan to commercialise and deploy a 'broad and
deep' portfolio of specialist neuroimaging services. Specifically, this
includes the analysis of neuroimaging biomarkers as objective measures to
improve patient selection, monitor patient safety and determine efficacy of
new potential investigative treatments.
I am pleased to highlight several of these achievements and share details of
the strategic pillars that underpin our ambitious goals for the period 2022 to
2027.
Delivering on our purpose
Our purpose is to enable the advance of medicine and human health in an
increasingly broad range of neurodegenerative diseases. New services
developed in our data analytics offering during 2022 have further strengthened
our position to deliver on this purpose, underlined by over £12 million of
new contracts signed during the year with new and existing clients.
During the year, I have articulated our Precision in Neuroscience strategy for
the period 2022 to 2027, focussing on precision in neuroscience. The detail of
this is communicated further in the full annual report. This reflects the
completion of the five-year strategy that I set out on joining IXICO in 2017,
which has driven substantial development of our scientific, technological and
operational capabilities. This has seen a more than doubling of our revenues
and a rapid move to profitability, all of which strengthen our ability to
support our clients and deliver on our purpose.
This strategic renewal comes at a time when the Group has faced significant
short-term challenges following client decisions to halt three large trials
being supported by the Group; but also at a time when significant
breakthroughs are being seen which enhance the medium and long-term
opportunity for us. These include the increased adoption of imaging
biomarkers in neurological diseases clinical trial protocols, together with
new scientific approaches to addressing these diseases. These advances,
alongside an aging global population and escalating associated healthcare
costs are further developing the market opportunity for our services. In
particular, we see promising momentum and opportunity in clinical development
programmes of new investigative treatments for Alzheimer's disease.
Patient need, societal benefit, and market opportunity
We are achieving our purpose by building our specialist position in
neurodegenerative conditions, which continues to be a focus of significant
R&D investment by the global biopharmaceutical industry.
Clinical development in neurology is recognised as amongst the most
challenging of therapeutic areas and will frequently mean that clinical trials
will not reach regulatory approval. However, the potential quality of life
benefits of new treatments to many millions of patients and families, and to
society in general, supports the conviction that we are on a path of continued
and accelerating clinical development and healthcare system investments in
neurological conditions.
IXICO is well positioned to capitalise on the expected corresponding growing
demand for neuroimaging biomarker analytics services. In addition to our
strong innovation roadmap, we continue to invest in our technology and
operational capabilities.
As we address an increasing number of client opportunities, it is important to
demonstrate our ability to deliver our services, efficiently and at scale;
accompanied by a secure and resilient infrastructure. In recent years, we
have made significant capital investments in both our IT infrastructure and in
the development of our next generation, Microsoft Azure-cloud based,
TrialTracker platform. This will be deployed in 2023, enabling greater
agility, enhanced client service levels and support new commercial services to
support our long-term growth ambitions.
Executing on our forward-looking strategy
Our goal over the next five-year period is to establish IXICO as a global
neuroimaging specialist CRO of scale. Our strategy is to continue to build a
leadership position in rare diseases, such as Huntington's disease, whilst
capitalising on the growing demand for neuroimaging services in Alzheimer's
disease, Parkinson's disease and Multiple Sclerosis. Having established
agreements for neuroimaging services with an increasing portfolio of leading
biopharmaceutical clients, these act as a 'springboard for growth' by
enhancing access to new prospective clinical trials being initiated in these
large adjacent therapeutic areas.
As we enter the new year with £5.8m cash and remain debt free, our strong
balance sheet enables us to support the necessary investments required to
support the five pillars underpinning our ambitious growth strategy for the
period 2022 to 2027.
Most of all, we are a people business
I have spoken to how ongoing investments in our technology platform and
innovation roadmap ensures we continue to deliver superior AI driven analytics
services, through our CRO project management infrastructure, utilising our
end-to-end imaging technology platform. However, most important of all is
the talent and commitment of my colleagues at IXICO. Our employees drive our
performance, and I am proud of the organisation's tireless commitment to
support our clients and enable continued progress in achieving our purpose. I
would like to sign off this year, as in previous, in thanking all my
colleagues at IXICO for another year of exceptional progress in achieving our
purpose of advancing medicine and human health in neurological diseases. I
look forward to 2023 being another year in which IXICO further develops its
position as a trusted technology partner to the global biopharmaceutical
industry.
Giulio Cerroni
Chief Executive Officer
Financial review
Strategically reinvesting profits to deliver on our purpose.
Sustained profitability and a strengthened balance sheet aimed at delivering
future growth.
In 2022, the Group has delivered a year of continued strong EBITDA
profitability despite a reduction in revenues following the cessation of its
three largest client trials between March 2021 and January 2022. Further,
whilst revenues are expected to contract in 2023, the underlying strength of
the Group's order book has developed across the second half of 2022, both in
terms of total value and the diversification of clients and projects. The
Group continues to generate operating cash inflows, supporting its programme
of investment which is designed to capture increased market share, in a
growing market, across the medium and longer-term.
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 2022 2021 Movement
Restated
Revenue £8.6m £9.2m £0.6m ↓
Gross profit £5.2m £6.0m £0.8m ↓
Gross margin 60.7% 65.6% 490bps ↓
EBITDA profit £1.5m £1.7m £0.2m ↓
Operating profit £0.9m £1.1m £0.2m ↓
Profit per share 2.14p 3.17p 1.03p ↓
Order book £16.0m £18.8m £2.8m ↓
Net assets £12.5m £11.5m £1.0m ↑
Cash £5.8m £6.7m £0.9m ↓
Non-current asset investments £2.3m £2.6m £0.3m ↓
Revenue
Revenue for the year of £8.6 million (2021: £9.2 million) represents a
year-on-year contraction of 6%.
This contraction was caused by three large client trial cessations arising
across 2021 and early 2022, each materially impacting future revenues.
Replacing the revenues lost from these trials takes time, both in contracting
and initiating new trials and reflecting that those new trials will tend to be
lower value, earlier phase trials compared to the large, failed trials (which
were predominantly late stage). Positively, the Group signed £12.6 million
of new client contracts during the year, reflecting its continued traction in
expanding its position within the market.
The Group will therefore see a reduction in revenues in 2023 but expects this
to be a short-term contraction whilst new trials are contracted and initiated.
Gross profit
The Group reports gross profit of £5.2 million for the year (2021: £6.0
million). This equates to a gross margin of 61% (2021: 66%). Whilst gross
margin remains strong, it has reduced on the prior year reflecting both the
reduction in revenues and a revenue mix increasingly reflective of earlier
phase trials, which tend to be lower margin.
Looking forward, as early phase trials continue to increase as a proportion of
revenues delivered, we expect that gross margins will contract. Beyond 2023,
as the Group wins additional trials, the operational leverage opportunity
within the Group's cost structure supports long-term gross margin levels as we
scale.
Earnings before interest, tax, depreciation, and amortisation ('EBITDA')
The Group delivered an EBITDA profit of £1.5 million in the year (2021: £1.7
million). EBITDA is considered a key alternative performance measure as it
presents the underlying operating performance of the Group. This was achieved
despite the year-on-year revenue contraction and reflects:
· careful management of expenditure, including no performance bonus
payments in the year;
· the impact of capitalising costs in the Group's next generation
TrialTracker 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 including foreign currency exchange gains and a
write back of long term incentive charges reflecting that some share options
awarded to the management team are no longer expected to achieve their
performance conditions.
Looking forward, we expect to see a return to EBITDA losses in 2023 to reflect
the reorientation of the order book to earlier phase trials, the loss of the
one-time beneficial impacts seen in 2022 and a carefully managed continuation
of investments as we focus on the growing medium and long-term opportunity
available to the Group. EBITDA is reconciled by the following adjustments:
2022 2021
Restated
£000 £000
Profit attributable to equity holders for the period 1,032 1,512
Depreciation of fixed assets 451 464
Amortisation of fixed assets 188 144
Disposals of fixed assets - (53)
Interest on lease liabilities 23 22
Taxation (147) (414)
EBITDA 1,547 1,678
Operating profit
Operating expenditure in the year reflected careful cost management alongside
targeted investment, specifically:
· research and development expenses of £1.2 million (2021: £1.2
million) included research into new algorithms to support image analysis in
new and existing therapeutic indications. In addition, the Group capitalised
£0.9 million of internal development employee costs primarily in respect of
its next generation TrialTracker platform (2021: £1.0 million);
· sales and marketing expenses of £1.2 million (2021: £1.2 million)
reflecting increased travel and conference expenditure supporting client
relationship development post COVID-19 offset by savings resulting from
employee turnover; and
· general and administrative expenses of £2.6 million (2021: £2.9
million) reflecting careful cost management within the business as well as a
couple of one-time impacts that reduced expenditure as referred to in the
EBITDA section above.
Operating profit of £0.9 million (2021: £1.1 million) equated to an
operating profit margin of 11% (2021: 12%).
Order book
The Group continues to benefit from a healthy order book. On 30 September 2022
this totalled £16.0 million (2021: £18.8 million), which takes account of
£8.6 million of revenues delivered during the financial year, £12.6 million
of new and expanded multi-year contracts secured during the year and £6.8
million of trial descopes due to client trial failures including a minor
foreign exchange movement in the year.
New contracts won were across 16 different clients, across 11 projects, 3 of
whom are new to IXICO.
Cash
The Group reported operating cash inflows of £0.9 million before tax receipts
in the year (2021: £0.3 million) reflecting the Group's sustained
profitability and a reduced impact of the timing of working capital cash
movements compared to the prior year.
The Group had a closing cash balance as at 30 September 2022 of £5.8 million
(2021: £6.7 million) with the reduction in cash reflecting £2.2 million of
focussed investment in technology assets designed to support future
scalability and £0.1 million of lease payments on the Group offices. These
investments were partially offset by £1.4 million of operating cash and
taxation inflows. 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.
Non-current asset investments
The Group capitalised £2.3 million of non-current assets in the year to 30
September 2022 (2021: £2.6 million). This increase in non-current assets was
primarily driven by the investment of £2.0 million in its next generation
TrialTracker platform (2021: £1.8 million).
The next generation TrialTracker platform will further enhance the Group's
capabilities to remotely collect, and centrally analyse, brain images in
support of clinical trials. The platform has been developed on Microsoft
Azure's cloud infrastructure supporting further improvements in system
resilience, security, scalability, and efficiency. The platform development
is now largely complete and is being tested ahead of launch in 2023.
Net assets
The Group's net asset position increased by £1.0 million to £12.5 million
across the year (2021: £11.5 million). This is reflective of the Group's
continued profitability, as well as the Group's commitment to build its
technology assets to meet long-term future growth aspirations and market
demands.
Profit per share
The Group reports a profit per share of 2.14p (2021: 3.17p).
The Group is delivering against its 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.
________
Grant Nash
Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the years ended 30 September 2022 and restated for 30 September 2021
30-Sep-22 30-Sep-21
Restated 1
Notes £000 £000
Revenue 6 8,643 9,190
Cost of sales (3,400) (3,166)
Gross profit 5,243 6,024
Other income 8 689 448
Operating expenses
Research and development expenses (1,217) (1,240)
Sales and marketing expenses (1,226) (1,209)
General and administrative expenses (2,581) (2,905)
Total operating expenses 11 (5,024) (5,354)
Operating profit 908 1,118
Finance income 10 1
Finance expense (33) (22)
Profit on ordinary activities before taxation 885 1,097
Taxation 12 147 415
Profit attributable to equity holders for the period 1,032 1,512
Other comprehensive expense:
Items that will be reclassified subsequently to profit or loss
Foreign exchange translation differences 14 9
Movement in fair value of cash flow hedges 23 (214) -
Cash flow hedges recycled to revenue 23 103 -
Total other comprehensive expense (97) 9
Total comprehensive income attributable 935 1,521
to equity holders for the period
Profit per share (pence)
Basic profit per share 13 2.14 3.17
Diluted profit per share 13 2.03 3.00
Consolidated Statement of Financial Position
as at 30 September 2022 and restated for 30 September 2021 and 30 September
2020
30-Sep-22 30-Sep-21 30-Sep-20
Restated 2 Restated(1)
Notes £000s £000s £000s
Assets
Non-current assets
Property, plant and equipment 14 817 1,081 1,014
Intangible assets 15 4,587 2,710 796
Total non-current assets 5,404 3,791 1,810
Current assets
Trade and other receivables 17 3,029 3,305 2,212
Current tax receivables 12 453 480 259
Cash and cash equivalents 5,769 6,684 7,945
Total current assets 9,251 10,469 10,416
Total assets 14,655 14,260 12,226
Liabilities and equity
Non-current liabilities
Trade and other payables 18 33 114 167
Provisions - - 90
Lease liabilities 19 394 519 45
Total non-current liabilities 427 633 302
Current liabilities
Trade and other payables 18 1,502 2,070 2,216
Derivative financial liabilities 23 111 - -
Provisions - - 100
Lease liabilities 19 122 78 168
Total current liabilities 1,735 2,148 2,484
Total liabilities 2,162 2,781 2,786
Equity
Ordinary shares 21 482 482 471
Share premium 21 84,802 84,802 84,499
Merger relief reserve 21 1,480 1,480 1,480
Reverse acquisition reserve 21 (75,308) (75,308) (75,308)
Cash flow hedge reserve 21,23 (111) - -
Foreign exchange translation reserve 21 (74) (88) (97)
Capital redemption reserve 21 7,456 7,456 7,456
Accumulated losses 21 (6,234) (7,345) (9,061)
Total equity 12,493 11,479 9,440
Total liabilities and equity 14,655 14,260 12,226
Company Statement of Financial Position
as at 30 September 2022 and 30 September 2021
30-Sep-22 30-Sep-21
Notes £000s £000s
Assets
Non-current assets
Investments in Group undertakings 16 5,805 5,748
Total non-current assets 5,805 5,748
Current assets
Trade and other receivables 17 3,088 3,549
Cash and cash equivalents 1,590 1,845
Total current assets 4,678 5,394
Total assets 10,483 11,142
Liabilities and equity
Current liabilities
Trade and other payables 18 83 80
Total current liabilities 83 80
Equity
Ordinary shares 21 482 482
Share premium 21 84,802 84,802
Merger relief reserve 21 1,480 1,480
Capital redemption reserve 21 7,456 7,456
Accumulated losses 21 (83,820) (83,158)
Total equity 10,400 11,062
Total liabilities and equity 10,483 11,142
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 £741,000 (2021: £966,000).
Consolidated Statement of Changes in Equity
for the years ended 30 September 2022 and 30 September 2021
Foreign Cash
Merger Reverse exchange flow Capital Accumulated
Ordinary Share relief acquisition translation hedge redemption Losses
shares premium reserve reserve reserve reserve reserve Restated Total
£000s £000s £000s £000s £000s £000s £000s £000s £000s
Balance at 30 September 2020 471 84,499 1,480 (75,308) (97) - 7,456 (9,382) 9,119
Prior period adjustment (note 3) - - - - - - - 321 321
Restated balance at 30 September 2020 471 84,499 1,480 (75,308) (97) - 7,456 (9,061) 9,440
Total comprehensive income/(expense)
Profit for the period - - - - - - - 1,512 1,512
Other comprehensive expense:
Foreign exchange translation - - - - 9 - - - 9
Total comprehensive income - - - - 9 - - 1,512 1,521
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
Restated balance at 30 September 2021 482 84,802 1,480 (75,308) (88) - 7,456 (7,345) 11,479
Total comprehensive income
Profit for the period - - - - - - - 1,032 1,032
Other comprehensive expense:
Foreign exchange translation - - - - 14 - - - 14
Movement in fair value of cash flow hedges - - - - - (214) - - (214)
Cash flow hedges recycled to revenue - - - - - 103 - - 103
Total comprehensive income - - - - 14 (111) - 1,032 935
Transactions with owners
Charge in respect of share options - - - - - - - 79 79
Total transactions with owners - - - - - - - 79 79
Balance at 30 September 2022 482 84,802 1,480 (75,308) (74) (111) 7,456 (6,234) 12,493
Company Statement of Changes in Equity
for the years ended 30 September 2022 and 30 September 2021
Merger Capital
Ordinary Share relief redemption Accumulated
shares premium reserve reserve losses Total
£000 £000 £000 £000 £000 £000
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
Total comprehensive expense for the period - - - - (741) (741)
Transactions with owners
Charge in respect of share options - - - - 79 79
Total transactions with owners - - - - (662) (662)
Balance at 30 September 2022 482 84,802 1,480 7,456 (83,820) 10,400
Consolidated and Company Statements of Cash Flows
for the years ended 30 September 2022 and 30 September 2021
Group Company
30-Sep-22 30-Sep-21 30-Sep-22 30-Sep-21
Restated 3
£000s £000s £000s £000s
Cash flows from operating activities
Profit / (loss) for the period 1,032 1,512 (741) (966)
Finance income (10) (1) (4) -
Finance expense 33 22 - 29
Taxation (147) (415) - -
Depreciation of fixed assets 451 464 - -
Amortisation of intangibles 188 145 - -
Research and development expenditure credit (316) (160) - -
Impairment of intangible assets 41 - - -
Dilapidation provision release - (53) - -
Share option charge 79 204 22 78
1,351 1,718 (723) (859)
Changes in working capital
Decrease/(increase) in trade and other receivables 280 (1,093) 462 706
(Decrease)/increase in trade and other payables (696) (366) 3 (21)
Cash (used in)/generated from operations 935 259 (258) (174)
Taxation received 499 354 - -
Taxation paid (10) - - -
Net cash (used in)/generated from operating activities 1,424 613 (258) (174)
Cash flows from investing activities
Purchase of property, plant and equipment (187) (170) - -
Purchase of intangible assets including staff costs capitalised (2,058) (1,984) - -
Finance income 6 1 3 -
Net cash (used in)/ generated from investing activities (2,239) (2,153) 3 -
Cash flows from financing activities
Issue of shares - 314 - 314
Repayment of lease liabilities (114) (44) - -
Net cash (used in)/ generated from financing activities (114) 270 - 314
Movements in cash and cash equivalents in the period (929) (1,270) (255) 140
Cash and cash equivalents at start of period 6,684 7,945 1,845 1,705
Effect of exchange rate fluctuations on cash held 14 9 - -
Cash and cash equivalents at end of period 5,769 6,684 1,590 1,845
Notes to the financial statements
For the years ended 30 September 2022 and 30 September 2021
The financial information set out in these results does not constitute the
Group's consolidated statutory accounts for the years ended 30 September 2022
or 2021. Statutory accounts for the year ended 30 September 2021 have been
filed with the Registrar of Companies. The statutory accounts for the year
ended 30 September 2022 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 2022 will be posted to shareholders on or about 16
December 2022.
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 16,
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 16.
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
Whilst COVID-19, and the associated uncertainties are now receding, the
conflict in eastern Europe, accompanied by rising inflation, interest rates
and a broad degree of macro-economic and political disruption continue to
create challenges for the global economy.
The Group is not immune to these challenges but benefits from serving a sector
that is less exposed to economic slowdowns as compared to others. The Group
itself is well capitalised and debt-free, meaning it is able to benefit from
rising interest rates on its cash reserves without any exposure to increased
costs of debt.
Whilst the Group has suffered material client contract cessations during the
year, these are not atypical for the neurological market the Group serves, in
which it is notoriously challenging to achieve a market approved drug. The
Group has a strong balance sheet for its size, with a large cash balance and
has secured £12.6 million of new contracts in the year providing it with good
visibility of future revenues across a diversified portfolio of clients and
projects.
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, assessed through a Reverse Stress Test. 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 2022
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:
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37)
• Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
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:
• 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. Prior period adjustment
Under IFRS 15, an entity should recognise as an asset the incremental costs of
obtaining a contract with a client if it expects to recover those costs. The
incremental costs of obtaining a contract are those costs that an entity
incurs to obtain a contract with a client that it would not have incurred if
the contract had not been obtained. The asset is then amortised on a
systematic basis over the contract period.
Following an internal review of the Group's accounting policies, including
IFRS 15, it was identified that some elements of its sales commission payments
constitute incremental costs of obtaining client contracts. This portion of
sales commission costs were being recognised in full when the corresponding
client contract was signed. This treatment is incorrect. The correct
treatment was for these costs to have been capitalised and amortised on a
systematic basis to reflect the period of the client contract. This error
impacted the financial years 2017 through 2021.
The impact of this error led to an overstatement of total comprehensive income
in 2021 by £63,000 due to no recognition of amortisation of commission
contracts from financial years 2017 through to 2021, instead the commission
was recognised at the time the corresponding contract was signed. Due to the
Group surrendering taxable losses under the R&D tax credit schemes the
restatement did not materially affect the Group's tax position. The 2021
liability position was also identified as overstated by £191,000 due to a
recognition of a commission accrual, representing commission that was likely
to be earned through the life of the contract. As this element of the
commission payment requires the respective employee to remain in service for a
specific period, this element of commission should have been accrued over time
as this service was provided. Finally, the 2021 asset position was understated
by £130,000 as no commission asset was recognised. The full extent of the
2021 restatement is therefore to increase net assets by £258,000 as can be
seen below:
Consolidated statement of financial position 2020 as originally presented Change in commission accounting 2020 restated 2021 as originally presented Change in commission accounting 2021 restated
£000s £000s £000s £000s £000s £000s
Trade and other receivables 2,082 130 2,212 3,194 111 3,305
Trade and other payables 2,407 (191) 2,216 2,217 (147) 2,070
Accumulated losses (9,382) 321 (9,061) (7,603) 258 (7,345)
2021 as originally presented Change in commission accounting 2021 restated
Consolidated statement of comprehensive income £000s £000s £000s
Sales and marketing expenses (1,146) (63) (1,209)
Total operating expenses (5,291) (63) (5,354)
Operating profit 1,181 (63) 1,118
Profit on ordinary activities before taxation 1,160 (63) 1,097
Profit attributable to equity holders for the period 1,575 (63) 1,512
Total comprehensive income attributable to equity holders for the period 1,584 (63) 1,521
2021 as originally presented Change in commission accounting 2021 restated
Consolidated and Company Statements of Cash Flows £000s £000s £000s
Profit/(loss) for the period 1,575 (63) 1,512
Changes in working capital
(Increase)/decrease in trade and other receivables (1,112) 19 (1,093)
Increase/(decrease) in trade and other payables (410) 44 (366)
Cash (used in)/generated from operations 259 - 259
Net cash (used in)/generated from operating activities 613 - 613
2021 As originally presented Change in commission accounting 2021 Restated
Basic earnings per share 3.30p (0.13p) 3.17p
Diluted earnings per share 3.12p (0.12p) 3.00p
4. Significant accounting policies
4.1 Revenue
Revenue is principally derived from service revenue. Revenue comprises the
transaction price, being the amount of consideration the Group expects to be
entitled to in exchange for transferring promised goods or services to a
customer in the ordinary course of business net of value-added tax, returns,
rebates and discounts and after eliminating sales within the Group.
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, wherein the transaction price is determined and agreed for
each performance obligation in the schedule of work. The transaction price
agreed at the outset is not variable or subject to any refunds or warranties,
this is consistent across all revenue streams. 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. Deferred income and advanced payments are
recognised where consideration is received before all performance
considerations have been completed. They are then released in line with
contractual terms which dictate which performance obligations they relate to.
The Group invoices in the month performance obligations are completed and
hence do not recognise any contract assets relating to revenue.
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 over time as the platform is
centralised imaging services designed to efficiently manage the complex configured for the customer. This is because an asset is being created that
imaging workflow, including image upload, quality control, reading and has no alternative use for the Group and there is an enforceable entitlement
analysis. The platform also allows for reporting and data transfer. This to receive payment for the work completed to date.
involves the initial configuration and deployment of TrialTracker, and 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 two distinct services
provided, each are recognised independently. The performance obligations for
each are:
· The performance obligation for deployment is met over a period of
time during the configuration and development of TrialTracker.
· 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, or reduction, 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.
In line with note 5, the Group has determined that it acted as an agent in one
material contract in the year. The Group charges a management fee and
recognises this as revenue. This contract delivered £192,000 of revenues in
the year.
4.2 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% 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.
4.3 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 and an intangible asset is recognised as set out in
note 15.
4.4 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 payment is expensed on a straight-line
basis over the performance 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 any non-market-based performance 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.
In the year the Group modified the terms of two option awards. The Group
accounts for the incremental fair value expense of these modifications on a
straight-line basis over the remaining performance period in line with the
accounting policy as described above.
4.5 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 pension plan.
The assets of the Group pension scheme are held separately from those of the
Group in independently administered pension funds. The Group does not offer
any other post-retirement benefits.
4.6 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
accrued, 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.
Please see note 19 for more information.
4.7 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.
4.8 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 arise 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 4.3.
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
4.9 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.
4.10 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 16.
4.11 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 17 for further information on aging of trade receivables and an
analysis of any expected credit losses.
The Group recognises commission payments as incremental costs from obtaining a
contract. Those that are paid immediately are capitalised under IFRS 15 and
amortised over 3 years (2021: 3 years), being the average length of contracts
entered into by the Group. Those not paid immediately are accrued over a
period of time as this element of the commission payment requires the
respective employee to remain in service for a specific period.
4.12 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 4.2.
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.
Deferred tax assets are recognised to the extent it is probable that the
underlying tax loss or deductible temporary difference will be utilised
against future taxable income. This is assessed based on the Group's forecast
of future operating results, adjusted for significant non-taxable income and
expenses and specific limits on the use of any unused tax loss or credit. As
such, the Group does not recognise any deferred tax assets, see note 20.
4.13 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.
4.14 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.
4.15 Trade and other payables
Trade and other payables are non-interest-bearing, unless significantly
overdue, and are initially recognised at fair value and subsequently stated at
amortised cost.
4.16 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.
4.17 Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
4.18 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.
The Group holds one type of derivative financial instrument - forward
contracts used for the purposes of hedging. These are designated as cash flow
hedges and held at fair value with changes held in the cash flow hedge
reserve. On crystallisation the gain or loss is recycled to revenue to reflect
the risks being hedged. The ineffective portion of the hedging instrument is
recognised in the profit or loss account immediately.
Further information relating to financial instruments and the policies adopted
by the Group to manage risk is found in note 23.
5. 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 a client project or its 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 prior 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 in the prior 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 4.3 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 2022, research and development expenses
totalled £2,129,000 (2021: £2,270,000). Of this amount, £912,000 (2021:
£1,030,000) was capitalised as an intangible asset relating to employee
costs. The balance of expenditure being £1,217,000 (2021: £1,240,000) 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 Group 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. In line with
IAS 2, management assess whether non-market conditions will be achieved and
adjusts appropriately.
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.
Commission assets
The Group capitalises incremental costs incurred through contracts in line
with IFRS 15. These costs are spread over 3 years which is the average length
of a contract, as opposed to using a tailored time period for each project.
Management annually reviews this assessment to determine that there are no
material variances.
6. Revenue
An analysis of the Group's revenue by type is as follows:
2022 2021
£000 £000
Service revenue 8,643 9,190
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 2022, revenue includes £499,000 (2021:
£438,000) 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 a single access fee, with this access fee being
recognised over the duration of the project. This amount also includes
performance obligations relating to advance payments that were not yet
complete 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, £575,000 of advanced payments were
recognised on the balance sheet as at 30 September 2022 (2021: £214,000).
7. 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 from
other team members. Performance information is reported as a single business
unit to the management team.
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 2022, the Group had three clients (2021:
two clients) that exceeded 10% of total revenue. In 2022 the individual
percentage revenue associated with these clients was 38% (£3,320,000), 14%
(£1,175,000) and 11% (£976,000). In 2021, the individual percentage revenue
associated with the two largest clients was 55% (£5,012,000) and 14%
(£1,248,000).
Geographical information
The Group's revenue can be categorised by country, based on the location of
the contracting client. Sometimes clients of the Group, which include global
biopharmaceutical 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 or
partners of the client based elsewhere in the world.
2022 2021
£000 £000
Switzerland 2,077 3,247
United Kingdom 2,057 1,983
United States of America 2,711 1,860
Netherlands 436 1,248
Ireland 724 482
Other - Europe 638 370
Revenue 8,643 9,190
As the Group is domiciled in the United Kingdom, the entirety of the revenue
originates from this location.
8. Other income
Items of other income principally relate to government grants received. 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.
2022 2021
£000 £000
Grant income 373 288
RDEC 316 160
Other income 689 448
9. Auditor's remuneration
2022 2021
£000 £000
Audit services
- Group and Parent Company 38 33
- subsidiary companies 26 22
Total audit fees 64 55
Audit-related assurance services 7 6
Total auditor's remuneration 71 61
10. Employees and Directors
The average monthly number of persons (including Executive and Non-Executive
Directors) employed by the Group was:
2022 2021
Number Number
Administration 15 16
Operations, research and development 75 77
Average total persons employed 90 93
The aggregate remuneration of employees in the Group was:
2022 2021
restated
£000 £000
Wages and salaries 5,851 5,841
Social security costs 610 625
Other pension costs 286 269
Share-based payments charge 79 204
Total remuneration for employees 6,826 6,939
Employee costs capitalised (912) (1,030)
Net employee costs 5,914 5,909
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 2022
in respect of pension costs were £46,000 (2021: £42,000).
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.
11. Operating profit
The Group's operating profit has been achieved after charging:
2022 2021
restated
£000 £000
Research and development expenses 1,176 1,240
Sales and marketing expenses 1,173 1,146
Amortisation of commission assets (restated) 53 63
Operating lease charges: land, buildings and printers 1 2
Depreciation of tangible assets 451 464
Impairment in the year 41 -
Dilapidation provision release - (53)
Amortisation of intangible assets 23 26
Foreign exchange (gain) / loss (149) 28
Administrative expenses 2,255 2,438
Total operating expenses 5,024 5,354
There is a further amortisation charge of £165,000 (2021: £118,000)
recognised in cost of sales for those items directly related to project
activities. The total amortisation charge for the year is £188,000 (2021:
£144,000).
12. Taxation
The tax charge for each period can be reconciled to the result per the
Consolidated Statement of Comprehensive Income as follows:
2022 2021
restated
£000 £000
Profit on ordinary activities before taxation 885 1,097
Profit before tax at the effective rate of corporation tax
in the United Kingdom of 19% (2021: 19%) 168 208
Effects of:
Expenses not deductible for tax purposes 4 4
Origination and reversal of temporary differences (332) (415)
Research and development uplifts net of losses surrendered for tax credits 17 (319)
Commission restatement - 12
Prior period adjustment (4) 95
Tax credit for the period (147) (415)
The tax credit for each period can be reconciled as follows:
2022 2021
£000 £000
Small or medium enterprise research and development credit (200) (350)
Deduction for corporation tax on RDEC 57 30
Prior period adjustment (4) (95)
Tax credit for the period (147) (415)
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:
2022 2021
£000 £000
Current tax receivable at start of period 480 259
Current period credit 472 575
Corporation tax repayment (499) (354)
Current tax receivable at end of period 453 480
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:
2022 2021
£000 £000
Tax credit for the year 147 415
RDEC gross of corporation tax deduction 316 160
Tax recoverable 9 -
Current period credit 472 575
13. Earnings per share
The calculation of basic and diluted earnings per share ('EPS') of the Group
is based on the following data:
2022 2021
Restated
Earnings
Earnings for the purposes of basic and diluted EPS, being net profit 1,032 1,512
attributable to the owners of the Company (£000)
Number of shares
Weighted average number of shares for the purposes of basic EPS 48,151,373 47,664,319
Effect of potentially dilutive ordinary shares:
- Weighted average number of share options 2,606,350 2,749,423
Weighted average number of shares for the purposes of diluted EPS 50,757,723 50,413,742
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:
2022 2021
Restated
Basic earnings per share 2.14p 3.17p
Diluted earnings per share 2.03p 3.00p
14. Property, plant and equipment
Group
Office Leasehold Fixtures and
building improvement fittings Equipment Total
Cost £000 £000 £000 £000 £000
At 30 September 2020 462 146 5 831 1,444
Additions 405 39 - 124 568
Adjustment for dilapidation provision release (90) - - - (90)
Disposals - - - - -
At 30 September 2021 777 185 5 955 1,922
Additions - - - 187 187
Disposals - - - (25) (25)
At 30 September 2022 777 185 5 1,117 2,084
Accumulated depreciation
At 30 September 2020 191 47 4 188 430
Charge for the period 139 51 1 273 464
Adjustment for dilapidation provision release (53) - - - (53)
Disposals - - - - -
At 30 September 2021 277 98 5 461 841
Charge for the period 102 59 - 290 451
Disposals - - - (25) (25)
At 30 September 2022 379 157 5 726 1,267
Net book value
At 30 September 2021 500 87 - 494 1,081
At 30 September 2022 398 28 - 391 817
The only right-of-use asset is held within the office building category. At 30
September 2022, the carrying amount of the right-of-use asset was £398,000
(2021: £500,000).
Company
At 30 September 2022 and 30 September 2021, the Company had no property, plant
and equipment.
15. Intangible assets
Group
Other acquired intangibles Other Internally developed technology Next generation TrialTracker platform Total
£000 £000 £000 £000
Cost
At 30 September 2020 257 352 318 927
Additions 60 179 1,819 2,058
Transfers (107) 107 - -
Impairment - - - -
At 30 September 2021 210 638 2,137 2,985
Additions 11 121 1,974 2,106
Impairment - (41) - (41)
Disposals - (8) - (8)
At 30 September 2022 221 710 4,111 5,042
Accumulated amortisation
At 30 September 2020 65 66 - 131
Amortisation 39 105 - 144
Impairment - - - -
At 30 September 2021 104 171 - 275
Amortisation 37 151 - 188
Impairment - - - -
Disposals - (8) - (8)
At 30 September 2022 141 314 - 455
Net book value
At 30 September 2021 106 467 2,137 2,710
At 30 September 2022 80 396 4,111 4,587
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 4 and 5.
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 2022 and 30 September 2021, the Company had no intangible
assets.
16. Investments
The consolidated financial statements of the Group as at 30 September 2022 and
at 30 September 2021 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:
2022 2021
£000 £000
Investments in subsidiary undertakings
At beginning of the period 5,748 5,623
Capital contribution 57 125
Total investments at end of the period 5,805 5,748
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.
17. Trade and other receivables
Group Company
2022 2021 2022 2021
restated
£000 £000 £000 £000
Trade receivables 2,247 2,613 - -
Less provision for bad and doubtful debts - - - -
Net carrying amount of trade receivables 2,247 2,613 - -
Other taxation and social security 30 11 2 2
Prepayments and accrued income 652 552 28 19
Commission assets (restated) 96 111
Other receivables 4 18 1 -
Amounts due from subsidiary undertakings - - 3,057 3,528
Trade and other receivables 3,029 3,305 3,088 3,549
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 (2021: 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 (2021:
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 (2021:
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
2022 2021 2022 2021
£000 £000 £000 £000
Amounts not past due 2,189 2,613 - -
Past due:
Less than 30 days 58 - - -
Total trade receivables 2,247 2,613 - -
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of financial assets disclosed in note 23.
18. Trade and other payables
Group Company
2022 2021 2022 2021
restated
£000 £000 £000 £000
Current liabilities
Trade payables 254 734 - 15
Other taxation and social security 56 42 - -
Contract liabilities 673 475 - -
Accrued expenses 508 806 83 65
Other payables 11 13 - -
1,502 2,070 83 80
Non-current liabilities
Accrued expenses 33 114 - -
Total trade and other payables 1,535 2,184 83 80
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 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
Lease liability as at 1 October 2021 597
Cash-flow: Repayment of lease (114)
Non-cash: Interest charge 33
Lease liability as at 30 September 2022 516
19. Leases
All lease liabilities are presented in the statement of financial position as
follows:
Group
2022 2021
£000 £000
Current 122 78
Non-current 394 519
516 597
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. The remaining lease term is 48 months
(2021: 60 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.
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 500 (102) 398
The various elements recognised in the financial statements are as follows:
2022 2021
£000 £000
Statement of Comprehensive Income
Depreciation charge in the year 102 139
Release of dilapidation provision - (53)
Interest expense on lease liability 33 22
Low value leases expensed in the year 1 2
Statement of Cash Flows
Capital repayments on lease agreements 114 44
The undiscounted maturity analysis of lease liabilities for the office
building is as follows:
Within 1 year 1 - 2 years 2 - 3 years 3 - 4 years 4 - 5 years Total
30 September 2022
Lease payments 151 132 166 134 - 583
Finance charges (29) (20) (14) (4) - (67)
Net present values 122 112 152 130 - 516
30 September 2021
Lease payments 111 155 132 166 133 697
Finance charges (33) (29) (20) (14) (4) (100)
Net present values 78 126 112 152 129 597
At 30 September 2022, the Group's commitment to short-term and low-value
leases was £nil (2021: £nil).
20. Deferred tax
Deferred tax asset (unrecognised)
Group Company
2022 2021 2022 2021
£000 £000 £000 £000
Tax effect of temporary differences:
Tax allowances in excess of depreciation 1,316 891 (1) (1)
Accumulated losses (17,310) (17,098) (3,217) (3,038)
Losses on financial instruments debited to equity 28 - - -
Deductible temporary differences (14) (51) (5) (20)
Deferred tax asset (unrecognised) (15,980) (16,258) (3,223) (3,059)
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 and 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% (2021: 25%).
21. Issued capital and reserves
Ordinary shares and share premium
The Company has one 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 2022 and 30 September 2021 48,151,373 482 84,802
Exercise of share options
During the year, no options were exercised.
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.
Cash flow hedge reserve
This reserve represents the movement in designated hedging instruments in the
year that have not yet crystallised.
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 7.2 years
(2021: 7.7 years). The total charge for each period relating to employee
share-based payment plans for continuing operations is disclosed in note 10 of
the consolidated financial statements.
Details of the share options under the scheme outstanding during the period
are as follows:
2022 2021
Number Weighted average exercise price Number Weighted average exercise price
Outstanding at start of the period 3,815,931 £0.18 4,438,512 £0.17
Granted 900,000 £0.20 475,000 £0.52
Exercised - - (1,060,081) £0.30
Lapsed (225,000) £0.35 (37,500) £0.36
Outstanding at end of the period 4,490,931 £0.18 3,815,931 £0.18
Exercisable at end of the period 1,719,680 £0.07 998,766 £0.07
During the year to 30 September 2022, there were two issues of share options
awarded (2021: one issue of share options). Details of these awards are
provided below.
10 January 2022
Share options totalling 300,000 were granted on 10 January 2022 to employees
of the Group with an exercise price of £0.01. In this grant there were two
performance conditions attached. The options are subject to a performance
condition linked to share price growth and a performance condition linked to
service. Both conditions will be measured over a 3-year period.
14 September 2022
Share options totalling 600,000 were granted on 14 September 2022 to employees
of the Group with an exercise price of £0.29. In this grant there were two
conditions attached. The options are subject to a performance condition linked
to revenue growth and a performance condition linked to service. Both
conditions will be measured over a 3-year period.
The final valuation was based the Monte Carlo method followed by 'Hull White'
trinomial lattice with the following inputs:
10-Jan-22 14-Sep-22
Weighted average share price £0.59 £0.35
Weighted average exercise price £0.01 £0.26
Expected volatility 55.40% 39.30%
Expected life 10 years 10 years
Expected dividend yield 0% 0%
Risk-free interest rate 1.18% 2.16%
The expected volatility was calculated using the Exponentially Weighted Moving
Average Mode model. The shares dated 14-Sep-22 changed marginally following
valuation. The fair value has been slightly uplifted to reflect this.
Share option modifications
In the year the Group modified two pools of options, these related to options
originally granted on 5 December 2019 and options granted on 5 July 2020
accompanied by the following conditions.
5 December 2019
On 5 December 2019, the Company issued options with an exercise price of
£0.01. The share options granted were subject to share price and revenue
growth performance metrics. The associated performance measurement date was to
be made immediately prior to the third anniversary from the date of the award.
Of the options that were deemed to vest based on achievement of the
performance criteria, 50% were to be eligible to vest immediately on the third
anniversary from the date of the award and 50% were to be eligible to vest on
the first anniversary of this date. The performance conditions of this award
were as follows:
- 0% of the share options would vest if the share price increased by less than
12.5%;
- 25% of the share options would vest if the share price increased by 12.5%
from the date of issue of the grant;
- 25% - 100% of the share options would vest on a straight-line basis if the
share price increased by up to 25% from the date of issue of the grant
The options would not vest unless compound annual revenue growth of the
Company over the three-year period was 10% or greater.
5 July 2020
On 5 July 2020, the Company issued options with an exercise price of £0.70.
The share options granted were subject to share price, and revenue growth
performance metrics. The associated performance measurement date was
immediately prior to the third anniversary from the date of the award. Of
any options that were deemed to vest based on achievement of the performance
criteria, 50% were to be eligible to vest immediately on the third anniversary
from the date of the award and 50% were to be eligible to vest on the first
anniversary of this date. The performance conditions of this award were as
follows:
- 0% of the share options would vest if the share price increases by less than
12.5%;
- 25% of the share options would vest if the share price increases by 12.5%
from the date of issue of the grant;
- 25% - 100% of the share options would vest on a straight-line basis if the
share price increases by up to 25% from the date of issue of the grant
The options would not vest unless compound annual revenue growth of the
Company over the three-year period was 10% or greater.
On 14 September 2022, both pools of share options granted to those still
employed by the Group were modified. This altered the performance measurement
date by inserting additional performance condition measurement dates at each
anniversary of the award date. No new valuation was computed, those options
which had met the performance criteria at prior evaluation dates were deemed
to be valued at the current share price. The remaining options had no change
as only the final and original performance evaluation date remained. The
vesting dates remained unmodified.
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
2022 2021 2022 2021
Restated
£000 £000 £000 £000
Financial assets held at amortised cost
Trade and other receivables excluding prepayments 2,943 3,331 3,060 3,530
Cash and cash equivalents 5,769 6,684 1,590 1,845
8,712 10,015 4,650 5,375
Financial liabilities held at amortised cost
Trade and other payables excluding statutory liabilities 1,535 1,691 83 80
Lease liabilities 516 597 - -
2,051 2,288 83 80
Financial liabilities held at fair value
Forward contracts held at fair value (Level 1) 111 - - -
111 - - -
Fair value of financial assets and liabilities
There is no material difference between the fair values and the carrying
values of the financial instruments held at amortised cost 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 (2021: 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 of 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, Euros and Swiss Francs. 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. The Group seeks to minimise the exposure to
foreign currency risk by matching local currency income with local currency
costs where possible. In the year, due to a change in US Dollar revenues and
costs, the Group made the decision to begin hedging substantially all forecast
USD inflows and to apply hedge accounting to minimise currency risk.
During the year, the Group made use of financial instruments to minimise
foreign exchange gains or losses. The Group entered into forward contracts to
sell US Dollars at quarterly intervals and applied hedge accounting to all of
these contracts. Under hedge accounting, unrealised gains or losses are
recognised in other comprehensive income and the cash flow hedge reserve, with
the ineffective portion being recognised in the profit and loss as soon as
they occur. The gains or losses arising on these are allocated to revenue on
settlement. The item hedged was a portion of highly probable forecast US
Dollar inflows. The hedged item is the receipt of US Dollars, and the hedging
instrument is the sale of a portion of these. The Group has determined that a
1:1 ratio exists between the instrument and items as the underlying risks of
both are the same - the exchange rate of USD:GBP. The Group uses the dollar
offset method to monitor effectiveness, which compares the change in fair
value of the underlying derivative and the change in fair value of future cash
flows. As the instrument and items fair value are based on the underlying
exchange rate, ineffectiveness has not arisen in the year. Ineffectiveness can
arise due to the counterparties credit risk and inaccurate forecasting, which
could leave the Group over hedged. However, the Group monitors this through
its Treasury function.
At year end the Group had contracts to sell $1,000,000, these hedges are
designated as effective under IFRS 9 and hence the fair value of these is
recognised in other comprehensive income. These balances are removed from the
Group's US Dollar exposure as there is deemed to be no foreign exchange
exposure. At 30 September 2022 $1m is hedged to period of March 2023, at an
average rate of 1.2797.
The hedging transactions in the year had the following effect on the Group's
results:
Without hedge accounting Hedging movements 2022
£000 £000 £000
Statement of Comprehensive Income
Revenue 8,746 (103) 8,643
Profit for the year 1,136 (103) 1,033
Total other comprehensive expense 14 (111) (97)
Total comprehensive income attributable to equity holders for the period 1,149 (214) 935
Statement of financial position
Derivative financial liabilities - 111 111
Cash flow hedge reserve - (111) (111)
Accumulated losses (6,131) (103) (6,234)
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities as at 30 September are as follows:
Group Company
2022 2021 2022 2021
US Dollar exposure USD'000 USD'000 USD'000 USD'000
Balance at end of period
Monetary assets 704 1,224 - -
Monetary liabilities (135) (612) - -
Total exposure 569 612 - -
Group Company
2022 2021 2022 2021
Euro exposure EUR'000 EUR'000 EUR'000 EUR'000
Balance at end of period
Monetary assets 480 450 - -
Monetary liabilities (15) (24) - -
Total exposure 465 426 - -
Group Company
2022 2021 2022 2021
Swiss Franc exposure CHF'000 CHF'000 CHF'000 CHF'000
Balance at end of period
Monetary assets 113 - - -
Monetary liabilities - - - -
Total exposure 113 - - -
Foreign currency sensitivity analysis
As at 30 September 2022, the sensitivity analysis assumes a +/-10% change of
the USD/GBP, EUR/GBP and CHF/GBP exchange rates, which represents management's
assessment of a reasonably possible change in foreign exchange rates (2021:
10%). The sensitivity analysis was applied on the fair value of financial
assets and liabilities.
2022 2021
10% weaker(1) 10% stronger 10% weaker 10% stronger
£000 £000 £000 £000
US Dollar (51) 51 (61) 61
Euro (41) 41 (43) 43
Swiss Franc (10) 10 - -
(102) 102 (104) 104
(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 2022
(2021: 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 17.
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 2022 (2021: £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:
2022 2021
£000 £000
Short-term employee benefits 1,269 1,317
Post-employment benefits 33 27
Other long-term benefits (115) 46
Share-based payments 77 171
Total remuneration 1,264 1,561
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 £658,000 (2021: £1,028,000) and
aggregate pension of £15,000 (2021: £15,000). 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 carry out the Group's research and development
strategy, employ all employees, including the Executive Directors, and manage
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
17. During the year, the following transactions occurred with related parties:
2022 2021
£000 £000
Charges from subsidiaries:
Management recharge from subsidiaries 416 611
Net interest charged (68) 29
Charges to subsidiaries:
Share option charge 57 125
1 See note 3
2 See note 3
3 See note 3
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