REG - IXICO plc - Financial Results for year ended 30 September 2023
05/12/2023 07:15
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RNS Number : 6379V IXICO plc 05 December 2023
5 December 2023
IXICO plc
("IXICO" or the "Group")
Financial Results for year ended 30 September 2023, Board chair retirement
& Notice of AGM
IXICO plc (AIM: IXI), the medical imaging advanced analytics company
delivering insights in neuroscience, announces its results for the year ended
30 September 2023 ("FY23").
The Group has continued to develop its capabilities in 2023. The validation
of its next generation TrialTracker imaging platform, as well as the launch of
new MRI and PET imaging analysis solutions exemplify investments that further
strengthen the Group's offering to the neurological clinical trials market.
This infrastructure also enables the integration of new, partner technologies
that will complement and augment the Group's internal capabilities to address
new markets and so expand the Group's addressable market.
Financial:
The Group has delivered financial earnings in line with market expectations
and retains a strong, debt free, cash balance in an especially challenging
year for the biopharmaceutical industry. Financial performance marginally
outperformed the trading update provided in September following a strong final
month of the year.
· £6.7 million revenues (2022: £8.6 million). The reduction on
the prior period principally reflects the final year of impact of the
previously announced early cessation of large client trials coupled with a
slower pace of new client contract wins reflecting a challenging market
backdrop;
· Gross margin of 49% (2022: 61%) reflects the lower revenues and
an increased proportion of early phase trials requiring lower volumes of
automated, AI-assisted, image analysis;
· EBITDA(1) loss of £0.8 million (2022: £1.5 million profit);
· Closing, debt-free, cash of £4.0 million (2022: £5.8 million),
after investments in long-term technology and data of £1.9 million (2022:
£2.2 million); and
· Closing balance sheet value of £11.4 million (2022: £12.5
million).
Operational & Commercial:
· Completed the PET analysis of the landmark 1,000 participant
BioHermes study for the Global Alzheimer's Platform (GAP);
· Completed the first phase of an unprecedented harmonization
analysis of the c.6,000 HD-IH consortium MRI datasets and onboarding of a
third biopharma partner, Asklepios BioPharmaceutical, Inc.
· £8.0 million in new contracts won across 6 therapeutic areas, a
combination of new contracts across 7 clients and 13 client contract
extensions;
· Closing order book of £14.8 million (2022: £16.0 million),
providing good visibility to future years' contracted revenues; and
· Funding secured to further progress the Group's "Precision in
Neuroscience" strategy, supporting diagnostic decision-support and safety
monitoring of ARIA(3), the core side effect of recently approved anti-amyloid
therapies.
(1)Earnings before interest, tax, depreciation, and amortisation
(2)Operating cash and R&D tax credit inflows
(3)Amyloid related imaging abnormality
Giulio Cerroni, CEO of IXICO, said: "I am proud of IXICO's achievements in
2023, reflected most clearly by several important successes in our scientific
and technological capabilities. We have purposefully and deliberately focussed
investment over recent years to ensure we develop and own our technology. In
leveraging our neurological expertise, together with cutting edge
technologies, we have built a truly unique, end-to-end, regulatory compliant,
medical imaging technology platform. Whilst IXICO was not immune to the more
challenging market conditions of 2023, we remain confident that our "Precision
in Neuroscience" strategy will gain market traction as the importance and use
of imaging biomarkers in a broad range of CNS therapeutic areas continues to
grow.
Board Chair Succession
Charles Spicer, having served for ten years as a Non-Executive Director and
seven as the Board Chair, will retire from the Board at the AGM on 25 January
2024. As previously disclosed, Mark Warne, a current Non-Executive Director,
will subsequently assume the role of Chair.
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 and he has been a
wonderful adviser to me and to my leadership team. I also want to thank
Charles for continuing to work hard for IXICO over the last few months whilst
we have been undertaking a managed transition of roles within the Board."
Notice of AGM
IXICO also announces that its 2024 Annual General Meeting ("AGM") will be held
at CCT Venues Smithfield, Two East Poultry Avenue, Smithfield, London EC1A 9PT
on 25 January 2024 at 10.30am.
The full Annual Report and Accounts, along with Notice of AGM, will be posted
to shareholders on 15 December 2023 and at the same time will be made
available on the Company's website in accordance with AIM Rule 20.
This announcement contains inside information as stipulated under the retained
EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR")
which is part of UK law by virtue of the European Union (Withdrawal) Act 2018.
The information is disclosed in accordance with the Company's obligations
under Article 17 of the UK MAR.
For further information please contact:
IXICO plc +44 (0) 20 3763 7499
Giulio Cerroni, Chief Executive Officer
Grant Nash, Chief Financial Officer
Cavendish Securities PLC (Nominated adviser and sole broker) +44 (0) 20 7397 8900
Giles Balleny (Corporate Finance)
Charlie Combe (ECM)
Michael F Johnson / Tamar Cranford Smith (Sales)
About IXICO
IXICO is dedicated to delivering insights in neuroscience to help transform
the advancement of investigational therapies for neurological diseases, such
as Huntington's disease, Parkinson's disease and Alzheimer's disease. The
Company's purpose is to advance medicine and human health by turning data into
clinically meaningful information, providing valuable new insights in
neuroscience by supporting pharmaceutical companies across all phases of CNS
clinical research. IXICO's goal is to be a leading advocate of artificial
intelligence in medical image analysis.
IXICO has developed and deployed breakthrough data analytics, at scale,
through its remote access technology platform, to improve the return on
investment in drug development and reduce risk and uncertainty in clinical
trials for the Company's pharmaceutical clients.
More information is available on www.IXICO.com (http://www.IXICO.com) and
follow us on Twitter @IXICOnews
Chair's statement
This is my last statement as Chair as, after ten years on the Board and seven
as Chair, I will step down at the AGM in January 2024 and be succeeded by my
fellow non-executive director, Mark Warne.
I am proud of all that the Group has achieved over the last decade. IXICO
now leads the market in neurological image analysis capabilities. We support
academic and industry partnerships investigating and illuminating disease
progression in the challenging conditions of Huntingdon's disease (HD) and
Alzheimer's disease (AD) and have seamlessly delivered image analysis services
to the world's largest HD clinical trial.
This year, Eisai announced FDA approval for a drug to treat AD and Eli Lilly
reported positive late stage trial results that together, by showing disease
modification benefits, herald a new era for neurological drug development.
Such positive progress towards mechanisms that slow, halt and potentially even
reverse the progression of AD, coupled with the global epidemic of dementia
and the rapid growth in associated international healthcare costs, creates a
compelling investment case for the biopharma industry generally and IXICO in
particular.
Despite the currently challenging neurological disease clinical trials market,
typified by high profile drug failures and decades of research to achieve even
minor progress, IXICO has progressed in its technical, scientific and
operational capabilities and is strongly positioned to scale. In the last few
months, we have streamlined our cost base whilst sharpening our focus on the
growth opportunity ahead. The next generation TrialTracker platform is now
production ready and our recent investments in IT infrastructure provide the
Group with the highest levels of data security and resilience.
Overview
Our purpose is to advance medicine and human health in neuroscience by
converting raw imaging data, captured as part of the clinical trial process,
into clinically meaningful information. We accurately measure changes (which
can be very small) in biomarkers relevant to diseases of the brain. By doing
so, our data analytics services provide objective insights into the efficacy
and safety of the drugs being trialled and so deliver greater efficiency and
accuracy to the clinical development process. These services are underpinned
by our TrialTracker end-to-end technology platform which supports the capture,
management, analysis and reporting of data on behalf of each clinical trial in
a seamless, centralised, regulatory compliant system that removes the need for
travel to global imaging sites.
A step backwards to move forwards.
It has been an especially challenging year for the biopharmaceutical industry
and the clinical trials service providers that support it. Across the
Contract Research Organization (CRO) market we have seen fewer clinical trial
initiations as large pharma companies scrutinise their existing trial
pipelines. Meanwhile, biotech companies, facing tight capital market
conditions, are making cash conservation their primary priority. Consequently,
cost restructuring and market consolidation have been widely reported.
In this context, IXICO has performed satisfactorily. Despite reduced
revenues (which we communicated this time last year) the Group has delivered
an earnings performance in line with market expectations and retains a strong,
debt-free, cash balance.
As the Group looks to return to growth, we have carefully adjusted
expectations based on the wider market challenges and the Board took the
important, but uncomfortable, decision to right-size our cost base. I thank
the IXICO team for the professional, sensitive and respectful way in which
this was managed by all involved.
Governance and people
IXICO's future depends on our people and the Board thanks all our employees
for their hard work, dedication, and flexibility in this particularly
challenging year. We continue to promote our values - Aspiration, Ability,
Agility and Accountability - to augment our culture and align our team with
our purpose. 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
that places IXICO's values and the QCA principles at the core of our culture.
The Board met formally thirteen times during the year with several additional
ad-hoc meetings or calls to discuss specific topics.
I am delighted that Dr Dipti Amin has joined us as a Non-Executive Director.
An experienced NED with an executive career that includes more than twenty
years with IQVIA, where she occupied senior positions in compliance, drug
safety and medical affairs. Dipti brings significant additional pharmaceutical
and CRO experience to the Board.
At the 2024 Annual General Meeting ('AGM'), in accordance with the Company's
Articles of Association, Dipti Amin and Mark Warne will stand for election,
supported by the Board of Directors' recommendation. I will retire from the
Board on the same date and Mark Warne will step up to the Board Chair
position. I am delighted that Mark has agreed to do so, thereby creating a
smooth succession, and wish him, our fellow directors and the wider IXICO team
the best of luck for the future.
Shareholders
The Group has an impressive list of leading institutional investors, and we
would like to thank all our shareholders for their continued support and
enthusiasm for IXICO's important work.
Outlook
While we expect 2024 to be largely flat on 2023, we anticipate growth in our
orderbook of client contracts should position the Group for a return to double
digit revenue growth in 2025.
IXICO is well positioned in its wider market which we expect to grow and
therefore attract new investment in the global pursuit of medical solutions to
those neurological diseases so that impact the lives of millions of patients
and impose wider significant social and economic burdens. We are a small but
important part of the solution to this high unmet medical need and the Board
is 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
Executive Summary
As I look back and reflect on 2023, it is with mixed feelings. On the one
hand, the Alzheimer's Disease (AD) research landscape continues to experience
a significant resurgence, with regulatory approvals for new therapies with
blockbuster potential imminent. After nearly two decades of high-profile
disappointing results in Phase 3 trials, Biogen's Aducanumab approval in 2021
was followed in 2023 by the accelerated and then full FDA approval granted for
Eisai's Lecanemab and positive Phase 3 readouts for Eli Lilly's Donanemab. Our
view is that these major milestones will be a trigger for more investment in
neurological disease areas by the biopharmaceutical industry. With this
favourable backdrop, we took significant strides in 2023 in the delivery of
our purpose of harnessing medical imaging data to advance human health,
investing to strengthen our position as a specialist provider of neuroscience
imaging data analytics solutions to the clinical trials industry.
Conversely, macro-economic impacts of a challenging political landscape, high
global inflation, and continuing regional conflicts resulted in the
biopharmaceutical industry cutting back on development pipelines and/or
delaying new clinical trial start-ups. Like many other CRO companies
supporting the clinical trials market, IXICO was not immune to the financial
impacts of these conditions, resulting in a weaker year of new contract
bookings than had been anticipated. Despite lower than planned revenues, I
am pleased to report earnings that align with market expectations. However,
given that we expect the challenging business environment to continue across
2024, we recently took the difficult decision to reduce headcount to right
size our cost base as we reset the business for growth.
During the year we supported two important enhancements to neurological
disease knowledge in AD and Huntington's disease (HD). We supported the
Global Alzheimer's Platform (GAP) by providing PET Amyloid visual reads for
their 1,000 participant BioHermes trial, completing data transfers ahead of
the requested timelines. The study was notable for achieving a secondary
recruitment target requiring a minimum of 20% of the study participants to be
from traditionally underrepresented populations, enabling IXICO to report on
initial findings on differences between racial and ethnic groups at the CTAD
opening symposium (Boston, October 2023). We also led, alongside the CHDI
Foundation, the Huntington's Disease Imaging Harmonization Consortium (HD-IH)
in securing funding to ensure the full analysis of more than 6,000 HD datasets
using IXICO's leading IXIQ.Ai analytics platform. We anticipate that the
insights derived from the work of the HD-IH consortium will create long term
value to the biopharmaceutical partners to support them in their clinical
development programmes and to the broader HD research community.
We delivered seamlessly for our clients, providing image analysis services to
more than 30 studies, broadening our offering across therapeutic indications
whilst improving our service level metrics to exceed our clients'
expectations. In tandem, we further developed our PET imaging capabilities,
including an enhanced service offering for PET tracer management, deepening
our reach into the AD market. Our next generation TrialTracker platform is
production ready, and we are looking forward to deploying this Microsoft Azure
enabled technology in support of our client trials during 2024 and in the
years ahead.
We have made strides in executing our 2022 to 2027 "Precision in Neuroscience"
strategy. We enter our new financial year with an order book of signed
contracts valued at £14.8m and a stronger pipeline of client opportunities,
with visibility of new contracts to provide a platform for double digit growth
in 2025 and beyond. Considering the longer term, I am also excited by the
progress made with the "Bridge Pillar" of our strategy, with a recent funding
award to develop our plans for post-market decision support; this development
will provide the bridge between clinical trials and diagnostic tools to
enable the right patients to safely access novel therapies in AD. There
remains significant opportunity in this space, and our intention is to
accelerate further development in this area during 2024.
I would like to thank my team at IXICO for their incredible hard work over the
last twelve months, and for the approach and professionalism that they have
brought to both meeting the opportunities and supporting the challenges that
we and our current and prospective clients face in developing new therapies
across many neurological diseases. As I look forward to 2024, it is with
cautious optimism underpinned by a deep-rooted confidence that IXICO is better
placed than it has ever been to deliver seamlessly for our clients on our
purpose of harnessing medical imaging data to advance human health within
neuroscience.
Market overview
The burden of degenerative neurological disease continues to increase, driven
by an aging population. Research in this area continues to advance; greater
understanding of neurological disease has been recently driven by insights
derived from multi-modal approaches combing genomics, biomarkers, diagnostics,
and imaging techniques, and this, along with emerging new drug mechanisms, is
changing the fundamentals of innovation in the sector.
Recent regulatory progress in AD for Biogen, Eisai and Eli Lilly has given
pharma companies greater certainty of commercial returns in what has been
historically a very challenging indication. This has encouraged further
investment in neuroscience portfolios and, consequently, the market for
clinical trials in neuroscience is expected to continue to grow at pace.
Central Nervous System disorders account for the second largest segment of
pharmaceutical R&D investment, behind only that of oncology. The CNS
disorders segment accounted for 10.6% of the clinical trial imaging market in
2020. This segment has been valued at $108 million in 2021 and it is expected
to grow to $157 million in 2026 with a CAGR of 7.7%
Neuroimaging is widely deployed in CNS trials at all phases, firstly to screen
patients for safety and eligibility and then at regular intervals to detect
and measure changes in brain structure caused by disease progression and
interventions. Although many imaging biomarkers are exploratory, objectively
detecting and measuring even small changes can deliver significant insights to
the sponsor on treatment mode of action and efficacy.
The core of IXICO's imaging offer is in its proprietary, validated artificial
intelligence technology which is deployed to deliver standardised and
repeatable analysis generating reliable insights; IXIQ.Ai can more than double
the amount of usable data compared to widely used tools delivering greater
value to clients in extracting insights from its trial investments. In
addition, IXICO offers its clients deep expertise, in imaging techniques and
endpoints with specialist Biomarker Scientists dedicated to each study to help
clients plan the imaging approach and protocol, and to provide quality
assurance for the study output. IXICO's TrialTracker platform ensures robust
data management and security which is of the highest importance to clients
operating in the highly regulated field of clinical trials, particularly when
deploying studies in multiple jurisdictions.
Outlook of the neurological drug development segment by indication
Alzheimer's Disease (AD)
Historically, over 99% of novel treatments in development for AD have failed
to achieve regulatory approval, with many of these failures occurring in the
late stage of trial, representing a loss of many billions of dollars of
investment. More recently, Biogen and Eisai have achieved approval by the
FDA and, with a further asset now in regulatory review (Eli Lilly), there is
renewed confidence in the validity of the research approach. This has paved
the way for even greater focus in this area of research and development. The
IXIQ.Ai brain segmentation platform can improve success rates by providing
more usable data, enabling more targeted patient selection to lower the
biggest driver of costs and inefficiencies while increasing the chance of
success. Currently there are over 140 drugs in the global AD development
pipeline; many of these drugs are exploring new modes of action, increasing
the value of imaging biomarkers to closely monitor patients for safety, as
well as to study disease progression and drug efficacy.
Parkinson's Disease (PD)
Until recently, treatments for PD have focused on reducing the severity and
impact of the physical symptoms of this debilitating disorder. However,
decades of research into the underlying causes of PD are now bearing fruit
with the development of newer drugs that focus on slowing, halting, or even
reversing disease progression, particularly in the early stages. To date,
IXICO has provided neuroimaging services to 14 trials in parkinsonian
syndromes and more recently has introduced algorithms for DAT SPECT imaging
modalities, specifically to support the growing portfolio of PD trials.
Multiple Sclerosis (MS)
MS tends to affect a younger patient population compared to AD and PD, and a
wide portfolio of therapies has been available for treatment for many years.
However, the disease is increasingly now well-understood, and research has
identified new clinical subtypes, ushering in new approaches to treatment and
management, and fuelling an increasing development pipeline. IXICO is
partnering with leading clinical centres on the development of new algorithms
to support subtype detection and monitoring, providing leading-edge services
to MS studies. The Group also recently introduced an early engagement
programme to enable sponsors to fully take advantage of novel imaging
approaches on their studies to unlock new insights.
Huntington's Disease (HD)
HD is a relatively rare neurodegenerative disease caused by a faulty gene.
Although there have been recent setbacks in the progress of drug development
for this indication, the genetic nature of HD means that patients can be
reliably identified earlier in the disease pathway, long before symptoms are
apparent. This may enable earlier intervention and raises the possibility of
gene therapies, supporting the continued growth of the HD development
pipeline. IXICO is a leader in neuroimaging in HD, having supported many HD
studies in the past decade and has strengthened its leadership position
through its close collaboration with the CHDI Foundation and the HD-IH
consortium (see the Science review).
Orphan and Rare Diseases
Initiatives by the EU EMA and US FDA such as orphan drug designation, and the
increasing use of genomic sequencing technology to screen newborns and to
investigate early childhood development disorders, have encouraged significant
investment into a wide range of rare diseases. In the past five years a new
wave of rare disease neurological treatments, including dozens with orphan
designation, have been approved. With its expertise in imaging and biomarker
development, IXICO has successfully adapted many biomarkers for rare
neurodegenerative diseases to support a wide range of studies in rare
indications such as Friedreich's Ataxia, Multiple System Atrophy and
Progressive Supranuclear Palsy.
Operational review
During 2023, the Group worked on more than 30 studies across a broadening
range of neurodegenerative indications, supporting all phases of clinical
research from small early phase studies to larger Phase 3 trials.
Delivering operational excellence
As a highly specialised provider of tailored solutions, we strive to deliver
an excellent service to our biopharmaceutical clients and to the imaging sites
we work with. We achieve our high standards by being agile in decision-making
and through our ability to customise the solutions we offer. Examples of
2023 performance metrics include:
• Project performance: we monitor our performance through customer
satisfaction, quality, resources and deliverables. Our metrics have exceeded
both those agreed with our sponsors and our own internal targets.
• Geographies: We supported more than 30 studies across 25
countries. During 2023 we added more than 10 SPECT sites to our network of
qualified sites, bringing our total qualified site number for MRI, PET and
SPECT to over 1,000 sites across the globe.
• Analysis units: we analysed over 30,000 image endpoints this year
for over 4,000 patient visits. The number of endpoints analysed increased by
37% compared to FY22.
• Turnaround timelines: fast turnarounds of radiology reports are
key to ensure patient eligibility and treatment decisions are not delayed.
During 2023, IXICO consistently delivered radiology reports in an average of 3
working days or less, meeting or exceeding the high standards of expectation
by clients for brain scans.
We strive to stay at the forefront when developing best practice and have
reduced the timelines for transferring data and images to our clients. We know
how critical it is for biopharmaceutical companies to have quick access to the
full set of high-quality data collected in their study to allow regulatory
filing, early publication and conference presentations. We continue to
streamline our processes to ensure that client requirements are fulfilled or
exceeded to achieve these important milestones.
We are proud of our easy-to-work with operations processes, exemplified by a
webinar (December 2022) in collaboration with Re:Cognition Health showcasing
our best-in-class approach in setting up imaging studies quickly and
efficiently.
Enhancing operational capabilities
1. PET Tracer management
During 2023, IXICO enhanced its service offering to our sponsors to provide
PET Tracer management solution for AD and PD studies. PET imaging uses a
radioactive tracer during the scan. The tracer's uptake provides information
to help determine patient eligibility and treatment efficacy. Due to their
radioactive nature, these tracers have a short half-life (e.g., 110 minutes
for the most widely used), and require special transportation, licencing and
storage conditions. They are complex to produce and therefore their
availability may be limited. Due to all these characteristics, tracer
management is increasingly of interest to biopharmaceutical companies. IXICO
is able to support these activities by facilitating the coordination of the
Tracer manufacturing company, the logistics companies and the imaging sites.
2. Next generation of TrialTracker
Over the past three years, IXICO has utilised its in-house development
resources, augmented by contracted expertise, to bring to market a next
generation of its TrialTracker platform.
As with the Group's existing TrialTracker, this is an end-to-end data
management platform enabling imaging sites, wherever they are in the world, to
upload brain scans whilst automatically checking scan quality and
pseudonymising the scan. The platform seamlessly transfers the scan to
IXICO's radiological team, to provide image reads and safety checks, and hosts
its AI enabled, automated proprietary analysis pipelines.
The next generation TrialTracker platform has been developed using Microsoft's
Azure cloud technologies, providing the Group and its clients with
state-of-the-art, secure, resilient, regulatory compliant infrastructure
benefitting from highly flexible microservice capabilities. This enables the
Group to adapt the platform to suit the specific (and often bespoke) clinical
trial needs of its clients and partners.
The platform is ready to be deployed on client trials having completed
extensive testing and validation activities in 2023.
Science review
Significant progress was made across 2023 in further developing, validating
and positioning IXICO's clinical trial product portfolio across therapeutic
indications. In addition, the Group made further progress in developing core
technology to 'bridge' into potential new markets in clinical applications as
the field is experiencing significant momentum in the approval of new
therapies, specifically in AD. Throughout 2023, IXICO has actively
participated in the scientific discussion across core therapeutic areas as
demonstrated by the attendance at eight conference and the (co-) presentation
of more than 20 posters and (invited) talks. IXICO has furthermore, hosted
three scientific webinars with key opinion leaders in AD, gene therapies, and
HD.
A key R&D focus was on the extension of IXICO's PET analysis capabilities
to extend the service offerings across both relevant (MRI and PET) imaging
modalities within a broadening range of neuroscience clinical trials.
Specifically, IXICO has now deployed PET visual read and quantitative analysis
solutions across core PET tracers in AD and PD. During 2023, we have completed
PET analysis of the Bio-Hermes trial for the Global Alzheimer's Platform
(GAP). Co-sponsored by pharma companies with an interest in AD clinical
development, the landmark 1,000-participant Bio-Hermes study was designed to
evaluate the ability of blood-based and digital biomarkers to reflect the
presence of brain amyloid in participants enrolled in AD clinical trials. A
secondary objective of Bio-Hermes was to include a significant representation
of ethnic and racial minority participants, building a highly valuable
database as regulatory requirements in AD clinical trials increasingly require
improved representation of traditionally underrepresented populations. IXICO
provided all PET data collection services as well as the visual radiology read
to determine gold-standard amyloid pathology. Following study completion,
IXICO's scientific team led an initial analysis of the collected PET
biomarkers, specifically focusing on the analysis across ethnic and racial
groups. The work was selected for presentation and discussion in the opening
symposium at the high-impact CTAD (Clinical Trials in Alzheimer's Disease)
conference, held in Boston, Massachusetts, between 24(th) and 27(th) October
2023. Selection by the organising committee for this prestigious presentation
slot highlights the importance of the work performed for the AD community and
provided a significant opportunity for IXICO to demonstrate cutting edge
scientific and technical capabilities in AD PET imaging to participating
pharma sponsors and academic researchers. As a Bio-Hermes partner with an
R&D license on the data collected, IXICO is well-positioned to further
investigate the unique dataset and thereby advance scientific knowledge in
this critical field of AD development.
Huntington's disease continues to be a key market for IXICO, and good progress
was made during 2023 to further underline the Group's leading position by
progressing the IXICO-initiated HD Imaging Harmonization (HD-IH) consortium.
HD-IH was founded in 2022 by IXICO, the CHDI Foundation Inc. (CHDI) and pharma
partners uniQure and PTC Therapeutics to conduct an unprecedented
harmonization analysis of more than 6,000 participant-visit magnetic resonance
images (MRIs) acquired from over 2,000 research participants. During 2023, the
project has completed the initial phase and, through the onboarding of a third
pharma partner, Asklepios BioPharmaceutical, Inc. (AskBio) and additional
funding commitments by both CHDI and IXICO, secured the necessary financing to
complete the project. These analyses are expected to support the development
of therapeutic strategies targeting specific HD sub-populations
("precision-medicine"), inform eligibility and dosing decisions for clinical
trials, and aid in associated trial design decisions and biomarker development
to enable interventional studies earlier in the disease course. IXICO
presented an update on progress of HD-IH at the 18(th) Huntington's Disease
Therapeutics Conference (HDTC) held in Dubrovnik, Croatia, from 24-27 April
2023.
Further steps were taken in the development of an extended offering for
demyelinating disorders. The Group has previously announced the award of two
phase-III trials in MOG antibody-associated disease (MOG-AD) and during 2023
we have extended our service offering to provide automated lesion
quantification into one of those trials. With these extended capabilities, the
Group can now serve core imaging requirements across demyelinating disorders,
including Multiple Sclerosis (MS) as the most prevalent and widely researched
disease area. IXICO presented a poster on its quantitative MS analysis at the
9(th) conference by the European Committee for Treatment and Research in MS,
ECTRIMS, held in Milan, Italy, from 11-13 October 2023.
The Group continues an active R&D program exploring opportunities to
develop its core clinical trial analytics technology for applications that
support treatment-related decision-making in new post-market applications.
During 2023, we have actively progressed several partnership opportunities on
the development of solutions to provide diagnostic decision-support in
clinical practice and safety monitoring of ARIA (amyloid related imaging
abnormality), the core side effect of recently approved anti-amyloid therapy.
To further support development of a post-market decision support tool, the
Group has secured funding that will support and complement IXICO's internal
R&D program during 2024.
Growth strategy & Corporate outlook
Our focus remains on neuroscience with neurology global medicine spending
expected to grow at 3-6% to more than $140 billion by 2025. This includes much
higher growth subsegments, as a range of rare neurological diseases have had
new treatments approved or showing positive progression as well as the
potential that large population diseases like AD or PD will see further
investment consequent to the approval of new treatments.
During 2023, IXICO was impacted by a slow-down in trial start-ups and
near-term cutbacks in pharma R&D pipelines resulting from a tighter
funding environment affecting the biopharmaceutical industry. Whilst we
anticipate these conditions continuing in 2024, we view them as near-term
headwinds. We remain resolute in our conviction that the unmet clinical need
in neurodegenerative diseases provides significant runway for growth for
IXICO, reflected in our "Precision in Neuroscience" strategy.
Our 5-point Precision in Neuroscience strategy
IXICO continued to make good progress in several strategic areas:
Build Pillar: Robust operational performance and cost control measures for
the period enabled financial earnings in line with market expectations,
despite lower year over year revenues. Investments made during 2023 to build
our commercial infrastructure have led to notable increase in the client
contract opportunities pipeline providing management visibility to
significantly larger numbers of Requests for Proposal (RFP) over the next 24
months, each valued at between £0.25m to £2.5m, across a broadening range of
therapeutic areas. This, combined with an order book at the end of 2023 of
£14.8m, provides good future revenue visibility and a basis for targeting our
commercial efforts to return to double digit revenue growth in 2025 and
beyond.
Innovate Pillar: We believe that IXICO will lead in our addressable markets by
developing proprietary algorithms that the biopharmaceutical industry rely on
to establish both the safety and efficacy of new treatments. Data analysis
undertaken by IXICO as part of the GAP Bio-Hermes study (see Science review)
completed in 2023 were presented in the opening symposium at the prestigious
CTAD (Boston, October 24th), AD clinical trials scientific conference.
Presenting important data at large disease specific conferences is expected to
increase awareness of IXICO's capabilities to the global pharma industry and
provide significant potential future business development opportunities.
In 2023, the HD-IH consortium was expanded (see Science review). The HD-IH
consortium deploys IXICO's proprietary IXIQ.Ai brain segmentation platform to
conduct a harmonized analysis of more than 6,000 participant-visit magnetic
resonance images (MRIs) acquired from over 2,000 research participants. These
analyses will support the development of therapeutic strategies targeting more
specific sub-populations, inform eligibility and dosing decisions for HD
clinical trials, and aid in associated trial design decisions and biomarker
development to enable interventional studies earlier in the disease course.
Penetrate Pillar: Despite delays in clinical trial start-ups, we continue to
make good progress in pursuing our strategy of penetrating early stage (phase
1 and 2) programmes, accessing the potential to stay with the client for
several years as the asset, if successful, moves along the development
continuum. Broadening the client base with more early phase studies reduces
the risk associated with any single large, late phase project, while providing
multiple opportunities to move into larger, later stage (phases 3 and 4)
clinical trials in the future.
Developing drugs takes a long time and is expensive. The overall likelihood of
approval (LOA) from Phase 1 for all developmental candidates over 2011-2020
was 7.9%. However, rare disease therapies (of which many are in neurology)
are notably more successful with an overall LOA of 17.0% and development
programs with trials employing patient preselection biomarkers have two-fold
higher LOAs (15.9%), driven by a Phase 2 success rate of nearly one-in-two.
This insight supports our strategy of becoming the partner of choice across a
broader range of rare diseases, as we have done in HD. In addition, we will be
looking to leverage our next generation TrialTracker platform to increase
commercial success in new trials of large population diseases like AD, MS, or
PD, in particular those employing imaging biomarkers combined with potential
analysis of non-imaging biomarkers, such as blood-based and digital
biomarkers.
Bridge Pillar: There is incredible potential for real world evidence (RWE) to
play a much broader role in the advancement of drug development, delivering
insights that ensure efficacy and safety, while increasing patient-centricity
and trial feasibility. With our recent and ongoing investments in artificial
intelligence (AI) and cloud analytics together with our next generation
TrialTracker data sharing and AI analysis platform, IXICO's ambition is to
address many of the challenges to analysing and interpreting RWE Imaging data.
We expect this to expand IXICO's addressable clinical trials market whilst
creating a bridge into post marketing and clinical practice markets.
Enhance Pillar: With long lead times, significant regulatory and procurement
barriers to entry into the clinical trials market, IXICO is uniquely
positioned to partner with innovative analytics organisations to provide a
market channel to the global biopharmaceutical industry. This partnering
strategy supplements our own innovation roadmap with additional enhancements
to our offering to provide cutting edge innovations across a broad range of
CNS disease areas. Progress made during 2023 means that we are hopeful to be
able to announce our first significant partnership agreement early in 2024.
Giulio Cerroni
Chief Executive Officer
Financial review
Right sizing the Group for future growth.
In 2023, the Group has navigated a challenging trading environment. This was
anticipated, and the Group has delivered financial earnings for 2023 in line
with market expectations.
Looking to 2024, ongoing macro-economic and political challenges continue to
weigh down on the clinical trials market, and, in particular, the availability
of capital. This has led to cost restructuring and consolidation across the
pharma, biotech and CRO space, and has softened the Group's revenue outlook
for 2024, as announced in September 2023. To anticipate this, the Group has
undertaken cost reduction measures, including a 'right sizing' of the employee
base seeking to balance the weaker short-term outlook and the medium-long term
market opportunity (which, if anything, has strengthened in the year).
The Group expects to deliver flat revenue across 2024, before returning to
revenue growth in 2025.
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 2023 result 2022 result Movement
Revenue £6.7m £8.6m £1.9m ↓
Gross profit £3.3m £5.2m £1.9m ↓
Gross margin 49.1% 60.7% 1,160bps ↓
EBITDA (loss)/profit (£0.8m) £1.5m £2.3m ↓
Operating (loss)/profit (£1.4m) £0.9m £2.3m ↓
(Loss)/profit per share (2.44p) 2.14p 4.58p ↓
Order book £14.8m £16.0m £1.2m ↓
Net assets £11.4m £12.5m £1.1m ↓
Cash £4.0m £5.8m £1.8m ↓
Non-current asset investments £1.9m £2.3m £0.4m ↓
Revenue
Revenue for the year of £6.7 million (2022: £8.6 million) represents a
year-on-year contraction of 23%. This contraction was expected, and was caused
by the final year impact of 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 those new trials will tend to be lower value, earlier phase
trials compared to the large, failed trials (which were predominantly late
stage).
Across 2023, the Group has seen lower levels of new contract bookings than it
anticipated, a trend seen across the clinical trials market. The Group will
deliver approximately flat revenues in 2024 before an expected return to
revenue growth in 2025.
Gross profit
The Group reports gross profit of £3.3 million for the year (2022: £5.2
million). This equates to a gross margin of 49% (2022: 61%). Whilst this
remains a strong gross margin, the reduction on the prior year reflects both
the reduction in revenues and a revenue mix increasingly reflective of earlier
phase trials, which tend to be lower margin. Whilst in the short term, a
portfolio of early phase trials results in lower gross margins, this portfolio
also provides a strong base for future growth, as those trials that
successfully move from early to late phase provide the Group with the
opportunity to continue providing services as these trials transition to
larger, later phase trials.
Earnings before interest, tax, depreciation, and amortisation ('EBITDA')
The Group delivered an EBITDA loss of £0.8 million in the year (2022: £1.5
million profit). This reflects the reduction in revenues, tighter margins, a
lower level of grant income, several non-recurring benefits that supported
profitability in 2022 and a reduced level of cost capitalisation. These
negative impacts have then been partially offset by careful cost management
including the completion of a headcount reduction exercise immediately post
the financial year end.
2023 2022
£000 £000
Profit attributable to equity holders (1,178) 1,032
Depreciation of fixed assets 400 451
Amortisation of fixed assets 225 188
Interest on lease liabilities 29 33
Interest on cash held at bank (105) (10)
Taxation (183) (147)
EBITDA (812) 1,547
Operating profit
Operating expenditure in the year reflected careful cost management alongside
targeted investment, specifically:
· research and development expenses of £0.9 million (2022: £1.2
million) included the development of new algorithms to support image analysis
in new and existing therapeutic indications. In addition, the Group
capitalised £1.2 million of internal development expenditure primarily in
respect of its next generation TrialTracker platform (2022: £0.9 million);
· sales and marketing expenses of £1.3 million (2022: £1.2
million) reflecting increased investment in this team in particular, sales
executives and marketing and product capabilities; and
· general and administrative expenses of £2.9 million (2022: £2.6
million) reflecting several non-recurring positive impacts on profit in the
prior year that included positive foreign exchange movements and the write
back of long term incentive charges on share options that did not, or were not
expected to, meet their performance conditions.
Operating losses totalled £1.4 million (2022: £0.9 million profit) equated
to an operating loss margin of 22% (2022: 11% profit margin).
Order book
The Group continues to benefit from a healthy contracted order book. On 30
September 2023 this totalled
£14.8 million (2022: £16.0 million), which takes account of £6.7 million of
revenues delivered during the financial year,
£8.0 million of new and expanded multi-year contracts secured during the year
and £2.6 million of trial descopes due to client trial failures and minor
foreign exchange movement in the year. This net contraction in the order book
reflects the notable slowdown in new trial initiations during 2023. This is
a short-term challenge reflective of the tight capital markets and is counter
to the medium and longer term trends for increased investment in this market
driven by aging populations, increased global healthcare costs and scientific
breakthroughs in the area of neurological disease.
New contracts won were across 7 clients with contract extensions across 13
clients.
2023 2022
£000 £000
Opening orderbook 16,019 18,776
New wins 8,030 12,617
Revenue (6,665) (8,643)
Net descoping, inflation and FX (2,631) (6,731)
Closing orderbook 14,753 16,019
Cash
The Group reported operating cash inflows after tax receipts of £0.3 million
in the year (2022: £1.4 million). This reflects the timing of operational
cash inflows and outflows with strong client payment volumes early in the year
supporting an overall positive operational cash position.
The Group had a closing cash balance at 30 September 2023 of £4.0 million
(2022: £5.8 million) with the reduction in cash reflecting £1.9 million
(2022: £2.2 million) of investment in data and technology assets designed to
support future scalability and £0.2m of lease payments on the Group offices
(2022: £0.1m). These investments were partially offset by the £0.3m of
operating cash and taxation inflows (2022: £1.4 million).
Non-current asset investments
The Group capitalised £1.9 million of non-current assets in the year to 30
September 2023 (2022: £2.3 million). This decrease in non-current assets
reflects the 2023 investment in bringing to operational readiness of the
Group's next generation TrialTracker platform totalling £1.6 million (2022:
£2.0 million). 2024 capitalised investment in this platform to deliver
additional functionality is expected to be less than £1.0 million.
The next generation TrialTracker platform further enhances 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.
Net assets
The Group's net asset position decreased by £1.1 million to £11.4 million
across the year (2022: £12.5 million). This reflects the losses reported
partially offset by the investments made in technology assets to underpin
long-term future growth aspirations and market demands.
Loss per share
The Group reports a loss per share of 2.44p (2022: 2.14p profit per share).
Grant Nash
Chief Financial Officer
Financial Statements
Consolidated Statement of Comprehensive Income
for the years ended 30 September 2023 and for 30 September 2022
30-Sep-23 30-Sep-22
( )
Notes £000 £000
Revenue 5 6,665 8,643
Cost of sales (3,395) (3,400)
Gross profit 3,270 5,243
Other income 7 393 689
Operating expenses
Research and development expenses (925) (1,217)
Sales and marketing expenses (1,321) (1,226)
General and administrative expenses (2,854) (2,581)
Total operating expenses 10 (5,100) (5,024)
Operating (loss) / profit (1,437) 908
Finance income 105 10
Finance expense (29) (33)
(Loss) / profit on ordinary activities before taxation (1,361) 885
Taxation 11 183 147
(Loss) / profit attributable to equity holders for the period (1,178) 1,032
Other comprehensive income / (expense):
Items that will be reclassified subsequently to profit or loss
Foreign exchange translation differences (21) 14
Movement in fair value of cash flow hedges 22 111 (214)
Cash flow hedges recycled to revenue 22 (27) 103
Total other comprehensive income / (expense) 63 (97)
Total comprehensive (expense) / income attributable (1,115) 935
to equity holders for the period
(Loss) / profit per share (pence)
Basic (loss) / profit per share 12 (2.44) 2.14
Diluted (loss) / profit per share 12 (2.44) 2.03
Consolidated Statement of Financial Position
as at 30 September 2023 and 30 September 2022
30-Sep-23 30-Sep-22
Notes £000 £000
Assets
Non-current assets
Property, plant and equipment 13 518 817
Intangible assets 14 6,147 4,587
Commission assets 16 39 -
Total non-current assets 6,704 5,404
Current assets
Trade and other receivables 16 1,706 3,029
Current tax receivables 11 549 453
Cash and cash equivalents 4,031 5,769
Total current assets 6,286 9,251
Total assets 12,990 14,655
Liabilities and equity
Non-current liabilities
Trade and other payables 17 2 33
Lease liabilities 18 275 394
Total non-current liabilities 277 427
Current liabilities
Trade and other payables 17 1,142 1,502
Derivative financial liabilities 22 27 111
Lease liabilities 18 112 122
Total current liabilities 1,281 1,735
Total liabilities 1,558 2,162
Equity
Ordinary shares 20 484 482
Share premium 20 84,802 84,802
Merger relief reserve 20 1,480 1,480
Reverse acquisition reserve 20 (75,308) (75,308)
Cash flow hedge reserve 20,22 (27) (111)
Foreign exchange translation reserve 20 (95) (74)
Capital redemption reserve 20 7,456 7,456
Accumulated losses 20 (7,360) (6,234)
Total equity 11,432 12,493
Total liabilities and equity 12,990 14,655
Company Statement of Financial Position
as at 30 September 2023 and 30 September 2022
30-Sep-23 30-Sep-22
Notes £000 £000
Assets
Non-current assets
Investments in Group undertakings 15 5,857 5,805
Total non-current assets 5,857 5,805
Current assets
Trade and other receivables 16 2,481 3,088
Cash and cash equivalents 1,469 1,590
Total current assets 3,950 4,678
Total assets 9,807 10,483
Liabilities and equity
Current liabilities
Trade and other payables 17 60 83
Total current liabilities 60 83
Equity
Ordinary shares 20 484 482
Share premium 20 84,802 84,802
Merger relief reserve 20 1,480 1,480
Capital redemption reserve 20 7,456 7,456
Accumulated losses 20 (84,475) (83,820)
Total equity 9,747 10,400
Total liabilities and equity 9,807 10,483
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 £707,000 (2022: £741,000).
Consolidated Statement of Changes in Equity
for the years ended 30 September 2023 and 30 September 2022
Foreign Cash
Merger Reverse exchange flow Capital
Ordinary Share relief acquisition translation hedge redemption Accumulated
shares premium reserve reserve reserve reserve reserve Losses Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
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 income/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/expense - - - - 14 (111) - 1,032 935
Transactions with owners
Charge in respect of share options - - - - - - - 79 79
Balance at 30 September 2022 482 84,802 1,480 (75,308) (74) (111) 7,456 (6,234) 12,493
Total comprehensive income
Loss for the period - - - - - - - (1,178) (1,178)
Other comprehensive income/expense
Foreign exchange translation - - - - (21) - - - (21)
Movement in fair value of cash flow - - - - - 111 - - 111
Cash flow hedges recycled to revenue - - - - - (27) - - (27)
Total comprehensive income/expense - - - - (21) 84 - (1,178) (1,115)
Transactions with owners
Charge in respect of share options - - - - - - - 52 52
Exercise of share options 2 - - - - - - - 2
Total transactions with owners 2 - - - - - - 52 54
Balance at 30 September 2023 484 84,802 1,480 (75,308) (95) (27) 7,456 (7,360) 11,432
Company Statement of Changes in Equity
for the years ended 30 September 2023 and 30 September 2022
Capital
Ordinary Share Merger relief redemption Accumulated
shares premium reserve reserve losses Total
£000 £000 £000 £000 £000 £000
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
Balance at 30 September 2022 482 84,802 1,480 7,456 (83,820) 10,400
Total comprehensive expense for the period - - - - (707) (707)
Transactions with owners
Charge in respect of share options - - - - 52 52
Exercise of share options 2 - - - - 2
Total transactions with owners 2 - - - 52 54
Balance at 30 September 2023 484 84,802 1,480 7,456 (84,475) 9,747
Consolidated Statement of Cash Flows
for the years ended 30 September 2023 and 30 September 2022
30-Sep-23 30-Sep-22
£000 £000
Cash flows from operating activities
Profit / (loss) for the period (1,178) 1,032
Finance income (105) (10)
Finance expense 29 33
Taxation (183) (147)
Depreciation of fixed assets 400 451
Amortisation of intangibles 225 188
Research and development expenditure credit (355) (316)
Impairment of intangible assets 14 41
Share option charge 52 79
(1,101) 1,351
Changes in working capital
Decrease in trade and other receivables 1,290 280
(Decrease) / increase in trade and other payables (327) (696)
Cash (used in) / generated from operations (138) 935
Taxation received 456 499
Taxation paid (16) (10)
Net cash (used in) / generated from operating activities 302 1,424
Cash flows from investing activities
Purchase of property, plant and equipment (100) (187)
Purchase of intangible assets including staff costs capitalised (1,863) (2,058)
Finance income 99 6
Net cash (used in) / generated from investing activities (1,864) (2,239)
Cash flows from financing activities
Issue of shares 2 -
Repayment of lease liabilities (158) (114)
Net cash (used in) / generated from financing activities (156) (114)
Movements in cash and cash equivalents in the period (1,718) (929)
Cash and cash equivalents at start of period 5,769 6,684
Effect of exchange rate fluctuations on cash held (20) 14
Cash and cash equivalents at end of period 4,031 5,769
The financial information set out in these results does not constitute the
Group's consolidated statutory accounts for the years ended 30 September 2023
or 2022. Statutory accounts for the year ended 30 September 2022 have been
filed with the Registrar of Companies. The statutory accounts for the year
ended 30 September 2023 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 2023 will be posted to shareholders on or about 15
December 2023.
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 the parent of the subsidiaries detailed in note 15, together
referred to throughout as 'the Group'. The Group is an established provider of
technology-enabled services to the global biopharmaceutical industry. The
Group's services are used to select participants for clinical trials and
assess the safety and efficacy of new drugs in development within the field of
neurological disease.
b. Basis of preparation
The consolidated financial statements have been prepared on a going concern
basis and in accordance with international accounting standards in conformity
with the requirement of the Companies Act 2006.
The consolidated financial statements comprise a Statement of Comprehensive
Income, a Statement of Financial Position, a Statement of Changes in Equity, a
Statement of Cash Flows, and accompanying notes. These financial statements
have been prepared under the historical cost convention modified by the
revaluation of certain financial instruments.
The consolidated financial statements are presented in Great British Pounds
('£' or 'GBP') and are rounded to the nearest thousand unless otherwise
stated. This is the predominant functional currency of the Group, and is the
currency of the primary economic environment in which it operates. Foreign
currency transactions are accounted in accordance with the policies set out
below.
The Company has elected to use Financial Reporting Standard - 'The Reduced
Disclosure Framework' (FRS101). In preparing these financial statements the
Company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore, these financial statements do not include:
· A statement of cash flows and related notes;
· The requirement to produce a statement of financial position at
the beginning of the earliest comparative period;
· The requirements of IAS 24 'Related Party Disclosures' to
disclose related party transactions entered in to between two or more members
of the group as they are wholly owned within the group;
· The effect of future accounting standards not adopted;
· Paragraphs 45(b) and 46 to 52 of IFRS 2, 'Share-based payment'
(details of the number and weighted average exercise prices of share options,
and how the fair value of goods or services received was determined);
· Paragraphs 91 to 99 of IFRS 13, 'Fair value measurement'
(disclosure of valuation techniques and inputs used for fair value measurement
of assets and liabilities).
· Disclosures in relation to impairment of assets
· IFRS 7, 'Financial instruments: Disclosures'.
c. Basis of consolidation
The consolidated financial statements incorporate the accounts of the Company
and its subsidiary companies adjusted to eliminate intra-Group balances and
any unrealised gains and losses or income and expenses arising from
intra-Group transactions. The Company's subsidiaries are detailed in note 15.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the Group's
accounting policies.
The Group controls a subsidiary when the Group is exposed to, or has rights
to, variable returns from its involvement with a subsidiary and has the
ability to affect those returns through its power over a subsidiary. In
assessing control, potential voting rights that are currently exercisable or
convertible are taken into account.
The results of subsidiary companies are included in the consolidated financial
statements from the date that control commences until the date that control
ceases. The assets and liabilities of foreign operations are translated into
GBP at exchange rates prevailing at the end of the reporting period. Income
statements and cash flows of foreign operations are translated into GBP at
average monthly exchange rates which approximate foreign exchange rates at the
date of the transaction. Foreign exchange differences arising on retranslation
are recognised directly in a separate translation reserve.
d. Going concern
The ongoing conflict in eastern Europe and recent re-commencement of
hostilities in the middle east, accompanied by rising inflation, interest
rates and a broad degree of macro-economic and political disruption continue
to create challenges for the global economy. These have resulted in a lowered
risk appetite which has impacted capital markets around the world, reducing
capital availability and investment in areas deemed higher risk.
The impact of this has been visible in the clinical trials market both through
a slow down in the initiation of new clinical trials, increased focus on
development pipelines by the biopharmaceutical companies and restructuring and
consolidation announcements within both biopharma and CROs.
The Group has seen the impact of this and, whilst it remains well capitalised
and debt-free, it has seen an elongation of the timeframes to sign new
clinical trials and therefore has lowered its expectations for revenues in
2024 ahead of a return to growth in 2025.
Irrespective, the Group has a strong balance sheet for its size with financial
year end net assets of £11.4 million, a £4.0 million cash balance and has
secured £8.0 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 through to December 2024. These
include the risk to current projects and expected future sales pipelines. 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, as
well as the review completed by the Audit Committee (including a review of a
reverse stress test) 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 2023
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.
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)
• Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
• Definition of Accounting Estimates
• Disclosure of Accounting Policies
The Directors anticipate, based on current business processes, that the
introduction of the above standards and amendments will not have a material
impact on the Group and Company financial statements and therefore the impact
of these changes on the financial statements has not been assessed.
3. Significant accounting policies
3.1 Revenue
Revenue is principally derived from service revenue. 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,
and 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. In some instances the Group
invoices in advance of work being completed, a corresponding contract
liability is therefore created to account for this. The Group also invoices on
completion of contractual milestone. In these instances accrued income is
recognised until the invoices are issued to reflect the Group's right to
compensation for these completed but not invoiced performance obligations.
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 £13,000 (£192,000) of
revenues in the year.
3.2 Other income
Government grants and assistance
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, with the rate increasing to 20% for expenses
incurred from 1 April 2023. The Group recognises research and development
expenditure credit as an item of other income, taking advantage of the 'above
the line' presentation, and is recognised in the year for which the research
and development relates.
3.3 Research and development expenditure
In all instances across the Group, research expenditure is expensed through
the income statement. For development expenditure, items will be expensed
where the recognition criteria for internally generated intangible assets is
not met.
The main criteria used to assess this, as required under IAS 38 - Intangible
Assets, are:
- Demonstrating technical feasibility of completing the intangible
asset;
- Intention to complete the asset;
- Ability to use or sell the asset in order to generate future
economic benefit;
- Availability of adequate technical or other resources to complete
development; and
- Ability to measure reliably the expenditure attributable to the
asset.
It was determined that the Group continued to meet the above criteria in
respect of specific developments to its TrialTracker platform and data
analytics service offering. As a result, associated development costs are
capitalised in the year and an intangible asset is recognised as set out in
note 14.
3.4 Share-based payments
Equity-settled share-based payments are measured at the fair value of the
equity instruments at the grant date. The fair value determined at the grant
date of the equity-settled share-based 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 21 of the consolidated financial
statements.
3.5 Employee benefits
All employee benefit costs are recognised in the Consolidated Statement of
Comprehensive Income as they are incurred. These principally relate to holiday
pay and contributions to the Group defined contribution 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.
3.6 Leased assets
A lease is defined as a contract that gives the Group the right to use an
asset for a period of time in exchange for consideration. The Group identifies
from the contract the total length and cost of the lease contract, and
determines whether it meets the definition of a right-of-use asset.
Recognition of a right-of-use asset is met if it is longer than 12 months and
of a high value. For those leases that do not meet these criteria, the rental
charge payable under these leases are charged to the Consolidated Statement of
Comprehensive Income on a straight-line basis over the lease term.
The initial recognition and subsequent measurement of right-of-use asset
leases are:
Initial recognition
At the commencement date, the Group measures the lease liability at the
present value of future lease payments, discounted using the Group's
incremental borrowing rate. The Group also recognises a right-of-use asset
which is measured at cost, which is made up of the initial measurement of the
lease liability, any initial direct costs and an estimate of any costs to
reinstate the asset to its original condition.
Subsequent measurement
The lease liability is reduced for payments made and increased for interest
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 18 for more information.
3.7 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and, where appropriate, less provisions for impairment. The initial
recognition and subsequent measurement of property, plant and equipment are:
Initial recognition
Property, plant and equipment is initially recognised at acquisition cost,
including any costs directly attributable to bringing the assets to the
location and condition necessary for them to be capable of operating. In most
circumstances, the cost will be its purchase cost, together with the cost of
delivery.
Subsequent measurement
An asset will only be depreciated once it is ready for use. Depreciation is
charged so as to write off the cost of property, plant and equipment, less its
estimated residual value, over the expected useful economic lives of the
assets.
Depreciation is charged on a straight-line basis as follows:
Office buildings over expected lease term
Leasehold improvements shorter of 5 years or the lease term
Fixtures and fittings 3 years
Equipment 3 years
The disposal or retirement of an asset is determined by comparing the sales
proceeds with the carrying amount. Any gains or losses are recognised within
the Consolidated Statement of Comprehensive Income.
3.8 Intangible assets
Acquired intangibles
Intangible assets that are acquired through business combinations are
recognised as intangible assets if they are separable from the acquired
business or 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 3.3.
Initial recognition
Internally generated intangible assets are initially recognised at cost once
the recognition criteria of IAS 38 are met.
Subsequent measurement
Any assets that are not yet ready for use will be capitalised as assets under
construction and will not be amortised. Once the asset is ready for use,
amortisation will begin. The amortisation rates adopted are based on the
expected useful economic life of the projects to which they relate, with the
charges recognised in accordance with how the Group receives the benefit from
the technology. The assets useful economic life is as follows:
Internally generated technology 3 - 5 years
Proprietary clinical trial platform 15 years
3.9 Impairment of non-current assets
Each category of non-current assets is reviewed for impairment annually when
under construction or when there is an indication that an asset may be
impaired, being when events or changes in circumstances indicate that the
carrying value may not be recoverable. An impairment loss is recognised in the
Consolidated Statement of Comprehensive Income for the amount by which the
asset's carrying value exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less cost to
sell and value in use. Non-financial assets, other than goodwill, which have
suffered an impairment are reviewed for possible reversal of the impairment at
each reporting date.
3.10 Investments in Group undertakings
Investments in Group undertakings are initially recognised at cost and
subsequently measured at cost less any impairment provision. Investments are
subject to an annual impairment review, with any impairment charge being
recognised through the Consolidated Statement of Comprehensive Income.
Additions to investments are amounts relating to share options for the
services performed by employees of the subsidiaries of the Company and are
classified as capital contributions within note 15.
3.11 Trade and other receivables
Trade and other receivables are initially recognised at fair value and
subsequently stated at amortised cost using the effective interest method,
less any expected credit losses. The Group makes use of a simplified approach
in accounting for trade and other receivables as well as contract assets and
records the loss allowance as lifetime expected credit losses. These are the
expected shortfalls in contractual cash flows, considering the potential for
default at any point during the life of the financial instrument. In
calculating, the Group uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses.
The Group assess impairment of trade receivables on an individual basis as
they possess individual credit risk characteristics based on each client.
Refer to note 16 for further information on aging of trade receivables and an
analysis of any expected credit losses.
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 (2022: 3 years), being the average length of contracts
entered into by the Group, as opposed to using a tailored time period for each
project. Management reviews this assessment annually to determine that there
are no material variances. 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. Commission
assets.
3.12 Taxation
Current tax
Current tax represents amounts recoverable within the United Kingdom and is
provided at amounts expected to be recovered using the tax rates and laws that
have been enacted at the Statement of Financial Position date.
Research and development credits
The benefit associated with UK-based research and development is recognised
under the UK's Research and Development Expenditure Credit scheme. Details of
the recognition are set out in note 3.2.
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 19.
3.13 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand with original
maturities at inception of 3 months or less.
3.14 Foreign currency translation
Transactions denominated in foreign currencies are translated into Great
British Pounds at actual rates of exchange prevailing at the date of
transaction. Monetary assets and liabilities expressed in foreign currencies
are translated into Great British Pounds at rates of exchange prevailing at
the end of the financial year. All foreign currency exchange differences are
taken to the Consolidated Statement of Comprehensive Income in the year in
which they arise.
Non-monetary items are not retranslated at year end and are measured at
historical cost (translated using the exchange rates at the transaction date),
except for non-monetary items measured at fair value which are translated
using the exchange rates at the date when fair value was determined.
3.15 Trade and other payables
Trade and other payables are non-interest-bearing, unless significantly
overdue, and are initially recognised at fair value and subsequently stated at
amortised cost.
3.16 Provisions, contingent assets and contingent liabilities
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of
economic resources will be required from the Group and amounts can be
estimated reliably. The timing of such outflows may still be uncertain. Such
provisions are measured at the estimated expenditure required to settle the
present obligation based on the most reliable estimate available at the
reporting date, discounted to the present value where material.
Any reimbursement that the Group is virtually certain to collect from a third
party in relation to the related provision will be recognised as a separate
asset.
Liabilities are not recognised where the outflow of economic resources is not
probable, but are instead disclosed as contingent liabilities.
3.17 Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
3.18 Financial instruments
Financial assets and financial liabilities are recognised on the Consolidated
Statement of Financial Position when the Group or the Company becomes a party
to the contractual provisions of the instrument. Debt and equity instruments
are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangement.
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 22.
4. Significant management judgement in applying accounting policies
and estimation uncertainty
When preparing the consolidated financial statements, the Directors make a
number of judgements, estimates and assumptions about the recognition and
measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying the accounting
policies of the Group that have the most significant effect on the
consolidated financial statements.
Determination of acting as agent or principal
The scope of 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 year, the Group had 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 an immaterial increase in revenue and cost of sales recognised in
the year and a decrease in profit margins achieved. In the prior year the
effect would have been material.
Capitalisation of internally developed software
Distinguishing the research and development phases of a new software product
and determining whether the requirements for the capitalisation of development
costs are met requires judgement. Management will assess whether a project
meets the recognition criteria as set out in IAS 38 based on an individual
project basis. More detail is included in note 3.3 as to the specific
considerations given to each project when determining whether to capitalise
internally developed software. Where the criteria are not met, the research
and development expenditure will be expensed in the Consolidated Statement of
Comprehensive Income. Where the recognition criteria are met, the items will
be capitalised as an intangible asset.
During the year ended 30 September 2023, research and development expenses
totalled £2,152,000 (2022: £2,129,000). Of this amount, £1,211,000 (2022:
£912,000) was capitalised as an intangible asset relating to employee costs.
The balance of expenditure being £925,000 (2022: £1,217,000) 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 19 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.
5. Revenue
An analysis of the Group's revenue by type is as follows:
2023 2022
£000 £000
Service revenue 6,665 8,643
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 2023, revenue includes £214,000 (2022:
£499,000) held in contract liabilities within trade and other payables at the
beginning of the period. 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. At 30 September 2023, £343,000 (2022:
£575,000) of advanced payments were recognised on the balance sheet.
6. Segmental information
The Board considers there to be only one core operating segment for the
Group's activities. This is based on the Group's development, commercial and
operational delivery teams operating across the entirety of the Group, which
is primarily based in the United Kingdom. The projects undertaken by the Group
are managed by project managers, who receive inputs for each project 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 2023, the Group had five clients (2022:
three clients) that exceeded 10% of total revenue. In 2023 the individual
percentage revenue associated with these clients was 14% (£966,000), 14%
(£949,000), 13% (£862,000), 12% (£792,000) and 10% (£699,000). In 2022,
the individual percentage revenue associated with the three largest clients
was 38% (£3,320,000), 14% (£1,175,000) and 11% (£976,000).
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.
2023 2022
£000 £000
United States of America 3,053 2711
United Kingdom 952 2057
Netherlands 862 436
Switzerland 816 2077
Ireland 689 724
Other - Europe 293 638
Revenue 6,665 8,643
As the Group is domiciled in the United Kingdom, the entirety of the revenue
originates from this location.
7. Other income
Items of other income principally relate to government grants received. 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.
2023 2022
£000 £000
Grant income 38 373
RDEC 355 316
Other income 393 689
8. Auditor's remuneration
2023 2022
£000 £000
Audit services
- Group and Parent Company 56 38
- subsidiary companies 37 26
Total audit fees 93 64
Audit-related assurance services 8 7
Total auditor's remuneration 101 71
9. Employees and Directors
The average monthly number of persons (including Executive and Non-Executive
Directors) employed by the Group was:
2023 2022
Number
Number
Administration 14 15
Operations, research and development 75 75
Average total persons employed 89 90
The aggregate remuneration of employees in the Group was:
2023 2022
£000 £000
Wages and salaries 5,944 5,851
Social security costs 702 610
Other pension costs 303 286
Share-based payments charge 52 79
Total remuneration for employees 7,001 6,826
Employee costs capitalised (1,211) (912)
Net employee costs 5,790 5,914
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 2023
in respect of pension costs were £46,000 (2022: £46,000).
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 23 under
related party transactions.
The Company did not directly employ any staff and therefore there is no cost
recognised in respect of staff costs.
10. Operating loss / profit
The Group's operating loss (2022: profit) has been achieved after charging:
2023 2022
£000 £000
Research and development expenses 903 1,176
Research and development related impairment 14 41
Research and development related amortisation 8 -
Sales and marketing expenses 1,262 1,173
Amortisation of commission assets 59 53
Operating lease charges: land, buildings and printers 1 1
Depreciation of tangible assets 400 451
Amortisation of intangible assets 24 23
Foreign exchange (gain) / loss 85 (149)
Administrative expenses 2,344 2,255
Total operating expenses 5,100 5,024
There is a further amortisation charge of £193,000 (2022: £165,000)
recognised in cost of sales for those items directly related to project
activities. The total amortisation charge for the year is £225,000 (2022:
£188,000).
11. Taxation
The tax charge for each period can be reconciled to the result per the
Consolidated Statement of Comprehensive Income as follows:
2023 2022
£000 £000
(Loss) / profit on ordinary activities before taxation (1,361) 885
(Loss) / profit before tax at the effective rate of corporation tax
in the United Kingdom of 22% (2022: 19%) (299) 168
Effects of:
Expenses not deductible for tax purposes (17) 4
Origination and reversal of temporary differences (291) (332)
Research and development uplifts net of losses surrendered for tax credits 406 17
Overseas taxation 16 -
Prior period adjustment 2 (4)
Tax credit for the period (183) (147)
The tax credit for each period can be reconciled as follows:
2023 2022
£000 £000
Small or medium enterprise research and development credit (276) (200)
Deduction for corporation tax on RDEC 75 57
Overseas taxation 16 -
Prior period adjustment 2 (4)
Tax credit for the period (183) (147)
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:
2023 2022
£000 £000
Current tax receivable at start of period 453 480
Current period credit 552 472
Corporation tax repayment (456) (499)
Current tax receivable at end of period 549 453
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:
2023 2022
£000 £000
Tax credit for the year 183 147
RDEC gross of corporation tax deduction 355 316
Overseas taxation 15 -
Tax recoverable (1) 9
Current period credit 552 472
12. Earnings per share
The calculation of basic and diluted earnings per share ('EPS') of the Group
is based on the following data:
2023 2022
Earnings
Earnings for the purposes of basic and diluted EPS, being net profit (1,178) 1,032
attributable to the owners of the Company (£000)
Number of shares
Weighted average number of shares for the purposes of basic EPS 48,309,181 48,151,373
Effect of potentially dilutive ordinary shares:
- Weighted average number of share options - 2,606,350
Weighted average number of shares for the purposes of diluted EPS 48,309,181 50,757,723
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. For the year ended to 30 September 2023, there was no dilutive effect as
the share options in issue would have decreased the loss per share.
The basic and diluted earnings per share for the Group and Company is:
2023 2022
Basic earnings per share (2.44p) 2.14p
Diluted earnings per share (2.44p) 2.03p
13. Property, plant and equipment
Group
Office Leasehold Fixtures and
building improvement fittings Equipment Total
Cost £000 £000 £000 £000 £000
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
Additions - 7 - 94 101
Disposals - - - (20) (20)
At 30 September 2023 777 192 5 1,191 2,165
Accumulated depreciation
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
Charge for the period 102 19 - 279 400
Disposals - - - (20) (20)
At 30 September 2023 481 176 5 985 1,647
Net book value
At 30 September 2022 398 28 - 391 817
At 30 September 2023 296 16 - 206 518
The only right-of-use asset is held within the office building category. At 30
September 2023, the carrying amount of the right-of-use asset was £296,000
(2022: £398,000).
Company
At 30 September 2023 and 30 September 2022, the Company had no property, plant
and equipment.
14. Intangible assets
Group
Other acquired intangibles Other Internally developed technology Next generation TrialTracker platform Total
£000 £000 £000 £000
Cost
At 30 September 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
Additions 121 89 1,589 1,799
Impairment - (14) - (14)
At 30 September 2023 342 785 5,700 6,827
Accumulated amortisation
At 30 September 2021 104 171 - 275
Amortisation 37 151 - 188
Disposals - (8) - (8)
At 30 September 2022 141 314 - 455
Amortisation 47 178 - 225
At 30 September 2023 188 492 - 680
Net book value
At 30 September 2022 80 396 4,111 4,587
At 30 September 2023 154 293 5,700 6,147
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, research and development for those items directly related
to the research activities of the company 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.
Whilst the asset remains under construction, amortisation is not charged.
Company
At 30 September 2023 and 30 September 2022, the Company had no intangible
assets.
15. Investments
The consolidated financial statements of the Group as at 30 September 2023 and
at 30 September 2022 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:
2023 2022
£000 £000
Investments in subsidiary undertakings
At beginning of the period 5,805 5,748
Capital contribution 52 57
Total investments at end of the period 5,857 5,805
The capital contribution represents the charge in the year for share-based
awards issued by the Company to employees of IXICO Technologies Limited and
IXICO Technologies Inc.
16. Trade and other receivables
Group Company
2023 2022 2023 2022
Current receivables £000 £000 £000 £000
Trade receivables 945 2,247 - -
Less provision for bad and doubtful debts - - - -
Net carrying amount of trade receivables 945 2,247 - -
Other taxation and social security 40 30 6 2
Prepayments and accrued income 684 652 20 28
Commission assets 27 96 - -
Other receivables 10 4 5 1
Amounts due from subsidiary undertakings - - 2,450 3,057
Current receivables 1,706 3,029 2,481 3,088
Non-current receivables
Commission assets 39 - - -
Total trade and other receivables 1,745 3,029 2,481 3,088
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 (2022: 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 (2022:
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 (2022:
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
2023 2022 2023 2022
£000 £000 £000 £000
Amounts not past due 864 2,189 - -
Past due:
Less than 30 days 81 58 - -
Total trade receivables 945 2,247 - -
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of financial assets disclosed in note 22.
17. Trade and other payables
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Current liabilities
Trade payables 86 254 - -
Other taxation and social security 58 56 - -
Contract liabilities 529 673 - -
Accrued expenses 464 508 60 83
Other payables 5 11 - -
1,142 1,502 60 83
Non-current liabilities
Accrued expenses 2 33 - -
Total trade and other payables 1,144 1,535 60 83
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:
£000
Lease liability as at 1 October 2021 597
Cash-flow: Repayment of lease (114)
Non-cash: Interest charge 33
Lease liability as at 1 October 2022 516
Lease liability as at 1 October 2022 516
Cash-flow: Repayment of lease (158)
Non-cash: Interest charge 29
Lease liability as at 30 September 2023 387
18. Leases
All lease liabilities are presented in the statement of financial position as
follows:
2023 2022
£000 £000
Current 112 122
Non-current 275 394
387 516
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 36 months
(2022: 48 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 398 (102) 296
The various elements recognised in the financial statements are as follows:
2023 2022
£000 £000
Statement of Comprehensive Income
Depreciation charge in the year 102 102
Interest expense on lease liability 29 33
Low value leases expensed in the year 1 1
Statement of Cash Flows
Capital repayments on lease agreements 158 114
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 Total
30 September 2023
Lease payments 132 166 127 - 425
Finance charges (20) (14) (4) - (38)
Net present values 112 152 123 - 387
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
At 30 September 2023, the Group's commitment to short-term and low-value
leases was £nil (2022: £nil).
19. Deferred tax
Deferred tax asset (unrecognised)
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Tax effect of temporary differences:
Tax allowances in excess of depreciation 1,581 1,316 (1) (1)
Accumulated losses (17,618) (17,310) (3,331) (3,217)
Losses on financial instruments debited to equity 5 28 - -
Accelerated commission charge 14 - - -
Deductible temporary differences (13) (14) - (5)
Deferred tax asset (unrecognised) (16,031) (15,980) (3,332) (3,223)
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% (2022: 25%).
20. 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 48,151,373 482 84,802
Share issue in the year 200,000 2 -
At 30 September 2023 48,351,373 484 84,802
Exercise of share options
During the year, the following share options were exercised:
Date of exercise Key management personnel shares Other employee shares Total shares Exercise price Value
Pence £000
16/12/2022 200,000 - 200,000 1.0 2
200,000 - 200,000 2
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.
21. 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 6.7 years
(2022: 7.2 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:
2023 2022
Number Weighted average exercise price Number Weighted average exercise price
Outstanding at start of the period 4,490,931 £0.18 3,815,931 £0.18
Granted - - 900,000 £0.20
Exercised (200,000) £0.01 - -
Lapsed (761,250) £0.29 (225,000) £0.35
Outstanding at end of the period 3,529,681 £0.15 4,490,931 £0.18
Exercisable at end of the period 1,949,680 £0.08 1,719,680 £0.07
22. 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
2023 2022
£000 £000
Financial assets held at amortised cost
Trade and other receivables excluding prepayments 1,795 2,943
Cash and cash equivalents 4,031 5,769
5,826 8,712
Financial liabilities held at amortised cost
Trade and other payables excluding statutory liabilities 1,144 1,535
Lease liabilities 387 516
1,531 2,051
Financial liabilities held at fair value
Forward contracts held at fair value (Level 2) 27 111
27 111
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 (2022: 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 18. All other non-current liabilities are due
between 1 to 3 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. The Group utilises US Dollar forward contracts to
mitigate the risk of US Dollar fluctuations on client contracts. It agrees
forward contracts based on forecasts of its US Dollar inflows and applies
hedge accounting to minimise currency risk.
The Group enters into forward contracts to sell US Dollars at quarterly
intervals and applies hedge accounting to 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. Ineffectiveness can arise due to
the counterparties credit risk and inaccurate forecasting, which
could leave the Group over hedged. In the year some ineffectiveness arose
where the Group's actual inflows were below that of the hedging instrument.
This ineffective portion was recognised in general and administrative
expenses.
At year end the Group had contracts to sell $750,000, 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 2023, $750,000 is hedged to period of March 2024, at
an average rate of 1.2785. The contracts are valued based on observable market
exchange rates.
The hedging transactions in the year had the following effect on the Group's
results:
Without hedge accounting Hedging movements 2023
£000 £000 £000
Statement of Comprehensive Income
Revenue 6,638 27 6,665
Gross profit 3,243 27 3,270
General and administrative expenses (2,743) (111) (2,854)
Profit for the year (1,094) (84) (1,178)
Total other comprehensive expense (21) 84 63
Total comprehensive income attributable to equity holders for the period (1,115) - (1,115)
Statement of financial position
Derivative financial liabilities 27 - 27
Cash flow hedge reserve - (27) (27)
Accumulated losses (7,387) 27 (7,360)
Without hedge accounting Hedging movements 2022
£000 £000 £000
Statement of Comprehensive Income
Revenue 8,746 (103) 8,643
Gross profit 5,346 (103) 5,243
General and administrative expenses (2,795) 214 (2,581)
Profit for the year 921 111 1,032
Total other comprehensive expense 14 (111) (97)
Total comprehensive income attributable to equity holders for the period 935 - 935
Statement of financial position
Derivative financial liabilities 111 - 111
Cash flow hedge reserve - (111) (111)
Accumulated losses (6,345) 111 (6,234)
The carrying amounts of the Group's foreign currency denominated monetary
assets and monetary liabilities as at 30 September are as follows:
2023 2022
US Dollar exposure USD'000 USD'000
Balance at end of period
Monetary assets 14 704
Monetary liabilities (27) (135)
Total exposure (13) 569
2023 2022
Euro exposure EUR'000 EUR'000
Balance at end of period
Monetary assets 156 480
Monetary liabilities (13) (15)
Total exposure 143 465
2023 2022
Swiss Franc exposure CHF'000 CHF'000
Balance at end of period
Monetary assets 33 113
Monetary liabilities - -
Total exposure 33 113
The Company had no foreign currency exposure at the year end (2022: nil).
Foreign currency sensitivity analysis
As at 30 September 2023, 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 (2022:
10%). The sensitivity analysis was applied on the fair value of financial
assets and liabilities.
2023 2022
10% weaker(1) 10% stronger 10% weaker 10% stronger
£000 £000
US Dollar 1 (1) (51) 51
Euro (12) 12 (41) 41
Swiss Franc (3) 3 (10) 10
(14) 14 (102) 102
(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 2023
(2022: nil).
Prior to entering into an agreement to provide services, the Group makes
appropriate enquiries of the counterparty and independent third parties to
determine creditworthiness. The Group has not identified any significant
credit risk exposure to any single counterparty or Group of counterparties as
at the period end.
The Group and Company continually reviews client credit limits based on market
conditions and historical experience. Any provision for impairment, as well as
the ageing analysis of overdue trade receivables, is set out in note 16.
The Group and Company's policy is to minimise the risks associated with cash
and cash equivalents by placing these deposits with institutions with a
recognised high credit rating.
Capital risk management
The Group considers capital to be shareholders' equity as shown in the
Consolidated Statement of Financial Position, as the Group is primarily funded
by equity finance and is not yet in a position to pay a dividend. The Group
had no borrowings at 30 September 2023 (2022: £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.
23. 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:
2023 2022
£000 £000
Short-term employee benefits 1,113 1,269
Post-employment benefits 29 33
Other long-term benefits (44) (115)
Share-based payments 19 77
Total remuneration 1,117 1,264
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 £687,000 (2022: £658,000) and
aggregate pension of £16,000 (2022: £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:
2023 2022
£000 £000
Charges from subsidiaries:
Management recharge from subsidiaries 530 416
Net interest charged (100) (68)
Charges to subsidiaries:
Share option charge 52 57
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