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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| C4x Discovery Holdings Plc | LSE:C4XD | London | Ordinary Share | GB00BQQ2RV18 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 12.00 | 10.30 | 10.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Pharmaceutical Preparations | 1.71M | -11.11M | -0.0441 | -2.72 | 30.27M |
From Apr 2019 to Apr 2024
TIDMC4XD
RNS Number : 4922T
C4X Discovery Holdings PLC
06 January 2017
This announcement contains inside information
C4X Discovery Holdings plc
("C4XD" or the "Company")
Full year results for the year ended 31 July 2016
6 January 2017 - C4X Discovery Holdings plc (AIM: C4XD), a pioneering drug discovery company, today announces its full year results for the year ended 31 July 2016.
Financial highlights
-- Fee-for-service revenue for the 12 months ended 31 July 2016 was GBP279,000 (2015: GBP312,000).
-- Loss after tax for the 12 months ended 31 July 2016 was GBP5,321,000 or 16.83 pence per share (2015: GBP3,064,000 or 10.77 pence per share).
-- R&D expenses increased by 66% to GBP5,239,000 for the year ended 31 July 2016 (2015: GBP3,159,000).
-- Administrative expenses increased by GBP903,000 during the year to GBP1,817,000 (2015: GBP904,000).
-- Net assets at 31 July 2016 of GBP4,305,000 (2015: GBP7,968,000).
-- Cash, cash equivalents, short-term investments and deposits of GBP1,328,000 (2015: GBP7,485,000).
Strategic and Operational highlights
Strategy
-- The Board has committed to the delivery of C4X Discovery's ("C4XD") vision to become the world's most productive Drug Discovery Engine. Focus has shifted to generating a high value pre-clinical asset portfolio that will drive revenue through early stage licensing deals. Existing fee-for-service agreements have been discontinued after the year end.
-- Strategic acquisitions made to enhance the Company's core target identification and drug design capabilities:
o In March 2016, Adorial Limited ("Adorial") together with its subsidiaries and its proprietary DNA based target identification platform, Taxonomy3(R), were acquired. New Taxonomy3(R) targets in rheumatoid arthritis were announced in July 2016 alongside a potential personalised medicine approach in Parkinson's disease; and
o In July 2016, the pioneering computational drug discovery technologies from MolPlex Ltd were acquired, further enhancing the Company's cutting-edge drug design platform.
Senior appointments
-- Dr Clive Dix was appointed Chief Executive Officer in May 2016, following a successful period as Executive Chairman
Discovery Engine progress
-- Drug asset portfolio grown from three programmes in addiction, diabetes and chronic obstructive pulmonary disorder at the time of the IPO in 2014 to eight programmes across a number of therapeutic areas.
o Future disease areas of focus will be inflammation, neurodegeneration and other areas selected on an opportunistic basis, for example, immuno-oncology.
Partnerships/acquisitions
-- In October 2015, a new research collaboration was announced with the University of Oxford's Structural Genomics Consortium, providing C4XD with access to valuable target, assay and 'hit' molecule information.
-- Acquisition of Adorial Limited and its subsidiaries ("Adorial") on 1 March 2016 for GBP1,670,700.
Post-period end
-- Completion of a GBP5.0 million fundraise in September 2016 through the conditional placing of 4,901,961 new ordinary shares at a price of 102 pence per ordinary share.
-- A new multi-target risk-sharing alliance with Evotec AG ("Evotec") was announced in September 2016. Evotec and C4XD will work together on novel small molecule drugs across a range of targets, therapeutic areas and stages of development.
-- Brad Hoy, Chief Financial Officer, and Dr Craig Fox, Chief Scientific Officer, were appointed to the Board of Directors in November 2016
Dr Clive Dix, CEO of C4X Discovery, said: "In this period, C4X Discovery has taken significant steps towards our vision of becoming the world's most productive Drug Discovery Engine. We have acquired new technologies to enhance our core target identification and drug design capabilities, expanded our drug asset portfolio and signed new strategic alliances to support our core expertise in solving the drug discovery challenges that confound others.
"We have defined our strategy to drive revenue through early-stage licensing deals around a high value, pre-clinical portfolio. In the coming year, we will focus on securing deal revenue from our existing portfolio, progressing our discovery candidates to pre-clinical development, identifying novel and exciting drug targets and selectively building our operations to support our vision. I believe C4X Discovery has the team in place to deliver this strategy."
A copy of the final results presentation given by Clive Dix (Chief Executive Officer) and Brad Hoy (Chief Financial Officer) will be released later this morning on the Group's website at www.c4xdiscovery.com
Analyst conference call today
Dr Clive Dix, Chief Executive Officer, will present the results at 14:00pm GMT on 6 January 2017 during a live conference call. Dial-in details are:
Participant local dial-in: +44(0)20 31394830
Participant free phone dial-in: 08082370030
Participant code: 72026171#
A live webcast of the meeting, with presentation slides will be available on C4X Discovery's website.
To register for the webcast:
http://arkadinemea-events.adobeconnect.com/c4x_discovery_results/event/registration.html
In accordance with AIM Rule 20, electronic copies of its Annual Report and Accounts for the year ended 31 July 2016, together with the Notice of Annual General Meeting and Form of Proxy are available from the Company's website at www.c4xdiscovery.com. Hard copies of the 2016 Annual Report and Accounts, Notice of Annual General Meeting and Form of Proxy will be posted to shareholders today.
The Company's Annual General Meeting will be held at 12.00 noon on Tuesday, 31 January 2017 at The Podium, Euston, 1 Eversholt Street, London NW1 1AD.
--S-
For further information, please contact:
C4X Discovery Holdings plc
Clive Dix, Chief Executive Officer 07801 865 803
Zeus Capital Limited
Dan Bate 0161 831 1512
Dominic Wilson/Phil Walker
0203 829 5000
Consilium Strategic Communications
Mary-Jane Elliott, Matthew Neal, Melissa Gardiner 0203 709 5700
About C4X Discovery
C4X Discovery aims to become the world's most productive drug discovery engine by exploiting cutting edge technologies to design and create best-in-class small-molecule candidates targeting a range of high value therapeutic areas. The company's goal is to drive returns through early-stage revenue-generating deals with the pharmaceutical industry.
C4X Discovery has a state-of-the-art suite of proprietary technologies across the drug discovery process. The company's innovative DNA-based target identification platform (Taxonomy3(R)) utilises human genetic datasets to identify novel patient-specific targets leading to greater discovery productivity and increased probability of clinical success. This is complemented by C4X's novel drug design platform which comprises two innovative chemistry technologies, Conformetrix and Molplex, that combine 4D molecular shape analyses (based on experimental data) with best-in-class computational chemistry. This provides new and unprecedented insight into the behaviour of drug molecules, enabling the production of potent selective compounds faster and more cost effectively than the industry standard.
C4X Discovery is advancing its in-house pipeline in addiction, diabetes and inflammation with a number of new drug candidates identified and further progress made towards the clinic. In selecting new targets C4X Discovery will focus on the high-value disease areas of inflammation and neurodegeneration, and will continue to maximise value from other areas selected on an opportunistic basis, for example, immuno-oncology.
The Company was founded as a spin-out from the University of Manchester. It has a highly experienced management team and Board who have delivered significant value creation within the healthcare sector historically and have enabled C4X to reach multiple value inflexion points since IPO. For additional information please go to: www.c4xdiscovery.com
INTERIM CHAIRMAN'S STATEMENT
We are passionate about finding better ways of discovering drugs, from identifying novel therapeutic targets through to designing best-in-class molecules that act against these targets. We believe that the only way to do this is to equip talented and motivated scientists with unique tools that allow them to perform discovery better than anyone else. That is what we aim to do at C4XD.
Our pioneering approach to target identification and drug design differentiates us from our peers and forms the core of our "Discovery Engine". We will continue to keep an open mind in building our engine and will add to our technological foundations where necessary. If we can deliver our scientific goals and our commitment to sustainability through the reinvestment of deal revenue into our engine, then we believe we will break new ground in the UK R&D landscape. The Board is fully committed to the delivery of this strategy.
The strength of our core technologies has continued to attract market-leading talent, and the Group has already been transformed with the appointment of Clive Dix as Chief Executive Officer following his short and impactful period as Executive Chairman. We could not have found a more suitable candidate to take the Group forward and our conviction is supported by the superb progress the Group has made since his appointment in May 2016.
C4XD has demonstrated a continued ability to adapt and evolve in order to deliver strong growth and sound business fundamentals. We appreciate our shareholders' continued support and confidence and we look forward to delivering significant shareholder value in 2017 and beyond.
Sam Williams
Interim Chairman
CEO'S STATEMENT
We see ourselves as the "architects" of drug discovery, constantly innovating and finding novel ways to solve the challenges in biology and chemistry that confound others. To enable this, we need to focus our efforts in areas where we can lead major shifts in traditional discovery approaches. It has been an exciting year for C4XD as we have taken the opportunity to identify these areas and build our Discovery Engine.
Strengthening our leadership
Our vision requires strong leadership. We have strengthened our Board with the appointment of Craig Fox, Chief Scientific Officer, and Brad Hoy, Chief Financial Officer. Both Craig and Brad bring a wealth of knowledge and experience to the Company and will make significant contributions to executing our strategic plans. In addition, Brad Hoy has been appointed permanent CFO following a period as interim CFO.
Enhancing our Discovery platform
Our flagship Conformetrix technology, which we believe to be the only platform in the world able to see the "4D" shape of molecules in solution, is highly disruptive and enables our medicinal chemists to design candidates faster than the industry standard. We have proven our ability to do this for known therapeutic targets by producing a highly potent and selective Orexin-1 antagonist for addictive disorders that is now in pre-clinical development.
However, to become a truly productive Discovery Engine, we recognise the need to enhance our capabilities to identify our own novel therapeutic targets to which Conformetrix can be applied. To address this, in March 2016 we acquired Adorial Limited and its subsidiaries ("Adorial") and its proprietary genetic platform Taxonomy3(R). Taxonomy3(R) is a highly sensitive mathematical tool that is able to identify previously unknown linkages and interactions between genes and biological pathways in a broad range of diseases. This enables the discovery of targets that cause disease, rather than those that are simply associated with its symptoms. This platform increases our chances of discovery success and reduces risk of clinical failures. The two founders of Adorial joined C4XD and have already led the identification of exciting novel targets in rheumatoid arthritis and a potential personalised medicine approach in Parkinson's disease. They are now working closely with our chemists as well as interrogating further genetic datasets.
To differentiate us further and accelerate our ability to design best-in-class pre-clinical candidates, we also acquired a suite of advanced software tools from MolPlex Ltd. These tools enable rapid identification of new hit compounds against targets in silico using a vast library of virtual molecules, visualisation of interactions between drug and target, and prediction of "drug-like" qualities of lead molecules.
Taken together, we believe our suite of complementary proprietary technologies provides our scientists with a complete range of tools to discover novel compounds and pioneer new disruptive approaches to drug discovery.
Building our discovery portfolio
Since our IPO in 2014, we have grown our portfolio from three programmes (in addiction, diabetes and chronic obstructive pulmonary disorder) to eight programmes across a number of therapeutic areas. We will continue to invest in C4XD's core discovery activities to support our ambition of producing at least four pre-clinical candidates each year at steady state.
To focus our efforts, we will prioritise new programmes in the areas of inflammation and neurodegeneration as these diseases have strong genetic associations and are likely to drive strong commercial interest from prospective partners. We will continue to maximise value from other areas selected on an opportunistic basis, for example, immuno-oncology. Additional disease areas are under continual assessment at C4XD, with robust scientific analysis and commercial intelligence used to identify the best next therapeutic areas for inclusion in our portfolio.
Forming strategic alliances
To deliver our vision, we understand that we must focus our efforts on the areas where we have strengths - novel target identification and drug design. As such, we will no longer provide any fee-for-service capabilities. Instead, we have secured, and will continue to seek, longer-term risk-sharing strategic alliances that enable us to achieve our goal of becoming the world's most productive Drug Discovery Engine.
In October 2015, we signed an agreement with the University of Oxford's Structural Genomics Consortium ("SGC Oxford"). This collaboration gives us access to structural, biological and therapeutic information held by SGC Oxford on both targets and "hit" molecules. Our expertise in drug design will be used to improve existing SGC Oxford "hit" molecules, which will remain its exclusive property, whilst new compounds identified by C4XD will belong to us. This alliance provides us with a powerful new basis to expand our portfolio into new therapeutic areas.
Following the end of the financial year, we entered a new multi-target, risk-sharing strategic collaboration with Evotec AG ("Evotec"), a leading drug discovery and development alliance company. This agreement builds on our existing scientific collaboration announced in January 2015 and will enable us to increase the output of our Discovery Engine with reduced risk and, potentially, lower cost. C4XD will work with Evotec on three projects where Evotec will apply its extensive assay and screening technologies, laboratory scientists and medicinal chemists in return for funding to partially cover operating costs, milestones and potential future royalties. We share common development and commercial goals with Evotec and we could not have found a better partner for this type of deal in terms of financial strength and capacity.
Successful GBP5m fundraise
In September 2016, we successfully closed a GBP5 million fundraise at 102 pence per share. This brought in several new strategic investors, including Calculus Capital Limited and Polar Capital LLP, who have strong track records in investing in the life sciences sector. This new cash enables us to progress our pre-clinical pipeline and initiate new discovery programmes derived by Taxonomy3(R), and provides working capital for operations.
Outlook
C4XD's strategy is to achieve our ambitions in drug discovery and corporate development, thereby delivering value for our shareholders. The coming year will focus on securing deal revenue from our existing portfolio, progressing our discovery candidates to pre-clinical development, identifying novel and exciting drug targets and selectively building our operations to support our vision. I am excited about what we can achieve and I look forward to sharing this journey with you.
Dr Clive Dix
Chief Executive Officer
FINANCIAL REVIEW
Results
Revenue for the 12 months ended 31 July 2016 amounted to GBP279,000 (2015: GBP312,000). These revenues were largely generated through collaborations with our partners. During the year, the Group has ceased its fee-for-service offering, choosing only to work on a collaborative risk-and-revenue-sharing basis.
Grants secured are accounted for as a reduction in administrative expenses. R&D expenses, which comprise payroll costs, materials spend and third-party contract development costs, have increased by 66% to GBP5,239,000 for the year ended 31 July 2016 (2015: GBP3,159,000). This reflects both the increase in drug discovery activity and the continued development of lead drug candidates.
Administrative expenses increased by GBP913,000 during the year to GBP1,817,000 (2015: GBP904,000), reflecting costs relating to the departure of Piers Morgan as CEO in November 2015, additional professional fees, non-scientific staff costs, premises costs and some modest post-acquisition operating costs for Adorial, which have now been absorbed within C4XD.
The loss after tax for the year ended 31 July 2016 was GBP5,321,000 or 16.83 pence per share (2015: GBP3,064,000 or 10.77 pence per share).
The Group had net assets at 31 July 2016 of GBP4,305,000 (2015: GBP7,968,000) and cash, cash equivalents, short-term investments and deposits of GBP1,328,000 (2015: GBP7,485,000).
The above cash position plus the GBP5 million raised post-year end and outlined in the CEO's Statement will allow C4XD to continue with its plan of becoming the world's most productive Drug Discovery Engine.
Both cash and costs continue to be prudently and tightly managed.
Acquisition
The Group acquired the entire of the share capital of Adorial Limited and its subsidiaries ("Adorial") on 1 March 2016 for a consideration of GBP1,670,700, which was satisfied by the issue of 1,508,207 ordinary shares at a price of 106 pence and GBP72,000 in cash. Adorial was acquired primarily for its proprietary genetic technology, Taxonomy3(R), and associated staff and scientific know-how. Since its acquisition Adorial has had no revenues, whilst its costs have largely comprised those related to its retained scientific staff.
Brad Hoy
Chief Financial Officer
Consolidated statement of comprehensive income
for the year ended 31 July 2016
Hot Features
Premium
2016 2015
Notes GBP000 GBP000
------------------------------------------ ----- -------- --------
Revenue 5 279 312
Cost of sales (12) (112)
------------------------------------------ ----- -------- --------
Gross profit 267 200
Research and development expenses (5,239) (3,159)
Administrative expenses (1,817) (904)
------------------------------------------ ----- -------- --------
Operating loss (6,789) (3,863)
------------------------------------------ ----- -------- --------
Finance income 8 32 49
------------------------------------------ ----- -------- --------
Loss on ordinary activities before
taxation (6,757) (3,814)
Taxation 9 1,436 750
------------------------------------------ ----- -------- --------
Loss for the year and total comprehensive
loss for the year (5,321) (3,064)
------------------------------------------ ----- -------- --------
Loss per share
Basic and diluted loss for the year 10 (16.83)p (10.77)p
------------------------------------------ ----- -------- --------
The loss for the year arises from the Group's continuing operations and is attributable to the equity holders of the parent.
There were no other items of comprehensive income for the year (2015: GBPnil) and therefore the loss for the year is also the total comprehensive loss for the year.
The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.
Consolidated statement of changes in equity
for the year ended 31 July 2016
Share-
Issued based Capital
equity Share payment Merger contribution Revenue
capital premium reserve reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- -------- -------- -------- -------- ------------- -------- -------
At 31 July 2014 200 - 29 920 - (2,482) (1,333)
Loss for the year
and total comprehensive
loss for the year - - - - - (3,064) (3,064)
------------------------- -------- -------- -------- -------- ------------- -------- -------
Issue of share capital 110 10,890 - - - - 11,000
Expenses of placing - (877) - - - - (877)
Loan notes converted
to deferred shares 2,025 - - - - - 2,025
Waiver of loan note
interest - - - - 195 - 195
Share-based payments - - 22 - - - 22
------------------------- -------- -------- -------- -------- ------------- -------- -------
Transactions with
owners 2,135 10,013 22 - 195 - 12,365
------------------------- -------- -------- -------- -------- ------------- -------- -------
At 31 July 2015 2,335 10,013 51 920 195 (5,546) 7,968
Loss for the year
and total comprehensive
loss for the year - - - - - (5,321) (5,321)
------------------------- -------- -------- -------- -------- ------------- -------- -------
Issue of share capital 15 1,584 - - - - 1,599
Share-based payments - - 59 - - - 59
------------------------- -------- -------- -------- -------- ------------- -------- -------
Transactions with
owners 15 1,584 59 - - - 1,658
------------------------- -------- -------- -------- -------- ------------- -------- -------
At 31 July 2016 2,350 11,597 110 920 195 (10,867) 4,305
------------------------- -------- -------- -------- -------- ------------- -------- -------
Company statement of changes in equity
for the year ended 31 July 2016
Share-
Issued based
equity Share payment
capital premium reserve Total
GBP000 GBP000 GBP000 GBP000
------------------------------------------ -------- -------- -------- -------
At 31 July 2014 - - - -
Loss for the year and total comprehensive - - - -
loss for the year
Acquisition of C4X Discovery
Limited 200 - - 200
------------------------------------------ -------- -------- -------- -------
Issue of share capital 110 10,890 - 11,000
Expenses of placing - (877) - (877)
Loan notes converted to deferred
shares 2,025 - - 2,025
Share-based payments - - 22 22
------------------------------------------ -------- -------- -------- -------
Transactions with owners 2,335 10,013 22 12,370
------------------------------------------ -------- -------- -------- -------
At 31 July 2015 2,335 10,013 22 12,370
Loss for the year and total comprehensive - - - -
loss for the year
------------------------------------------ -------- -------- -------- -------
Issue of share capital 15 1,584 - 1,599
Share-based payments - - 59 59
------------------------------------------ -------- -------- -------- -------
Transactions with owners 2,350 11,597 81 14,028
------------------------------------------ -------- -------- -------- -------
At 31 July 2016 2,350 11,597 81 14,028
------------------------------------------ -------- -------- -------- -------
Statements of financial position
at 31 July 2016
Registered no. 09134041
31 July 31 July 31 July 31 July
2016 2016 2015 2015
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
------------------------------ ----- -------- -------- -------- --------
Assets
Non-current assets
Property, plant and equipment 11 94 - 85 -
Intangible assets 12 654 - 59 -
Goodwill 13 1,192 - - -
Investment in subsidiaries 14 - 1,952 - 222
------------------------------ ----- -------- -------- -------- --------
1,940 1,952 144 222
------------------------------ ----- -------- -------- -------- --------
Current assets
Trade and other receivables 15 429 12,075 388 12,147
Income tax asset 16 1,400 - 700 -
Short-term investments and
cash on deposit 17 - - 4,000 -
Cash and cash equivalents 17 1,328 1 3,485 1
------------------------------ ----- -------- -------- -------- --------
3,157 12,076 8,573 12,148
------------------------------ ----- -------- -------- -------- --------
Total assets 5,097 14,028 8,717 12,370
------------------------------ ----- -------- -------- -------- --------
Liabilities
Current liabilities
Trade and other payables 18 792 - 749 -
------------------------------ ----- -------- -------- -------- --------
792 - 749 -
------------------------------ ----- -------- -------- -------- --------
Total liabilities 792 - 749 -
------------------------------ ----- -------- -------- -------- --------
Net assets 4,305 14,028 7,968 12,370
------------------------------ ----- -------- -------- -------- --------
Capital and reserves
Issued equity capital 19 2,350 2,350 2,335 2,335
Share premium 19 11,597 11,597 10,013 10,013
Share-based payment reserve 20 110 81 51 22
Merger reserve 21 920 - 920 -
Capital contribution reserve 22 195 - 195 - Revenue reserve 23 (10,867) - (5,546) - ------------------------------ ----- -------- -------- -------- -------- Total equity 4,305 14,028 7,968 12,370 ------------------------------ ----- -------- -------- -------- --------
Cash flow statements
for the year ended 31 July 2016
31 July 31 July 31 July 31 July
2016 2016 2015 2015
Group Company Group Company
Notes GBP000 GBP000 GBP000 GBP000
------------------------------------- ----- -------- -------- -------- --------
Loss after interest and tax (5,321) - (3,064) -
Adjustments for:
Depreciation of tangible fixed
assets 11 33 - 21 -
Amortisation of intangible
assets 12 55 - 5 -
Share-based payments 20 59 - 22 -
Finance expense - - - -
Taxation (1,436) - (750) -
Changes in working capital:
(Increase)/decrease in trade
and other receivables (40) 67 (231) -
(Decrease)/increase in trade
and other payables (28) - 510 -
(Decrease)/increase in deferred
revenue (56) - 12 -
------------------------------------- ----- -------- -------- -------- --------
Cash (outflow)/inflow from
operating activities (6,734) 67 (3,475) -
Research and development tax
credit received 736 - 300 -
------------------------------------- ----- -------- -------- -------- --------
Net cash (outflow)/inflow from
operating activities (5,998) 67 (3,175) -
------------------------------------- ----- -------- -------- -------- --------
Cash flows from investing activities
Purchases of tangible fixed
assets 11 (42) - (85) -
Purchases of intangible fixed
assets 12 (50) - (8) -
Acquisition of subsidiary (net
of cash acquired) (67) (67) - -
Cash advance to subsidiary - - - (10,122)
Decrease/(increase) in cash
placed on deposit 17 4,000 - (4,000) -
------------------------------------- ----- -------- -------- -------- --------
Net cash inflow/(outflow) from
investing activities 3,841 (67) (4,093) (10,122)
------------------------------------- ----- -------- -------- -------- --------
Cash flows from financing activities
Proceeds from issues of ordinary
share capital 19 - - 11,000 11,000
Expenses share capital issue 19 - - (877) (877)
Repayment of preference shares - - (30) -
Interest paid - - (13) -
------------------------------------- ----- -------- -------- -------- --------
Net cash inflow from financing
activities - - 10,080 10,123
------------------------------------- ----- -------- -------- -------- --------
(Decrease)/increase in cash
and cash equivalents (2,157) - 2,812 1
Cash and cash equivalents at
the start of the year 3,485 1 673 -
------------------------------------- ----- -------- -------- -------- --------
Cash and cash equivalents at
the end of the year 1,328 1 3,485 1
Monies placed on deposit at
the end of the year - - 4,000 -
------------------------------------- ----- -------- -------- -------- --------
Cash, cash equivalents and
deposits at the end of the
year 17 1,328 1 7,485 1
------------------------------------- ----- -------- -------- -------- --------
Notes to the full year results
for the year ended 31 July 2016
1. Reporting entity
C4X Discovery Holdings plc ("the Company") is an AIM-listed company incorporated and domiciled in the UK.
These full year results consolidate those of the Company and its subsidiaries (together referred to as "the Group" and individually as "Group entities") for the year ended 31 July 2016.
The full year results of the Company and the Group for the year ended 31 July 2016 were authorised for issue by the Board of Directors on 6 January 2017 and the statement of financial position was signed on the Board's behalf by Clive Dix.
The full year results do not constitute statutory financial statements for the year ended 31 July 2016 but are derived from those financial statements. A copy of the statutory financial statements for the year ended 31 July 2016 will be delivered to the Registrar of Companies in due course. The Auditors' opinion on those financial statements was unqualified, did not draw attention to any matters by way of an emphasis of matters paragraph, and it contained no statement under section 498(2) or section 498(3) of the Companies Act 2006.
The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the parent company's statement of comprehensive income. The parent company's result for the year ended 31 July 2016 was GBPnil (2015: GBPnil).
The significant accounting policies adopted by the Group are set out in note 3.
2. Basis of preparation
(a) Statement of compliance
The Group's and parent company's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and International Financial Reporting Committee ("IFRIC") interpretations as they apply to the financial statements of the Group for the period ended 31 July 2016.
(b) Basis of measurement
The Company and Group financial statements have been prepared on the historical cost basis.
The methods used to measure fair values of assets and liabilities are discussed in the respective notes in note 3 below.
(c) Going concern
The Interim Chairman's Statement and CEO's Statement on pages 6 to 11 of the Annual Report outline the business activities of the Group along with the factors which may affect its future development and performance. The Group's financial position is discussed in the Financial Review on pages 14 and 15 of the Annual Report along with details of its cash flow and liquidity. Note 25 to the financial statements sets out the Group's financial risks and the management of those risks.
Having prepared management forecasts, which incorporate the post-year-end GBP5 million cash raise, and made appropriate enquiries, the Directors are satisfied that the Group has adequate resources for the foreseeable future. Accordingly, they have continued to adopt the going concern basis in preparing the Group and Company financial statements. However, given the nature of the Group's biotechnology-based business and need for ongoing investment in its drug development activities, the Group will be looking to raise additional funds in the future to allow continued development.
(d) Functional and presentational currency
The full year results are presented in Sterling, which is the Group's functional currency. All financial information presented has been rounded to the nearest thousand.
(e) Use of estimates and judgements
The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual amounts could differ from those estimates. Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary.
While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
Equity-settled share-based payments
The determination of share-based payment costs requires: the selection of an appropriate valuation method; consideration as to the inputs necessary for the valuation model chosen; judgement regarding when and if performance conditions will be met; and the estimation of the number of awards that will ultimately vest. Inputs required for this arise from judgements relating to the future volatility of the share price of C4XD and comparable companies, the Group's expected dividend yields, risk-free interest rates and expected lives of the options. The Directors draw on a variety of sources to aid in the determination of the appropriate data to use in such calculations. The share-based payment expense is most sensitive to vesting assumptions and to the future volatility of the future share price factor. Further information is included in note 3.
Taxation
Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised tax losses at 31 July 2016 was GBP830,000 (2015: GBP416,000). The value of the net deferred tax liability not recognised at the year end is GBP12,000 (2015: GBP8,000). Further information is included in note 9.
Research and development
Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain until such time as technical viability has been proven and commercial supply agreements are likely to be achieved. Judgements are based on the information available at each reporting date which includes the progress with testing and certification and progress on, for example, establishment of commercial arrangements with third parties. In addition, all internal activities related to research and development of new products are monitored by the Directors. Further information is included in note 3.
Revenue recognition
Judgements are required as to whether and when contractual milestones have been achieved and in turn the period over which development revenue should be recognised. Management judgements are similarly required to determine whether services or rights under licence agreements have been delivered so as to enable licence revenue to be recognised. Further information is included in note 3.
Valuation of IP assets
The IP assets acquired coincidental with the purchase of Adorial have been valued by independent specialists. The carrying value will be reviewed annually by the Board for any subsequent impairment.
3. Significant accounting policies
The accounting policies set out below are consistent with those of the previous financial year and are applied consistently by Group entities.
(a) Basis of consolidation
The Group financial statements consolidate the financial statements of C4X Discovery Holdings plc and the entities it controls (its subsidiaries) drawn up to 31 July each year.
All business combinations are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
The Group measures goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non-controlling interests in the acquiree; plus
-- the fair value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies. All C4X Discovery Holdings plc's subsidiaries are 100% owned. Subsidiaries are fully consolidated from the date control passes.
All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Subsidiaries' accounting policies are amended where necessary to ensure consistency with the policies adopted by the Group.
(b) Foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of comprehensive income.
(c) Segmental reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. As at the reporting date the Group operated with only a single segment.
(d) Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or services, excluding discounts, rebates, VAT and other sales taxes or duties.
The Group's revenues to date comprise amounts earned under joint development agreements and individual project development programmes in respect of novel small molecule therapies.
Revenues received from development programmes are recognised on a straight-line basis over the period that the development work is being performed as measured by contractual milestones. Revenue is not recognised where there is uncertainty regarding the achievement of such milestones and where either revenue has not been paid or the customer has the right to recoup advance payments.
(e) Government grants
Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment.
Government grants of a revenue nature are deducted from R&D expenses in the consolidated statement of comprehensive income in line with the terms of the underlying grant agreement.
Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset.
(f) Research and development
Research costs are charged in the consolidated statement of comprehensive income as they are incurred. Development costs will be capitalised as intangible assets when it is probable that future economic benefits will flow to the Group. Such intangible assets will be amortised on a straight-line basis from the point at which the assets are ready for use over the period of the expected benefit, and will be reviewed for impairment at each reporting date based on the circumstances at the reporting date.
The criteria for recognising expenditure as an asset are:
-- it is technically feasible to complete the product;
-- management intends to complete the product and use or sell it;
-- there is an ability to use or sell the product;
-- it can be demonstrated how the product will generate probable future economic benefits;
-- adequate technical, financial and other resources are available to complete the development, use and sale of the product; and
-- expenditure attributable to the product can be reliably measured.
Development costs are currently charged against income as incurred since the criteria for their recognition as an asset are not met.
(g) Lease payments
Rentals payable under operating leases, which are leases where the lessor retains a significant proportion of the risks and rewards of the underlying asset, are charged in the consolidated statement of comprehensive income on a straight-line basis over the expected lease term.
Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
(h) Finance income
Finance income comprises interest income on funds invested. Interest income is recognised as interest accrues using the effective interest rate method.
(i) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from, or paid to, the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:
-- where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that at the time of the transaction affects neither accounting nor taxable profit nor loss; and
-- in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantially enacted by the date and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer of economic benefits in the future is uncertain.
(j) Tangible fixed assets
Property, plant and equipment assets are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended.
Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.
The following bases and rates are used to depreciate classes of assets:
Building improvements - straight line over remainder of lease period Office equipment - straight line over three years
The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable, and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
A property, plant and equipment item is derecognised on disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the consolidated statement of comprehensive income in the period of derecognition.
(k) Intangible assets
Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill provided they are separable and their fair value can be measured reliably. This includes the costs associated with acquiring and registering patents in respect of intellectual property rights.
Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight-line basis over those lives. The nature of those intangibles recognised and their estimated useful lives are as follows:
Patents - straight line over 20 years IP assets - straight line over five years Software - straight line over five years (l) Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment.
(m) Impairment of assets
At each reporting date the Group reviews the carrying value of its plant, equipment, intangible assets and goodwill to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset's recoverable amount.
An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators. Impairment losses on continuing operations are recognised in the consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a valuation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
The carrying values of plant, equipment, intangible assets and goodwill as at the reporting date have not been subjected to impairment charges.
(n) Investments in subsidiaries
Investments in subsidiaries are stated in the Company statement of financial position at cost less provision for any impairment.
(o) Trade and other receivables
Trade receivables, which generally have 30 to 60 day terms, are recognised and carried at the lower of their original invoiced value and recoverable amount. The time value of money is not material.
Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Significant financial difficulties faced by the customer, probability that the customer will enter bankruptcy or financial reorganisation and default in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the consolidated statement of comprehensive income within administrative expenses.
When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables.
(p) Cash, cash equivalents and short-term investments and cash on deposit
Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Short-term investments and cash on deposit comprise deposits with maturities of more than three months, but no greater than 12 months.
(q) Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.
(r) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The expense relating to any provision is presented in the consolidated statement of comprehensive income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain.
Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
There were no provisions at 31 July 2016 (2015: nil).
(s) Financial assets and liabilities
Financial assets and liabilities are recognised when the Group becomes party to the contracts that give rise to them and are classified as financial assets and liabilities at fair value through the consolidated statement of comprehensive income. The Group determines the classification of its financial assets and liabilities at initial recognition and re-evaluates this designation at each financial year end.
A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold or cancelled or expires.
At the year end, the Group had no financial assets or liabilities designated at fair value through the consolidated statement of comprehensive income (2015: GBPnil).
(t) Classification of financial instruments issued by the Group
Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:
-- they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
-- where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called-up share capital and share premium account exclude amounts in relation to those shares.
(u) Share capital
Proceeds on issue of shares are included in shareholders' equity, net of transaction costs. The carrying amount is not remeasured in subsequent years.
(v) Share-based payments
Equity-settled share-based payment transactions are measured with reference to the fair value at the date of grant, recognised on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured using a suitable option pricing model.
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous reporting date is recognised in the consolidated statement of comprehensive income, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
Where awards are granted to the employees of a subsidiary company, the fair value of the awards at grant date is recorded in the Company's financial statements as an increase in the value of the investment with a corresponding increase in equity via the share-based payment reserve.
(w) Defined contribution pension scheme
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.
(x) New accounting standards and interpretations
A number of new standards, amendments to standards and interpretations are effective for annual periods commencing on or after 1 January 2016 or ending 31 July 2017 or thereafter and have not been applied in preparing these consolidated financial statements and those that are relevant to the Group are summarised below. None of these are expected to have a significant effect on the consolidated financial statements of the Group in the period of initial application.
The following standards and interpretations have an effective date after the date of these financial statements.
Effective
date
------------------------------------------------------------------------- ---------
Accounting for Acquisitions of Interests in Joint Operations - Amendments 1 January
to IFRS 11 2016
------------------------------------------------------------------------- ---------
Clarification of Acceptable Methods of Depreciation and Amortisation 1 January
- Amendments to IAS 16 and IAS 38 2016
------------------------------------------------------------------------- ---------
Equity Method in Separate Financial Statements - Amendments to IAS 1 January
27 (endorsed for use in the EU on 18 December 2015) 2016
------------------------------------------------------------------------- ---------
Annual Improvements to IFRSs - 2012-2014 Cycle (endorsed or use in 1 January
the EU on 15 December 2015) 2016
------------------------------------------------------------------------- ---------
Disclosure Initiative - Amendments to IAS 1 (endorsed for use in the 1 January
EU on 18 December 2015) 2016
------------------------------------------------------------------------- ---------
Recognition of Deferred Tax Assets for Unrealised Losses - Amendments 1 January
to IAS 12 2017
------------------------------------------------------------------------- ---------
Disclosure Initiative - Amendments to IAS 7 1 January
2017
------------------------------------------------------------------------- ---------
IFRS 9 Financial Instruments 1 January
2018
------------------------------------------------------------------------- ---------
IFRS 15 Revenue from Contracts with Customers 1 January
2018
------------------------------------------------------------------------- ---------
Clarifications to IFRS 15 Revenue from Contracts with Customers 1 January
2018
------------------------------------------------------------------------- ---------
Effective date of IFRS 15 - Amendment to IFRS 15 1 January
2018
------------------------------------------------------------------------- ---------
Classification and Measurement of Share-based Payment Transactions 1 January
- Amendments to IFRS 2 2018
------------------------------------------------------------------------- ---------
IFRS 16 Leases 1 January
2018
------------------------------------------------------------------------- ---------
4. Acquisitions of businesses
Acquisition of subsidiary in the current period
On 1 March 2016, the Group acquired all of the ordinary shares in Adorial Limited together with its subsidiaries for a consideration of GBP1,670,700, of which GBP1,598,700 was satisfied by the issue of 1,508,207 ordinary shares at a price of 106 pence, being a 3% premium to the closing price of a C4XD share on 29 February 2016, and GBP72,000 in cash. The privately held company has a key proprietary genetic technology platform, Taxonomy3(R) , for the identification of novel drug targets.
With Adorial, the Group now not only has the ability to create the best-in-class molecules against any known therapeutic target using C4XD's approach to ligand-based drug discovery, but also the ability to identify its own highly relevant and unique targets using Taxonomy3(R) . Combining Taxonomy3(R) with C4XD's existing platform will fuel the Group's small molecule drug discovery and development pipeline, as well as help it to progress towards its goal of becoming the world's leading engine for the discovery of novel small molecule drugs.
In the five months to 31 July 2016 the subsidiary contributed an estimated pre-tax loss of GBP75,000 to the consolidated pre-tax loss for the year. If the acquisition had occurred on 1 August 2015, Group revenue would have been unchanged, as Adorial currently has no revenue, and the pre-tax loss would have been an estimated GBP75,000 higher than currently shown. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on 1 August 2015.
Effect of acquisition
The acquisition had the following effect on the Group's assets and liabilities.
Recognised
values on
acquisition
GBP000
----------------------------------------------- ------------
Acquiree's net assets at the acquisition date:
Intangible assets - IP assets 600
Trade and other receivables 1
Cash and cash equivalents 5
Trade and other payables (127)
----------------------------------------------- ------------
Net identifiable assets and liabilities 479
----------------------------------------------- ------------
Consideration paid:
Cash 72
Equity issued - see above 1,599
----------------------------------------------- ------------
Total consideration 1,671
----------------------------------------------- ------------
Goodwill 1,192
----------------------------------------------- ------------
Goodwill has arisen on the acquisition due to the excess of the consideration paid over the net assets acquired.
The Group incurred acquisition-related professional fees of GBP68,000, which have been included in administrative expenses in the Group's consolidated statement of comprehensive income.
5. Segmental information
Operating segments
At 31 July 2016, the Group operated as one segment, being the provision of new technologies to improve the drug discovery process for novel small molecule therapies. This is the level at which operating results are reviewed by the chief operating decision maker (i.e. the CEO) to make decisions about resources, and for which financial information is available. All revenues have been generated from continuing operations and are from external customers.
31 July 31 July
2016 2015
GBP000 GBP000
-------------------------------------------------- ------- -------
Analysis of revenue
Amounts earned under joint development agreements 279 312
-------------------------------------------------- ------- -------
279 312
-------------------------------------------------- ------- -------
Included within amounts earned under joint development agreements is revenue from two material customers of GBP128,000 and GBP106,000 respectively (2015: one material customer amounting to GBP152,000).
The Group operates in two main geographic areas, although both are managed in the UK. The Group's revenue per geographical segment based on the customer's location is as follows:
31 July 31 July
2016 2015
GBP000 GBP000
---------------------- ------- -------
Revenue
UK 151 160
Europe (excluding UK) 128 152
---------------------- ------- -------
279 312
---------------------- ------- -------
All the Group's assets are held in the UK and all of its capital expenditure arises in the UK.
6. Operating loss
31 July 31 July
2016 2015
The Group GBP000 GBP000
----------------------------------------------------- ------- -------
Operating loss is stated after charging/(crediting):
Depreciation of property, plant and equipment
(see note 11) 33 21
Amortisation of intangible assets (see note
12) 55 5
Research and development expense* 5,239 3,159
Cost of inventories recognised as an expense
(included in cost of sales) 12 112
Grant income (65) (144)
Operating lease rentals (see note 24):
Land and buildings 62 34
----------------------------------------------------- ------- -------
Auditor's remuneration:
Audit services:
- Fees payable to Company auditors for the
audit of the parent and the consolidated accounts 38 25
Fees payable in respect of the audit of subsidiary
companies:
- Auditing the accounts of subsidiaries pursuant
to legislation 12 -
- Other services 4 103
----------------------------------------------------- ------- -------
Total auditor's remuneration 54 128
----------------------------------------------------- ------- -------
* Included within research and development expense are staff costs totalling GBP1,535,000 (2015: GBP937,000) also included in note 7.
7. Staff costs and numbers
31 July 31 July
2016 2015
GBP000 GBP000
------------------------------------------------- ------- -------
Wages and salaries 1,784 1,177
Social security costs 206 140
Pension contributions 101 3
Share-based payments 59 22
------------------------------------------------- ------- -------
2,150 1,342
------------------------------------------------- ------- -------
Directors' remuneration (including benefits
in kind) included in the aggregate remuneration
above comprised:
Emoluments for qualifying services 468 356
------------------------------------------------- ------- -------
Directors' emoluments (excluding social security costs, but including benefits in kind) disclosed above include GBP297,000 paid to the highest paid Director (2015: GBP284,000). An analysis of the highest paid Director's remuneration is included in the Directors' Remuneration Report.
Retirement benefits are accruing to four Directors (2015: one Director).
The average number of employees during the year (including Directors) was as follows:
31 July 31 July
2016 2015
The Group Number Number
--------------------- ------- -------
Directors 4 5
Technological staff 23 14
Administrative staff 1 -
--------------------- ------- -------
28 19
--------------------- ------- -------
8. Finance income and expense
31 July 31 July
2016 2015
The Group GBP000 GBP000
------------------------- ------- -------
Finance income:
Bank interest receivable 32 49
------------------------- ------- -------
32 49
------------------------- ------- -------
Bank interest receivable includes GBPnil (2015: GBP49,000) which is receivable after the year end.
9. Income tax
The tax credit is made up as follows:
31 July 31 July
2016 2015
The Group GBP000 GBP000
------------------------------------------- ------- -------
Current income tax:
UK corporation tax losses in the year - -
Research and development income tax credit
receivable (1,400) (700)
Adjustment in respect of prior years (36) (50)
------------------------------------------- ------- -------
Total current income tax (1,436) (750)
------------------------------------------- ------- -------
The tax assessed for the year varies from the standard rate of corporation tax as explained below:
31 July 31 July
2016 2015
The Group GBP000 GBP000
----------------------------------------------- ------- -------
Loss on ordinary activities before taxation (6,757) (3,814)
----------------------------------------------- ------- -------
Tax at standard rate of 20.00% (2015: 20.67%) (1,351) (788)
Effects of:
Expenses not deductible for tax purposes 25 8
Movement in unprovided deferred tax (12) (6)
Surrender of research and development relief
for repayable tax credit 835 447
Research and development tax credit receivable (1,400) (700)
Tax losses carried forward 503 339
Adjustment in respect of prior years (36) (50)
----------------------------------------------- ------- -------
Tax credit in income statement (1,436) (750)
----------------------------------------------- ------- -------
Reductions of the main rate of corporation tax from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015 were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015.
An additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future tax charge accordingly.
The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset, measured at a standard rate of 18% (2015: 20%) is GBP830,000 (2015: GBP416,000), of which GBPnil (2015: GBPnil) has been recognised. Remaining tax losses have not been recognised as an asset as it is not probable that future taxable profits will be available against which the unused tax losses can be utilised.
The Group also has a deferred tax liability being accelerated capital allowances, for which the tax, measured at a standard rate of 18% (2015: 20%), is GBP32,000 (2015: GBP18,000).
The Group has a deferred tax asset for share-based payments, for which the tax, measured at a standard rate of 18% (2015: 20%), is GBP20,000 (2015: GBP10,000).
The net deferred tax liability of GBP12,000 (2015: GBP8,000) has not been recognised as it is covered by accumulated tax losses (2015: GBPnil).
10. Earnings per share
31 July 31 July
2016 2015
The Group GBP000 GBP000
----------------------------------------- ----------- ----------
Loss for the financial year attributable
to equity shareholders (5,321) (3,064)
----------------------------------------- ----------- ----------
Weighted average number of shares:
Ordinary shares in issue 31,616,625 28,457,043
----------------------------------------- ----------- ----------
Basic loss per share (pence) (16.83) (10.77)
----------------------------------------- ----------- ----------
Diluted loss per share has not been presented above as the effect of share options issued is anti-dilutive.
11. Property, plant and equipment
Office
equipment,
fixtures
and Building
fittings improvements Total
The Group GBP000 GBP000 GBP000
------------------------- ----------- ------------- -------
Cost:
At 31 July 2014 44 - 44
Additions 47 38 85
------------------------- ----------- ------------- -------
At 31 July 2015 91 38 129
Additions 42 - 42
------------------------- ----------- ------------- -------
At 31 July 2016 133 38 171
------------------------- ----------- ------------- -------
Depreciation:
At 31 July 2014 23 - 23
Provided during the year 18 3 21
------------------------- ----------- ------------- -------
At 31 July 2015 41 3 44
Provided during the year 25 8 33
------------------------- ----------- ------------- -------
At 31 July 2016 66 11 77
------------------------- ----------- ------------- -------
Net book value:
At 31 July 2016 67 27 94
------------------------- ----------- ------------- -------
At 31 July 2015 50 35 85
------------------------- ----------- ------------- -------
The Company has no property, plant and equipment.
12. Intangible assets
Patents IP assets Software Total
The Group GBP000 GBP000 GBP000 GBP000
----------------------------------------- ------- --------- -------- -------
Cost:
At 31 July 2014 79 - - 79
Additions 8 - - 8
----------------------------------------- ------- --------- -------- -------
At 31 July 2015 87 - - 87
Additions - - 50 50
Additions - acquisition through business
combinations - 600 - 600
----------------------------------------- ------- --------- -------- -------
At 31 July 2016 87 600 50 737
----------------------------------------- ------- --------- -------- -------
Amortisation:
At 31 July 2014 23 - - 23
Provided during the year 5 - - 5
----------------------------------------- ------- --------- -------- -------
At 31 July 2015 28 - - 28
Provided during the year 5 50 - 55
----------------------------------------- ------- --------- -------- -------
At 31 July 2016 33 50 - 83
----------------------------------------- ------- --------- -------- -------
Net book value:
At 31 July 2016 54 550 50 654
----------------------------------------- ------- --------- -------- -------
At 31 July 2015 59 - - 59
----------------------------------------- ------- --------- -------- -------
Patents are amortised on a straight-line basis over 20 years. Amortisation provided during the period is recognised in administrative expenses. The Group does not believe that any of its patents in isolation is material to the business.
IP assets are amortised on a straight-line basis over five years. Amortisation provided during the period is recognised in administrative expenses.
Software assets are amortised on a straight-line basis over five years. Additions were acquired at the end of the period so there is no amortisation charge for this period. The Company has no intangible assets.
13. Goodwill
Purchased
goodwill Total
The Group GBP000 GBP000
------------------------- --------- -------
Cost:
At 31 July 2014 - -
Additions - -
------------------------- --------- -------
At 31 July 2015 - -
Purchase of Adorial 1,192 1,192
------------------------- --------- -------
At 31 July 2016 1,192 1,192
------------------------- --------- -------
Impairment:
At 31 July 2014 - -
Provided during the year - -
------------------------- --------- -------
At 31 July 2015 - -
Provided during the year - -
------------------------- --------- -------
At 31 July 2016 - -
------------------------- --------- -------
Net book value:
At 31 July 2016 1,192 1,192
------------------------- --------- -------
At 31 July 2015 - -
------------------------- --------- -------
The goodwill which originated in the period is explained in note 4. The value at which goodwill is carried is reviewed annually. No impairment charge was provided during the period. The Company has no goodwill.
Impairment
Goodwill considered significant in comparison to the Group's total carrying amount of such assets have been allocated to one cash generating unit as follows:
Goodwill Goodwill
2016 2015
The Group GBP000 GBP000
---------- -------- --------
Taxonomy3 1,192 -
---------- -------- --------
The Group has one overall cash generating unit, to which synergies from the business combination will arise. The goodwill arising from the acquisition of Adorial Limited in March 2016 is therefore considered for impairment based on the business as a whole. The recoverable amount of the Taxonomy3 technology has been calculated with reference to its fair value less cost to sell. In calculating this value, management has used the following assumptions, based on their experience of the recent acquisition and external sources: the ability of the Taxonomy3 technology to identify new drug targets and their potential market value; and the value of the Group's drug discovery capability as a whole and Taxonomy3's contribution to that valuation. Such valuation is based on both management experience and external valuation assessments. As the business is currently in the Research and Development phase, no revenue is being generated. However, the acquisition has generated significant synergies to provide greater depth and breadth of drug discovery for the Group.
14. Investment in subsidiaries
Shares Loans Total
The Company GBP000 GBP000 GBP000
-------------------------------------------- ------- ------- -------
At 31 July 2015 200 22 222
Acquisition of subsidiary 1,671 - 1,671
Increase in respect of share-based payments - 59 59
-------------------------------------------- ------- ------- -------
At 31 July 2016 1,871 81 1,952
-------------------------------------------- ------- ------- -------
By subsidiary
--------------------------- ----- -----
C4X Discovery Limited 200 81 281
C4X Drug Discovery Limited - - -
Adorial Limited 1,671 - 1,671
--------------------------- ----- -----
At 31 July 2016 1,871 81 1,952
--------------------------- ----- -----
Country of Class of 31 July
Subsidiary undertakings incorporation Principal activity shares held 2016
------------------------ --------------- ------------------- ------------- -------
C4X Discovery England and Research and
Limited Wales development Ordinary 100%
C4X Drug Discovery England and
Limited Wales Dormant company Ordinary 100%
England and
Adorial Limited Wales Drug discovery Ordinary 100%
Adorial Technologies England and Research and
Limited Wales development Ordinary 100%
Adorial Pharma England and Research and
Limited Wales development Ordinary 100%
------------------------ --------------- ------------------- ------------- -------
15. Trade and other receivables
31 July 31 July 31 July 31 July
2016 2016 2015 2015
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
--------------------------------- ------- -------- ------- --------
Trade receivables 39 - 31 -
Prepayments 145 - 172 -
Inter-company short-term loan to
subsidiary - 12,075 - 12,147
Other receivables 245 - 185 -
--------------------------------- ------- -------- ------- --------
429 12,075 388 12,147
--------------------------------- ------- -------- ------- --------
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
All trade receivables are denominated in Sterling.
There are no formal terms for the repayment of inter-company loans, none of which bear interest and all of which are repayable on demand.
Other receivables include GBP243,000 VAT receivable (2015: GBP174,000).
16. Income tax asset
31 July 31 July 31 July 31 July
2016 2016 2015 2015
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
------------------------------------ ------- -------- ------- --------
Research and development income tax
credit receivable 1,400 - 700 -
------------------------------------ ------- -------- ------- --------
1,400 - 700 -
------------------------------------ ------- -------- ------- --------
17. Cash, cash equivalents and deposits
31 July 31 July 31 July 31 July
2016 2016 2015 2015
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
----------------------------------- ------- -------- ------- --------
Short-term investments and cash on
deposit - - 4,000 -
Cash and cash equivalents 1,328 1 3,485 1
----------------------------------- ------- -------- ------- --------
1,328 1 7,485 1
----------------------------------- ------- -------- ------- --------
Under IAS 7, cash held on deposits (being deposits with maturity of greater than three months and no more than 12 months) that cannot readily be converted into cash has been classified as a short-term investment. The maturity on this investment was less than 12 months at the prior reporting date.
Cash and cash equivalents at 31 July 2016 include deposits with original maturity of three months or less of GBPnil (2015: GBP485,000).
An analysis of cash, cash equivalents and deposits by denominated currency is given in note 25.
18. Trade and other payables
31 July 31 July 31 July 31 July
2016 2016 2015 2015
Group Company Group Company
GBP000 GBP000 GBP000 GBP000
----------------- ------- -------- ------- --------
Current payables 392 - 448 -
Other payables 116 - 112 -
Deferred revenue 83 - 56 -
Accruals 201 - 133 -
----------------- ------- -------- ------- --------
792 - 749 -
----------------- ------- -------- ------- --------
19. Issued equity capital
Deferred Ordinary A ordinary Share Deferred Share
shares shares shares capital shares premium Total
The Company Number Number Number GBP000 GBP000 GBP000 GBP000
----------------------- --------- ---------- ----------- -------- -------- -------- -------
Allotted, called
up and fully paid
ordinary shares of
1p:
At 31 July 2014 - 2 - - - - -
Share subdivision
on 3 September 2014 - 198 - - - - -
Shares issued on
the acquisition of
C4X Discovery Limited
on 13 October 2014 2,025,000 15,553,975 4,434,375 200 2,025 - 2,225
Redesignation on
17 October 2014 - 4,434,375 (4,434,375) - - - -
Issue of share capital - 11,000,000 - 110 - 10,890 11,000
Expenses of placing - - - - - (877) (877)
----------------------- --------- ---------- ----------- -------- -------- -------- -------
Ordinary and deferred
shares
at 31 July 2015 2,025,000 30,988,550 - 310 2,025 10,013 12,348
Issue of share capital - 1,508,207 - 15 - 1,584 1,599
----------------------- --------- ---------- ----------- -------- -------- -------- -------
Ordinary and deferred
shares
at 31 July 2016 2,025,000 32,496,757 - 325 2,025 11,597 13,947
----------------------- --------- ---------- ----------- -------- -------- -------- -------
Share Deferred Share
capital shares premium Total
The Group GBP000 GBP000 GBP000 GBP000
---------------------------------------- -------- -------- -------- -------
Allotted, called up and fully paid
ordinary shares of 1p:
At 31 July 2014 200 - - 200
Shares issued on the acquisition
of C4X Discovery Limited on 13 October
2014 - 2,025 - 2,025
Issue of share capital 110 - 10,890 11,000
Expenses of placing - - (877) (877)
---------------------------------------- -------- -------- -------- -------
At 31 July 2015 310 2,025 10,013 12,348
Issue of share capital 15 - 1,584 1,599
Expenses of placing - - - -
---------------------------------------- -------- -------- -------- -------
Ordinary and deferred shares at 31
July 2016 325 2,025 11,597 13,947
---------------------------------------- -------- -------- -------- -------
On 16 July 2014, being the date of incorporation of C4X Discovery Holdings plc, two ordinary shares of GBP1 were subscribed for fully paid, and on 3 September 2014 such shares were each subdivided into 100 ordinary shares of GBP0.01 each.
On 13 October 2014, the Company issued 15,553,975 ordinary shares of GBP0.01 each and 4,434,375 ordinary shares of GBP0.01 each to the shareholders of C4X Discovery Limited in consideration for the transfer of the entire share capital of C4X Discovery Limited to the Company pursuant to a share exchange agreement. In accordance with the reverse acquisition requirements of IFRS 3, this transaction is recorded in the Group accounts as if this share capital had always been in existence; therefore, it is reflected in the comparative periods for the Group accounts. The Company balance sheet, however, reflects the legal transactions that have occurred during the period and therefore this share for share exchange is recorded in the current period in the Company balance sheet. This gives rise to the difference between the Group and Company share capital in the comparative period.
On 13 October 2014, the Company executed an instrument constituting GBP2,025,000 unsecured loan notes, with a view to issuing them as consideration for the acquisition of the GBP2,025,000 unsecured loan notes of C4X Discovery Limited pursuant to a share exchange agreement. The Company's loan notes converted, at nominal value, into deferred shares of GBP1 in the Company having no rights to any vote or dividends as set out in the Articles.
By a resolution dated 17 October 2014 each of the issued A ordinary shares of GBP0.01 each was converted into and redesignated as an ordinary share of GBP0.01 each ranking equally with the existing ordinary shares of GBP0.01 each in the Company.
On 23 October 2014 11,000,000 shares were issued in a placing at a price of GBP1 resulting in share proceeds of GBP11,000,000. Share issue costs of GBP877,000 were incurred and have been deducted from share premium.
On 1 March 2016, together with GBP72,000 cash, 1,508,207 shares were issued at a price of 106p, being a 3% premium to the closing mid-market price of a C4XD share on 29 February 2016, for the purpose of acquiring the whole of the share capital of Adorial Limited and its subsidiaries.
20. Share-based payment reserve
The Group GBP000 --------------------- ------ At 31 July 2014 29 Share-based payments 22 --------------------- ------ At 31 July 2015 51 Share-based payments 59 --------------------- ------ At 31 July 2016 110 --------------------- ------ The Company GBP000 --------------------------- ------- At the start of the period 22 Share-based payments 59 --------------------------- ------- At 31 July 2016 81 --------------------------- -------
The share-based payment reserve accumulates the corresponding credit entry in respect of share-based payment charges. Movements in the reserve are disclosed in the consolidated statement of changes in equity.
A charge of GBP59,000 has been recognised in the statement of comprehensive income for the year (2015: GBP22,000).
Share option schemes
The Group operates the following share option schemes, all of which are operated as Enterprise Management Incentive ("EMI") schemes insofar as the share options being issued meet the EMI criteria as defined by HM Revenue & Customs. Share options issued that do not meet EMI criteria are issued as unapproved share options, but are subject to the same exercise performance conditions.
C4X Discovery Holdings plc Long Term Incentive Plan ("LTIP")
Grant in September 2009
Share options were granted to a staff member on 29 September 2009. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the Board. The exercise price was set at 2.05 pence (the original exercise price of GBP22.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.
Grant in August 2012
Share options were granted to staff on 28 August 2012. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the Board. The exercise price was set at 5.58 pence (the original exercise price of GBP60.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.
Grant in July 2013
Share options were granted to staff on 4 July 2013. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the Board. The exercise price was set at 5.58 pence (the original exercise price of GBP60.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.
Grant in May 2014
Share options were granted to staff on 27 May 2014. The options granted are exercisable in the event of the listing of the Company, its acquisition or at the absolute discretion of the Board. The exercise price was set at 5.58 pence (the original exercise price of GBP60.00 was adjusted for a subdivision of 1,075 share options in C4X Holdings plc for each share option originally held in C4X Discovery Limited), being the estimated fair value of the shares on the day preceding the issue of the share options. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.
Grant in June 2015
Share options were granted to staff and Directors on 8 June 2015. The options granted are exercisable at any time between three years and ten years of them being granted. There are no performance criteria attached to the options. The exercise price was set at 100.0 pence, being the price at which shares were placed in the IPO in October 2014. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.
Grant in December 2015
Share options were granted to a Director on 8 December 2015. The options granted are exercisable, subject to meeting certain performance criteria, at any time between three years and ten years of them being granted. The exercise price was set at 77 pence, being the average of the mid-market closing price over the three days prior to 8 December 2015. The fair value benefit is measured using a Black Scholes model, taking into account the terms and conditions upon which the share options were issued.
Share options are awarded to management and key staff as a mechanism for attracting and retaining key members of staff. The options are granted at no lower than either: (i) market price on the day preceding grant; or (ii) in the event of abnormal price movements at an average market price for the week preceding grant date. Options may be granted at prices higher than the market price on the day preceding grant where the Board believes it is appropriate to do so. These options vest over a three-year period from the date of grant and are exercisable until the tenth anniversary of the award. Exercise of the award is subject to the employee remaining a full-time member of staff at the point of exercise. The fair value benefit is measured using a binomial valuation model, taking into account the terms and conditions upon which the share options were issued.
The following tables illustrate the number and weighted average exercise prices of, and movements in, share options during the year.
2016 2015
The Group and Company Number Number
------------------------ --------- ---------
Outstanding at 1 August 2,177,325 1,699,575
Granted during the year 500,000 477,750
Lapsed/cancelled (20,000) -
------------------------ --------- ---------
Outstanding at 31 July 2,657,325 2,177,325
------------------------ --------- ---------
Exercisable at 31 July* 1,699,575 1,699,575
------------------------ --------- ---------
During the year ended 31 July 2016, no options were exercised (2015: nil).
* Coincidental with the Company's listing on AIM in October 2014, holders of options to acquire 1,699,575 ordinary shares, undertook not to exercise such options (subject to certain exceptions) within the 12-month period from admission.
Weighted average exercise price of options
2016 2015
The Group and Company Pence Pence
------------------------ ------ ------
Outstanding at 1 August 22.55 5.41
Granted during the year 77.00 83.50
Forfeited/cancelled 83.50 -
------------------------ ------ ------
Outstanding at 31 July 32.33 22.55
------------------------ ------ ------
The weighted average fair value of options granted during the year to 31 July 2016 was 77.0 pence (2015: 83.5 pence). The range of exercise prices for options outstanding at the end of the year was 2.05 pence-83.5 pence (2015: 2.05 pence-83.5 pence).
For the share options, outstanding as at 31 July 2016, the weighted average remaining contractual life is 7.8 years (2015: 8.4 years).
No share options were exercised during the year (2015: none).
The following table lists the inputs to the models used for the years ended 31 July 2016 and 31 July 2015.
The Group and Company 2016 2015 ----------------------------------------- ----------- ----------- Expected volatility (%) 52.5% 52.5% Risk-free interest rate (%) 0.78%-1.75% 1.34%-2.00% Expected life of options (years average) 3 years 4 years Weighted average exercise price (pence) 77.00 83.50 Weighted average share price at date of grant (pence) 32.33 22.55 ----------------------------------------- ----------- -----------
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
No other features of options granted were incorporated into the measurement of fair value.
21. Merger reserve
The Group GBP000 ----------------------------------------------- ------ At 31 July 2014, 31 July 2015 and 31 July 2016 920 ----------------------------------------------- ------
The merger reserve arises as a result of the reverse acquisition requirements of IFRS 3 meaning the consolidated accounts are presented as a continuation of the C4X Discovery Limited accounts along with the share capital structure of the legal parent company (C4X Discovery Holdings plc).
22. Capital contribution reserve
The Group GBP000 -------------------------------- ------ At 31 July 2014 - Waiver of loan interest payable 195 -------------------------------- ------ At 31 July 2015 and 2016 195 -------------------------------- ------
23. Revenue reserve
The Group GBP000 ------------------ -------- At 31 July 2014 (2,482) Loss for the year (3,064) ------------------ -------- At 31 July 2015 (5,546) Loss for the year (5,321) ------------------ -------- At 31 July 2016 (10,867) ------------------ --------
24. Commitments
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge payments under non-cancellable operating leases are as follows:
31 July 31 July
2016 2015
Group Group
GBP000 GBP000
-------------------------------------------- ------- -------
Land and buildings:
Not later than one year 62 95
After one year but not more than five years 119 228
After five years - -
-------------------------------------------- ------- -------
181 323
-------------------------------------------- ------- -------
25. Financial risk management
Overview
This note presents information about the Group's exposure to various kinds of financial risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.
The Board has overall responsibility for the establishment and oversight of the Group's risk management framework. The Executive Directors report regularly to the Board on Group risk management.
Capital risk management
The Group reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in notes 19 to 23 and in the Group statement of changes in equity. Total equity was GBP4,305,000 at 31 July 2016 (GBP7,968,000 at 31 July 2015).
The Group is not subject to externally imposed capital requirements.
Liquidity risk
The Group's approach to managing liquidity is to ensure that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
The Group manages all of its external bank relationships centrally in accordance with defined treasury policies. The policies include the minimum acceptable credit rating of relationship banks and financial transaction authority limits. Any material change to the Group's principal banking facility requires Board approval. The Group seeks to mitigate the risk of bank failure by ensuring that it maintains relationships with a number of investment grade banks.
At the reporting date the Group was cash positive with no outstanding borrowings.
Categorisation of financial instruments
Financial
liabilities
Loans at
and amortised
receivables cost Group Company
Financial assets/(liabilities) GBP000 GBP000 GBP000 GBP000
------------------------------------ ------------ ------------ ------- -------
31 July 2016
Trade receivables 39 - 39 -
Inter-company short-term loan to
subsidiary - - - 12,075
Cash, cash equivalents and deposits 1,328 - 1,328 -
Trade and other payables* - (591) (591) -
------------------------------------ ------------ ------------ ------- -------
1,367 (591) 776 12,075
------------------------------------ ------------ ------------ ------- -------
Loans
and Financial
receivables liabilities Group Company
Financial assets/(liabilities) GBP000 GBP000 GBP000 GBP000
------------------------------------ ------------ ------------ -------- -------
31 July 2015
Trade receivables 31 - 31 -
Inter-company short-term loan to
subsidiary - - - 12,147
Cash, cash equivalents and deposits 7,485 - 7,485 -
Trade and other payables* - (616) (616) -
------------------------------------ ------------ ------------ -------- -------
7,516 (616) (6,900) 12,147
------------------------------------ ------------ ------------ -------- -------
* Excluding accruals.
The values disclosed in the above table are carrying values. The Board considers that the carrying amount of financial assets and liabilities approximates to their fair value.
The main risks arising from the Group's financial instruments are credit risk and foreign currency risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.
Credit risk
The Group's principal financial assets are cash, cash equivalents and deposits. The Group seeks to limit the level of credit risk on the cash balances by only depositing surplus liquid funds with multiple counterparty banks that have investment grade credit ratings.
The Group trades only with recognised, creditworthy third parties. Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. The Group's maximum exposure is the carrying amount of trade receivables as disclosed in note 15, which was neither past due nor impaired. All trade receivables are ultimately overseen by the Chief Executive Officer and are managed on a day-to-day basis by the finance team. Credit limits are set as deemed appropriate for the customer.
The maximum exposure to credit risk in relation to cash, cash equivalents and deposits is the carrying value at the balance sheet date.
Foreign currency risk
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group. These are primarily US Dollars ("USD") and Euros. Transactions outside of these currencies are limited.
The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain.
There were no open forward contracts as at 31 July 2016 or at 31 July 2015 and the Group did not enter into any such contracts during 2016 nor 2015.
The split of Group assets between Sterling and other currencies at the year end is analysed as follows:
2016 2015
GBP USD EUR Total GBP USD EUR Total
The Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- ------- ------- ------- ------- ------- ------- ------- -------
Cash, cash equivalents
and deposits 1,328 - - 1,328 7,485 - - 7,485
Trade receivables 39 - - 39 31 - - 31
Trade payables (378) (12) (2) (392) (445) (1) (2) (448)
----------------------- ------- ------- ------- ------- ------- ------- ------- -------
989 (12) (2) 975 7,071 (1) (2) 7,068
----------------------- ------- ------- ------- ------- ------- ------- ------- -------
Sensitivity analysis to movement in exchange rates
Given the immaterial net payable balances in foreign currency, the exposure to a change in exchange rate is negligible.
Interest rate risk
As the Group has no borrowings the risk is limited to the reduction of interest received on cash surpluses held at bank which receive a floating rate of interest. The principal impact to the Group is the result of interest-bearing cash and cash equivalent balances held as set out below:
31 July 2016 31 July 2015
--------------------------- -------------------------- --------------------------
Fixed Floating Fixed Floating
rate rate Total rate rate Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ------- -------- ------- ------- -------- -------
The Group
Cash, cash equivalents and
deposits - 1,328 1,328 7,000 485 7,485
--------------------------- ------- -------- ------- ------- -------- -------
The Company
Cash, cash equivalents and
deposits - 1 1 - 1 1
--------------------------- ------- -------- ------- ------- -------- -------
As the majority of cash and cash equivalents are held on floating deposit and the overall level of interest rates is low, the exposure to interest rate movements is immaterial.
Maturity profile
Set out below is the maturity profile of the Group's financial liabilities at 31 July 2016 based on contractual undiscounted payments including contractual interest.
Less
than One to
one five
year years Total
2016 GBP000 GBP000 GBP000
-------------------------- ------- ------- -------
Financial liabilities
Trade and other payables* 591 - 591
-------------------------- ------- ------- -------
591 - 591
-------------------------- ------- ------- -------
Less
than One to
one five
year years Total
2015 GBP000 GBP000 GBP000
-------------------------- ------- ------- -------
Financial liabilities
Trade and other payables* 616 - 616
-------------------------- ------- ------- -------
616 - 616
-------------------------- ------- ------- -------
* Excluding accruals. Trade and other payables are due within three months.
The Directors consider that the carrying amount of the financial liabilities approximates to their fair value.
As all financial assets are expected to mature within the next 12 months an aged analysis of financial assets has not been presented.
26. Related party transactions
During the year, shareholder Aquarius Equity Partners Limited charged the Group GBP15,450 (2015: GBP20,000) for monitoring fees and was owed GBP1,545 at 31 July 2016 (2015: GBP1,545).
During the year, The Aquarius IV Fund LLP, a fund managed by shareholder Aquarius Equity Partners Limited, held 2,025,000 deferred shares of GBP1 each (2015: GBP2,025,000).
The Group:
There were no sales to, purchases from, or at the year end, balances with any related party.
The Company:
The following table summarises inter-company balances at the year end between C4X Discovery Holdings plc and subsidiary entities:
31 July 31 July
2016 2015
Notes GBP000 GBP000
-------------------------------------------------------- ----- ------- -------
Short-term loans owed to C4X Discovery Holdings plc by:
C4X Discovery Limited 15 12,075 12,147
C4X Drug Discovery Limited - -
Adorial Limited - -
-------------------------------------------------------- ----- ------- -------
12,075 12,147
-------------------------------------------------------- ----- ------- -------
There are no formal terms of repayment in place for these loans and it has been confirmed by the Directors that the long-term loans will not be recalled within the next 12 months.
None of the loans are interest bearing.
27. Compensation of key management personnel (including Directors)
2016 2015
GBP000 GBP000
----------------------------- ------- -------
Short-term employee benefits 906 561
Pension costs 59 5
Benefits in kind - -
Share-based payments 45 16
----------------------------- ------- -------
1,010 582
----------------------------- ------- -------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKPDNBBKBFDK
(END) Dow Jones Newswires
January 06, 2017 02:00 ET (07:00 GMT)
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