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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ixico Plc | LSE:IXI | London | Ordinary Share | GB00BFXR4C20 | 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% | 8.125 | 8.00 | 8.25 | 8.125 | 8.125 | 8.125 | 4,829 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMIXI
RNS Number : 5668V
IXICO plc
04 December 2019
4 December 2019
IXICO plc
("IXICO", "the Company" or "the Group")
Financial Results for the year ended 30 September 2019
First profitable full year built upon increased penetration of growing market combined with operational leverage
IXICO plc (AIM: IXI), the AI data analytics company delivering insights in neuroscience, today announces its final results for the year ended 30 September 2019.
Highlights
Financial
-- First year of profitability since admission to AIM;
-- Another year of record revenue of GBP7.6 million (2018: GBP5.4 million) representing 40% growth over prior year;
-- Gross margin of 65.4% (2018: 58.8%) representing 660 basis points over prior year;
-- EBITDA profit of GBP0.5 million (2018: loss of GBP0.6 million) due to operational leverage and controlled administrative costs;
-- Operating profit of GBP0.4 million (2018: loss of GBP0.8 million); -- Profit per share of 0.92 pence (2018: loss of 2.0 pence);
-- Closing cash of GBP7.3 million (2018: GBP7.9 million), with operating cash outflows being held at GBP0.1 million (2018: GBP0.1 million);
-- A healthy contracted order book of GBP15.9 million (2018: GBP19.3 million) with further contracts signed since year end; and
-- Two new institutional shareholders, BGF Investment Management and Canaccord Genuity Group, joined the share register.
Commercial and Operational
-- Secured GBP7.7 million of (both new and expanded) multi-year contracts across all phases of clinical development;
-- Strengthened visibility for continued revenue growth despite GBP3.5 million client trial cessation in August 2019;
-- Expansion of key scientific collaborations to develop new artificial intelligence algorithms for imaging and digital biomarkers, enabling further diversification into a broad range of neurological disease therapeutic areas; and
-- Investment in further strengthening of the leadership team to drive future growth.
Post year-end events
As previously reported:
-- A start up agreement with a new client for a multi-study programme in Progressive Supranuclear Palsy (PSP), with an initial value of c. GBP0.4 million over 12 months;
-- New contract worth c. GBP0.35 million for a 3-year expansion of an existing study to add a significant patient cohort in China; and
-- 2-year contract worth c. GBP0.45 million for a new US biotech client to support a Phase IV study exploring a new application for a marketed drug for mental health.
Giulio Cerroni, CEO of IXICO, said:
"2019 has been a pivotal year in strengthening IXICO as a trusted technology partner in clinical development. Revenue of GBP7.6 million built on the growth in 2018, resulting in a 3-year CAGR of 35%. We also achieved our first full year of profitability since admission to AIM. Our strengthened leadership team has allowed us to scale operations and enhanced our strategic planning. With a healthy order book of GBP15.9 million, new contracts signed since the year end, and a new US-based Chief Business Officer we continue to execute our ambitious growth plans with the aim of delivering another record year."
Notice of AGM
IXICO also announces that its Annual General Meeting (AGM) will be held at BGF Investment Management, 13 - 15 York Buildings, London, WC2N 6JU on Friday, 17 January 2020 at 9:30am. The full annual report and accounts along with notice of annual general meeting will be posted to shareholders on 16 December 2019.
For further information please contact:
IXICO plc +44 (0) 20 3763 7498 Giulio Cerroni, Chief Executive Officer Grant Nash, Chief Financial Officer Cenkos Securities PLC (Nominated adviser and sole broker) +44 (0) 20 7397 8900 Giles Balleny / Max Gould (Corporate Finance) Michael F Johnson / Russell Kerr (Sales) Optimum Strategic Communications +44 (0) 203 950 9144 Mary Clark / Supriya Mathur / Manel Mateus IXICO@optimumcomms.com
About IXICO
IXICO's purpose is to advance medicine and human health by turning data into clinically meaningful information, providing valuable new insights in neuroscience.
Our goal is to be a leading proponent in the use of AI in clinical development, to improve biopharma R&D productivity through the adoption of breakthrough data analytics in precision healthcare. Through the deployment of novel AI algorithms, we analyse and interpret brain scans and digital biosensor data to enable better trial design, patient selection and ultimately clinical outcomes across all phases of clinical evaluation. Our data analytics services are deployed on some of the most important clinical trials in neuroscience and rare disease, providing valuable insights to disease progression and patient safety, enabling our clients to make better informed decisions earlier in the clinical development pathway.
More information is available on www.IXICO.com
Chairman's Statement
A year of outstanding growth and first profitability
I am pleased to report that IXICO is now profitable and delivered this important milestone in the Group's evolution a full 2 years ahead of the market's expectation at the beginning of the year. This follows a third consecutive year of accelerating revenue growth and effective strategic execution by our strengthened leadership team.
Overview
IXICO is an Artificial Intelligence (AI) data analytics company, with strong links into the biotech, pharma and the academic community, delivering intelligent insights in neuroscience.
Our purpose is to advance medicine and human health in neuroscience by converting raw clinical trial data into clinically meaningful information. Our data analytics services provide clinical insights to improve the efficiency of biopharma clinical development. Through the deployment of novel AI algorithms, we analyse and interpret brain scans and wearable biosensor data to enable better trial design, patient selection and ultimately clinical outcomes across all phases of clinical evaluation.
In FY19, we have reported record revenue, strengthened gross margins, and most significantly, our first operating profit since admission to AIM in 2013.
During the year we announced several new contracts with leading biopharmaceutical clients. These multi-year contracts give good visibility to future revenue and provide confidence that we enter the new year with a continued growth trajectory.
We close the year with a strong balance sheet that underpins continued investment in our data analytics platform, AI algorithms and commercial team. These investments are designed to drive our ambitious growth plans for further international market penetration and thereby realise our full potential in the growing neuroscience market.
Governance & people
As the Group leverages data analytics and AI algorithms to provide specialist technology services to the clinical trials market, our people remain an integral part of our unique value proposition. We seek to recruit and retain highly qualified technical and scientific staff who develop deep understanding of our clients' requirements and drive forward our development programmes to provide innovative technology solutions.
As in any successful, high growth business, IXICO's future success depends on its people. In a competitive market for skilled individuals, we have focused significant efforts to develop the IXICO culture. This engenders hard work and accountability while offering a place where employees are empowered to be creative within a clearly defined structure. Our refreshed values - Ability, Aspiration, Accountability and Agility - reflect this evolving culture and underpin our approach to employee recruitment and performance management.
In addition, the Board uses the 10 principles outlined in the Quoted Companies Alliance ('QCA') Corporate Governance Code to ensure it maintains appropriate governance arrangements. The Board conducts itself in a manner which places IXICO's values and the QCA principles at the core of the Group's culture.
Board
During the year we have seen a couple of changes on the Board. Grant Nash, Chief Financial Officer and Executive Director, was appointed in April and joined the Board in August. Tim Sharpington, Non-Executive Director, stepped down from the Board in September. We thank Tim for his long and excellent service. We welcome Grant who brings over fifteen years of life science experience to the next phase of our planned growth.
At the 2020 Annual General Meeting ('AGM'), in accordance with the Company's Articles of Association, Giulio Cerroni and Grant Nash will stand for re-election, supported by the Board of Directors' recommendation.
Shareholders
During the year we welcomed BGF Investment Management and Canaccord Genuity Wealth Management to the register as new institutional shareholders. They join an impressive list of leading institutions who have invested in the Company over the last 2 years during which we have refreshed and diversified our institutional shareholder base. As we reflect on 2019, it is also pleasing to note the wider recognition in the market of the impact that our commercially-led growth strategy has had in delivering value to our clients.
Based on direct feedback, we believe our major shareholders are well aligned with the Group's vision and strategy set by our executive team, led by our Chief Executive Officer, Giulio Cerroni. This is important, as it is from these shareholders that we will seek support as we continue to accelerate our growth plans.
Outlook
Over the last year, we have seen increasing interest in IXICO from both the industry we serve and the investment community. As we improve how we communicate our capabilities, and as our sector continues to embrace the rapidly advancing benefits of AI data analytics, so the Group is ever better placed to support new and growing numbers of clinical trials. This, alongside the investments we have made in diversifying into new therapeutic areas and wearable biosensor analytics, underpins the Board's confidence in IXICO delivering continued profitable growth.
Chief Executive's Statement
Strengthening IXICO's position as a trusted technology partner in clinical development
With continued clarity of purpose and our focused investment for growth programmes in place, we go into the new year with confidence to continue to deliver on our ambitious goals.
Delivering our data analytics strategy
2019 has been a pivotal year in the delivery of our vision to transform IXICO into a leading proponent of AI in clinical development.
The year has seen the Group transformed not only by a significantly strengthened financial performance and balance sheet to support ongoing organic investment, but also by its ability to scale in support of growing client demand for our specialist technology-driven services.
Clarity of purpose
IXICO's purpose is to advance medicine and human health in neurological disease by turning data into clinically meaningful information, providing valuable insights. After some costly and disappointing drug trial failures in central nervous system ('CNS') diseases, the field is welcoming a renewed funding surge in tackling one of humanity's greatest clinical and societal challenges.
Accelerated commercial traction
The long-term runway for growth is driven by the increasing outsourcing requirements of the biopharmaceutical industry and the value that they derive from AI data analytics to increase R&D productivity. This is reflected in this year's revenue of GBP7.6 million (+40%), building on the revenue of GBP5.4 million (+32%) in 2018 and a 3-year compound annual growth rate ('CAGR') of 35%. Furthermore we are entering 2020 with strong commercial momentum and an order book at the 2019 year-end of GBP15.9 million (2018: GBP19.3 million).
We expect to continue to add new clients in all global regions and to expand our reach in existing client programmes. Revenue growth will continue to be fuelled by executing on our strategy of expanding our portfolio of proprietary imaging and digital biomarkers from wearable biosensors and further diversification into new adjacent neurological therapeutic areas. In addition, we plan to make significant investments in commercial capabilities and leadership, in particular to directly address the world's largest market, North America.
Achieving operational leverage
Our strengthened management brings a strong focus on delivery and we will continue to identify areas for enhanced client service levels and increased automation to enable even greater operational leverage in the future. This strengthened focus on operational efficiency resulted in significant progress in our productivity Key Performance Indicators ('KPIs'), including over 600 bps improvement in gross margin to 65% and revenue per FTE increasing from GBP94k to GBP124k.
Science & innovation
The primary focus of our investment for growth programmes is to further accelerate revenue contributed by our data analytics. To do so, we have developed five strategic R&D programmes to address additional identified opportunities in both current and new markets. A central part of this is focusing our efforts on developing partnerships with both academic and industrial partners in the coming year to maintain our position as the go-to people for AI in clinical development in neuroscience.
Innovation will be the key element by which we will build accretive, high margin growth and long-term value. We are setting out to grow into attractive adjacent markets, with a focus on developing leading edge algorithms and adapting our proven technology to new applications focused on neurological disease.
Business as usual: profitable growth
In 2019, we have delivered on the promise of accelerating commercial traction, executing on our ambitious growth plans and a strengthened organisation.
I sign off this year by thanking all my colleagues at IXICO for a truly pivotal, profitable year. With a clarity of purpose to advance medicine and human health in neurological disease, I look forward to 2020 being another year of achievement in establishing IXICO as a leading proponent of AI in clinical development to the global biopharmaceutical industry.
Risk management
The Board holds responsibility for monitoring risks to which the Group is exposed, and for reviewing and assessing the effectiveness of the internal control framework used by the Group to manage those risks.
The Group has designed its internal controls with the aim of providing a proportionate level of assurance for the organisation, taking account of its size, stage of development and risk exposure. Whilst the Board is confident that the control framework is fit for purpose, it continues to seek ways to further mitigate against the risk of material misstatement or loss.
In assessing the risks faced by the Group, a detailed risk identification and control framework is adopted. It is the responsibility of each department head to update the risk and control matrix for their area; these are then consolidated into a single matrix which is reviewed by the Leadership Team and Executive Directors. The Board receives a summary of the risk and control matrix for the purpose of further review and challenge.
Principal risks and uncertainties
The following table presents the principal risks and uncertainties that the Board considers could have a material impact on the Group's operational results, financial condition and prospects.
These risks and uncertainties reflect the business environment within which the Group operates, together with risks in the execution of its business strategy. The risks are separated into four specific risk areas being Strategic, Financial, Operational, and Legal/Compliance & Reputational.
Strategic risks
Hot Features
Premium
Principal Risks Risk Context Mitigation Change in the
Year
The Group fails The Board
to exploit anticipates * Annual review by the Board of Group strategy and Likelihood
the that its annual budget priorities; reduced
opportunities strategic following
available to initiatives improved
it and does will lead * Monthly Leadership review of delivery of specific strategic
not deliver to increased strategic initiatives; review process
the full market
potential penetration
for shareholder and open * Board appraisal of significant investments before
(and other up new market funds are committed and subsequent review of each
stakeholder) opportunities investment's performance; and
returns for the Group.
The
rapid * External key opinion leaders' advice to inform
development of strategic initiatives.
its end
markets means
that the
Group's
projections
for its
strategic
initiatives
will
inevitably
require
a level of
judgement
risk.
--------------- ----------------------------------------------------------------- ----------------
Changes to New
international impediments to * Regular Board review of likely risks associated with No significant
trading international Brexit and other potential changes to the trading impact is
environment trade environment. anticipated
due to resulting from at the current
political political time
events actions such
as Brexit
or US trade
tariffs
may
disadvantage
the
Group's
position in
its
marketplace.
--------------- ----------------------------------------------------------------- ----------------
Operational risks
Principal Risks Risk Context Mitigation Change in the
Year
Failure of A significant
IT infrastructure failure * Multiple controls are in place to reduce the impact Likelihood
of IT of any single hardware failure; and reduced due
infrastructure to improved
might disrupt the controls and
Group's * Investment in IT infrastructure (including expanding investment
operations. use of cloud services) will mitigate risk of programme
prolonged down time as a result of hardware failure.
------------------ ------------------------------------------------------------ ---------------
Resource The Group employs
constraints highly * With research links to London-based universities the Likelihood
which impact qualified Group is able to attract highly qualified individuals increased due
operational expertise as they complete their academic commitments; and to growing
delivery to deliver its pipeline of
services; work
its ability to * Opportunities for ongoing skills development and
recruit promotion to more senior roles are supported as the
and retain this Group continues to grow.
expertise
is critical to
operations
running smoothly.
------------------ ------------------------------------------------------------ ---------------
Financial risks
Principal Risk Context Mitigation Change in the
Risks Year
Early The Group's client
termination contracts bear a risk * Commercial contracts include up-front payment, Impact
of a of early termination close-out cost recovery and termination notice reduced
client's in the event of: clauses; and as adopted
clinical * an interim data review demonstrating no material contractual
trial benefit; or terms are
* Continued growth of the Group dilutes this risk strengthened
across a larger portfolio of clinical trials.
* a serious adverse event.
------------------------------------------------------- ----------------------------------------------------------- --------------
Loss of a Although the Group's
key portfolio of clients * Leadership monitoring of service levels across Whilst client
commercial has increased across projects and dedicating additional resources to concentration
relationship the year there remains supporting its largest client; risk has
with a a risk that if one increased,
client of its larger clients the Group has
terminated its relationship * All projects operate within clear governance and taken steps
with the Group, there escalation frameworks with leadership oversight; and to further
would be a significant support
impact on the Group's delivery
short and/or medium-term * Further development of sales pipeline, to support th of client
revenue expectations. e objectives
This risk is most notable continued broadening of the client portfolio across
in respect of its largest all phases of clinical trials.
client which constitutes
a significant portion
of Group revenue.
------------------------------------------------------- ----------------------------------------------------------- --------------
Financial The Group is exposed
risks to financial risks * Standard controls are applied around all of these Impact of
are set out typical of all commercial risks; foreign
in further companies. These include exchange rate
detail under the risks of a cash change
note 22 to shortfall, experiencing * The Group has a strong cash position and a diverse reduced
the a significant client client portfolio which includes large, well-funded due to a
financial payment delay and/or organisations; and greater
statements exposure to a foreign proportion
and include: currency rate fluctuation of client
Liquidity which is against the * The majority of contracts are denominated in GBP. contracts
risks interests of the Group. being
Credit risks denominated
Currency in GBP and
risks an increase
of costs
denominated
in USD
------------------------------------------------------- ----------------------------------------------------------- --------------
Legal/compliance & reputational risks
Principal Risks Risk Context Mitigation Change in the
Year
Reputational If the Group
damage due provided * Operational checks are used to control for data error, Similar risk
to error or incorrect duplication or transfer issues and to highlight when position across
system failure results in an analysis fails; and the year
in delivery the course of
of analysis delivering
services its services to * Continued investment to scale controls surrounding
a clinical increased data volumes as the business grows.
trial this may
impact
on the trial
and/or
patient outcomes
and
result in
reputational
damage for the
Group.
----------------- ------------------------------------------------------------- -----------------
Breach of data The Group
protection captures * Data captured from client sites is pseudonymised on Likelihood
regulations personal data receipt into the Group's 'TrialTracker' software; and reduced as
from improved and
clinical trial clearer contract
subjects. * Controls over the protection of personal data have terms
As such, it must been implemented. Data outputs to clients and key implemented.
be stakeholders are issued within a control framework to
appropriately reduce the likelihood of unintended release.
managed
according to
GDPR or
other equivalent
data
protection
regulations.
----------------- ------------------------------------------------------------- -----------------
Failure to It is a
comply with requirement * Significant funds have been employed already; and Likelihood
the requirements of the VCT/EIS increased as
of its VCT/EIS funding end of VCT/EIS
Funding that the Group * Detailed plans are in place to employ the remaining term nears
received funding within the remainder of the 2-year period and
in May 2018 that these are reviewed at least monthly.
it
is fully
employed within
a period of 2
years.
Failure to do so
would
result in the
VCT/EIS
investors losing
some
of the tax
benefits
associated with
their
investment.
----------------- ------------------------------------------------------------- -----------------
A cyber-attack Any successful Likelihood
results in cyber-attack * Strong levels of control exist over the Group's IT reduced as
a breach of may create infrastructure, including ongoing investments in improved
the Group's operational improved security infrastructure, training for all controls
IT systems (and potentially staff on data security and standard controls such as implemented
financial) password protection and policies.
risks and may
have
a significant
reputational
impact for the
Group.
----------------- ------------------------------------------------------------- -----------------
Financial review
A breakthrough year of strong results providing a solid basis for future investment and growth
The Group has delivered an exceptional financial performance across the year to 30 September 2019, further accelerating growth rates previously reported in 2017 and 2018.
This review includes a comparison of the financial KPIs that we use to measure our progress over the prior year as shown below:
KPI 2019 result 2018 result Movement
------------------------- ------------ ------------ ------------
Revenue GBP7.6m GBP5.4m GBP2.2m
(40%)
Gross profit GBP4.9m GBP3.2m GBP1.7m
(56%)
Gross margin 65.4% 58.8% 660 bps
EBITDA profit/(loss) GBP0.5m (GBP0.6m) GBP1.1m
Operating profit/(loss) GBP0.4m (GBP0.8m) GBP1.2m
Profit/(loss) per share 0.92p (2.00)p 2.92p
Order book GBP15.9m GBP19.3m (GBP3.4m)
Cash GBP7.3m GBP7.9m (GBP0.6m)
------------------------- ------------ ------------ ----------
Revenue
Revenue for the period of GBP7.6 million (2018: GBP5.4 million) represents a year-on-year increase of 40%. This growth was driven by an increasing portfolio of clinical trial projects, a widening of neurological therapeutic areas being serviced and the impact of a Phase III clinical trial accelerating enrolment in the second half of the year.
Gross profit
The Group reports gross profit of GBP4.9 million in the year. This is an increase of GBP1.7 million or 56% compared to 2018 and equates to a gross margin of 65%. This improved gross profit performance reflects a combination of a favourable sales mix and the leveraging of operational efficiencies as the Group grows.
Earnings before interest, tax, depreciation and amortisation ('EBITDA')
The Group generated its first EBITDA profit since it listed on the AIM market in 2013. This profit of GBP0.5 million (2018: GBP0.6 million loss) reflects the impact of strong revenue growth, improved operational leverage (and therefore overall productivity), and control of administrative costs whilst enabling a level of investment in research and development and in sales and marketing.
Operating profit/loss
Operating expenditure in the year reflected investment in people and product development:
-- research and development expenses of GBP1.0 million (2018: GBP1.0 million) included the innovation of new algorithms to support image analysis as well as enhancements of the Group's platforms to enable operational scalability. The Group, in addition, capitalised GBP0.2 million of development expenditure in the year (2018: GBPnil);
-- sales and marketing expenses were GBP1.2 million (2018: GBP0.8 million) reflecting increased investment to support continued future growth; and
-- general and administrative expenses were controlled at GBP3.0 million (2018: GBP2.7 million).
The reported operating profit of GBP0.4 million reflected 40% revenue growth, improved gross profit performance and controlled operating expenditure.
Order book
The Group continues to benefit from a healthy contracted order book. At 30 September 2019 this totalled GBP15.9 million (2018: GBP19.3 million), which takes account of GBP7.6 million of business executed during the year and GBP7.7 million of (both new and expanded) multi-year contracts secured across all phases of clinical development as well as a client's early trial cessation as reported on 9 August 2019. This means the Group retains a strong position to deliver continued revenue growth.
Cash
The Group reported a small (GBP0.1 million) operating cash outflow before tax receipts in the year (2018: GBP0.1 million cash outflow) reflecting operational profits offset by a reduction in working capital as up-front client receipts received in 2018 unwound across 2019.
The Group had a closing cash balance at 30 September 2019 of GBP7.3 million (2018: GBP7.9 million) with the reduction reflecting capital investment in the Group to support future scalability and deliver further process efficiencies. The cash balance remains strong and means the Group is well positioned to drive continued growth.
Profit/loss per share
The Group reports its first profit per share since listing on the AIM market in 2013. The profit per share of 0.92p improved from a 2.00p loss in 2018 and reflects the strong financial performance achieved across the year.
The Group is growing rapidly, is now profitable, and remains well capitalised, providing a strong basis to further accelerate investment across 2020 and thereby continue execution of its commercially-led growth strategy.
Corporate Governance Report
The Board has adopted, and complies with, the Quoted Companies Alliance ('QCA') Corporate Governance Code ('Code') and has published a statement on the Group website that sets out, in broad terms, how the Group complies with the Code at the date of this report. The Board provides annual updates about compliance with the Code.
The Board is responsible for ensuring that IXICO is managed for the long-term benefit of all shareholders, through effective and efficient decision-making. Corporate governance is an important part of the Board's role by providing oversight and guidance to help manage risk and build long-term value.
The Code comprises 10 principles, with which companies undertake to comply as part of their corporate governance arrangements. A summary of how the Group complies with these principles is outlined below with further detail being available on the Group's website (https://ixico.com/investors/governance/oversight/).
Focus Area Governance Group Approach Further
Principle Reading
Deliver 1: Establish The Group delivers insights to biopharmaceutical Our 5-point
value in a strategy companies developing drugs to address growth plan
a manner and business neurological disease. To achieve our is detailed
aligned model which business goals, the Group is accelerating in the full
to promotes growth and has achieved profitability annual report.
shareholder long-term in the financial year to 30 September Our approach
and wider value for 2019 by: to innovation
stakeholder shareholders * building scale and market presence for our technology and recent
aspirations solutions; and product
launches
is described
* developing and commercialising new products and in the full
services. annual report.
These activities promote and are delivering
long-term value for shareholders.
------------------ ----------------------------------------------------------------- ---------------
2: Seek to The Board is committed to encouraging
understand open communication between itself and
and meet shareholders. The Chief Executive Officer
shareholder and Chief Financial Officer arrange
needs and to meet with major shareholders at least
expectations twice a year to update them on strategy,
progress against this strategy and obtain
feedback. The Chairman also makes himself
available for discussions with major
shareholders as and when appropriate.
Further, should the Board consider any
significant divergence from strategy
it will seek feedback from major shareholders
as part of its deliberations.
The Board uses publications on its website
and its Annual Report to keep all shareholders
informed of its progress. It uses the
AGM to invite feedback from any shareholder.
The CEO and CFO are responsible for
investor relations and any feedback
received from shareholders is communicated
to the wider Board
------------------ ----------------------------------------------------------------- ---------------
3: Take into The Group is highly conscious of the Our
account wider requirements of its wider stakeholders stakeholders
stakeholder in supporting its long-term success. are described
and social It views its wider stakeholders as its in our
responsibilities clients, suppliers, employees and patients. business
and their The Board has implemented approaches model in
implications to support the requirements of each the full
for long-term group and, where it identifies, or is annual report.
success notified of, any risks or concerns in
respect of any of these stakeholder
groups, it puts in place actions to
address these.
------------------ ----------------------------------------------------------------- ---------------
4: Embed The Board has ultimate responsibility The Risk
effective for the Group's system of risk management Management
risk management, and internal control and for reviewing Report is
considering its effectiveness. provided
both The Board instils control to the Group's in more
opportunities operations by overseeing the following: detail above.
and threats, * competent and prudent management;
throughout
the organisation
* sound planning;
* adequate systems of control;
* adequate and accurate accounting records; and
* compliance with statutory and regulatory obligations.
------------------ ----------------------------------------------------------------- ---------------
Maintain 5: Maintain The Board comprises the Non-Executive More
a strong the Board Chairman, two Executive Directors and information
and dynamic as a two Non-Executive Directors, one of on Board
management well-functioning, whom acts as Senior Independent Director. membership
framework balanced The Board has an appropriate balance is provided
that places team led between independence and knowledge of in the full
value on by the Chair the Group and its target markets which annual report.
developing allows it to discharge its duties and
the Group responsibilities effectively.
in an ethical The Directors use their independent
manner judgement and challenge matters affecting
the business whether strategic or operational.
The Non-Executive Directors are in regular
contact with the Executive Directors
and the Chairman has regular one-to-one
meetings with the Chief Executive Officer.
The Board has access to independent
advisers to support it in its decisions,
where additional skills or expertise
is deemed necessary.
The Board has procedures in place to
deal with a situation in which a Director
has, or may have, a conflict of interest.
The Board is aware of other commitments
and interests as they are disclosed
by each Board member.
The Board meets formally not fewer than
four times per year in addition to the
annual strategy day. Additional Board
meetings are held by telephone to discuss
key strategic priorities.
------------------ ----------------------------------------------------------------- ---------------
6: Ensure The Board has an effective and appropriate Further
that between balance of skills and experience and details
them the is mindful of the need to continuously of the Board's
Directors review the needs of the business to skills and
have the ensure that this remains true, so that experience
necessary the Group can drive performance as well can be found
up-to-date as comply with regulations. in the full
experience, The Group's Articles of Association annual report.
skills and require that all Directors must stand
capabilities for re-election every 3 years and that
any new Directors appointed during the
year must stand for election at the
AGM following their appointment.
------------------ ----------------------------------------------------------------- ---------------
7: Evaluate The Board undertakes self-reviews from
Board performance time to time in order to assess its
based on performance. The Chairman provides leadership
clear and to the Board and assesses the individual
relevant Directors to ensure that their contribution
objectives, is relevant and effective and that they
seeking are committed members of the Board.
continuous In July 2019 the Board reviewed the
improvement outcome of its latest self-assessment.
As a result, it introduced changes to
the timing and format of information
it reviews from the leadership team
and streamlined the flow of information
from the 2 Board sub-committees to the
Board itself.
------------------ ----------------------------------------------------------------- ---------------
8: Promote The Group operates in a highly regulated The Group's
a corporate environment in accordance with an integrated values are
culture that Management System (including ISO 13485:2016) described
is based which is subject to third-party audit. in the full
on ethical The Group is focused on a therapeutic annual report.
values and area which has a high unmet medical
behaviours need and our employees are motivated
to support our clients in their quest
to develop and provide safe, effective
treatments for people living with neurological
diseases.
The Group employs a diverse workforce
and embraces a culture where employees
are treated equitably within an environment
of mutual respect and understanding.
------------------ ----------------------------------------------------------------- ---------------
9: Maintain The Board is collectively responsible
governance for the long-term success of the Group.
structures Its principal function is to provide
and processes the Group with a framework of prudent
that are and effective controls, which enables
fit for purpose risk to be assessed and managed and
and support its strategy executed. Further details
good as to how the governance processes are
decision-making structured to achieve this are outlined
by the Board within this Governance Report.
------------------ ----------------------------------------------------------------- ---------------
Build trust 10: Communicate The Group communicates with shareholders The Strategic
based on how the Group (and other stakeholders) via its website, Report and
open is governed its Annual Report and the AGM as well the Directors'
communication and is performing as via issuing RNS announcements and Report can
with by maintaining presenting to major shareholders and be found
stakeholders a dialogue analysts. in the full
with shareholders This Governance Report, alongside the annual report.
and other wider Strategic and Directors' Reports The Financial
relevant are designed to provide full and relevant Review can
stakeholders updates on how the Group is governed be found
and how it is performing. These are above.
drafted with both shareholders and the
wider stakeholder community in mind.
------------------ ----------------------------------------------------------------- ---------------
The Board and Board Subcommittees
The Board meets at least 4 times per year in accordance with a pre-determined meeting calendar. The Board is supported by 2 subcommittees, the Audit Committee and the Remuneration Committee. The subcommittees discharge responsibilities on behalf of the Board and are entitled to such internal or external advice as is required to allow them to fulfil their duties.
The table below shows the membership of the Board and each subcommittee as at the end of 30 September 2019:
Board Audit Committee Remuneration
Committee
------------------ ---------------
Charles Spicer (Non-Executive Chairman) Chairman - -
Giulio Cerroni (Chief Executive Officer) Member - -
Grant Nash (Chief Financial Officer Member & Secretary Secretary Secretary
& Company Secretary)
Mark Warne (Senior Independent Non-Executive Member Member Chairman
Director)
John Bradshaw (Independent Non-Executive Member Chairman Member
Director)
-------------------------------------------- ------------------ --------------- ------------
The Board and its Committees receive appropriate and timely information prior to each meeting including a formal agenda. Any Director may challenge Group proposals. Decisions are taken democratically after appropriate discussion. Specific actions arising from Board meetings are agreed by the Board or relevant Committee and are then followed up by the Executive Directors.
The Board and subcommittees all operate against terms of reference which are summarised on the Group website (https://ixico.com/investors/governance/).
Audit Committee
The Audit Committee is chaired by John Bradshaw. Mark Warne is a member of the Committee. The terms of reference of the Audit Committee include the following responsibilities:
-- monitoring the integrity of the Group's financial statements and application of accounting policies;
-- reviewing the effectiveness of the Group's internal control and risk management systems; and
-- oversight of the Group's external auditors.
Audit Committee meetings are usually held twice per financial year.
Remuneration Committee
The Remuneration Committee was chaired during the year by Tim Sharpington until his resignation from the Board on 30 September 2019. Mark Warne, who was a member of the Committee until 30 September 2019 has taken over the role of Chairman of the Committee from 30 September 2019. John Bradshaw is a member of the Committee.
The terms of reference of the Remuneration Committee include the following responsibilities:
-- determine and agree with the Board the framework or broad policy for the remuneration of the Executive Directors and other such members of the executive management as it is designated to consider;
-- approve the design of, and determine targets for any performance-related pay schemes and approve the total annual payments made under such schemes;
-- approve all long-term incentive scheme structures and option schemes; -- approve all option grants for ratification by the Board; and
-- within the terms of the agreed policy, determine the total individual remuneration package of each Executive Director including, where appropriate, bonuses, incentive payments and share options.
Remuneration Committee meetings are usually held twice per financial year.
Consolidated Statement of Comprehensive Income
for the years ended 30 September 2019 and 30 September 2018
2019 2018
Note GBP000 GBP000
----------------------------------------------------- ----- -------- --------
Revenue 5 7,561 5,394
Cost of sales (2,619) (2,221)
----------------------------------------------------- ----- -------- --------
Gross profit 4,942 3,173
Other income 7 588 562
Operating expenses
Research and development expenses (986) (1,033)
Sales and marketing expenses (1,154) (754)
General and administrative expenses (3,026) (2,745)
Total operating expenses 10 (5,165) (4,532)
----------------------------------------------------- ----- -------- --------
Operating profit / (loss) 364 (797)
Finance income 2 4
Profit / (loss) on ordinary activities before
taxation 366 (793) Taxation credit 11 66 125 ----------------------------------------------------- ----- -------- -------- Profit / (loss) attributable to equity holders for the period 432 (668) ----------------------------------------------------- ----- -------- -------- Other comprehensive expense: Items that will be reclassified subsequently to profit or loss Foreign exchange translation differences (1) (1) ----------------------------------------------------- ----- -------- -------- Total other comprehensive income / (expense) (1) (1) Total comprehensive income / (expense) attributable to equity holders for the period 431 (669) ----------------------------------------------------- ----- -------- -------- Profit / (loss) per share (pence) 12 ----------------------------------------------------- ----- -------- -------- Basic profit / (loss) per share 0.92 (2.00) Diluted profit / (loss) per share 0.92 (2.00) ----------------------------------------------------- ----- -------- --------
Consolidated Statement of Financial Position
as at 30 September 2019 and at 30 September 2018
2019 2018
Note GBP000 GBP000
------------------------------- ----- --------- ---------
Assets
Non-current assets
Property, plant and equipment 13 316 77
Intangible assets 14 292 32
Total non-current assets 608 109
Current assets
Trade and other receivables 16 2,379 2,140
Current tax receivables 11 450 229
Cash and cash equivalents 7,264 7,861
--------------------------------- ----- --------- ---------
Total current assets 10,093 10,230
Total assets 10,701 10,339
--------------------------------- ----- --------- ---------
Liabilities and equity
Current liabilities
Trade and other payables 17 2,782 3,013
Total current liabilities 2,782 3,013
Equity
Ordinary shares 19 7,925 7,923
Share premium 19 84,436 84,389
Merger relief reserve 19 1,480 1,480
Reverse acquisition reserve 19 (75,308) (75,308)
Foreign exchange translation
reserve (81) (80)
Accumulated losses (10,533) (11,078)
--------------------------------- ----- --------- ---------
Total equity 7,919 7,326
Total liabilities and equity 10,701 10,339
--------------------------------- ----- --------- ---------
Company Statement of Financial Position
as at 30 September 2019 and at 30 September 2018
2019 2018
Note GBP000 GBP000
----------------------------------- ----- --------- ---------
Assets
Non-current assets
Investments in Group undertakings 15 5,516 5,434
Total non-current assets 5,516 5,434
Current assets
Trade and other receivables 16 4,710 685
Cash and cash equivalents 2,187 7,229
------------------------------------- ----- --------- ---------
Total current assets 6,897 7,914
Total assets 12,413 13,348
------------------------------------- ----- --------- ---------
Liabilities and equity
Current liabilities
Trade and other payables 17 112 140
Total current liabilities 112 140
Equity
Ordinary shares 19 7,925 7,923
Share premium 19 84,436 84,389
Merger relief reserve 19 1,480 1,480
Accumulated losses (81,540) (80,584)
------------------------------------- ----- --------- ---------
Total equity 12,301 13,208
Total liabilities and equity 12,413 13,348
------------------------------------- ----- --------- ---------
Parent Company Income Statement
As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial statements. The Company's loss for the financial year was GBP1,069,000 (2018: GBP1,296,000).
Consolidated Statement of Changes in Equity
for the years ended 30 September 2019 and 30 September 2018
Foreign
Merger Reverse exchange
Ordinary Share relief acquisition translation Accumulated
shares premium reserve reserve reserve losses Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- --------- -------- -------- ------------ ------------ ------------ -------
Balance at 30 September
2017 7,727 79,421 1,480 (75,308) (79) (10,552) 2,689
Total comprehensive
expense
Loss for the period - - - - - (668) (668)
Other comprehensive
expense:
Foreign exchange
translation - - - - (1) - (1)
------------------------- --------- -------- -------- ------------ ------------ ------------ -------
Total comprehensive
expense - - - - (1) (668) (669)
Transactions with
owners
Charge in respect
of share options - - - - - 142 142
Exercise of share
options - 4 - - - - 4
Proceeds from shares
issued 196 5,304 - - - - 5,500
Transaction costs
for issue of shares - (340) - - - - (340)
Total transactions
with owners 196 4,968 - - - 142 5,306
Balance at 30 September
2018 7,923 84,389 1,480 (75,308) (80) (11,078) 7,326
------------------------- --------- -------- -------- ------------ ------------ ------------ -------
Total comprehensive
income/(expense)
Profit for the period - - - - - 432 432
Other comprehensive
expense:
Foreign exchange
translation - - - - (1) - (1)
------------------------- --------- -------- -------- ------------ ------------ ------------ -------
Total comprehensive
income/(expense) - - - - (1) 432 431
Transactions with
owners
Charge in respect
of share options - - - - - 113 113
Exercise of share
options 2 47 - - - - 49
Total transactions
with owners 2 47 - - - 113 162
Balance at 30 September
2019 7,925 84,436 1,480 (75,308) (81) (10,533) 7,919
------------------------- --------- -------- -------- ------------ ------------ ------------ -------
Company Statement of Changes in Equity
for the years ended 30 September 2019 and 30 September 2018
Merger
Ordinary Share relief Accumulated
shares premium reserve losses Total
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------ --------- -------- -------- ------------ --------
Balance at 30 September 2017 7,727 79,421 1,480 (79,430) 9,198
Total comprehensive expense
for the period - - - (1,296) (1,296)
Transactions with owners
Charge in respect of share options - - - 142 142
Exercise of share options - 4 - - 4
Proceeds from shares issued 196 5,304 - - 5,500
Transaction costs for issue
of shares - (340) - - (340)
Total transactions with owners 196 4,968 - 142 5,306
Balance at 30 September 2018 7,923 84,389 1,480 (80,584) 13,208
------------------------------------ --------- -------- -------- ------------ -------- Total comprehensive expense for the period - - - (1,069) (1,069) Transactions with owners Charge in respect of share options - - - 113 113 Exercise of share options 2 47 - - 49 Total transactions with owners 2 47 - 113 162 Balance at 30 September 2019 7,925 84,436 1,480 (81,540) 12,301 ------------------------------------ --------- -------- -------- ------------ --------
Consolidated and Company Statements of Cash Flows
for the years ended 30 September 2019 and 30 September 2018
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
------------------------------------------ ------- ------- -------- --------
Cash flows from operating activities
Profit / (loss) for the period 432 (668) (1,069) (1,296)
Finance income (2) (4) (40) -
Taxation (66) (125) - -
Depreciation 72 38 - -
Amortisation of acquired intangibles 40 114 - -
Impairment of subsidiaries - - -
Research and development expenditure
credit (155) (126) - -
Share option charge 113 142 31 28
434 (629) (1,078) (1,268)
Changes in working capital
(Increase)/decrease in trade and
other receivables (239) (653) (3,983) 2,910
(Decrease)/increase in trade and
other payables (325) 1,214 (29) 27
------------------------------------------ ------- ------- -------- --------
Cash (used in)/generated from operations (130) (68) (5,090) 1,669
Taxation received - 423 - -
------------------------------------------ ------- ------- -------- --------
Net cash (used in)/generated from
operating activities (130) 355 (5,090) 1,669
Cash flows from investing activities
Purchase of property, plant and
equipment (217) (60) - -
Purchase of intangible assets including
staff costs capitalised (300) (15) - -
Finance income 4 4 - -
Net cash used in investing activities (513) (71) - -
Cash flows from financing activities
Issue of shares 48 5,504 48 5,504
Transaction costs associated with
issue of shares - (340) - (340)
Net cash generated from financing
activities 48 5,164 48 5,164
Movements in cash and cash equivalents
in the period (595) 5,448 (5,042) 6,833
------------------------------------------ ------- ------- -------- --------
Cash and cash equivalents at start
of period 7,861 2,414 7,229 396
Effect of exchange rate fluctuations
on cash held (2) (1) - -
------------------------------------------ ------- ------- -------- --------
Cash and cash equivalents at end
of period 7,264 7,861 2,187 7,229
------------------------------------------ ------- ------- -------- --------
Notes to the financial statements
The financial information set out in these results does not constitute the company's statutory accounts for 2019 or 2018. Statutory accounts for the years ended 30 September 2019 and 30 September 2018 have been reported on by the Independent Auditors; their report was (i) unqualfied; (ii) did not draw attention to any matters by way of emphasis; and (iii) did not contain a statement under 498 (2) or 498 (3) of the Companies act 2006.
Statutory accounts for the year ended 30 September 2018 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 September 2019 will be delivered to the Registrar in due course. Copies of the Annual Report 2019 will be posted to shareholders on or about 16 December 2019.
1. Presentation of the financial statements a. General information
IXICO plc (the 'Company') is a public limited company incorporated in England and Wales and is admitted to trading on the AIM market of the London Stock Exchange under the symbol IXI. The address of its registered office is 4th Floor, Griffin Court, 15 Long Lane, London EC1A 9PN.
The Company is a parent of a number of subsidiaries detailed in note 15, together referred to throughout as 'the Group'. The Group is an established provider of technology-enabled services to the global biopharmaceutical industry. The Group's services are used to select patients for clinical trials and assess the safety and efficacy of new drugs in development within the field of neurological disease.
b. Basis of preparation
The consolidated financial statements have been prepared on a going concern basis and in accordance with IFRS as adopted by the EU, IFRIC interpretations and the Companies Act 2006 applicable to companies operating under IFRS.
The consolidated financial statements comprise a Statement of Comprehensive Income, a Statement of Financial Position, a Statement of Changes in Equity, a Statement of Cash Flows, and accompanying notes. These financial statements have been prepared under the historical cost convention modified by the revaluation of certain financial instruments.
The consolidated financial statements are presented in Great British Pounds ('GBP' or 'GBP') and are rounded to the nearest thousand unless otherwise stated. This is the predominant functional currency of the Group, and is the currency of the primary economic environment in which it operates. Foreign currency transactions are accounted in accordance with the policies set out below.
c. Basis of consolidation
The consolidated financial statements incorporate the accounts of the Company and its subsidiary companies adjusted to eliminate intra-Group balances and any unrealised gains and losses or income and expenses arising from intra-Group transactions. The Company's subsidiaries are detailed in note 15. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.
The Group controls a subsidiary when the Group is exposed to, or has rights to, variable returns from its involvement with a subsidiary and has the ability to affect those returns through its power over a subsidiary. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.
The results of subsidiary companies are included in the consolidated financial statements from the date that control commences until the date that control ceases. The assets and liabilities of foreign operations are translated into GBP at exchange rates prevailing at the end of the reporting period. Income statements and cash flows of foreign operations are translated into GBP at average monthly exchange rates which approximate foreign exchange rates at the date of the transaction. Foreign exchange differences arising on retranslation are recognised directly in a separate translation reserve.
d. Going concern
At the time of approving the consolidated financial statements, the Directors have considered the expected future performance together with the Group's estimated future cash inflows from existing long-term contracts and sales pipeline. Changes to the cost base are made in the normal course of business, so that operating expenditure and planned investment are in line with the Group's strategy and financial resources. After due consideration and taking into account management's estimate of future revenue and expenditure, the Directors have a reasonable expectation that the Company and the Group will have adequate financial resources to continue in operation for the foreseeable future.
2. New and amended accounting standards and interpretations a. Adoption of new accounting standards for the year ended 30 September 2019
The Group has adopted all new and amended accounting standards and interpretations issued by the International Accounting Standards Board ('IASB') that are mandatory for the current reporting period. Analysis of the impacts of these standards are set out below.
IFRS 9 - Financial Instruments
The Group adopted IFRS 9 from 1 October 2018. IFRS 9 is required to be applied prospectively only and therefore comparative figures are not restated. This standard replaces IAS 39 Financial Instruments Recognition and Measurement. The Group applied the model required for expected credit losses based on historical default rates experienced. This did not result in any change in circumstances and as such had no impact. The Group also has no complex financial instruments and the Directors' assessment of the financial instruments held in the Group results in no changes to the financial statements following the adoption of IFRS 9.
IFRS 15 - Revenue from Contracts with Customers
The Group adopted IFRS 15 early, applying it for the first time to the financial statements for the year to 30 September 2018. The Group has continued to apply IFRS 15 consistently throughout the period.
b. Accounting developments affecting financial statements in subsequent periods
At the date of authorisation of these financial statements, several new, but not yet effective, standards and amendments to existing standards and interpretations have been published by the IASB. The only standard that the Group consider will have a material impact on the financial statements is IFRS 16 Leases.
IFRS 16 - Leases
The standard requires a lessee to recognise assets and liabilities, currently accounted for as operating leases, on the Statement of Financial Position, with subsequent recognition of depreciation of the lease assets and interest on the lease liabilities over the term of the lease.
This standard is effective for periods beginning on or after 1 January 2019 and is therefore only applicable to the Group for the financial year starting 1 October 2019. The Group has assessed the current leases in operation throughout the Group and estimates that the discounted value of the lease commitments to be approximately GBP0.4 million at the 30 September 2019, based on current incremental borrowing rates. Due to the length of the lease, the impact on profitability will not be material.
Other standards or amendments
Other standards and amendments that are not yet effective and have not been adopted early by the Group include:
-- IFRIC 23 Uncertainty over Income Tax Treatments -- Prepayment Features with Negative Compensation (Amendments to IFRS 9)
The Directors anticipate, based on current business processes, that the introduction of the above standards and amendments will not have a material impact on the Group and Company financial statements and therefore the impact of these changes on the financial statements have not been made.
3. Significant accounting policies 3.1 Revenue
Revenue is principally derived from service revenue. This revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.
In determining whether to recognise revenue, the Group follows a 5-step process:
1. Identifying the contract with a client; 2. Identifying the performance obligations; 3. Determining the transaction price; 4. Allocating the transaction price to the performance obligations; and 5. Recognising revenue when/as performance obligation(s) are satisfied.
Each type of revenue has separate recognition criteria depending on the type of service provided. These services are agreed at the inception of a project through contracts with clients. A critical part of the contract is a detailed schedule of work that provides the list of services to be provided by the Group. Performance obligations are attached to each service, with revenue being recognised once these are satisfied. The transaction price associated to each performance obligation is allocated based on their relative stand-alone selling price.
Revenue types
Many of the Group's contracts comprise a variety of performance obligations including, but not limited to, project set-up and management, site set-up and management, TrialTracker configuration and access, data reading and analysis, data management and quality control and scientific study reporting.
The most significant service revenue streams to the Group and the respective recognition criteria are:
Project and site set-up
At the point a client approaches the Group to complete work, a project manager is assigned. The project manager co-ordinates the project set-up and ongoing delivery of the service. At inception, the project manager will also prepare the clinical study protocol and other essential study documents.
Once the project and/or the site is set-up, all performance obligations are satisfied. These services are therefore recognised at a point in time, being when the Group has delivered the relevant material to the client.
Project and site management
Each contract requires various project management activities, provided by the project manager. These services are provided throughout the duration of a contract. Site management services are provided throughout the duration of a site being operational, typically being shorter than the project management cycle.
The services provided for project and site management represents a provision of on-going services. Therefore, revenue for these items are recognised on a straight-line basis.
Site training and materials
A contract will typically include training of each individual site. Various materials are prepared in advance and provided to clients as tools for site training. Site training is provided either through live online training or through a self-paced training module. These activities are combined in one revenue transaction per site.
Revenue from site training is recognised when each site has completed the training activity.
TrialTracker configuration and access
The TrialTracker platform delivers a robust and comprehensive set of centralised imaging services designed to efficiently manage the complex imaging workflow from: image upload, quality control, reading and analysis. The platform also allows for reporting and data transfer.
The Group has identified 2 separate performance obligations in the TrialTracker platform:
1. A set-up fee is recognised at a point in time once TrialTracker access is provided to the client;
2. An ongoing access fee is recognised over the duration of the project, with revenue being recognised on a straight-line basis.
Data reading and analysis
The Group provides data analysis services across a range of biomarkers, providing high-quality, clinically meaningful data. Fees are charged to clients on a 'per data read'.
As these services have no ongoing obligations from the Group, revenue is recognised once the data read and analysis has taken place.
Data management and quality control
Ensuring data are managed appropriately and that the data are of a high quality is critical in the delivery of the Group's service. The data management and imaging teams work in collaboration to ensure ongoing integrity of data.
The performance of data management represents the provision of an on-going service and so the straight-line method of recognition is used.
Revenue recorded from data quality control is recognised at a point in time when the Group has delivered the service to the client.
Scientific reports
Scientific reports are provided at interim points and at the end of a study. Such reports contain data analysis and statistical interpretation.
These reports represent an individual performance obligation with no further work required by the Group. Revenue from these services is recognised at a point in time when the Group provides the report to the client.
Licence revenue
Revenue relating to licensing is entirely attributable to TrialTracker. Each agreement will grant the user rights to use the software and receive associated technical support during the licence period.
The licence is a distinct performance obligation and revenue is recognised over the contract term.
Change orders
Throughout the duration of a contract, the client may request additional services or service changes to be made. For revenue recognition purposes, the Group treats a change order or contract modification to a client agreement as a separate contract, if both:
-- the scope changes due to the addition of 'distinct' services; and
-- the price change reflects the services' stand-alone selling prices ('SSP') under the circumstances of the modified contract.
The revenue recognition for the change order is applied in the same way as the original contract, as detailed above, with the original client agreement remaining unchanged.
3.2 Other income
Government grants
A government grant is recognised only when there is reasonable assurance that the Group will comply with any conditions attached to the grant and the grant will be received. The grants are recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis. The Group recognises grant income as an item of other income.
Research and Development Expenditure Credit ('RDEC')
The Group has elected to take advantage of the RDEC introduced in the Finance Act 2013. A company may surrender corporation tax losses on research and development expenditure incurred on or after 1 April 2013 for a corporation tax refund. Relief is given as a taxable credit on 12% of qualifying research and development expenditure. The Group recognises research and development expenditure credit as an item of other income, taking advantage of the 'above the line' presentation.
3.3 Research and development expenditure
In all instances across the Group, research expenditure is expensed through the income statement. For development expenditure, items will be expensed where the recognition criteria for internally generated intangible assets is not met.
The main criteria used to assess this, as required under IAS 38 - Intangible Assets, are:
- Demonstrating technical feasibility of completing the intangible asset; - Intention to complete the asset; - Ability to use or sell the asset in order to generate future economic benefit; - Availability of adequate technical or other resources to complete development; and - Ability to measure reliably the expenditure attributable to the asset.
During the year, it was determined that the Group has met the above criteria in respect of specific developments to its TrialTracker platform and data analytics service offering. As a result, associated development costs are capitalised in the year in relation to TrialTracker and an intangible asset is recognised as set out in note 14.
3.4 Share-based payments
Equity-settled share-based payments are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions.
Any changes that impact the original estimates, for example the effect of employees who have left the Group in the year and have forfeited their options, is recognised in the Consolidated Statement of Comprehensive Income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 20 of the consolidated financial statements.
3.5 Employee benefits
All employee benefit costs are recognised in the Consolidated Statement of Comprehensive Income as they are incurred. These principally relate to holiday pay and contributions to the Group defined contribution plan.
The assets of the Group scheme are held separately from those of the Group in independently administered funds. The Group does not offer any other post-retirement benefits.
3.6 Leased assets
The Group has entered into leases that have a duration of longer than a year. The rental charge payable under these operating leases are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term.
The Group is currently preparing for the introduction of IFRS 16 'Leases' which will require the capitalisation of these leases. The impact of this assessment is in note 2.
3.7 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and, where appropriate, less provisions for impairment. The initial recognition and subsequent measurement of property, plant and equipment are:
Initial recognition
Property, plant and equipment is initially recognised at acquisition cost, including any costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating. In most circumstances, the cost will be its purchase cost, together with the cost of delivery.
Subsequent measurement
An asset will only be depreciated once it is ready for use. Depreciation is charged so as to write off the cost of property, plant and equipment, less its estimated residual value, over the expected useful economic lives of the assets.
Depreciation is charged on a straight-line basis as follows:
Leasehold improvements shorter of 5 years or
the lease term
Fixtures and fittings 3 years
Equipment 3 years
The disposal or retirement of an asset is determined by comparing the sales proceeds with the carrying amount. Any gains or losses are recognised within the Consolidated Statement of Comprehensive Income.
3.8 Intangible assets
Acquired intangibles
Intangible assets that are acquired through business combinations are recognised as an intangible asset if it is separable from the acquired business or arises from contractual or legal rights. These assets will only be recognised if they are also expected to generate future economic benefits and its fair value can be reliably measured.
Initial recognition
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.
Subsequent measurement
Following capitalisation, the intangible assets are carried at cost less any accumulated amortisation, and where appropriate, less provisions for impairment.
Intangible assets are amortised using the straight-line method over their estimated useful economic life as follows:
Intangibles acquired through 5 years business combinations Computer software 3 years
Amortisation is disclosed under general and administrative expenses in the Consolidated Statement of Comprehensive income.
Internally generated intangible assets
Intangible assets that are capitalised internally are deemed to have met the recognition criteria set out in IAS38. These items relate to research and development costs and are considered in note 3.3.
Initial recognition
Internally generated intangible assets are initially recognised at cost once the recognition criteria of IAS 38 are met.
Subsequent measurement
Any assets that are not yet ready for use will be capitalised as assets under construction and will not be amortised. Once the asset is ready for use, amortisation will begin. The amortisation rates adopted are based on the expected useful economic life of the projects to which they relate. The assets useful economic life is as follows:
Internally generated technology 3 - 5 years 3.9 Impairment of non-current assets
Each category of non-current assets is reviewed for impairment both annually and when there is an indication that an asset may be impaired, being when events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognised in the Consolidated Statement of Comprehensive Income for the amount by which the asset's carrying value exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less cost to sell and value in use. Non-financial assets, other than goodwill, which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
3.10 Investments in Group undertakings
Investments in Group undertakings are initially recognised at cost and subsequently measured at cost less any impairment provision. Investments are subject to an annual impairment review, with any impairment charge being recognised through the Consolidated Statement of Comprehensive Income.
3.11 Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently stated at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or significant delinquency in payments (exceeding credit terms) are considered indicators that the trade receivable should be 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 amount 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 general and administrative expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against general and administrative expenses in the Consolidated Statement of Comprehensive Income.
3.12 Taxation
Current tax
Current tax represents amounts recoverable within the United Kingdom and is provided at amounts expected to be recovered using the tax rates and laws that have been enacted at the Statement of Financial Position date.
Research and development credits
The benefit associated with UK-based research and development is recognised under the UK's Research and Development Expenditure Credit scheme. Details of the recognition are set out in note 3.2.
Deferred taxation
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements in accordance with IAS 12 'Income taxes'. Deferred tax liabilities are recognised for all taxable temporary differences. A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available in future years to utilise the temporary difference. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither the accounting, nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial Position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities, they relate to income taxes levied by the same taxation authority and the Group intends to settle these on a net basis.
3.13 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand with original maturities at inception of 3 months or less.
3.14 Foreign currency translation
Transactions denominated in foreign currencies are translated into Great British Pounds at actual rates of exchange prevailing at the date of transaction. Monetary assets and liabilities expressed in foreign currencies are translated into Great British Pounds at rates of exchange prevailing at the end of the financial year. All foreign currency exchange differences are taken to the Consolidated Statement of Comprehensive Income in the year in which they arise.
Non-monetary items are not retranslated at year end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.
3.15 Trade and other payables
Trade and other payables are non-interest bearing and are initially recognised at fair value and subsequently stated at amortised cost.
3.16 Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
3.17 Financial instruments
Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group or the Company becomes a party to the contractual provisions of the instrument. Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
Further information relating to financial instruments and the policies adopted by the Group to manage risk is found in note 22.
4. Significant management judgement in applying accounting policies and estimation uncertainty
When preparing the consolidated financial statements, the Directors make a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the consolidated financial statements.
Revenue recognition
The Group recognises revenue in accordance with amounts charged to clients under service contracts. All contracts include an agreed, detailed work order which defines the deliverables. The service contracts are typically multi-year and may be amended through a change order process, which may include changes to data volumes (increased or decreased), different methods of data analysis or changes to the timing of providing the deliverables.
Revenue is recognised upon achievement of deliverables set out in the service contract. The recognition is expected to approximate to the timing of the physical performance of the contracts. The Group records the performance of the contractual obligations to determine that the deliverables and actual work performed is in accordance with the contract and agreed change orders. The scope of the project and contract terms are reviewed to determine whether the Group is acting as principal or agent in respect of the project, which depends on facts and circumstances and requires judgement.
Client contracts include an agreed work order so the transaction price for a contract is allocated against distinct performance obligations based on their relative stand-alone selling prices. Management determines the fair value of individual components based on actual amounts charged by the Group on a stand-alone basis. The transaction price for a contract excludes any amounts collected on behalf of third parties.
Capitalisation of internally developed software
Distinguishing the research and development phases of a new software product and determining whether the requirements for the capitalisation of development costs are met requires judgement. Management will assess whether a project meets the recognition criteria as set out in IAS 38 based on an individual project basis. Where the criteria are not met, the research and development expenditure will be expensed in the Consolidated Statement of Comprehensive Income. Where the recognition criteria are met, the items will be capitalised as an intangible asset.
During the year ended 30 September 2019, total research and development expenses totalled GBP1,147,000 (2018: GBP1,033,000). Of this amount, GBP161,000 (2018: GBPnil) was capitalised as an intangible asset. The balance of expenditure being GBP986,000 (2018: GBP1,033,000) is recognised in the Consolidated Statement of Comprehensive Income as an expense.
Recovery of deferred tax assets
Deferred tax assets have not been recognised for deductible temporary differences and tax losses. The Directors consider that there is not sufficient certainty that future taxable profits will be available to utilise those temporary differences and tax losses. Further information of the Group's deferred tax asset can be found in note 18 of the consolidated financial statements.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Changes to these estimations may result in substantially different results for the year.
Share-based payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. Details of the estimations used in determining the fair value of the options in issue are detailed in note 20.
Useful lives of depreciable assets
The useful lives of depreciable assets are determined by management at the date of purchase based on the expected useful lives of the assets. These are subsequently monitored and reviewed annually and where there is objective evidence of changes in the useful economic lives, these estimates are adjusted. Any changes to these estimates may result in significantly different results for the period.
5. Revenue
An analysis of the Group's revenue by type is as follows:
2019 2018
GBP000 GBP000
----------------- ------- -------
Service revenue 7,561 5,394
--------------------- ------- -------
For the year ended 30 September 2019, revenue includes GBP1,271,000 (2018: GBP249,000) held in contract liabilities within trade and other payables at the beginning of the period.
6. Segmental Information
The Board considers there to be only one core operating segment for the Group's activities. This is based on the Group's development, commercial and operational delivery teams operating across the entirety of the Group, which is wholly based in the United Kingdom. The projects undertaken by the Group are managed by project managers, who receive inputs for each project by other team members. Performance information is reported as a single business unit to the leadership team, who review the Group's management information.
The information gathered for each project is subsequently reported to the Group's Chief Executive Officer, who is considered to be the chief operating decision maker. This information is used for resource allocation and assessment of performance. Therefore, the entirety of the Group's revenue and assets can be attributed wholly to this operating segment with reference to the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position.
During the year ended 30 September 2019, the group had 2 clients (2018: 3 clients) that exceeded 10% of total revenue. In 2019 the individual percentage revenue associated with each of these clients was 39% (GBP2,976,000) and 14% (GBP1,086,000). In 2018 the individual percentage revenue associated with each of these clients was 14% (GBP764,000), 13% (GBP690,000) and 12% (GBP630,000).
Geographical information
The Group's revenue can be categorised by type of revenue and by country, based on the contracting client location.
2019 2018
GBP'000 GBP000
---------------- -------- -------
United States 3,388 3,926
United Kingdom 2,764 481
Europe 1,404 951
Rest of World 5 36
-------------------- -------- -------
Revenue 7,561 5,394
-------------------- -------- -------
As the Group is domiciled in the United Kingdom, the entirety of the revenue originates from this location.
7. Other Income
Items of other income principally relate to government grants received, originating solely in the United Kingdom. Grants are recognised as income over the period required to match them with the related costs, for which they are intended to compensate, on a systematic basis.
The Group also recognises Research and Development Expenditure Credit ('RDEC') as other income.
2019 2018
GBP000 GBP000
-------------- ------- -------
Grant income 433 436
RDEC 155 126
-------------- ------- -------
Other income 588 562
-------------- ------- -------
8. Auditor's remuneration
2019 2018
GBP000 GBP000
---------------------------------- ------- -------
Audit services
- Group and Parent Company 31 29
- subsidiary companies 20 19
Total audit fees 51 48
Audit-related assurance services 6 5
Tax compliance services 9 11
Tax advisory services 1 16
Total auditor's remuneration 67 80
---------------------------------- ------- -------
9. Employees and Directors
The average monthly number of persons (including Executive and Non-Executive Directors) employed by the Group was:
2019 2018
Number Number
-------------------------------------- ------- -------
Administration 17 13
Operations, research and development 51 50
-------------------------------------- ------- -------
Average total persons employed 68 63
-------------------------------------- ------- -------
The aggregate remuneration of employees in the group was:
2019 2018
GBP000 GBP000
------------------------------ ------- -------
Wages and salaries 4,630 4,007
Social security costs 535 377
Other pension costs 177 187
Share-based payments' charge 113 142
------------------------------ ------- -------
Total remuneration for staff 5,455 4,713
------------------------------ ------- -------
Staff costs capitalised (161) -
------------------------------ ------- -------
Net staff costs 5,294 4,713
------------------------------ ------- -------
The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Group in independently administered funds. The amounts outstanding at 30 September 2019 in respect of pension costs were GBP27,000 (2018: GBP22,000).
The remuneration of the Group's Directors is set out in note 23 under related party transactions.
The Company did not directly employ any staff and therefore there is no cost recognised in respect of staff costs.
10. Operating profit / (loss)
An analysis of the Group's operating profit / (loss) has been arrived at after charging:
2019 2018
GBP000 GBP000
--------------------------------------------------- ------- -------
Research and development expenses 986 1,033
Sales and marketing expenses 1,154 754
Operating lease charges: land and building 144 131
Depreciation of property, plant and equipment 72 38
Gain on disposal of property, plant and equipment - (6)
Amortisation of intangible assets 40 114
Foreign exchange loss 27 17
Administrative expenses 2,743 2,451
Total operating expenses 5,166 4,532
--------------------------------------------------- ------- -------
11. Taxation
The tax charge for each period can be reconciled to the result per the Consolidated Statement of Comprehensive Income as follows:
2019 2018
GBP000 GBP000
------------------------------------------------------------ ------- -------
Profit / (loss) on ordinary activities before taxation 366 (793)
Profit / (loss) before tax at the effective rate
of corporation tax
in the United Kingdom of 19% (2018: 19%) 70 (151)
Effects of:
Expenses not deductible for tax purposes (2) 19
Temporary differences (85) 7
Research and development uplifts net of losses surrendered
for tax credits (28) 3
Prior period adjustment (21) (3)
Tax credit for the period (66) (125)
------------------------------------------------------------ ------- -------
The tax credit for each period can be reconciled as follows:
2019 2018
GBP000 GBP000
----------------------------------------------------- ------- -------
Small or medium enterprise research and development
credit (74) (128)
Deduction for corporation tax on RDEC 29 24
Tax due by foreign subsidiary undertakings - 1
Deferred tax movement on amortisation - (19)
Prior period adjustment (21) (3)
Tax credit for the period (66) (125)
----------------------------------------------------- ------- -------
The Group has elected to take advantage of the RDEC, introduced in the Finance Act 2013 whereby a company may surrender corporation tax losses on research and development expenditure incurred on or after 1 April 2013 for a corporation tax refund.
The following is a reconciliation between the tax charge and the tax receivable within the Consolidated Statement of Financial Position:
2019 2018
GBP000 GBP000
------------------------------------------- ------- -------
Current tax receivable at start of period 229 420
Current period credit 221 232
Corporation tax repayment - (423)
Current tax receivable at end of period 450 229
------------------------------------------- ------- -------
The tax credit for each period can be reconciled to the current period credit recognised in tax receivable within the Consolidated Statement of Financial Position in each period as follows:
2019 2018
GBP000 GBP000
----------------------------------------- ------- -------
Tax credit for the year 66 125
Deferred tax movement on amortisation - (19)
RDEC gross of corporation tax deduction 155 126
----------------------------------------- ------- -------
Current period credit 221 232
----------------------------------------- ------- -------
12. Earnings per share
The calculation of basic and diluted earnings per share ('EPS') of the Group is based on the following data:
2019 2018
Earnings
Earnings for the purposes of basic and diluted EPS,
being net profit / (loss) attributable to the owners
of the Company (GBP000) 432 (668)
Number of shares
Weighted average number of shares for the purposes
of basic EPS 46,786,375 33,761,428
Effect of potentially dilutive ordinary shares:
9,182 -
* Weighted average number of share options
Weighted average number of shares for the purposes
of diluted EPS 46,795,557 33,761,428
Basic earnings per share is calculated by dividing earnings attributable to the owners of the Company by the weighted average number of shares in issue during the year. The diluted EPS is calculated by dividing earnings attributable to the owners of the Company by the weighted average number of shares in issue taking into account the share options outstanding during the year. For the year to 30 September 2018, there was no dilutive effect as the share options in issue would be anti-dilutive due to the loss made in the year.
The basic and diluted earnings per share for the Group and Company is:
2019 2018
Basic earnings per share 0.92p (2.00p)
Diluted earnings per share 0.92p (2.00p)
13. Property, plant and equipment
Group
Leasehold Fixtures
and
improvement fittings Equipment Total
Cost GBP000 GBP000 GBP000 GBP000
------------------------------- ------------ ---------- ---------- -------
At 01 October 2017 62 7 207 276
Additions - - 60 60
Disposals - - (116) (116)
Transfer to computer software - - (11) (11)
------------------------------- ------------ ---------- ---------- -------
At 30 September 2018 62 7 140 209
Additions 102 5 204 311
Disposals (62) (7) (61) (130)
At 30 September 2019 102 5 283 390
------------------------------- ------------ ---------- ---------- -------
Accumulated depreciation
------------------------------- ------------ ---------- ---------- -------
At 01 October 2017 41 5 170 216
Charge for the period 12 2 24 38
Disposals - - (114) (114)
Transfer to computer software - - (8) (8)
------------------------------- ------------ ---------- ---------- -------
At 30 September 2018 53 7 72 132
Charge for the period 11 2 59 72
Disposals (62) (7) (61) (130) At 30 September 2019 2 2 70 74 ------------------------------- ------------ ---------- ---------- ------- Net book value ------------------------------- ------------ ---------- ---------- ------- At 30 September 2018 9 - 68 77 At 30 September 2019 100 3 213 316 ------------------------------- ------------ ---------- ---------- -------
Company
At 30 September 2019 and 30 September 2018, the Company had no property, plant and equipment.
14. Intangible assets
Group
Intangibles
acquired through Computer Internally
business combinations software developed technology Total
GBP000 GBP000 GBP000 GBP000
Cost
-------------------------- ----------------------- ---------- ---------------------- --------
At 01 October 2017 1,804 28 - 1,832
Additions - 15 - 15
Transfer from equipment - 3 - 3
-------------------------- ----------------------- ---------- ---------------------- --------
At 30 September 2018 1,804 46 - 1,850
Additions - 139 161 300
Disposals (1,804) (3) - (1,807)
-------------------------- ----------------------- ---------- ---------------------- --------
At 30 September 2019 - 182 161 343
Accumulated amortisation
-------------------------- ----------------------- ---------- ---------------------- --------
At 01 October 2017 1,704 - - 1,704
Amortisation 100 14 - 114
-------------------------- ----------------------- ---------- ---------------------- --------
At 30 September 2018 1,804 14 - 1,818
Amortisation - 23 17 40
Disposals (1,804) (3) - (1,807)
-------------------------- ----------------------- ---------- ---------------------- --------
At 30 September 2019 - 34 17 51
Net book value
-------------------------- ----------------------- ---------- ---------------------- --------
At 30 September 2018 - 32 - 32
At 30 September 2019 - 148 144 292
-------------------------- ----------------------- ---------- ---------------------- --------
Amortisation is charged to the Consolidated Statement of Comprehensive Income within general and administrative expenses.
Internally developed technology
The Group has capitalised research and development costs during the year in relation to the development of its proprietary TrialTracker software. Development includes TrialTracker platform upgrades as well as additional algorithm development. The costs capitalised include time and expenses in relation to staff costs. In recognising these assets, the Group has applied the recognition criteria of IAS 38 relating to internally generated intangible assets, where costs in relation to the development phase must be capitalised under certain circumstances. More information in relation to this is included in the accounting policies of the Group in notes 3 and 4.
Company
At 30 September 2019 and 30 September 2018, the Company had no intangible assets.
15. Investments
The consolidated financial statements of the Group as at 30 September 2019 and at 30 September 2018 include:
Class of Country of
Name of subsidiary share incorporation Principal activities
------------------- ---------- --------------- -----------------------------
Directly held:
IXICO Technologies Ordinary United Kingdom Data collection and analysis
Limited of neurological diseases
IXITech Limited Ordinary United Kingdom Dormant
Indirectly held:
IXICO US LLC Members' United States Dormant
interest
Optimal Medicine Ordinary United Kingdom Dormant
Limited
IXICO Technologies Ordinary United States Sales and marketing
Inc.
The Company and Group has no investments other than the holdings in the above subsidiaries that are all 100% owned. The carrying amount of the investments in subsidiaries for the Company are:
Company
2019 2018
GBP000 GBP000
Investments in subsidiary undertakings
At beginning of the period 5,434 5,320
Capital contribution 82 114
Total investments at end of the period 5,516 5,434
---------------------------------------- ------------ -----------
The capital contribution represents the charge in the year for share-based awards issued by the Company to employees of IXICO Technologies Limited.
All investments in subsidiaries, other than IXICO Technologies Limited, are not expected to be recoverable have been impaired in previous periods and therefore the carrying amount is GBPnil (2018: GBPnil).
Since the year end, both Optimal Medicine Limited and IXITech Limited entered voluntary liquidation and have been struck off.
16. Trade and other receivables
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
------------------------------------------ ---------- ---------- ------------ ------------
Trade receivables 1,933 1,864 - -
Less provision for bad and doubtful - - - -
debts
------------------------------------------ ---------- ---------- ------------ ------------
Net carrying amount of trade receivables 1,933 1,864 - -
Other receivables - 4 - -
Other taxation and social security 27 13 5 3
Prepayments and accrued income 419 259 34 25
Amounts due from subsidiary undertakings - - 4,671 657
------------------------------------------ ---------- ---------- ------------ ------------
Trade and other receivables 2,379 2,140 4,710 685
------------------------------------------ ---------- ---------- ------------ ------------
All amounts are classified as short term and are expected to be received within one year. The average credit period granted to clients ranges from 30 to 90 days (2018: 30 to 90 days).
A provision for bad and doubtful debts is made when there is uncertainty over the ability to collect the amounts outstanding from clients. This is determined based on specific circumstances relating to each individual client. The Directors consider that the carrying amount of trade and other receivables approximates their fair value and therefore as at 30 September 2019, the Group has not recognised an allowance for doubtful debts (2018: GBPnil).
As at the year-end, the ageing of trade receivables which are past due but not impaired is as follows:
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
------------------------- ---------- --------- ---------- ----------
Amounts not past due 1,812 1,705 - -
Past due:
Less than 30 days 91 155 - -
31 - 60 days 30 - - -
61 - 90 days - 4 - -
More than 90 days - - - -
------------------------- ---------- --------- ---------- ----------
Total trade receivables 1,933 1,864 - -
------------------------- ---------- --------- ---------- ----------
As at 30 September 2019, the average age of trade receivables is 89 days (2018: 77 days). The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 22.
17. Trade and other payables
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
Trade payables 597 339 59 39
Other taxation and social security 196 189 - -
Contract liabilities 414 1,399 - -
Accrued expenses 1,569 1,070 53 101
Other payables 6 16 - -
------------------------------------ ---------- --------- ---------- ----------
Trade and other payables 2,782 3,013 112 140
------------------------------------ ---------- --------- ---------- ----------
Trade payables and accrued expenses principally comprise amounts outstanding for trade purchases and ongoing costs, all of which are short term. As at 30 September 2019, the average credit period taken for trade purchases is 41 days (2018: 51 days). No interest is charged on the trade payables. The Group's policy is to ensure that payables are paid within the pre-agreed credit terms and to avoid incurring penalties and/or interest on late payments.
The fair value of trade and other payables approximates their current book values.
18. Deferred tax
Deferred tax asset (unrecognised)
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
-------------------------------------- ---------- ---------- ------------- ------------
Tax effect of temporary differences:
Depreciation in excess of tax
allowances 102 (63) (1) (2)
Accumulated losses (11,268) (12,344) (1,699) (1,719)
Deductible temporary differences (49) 9 (5) (5)
-------------------------------------- ---------- ---------- ------------- ------------
Deferred tax asset (unrecognised) (11,215) (12,398) (1,705) (1,726)
-------------------------------------- ---------- ---------- ------------- ------------
The unrecognised deferred tax is based on material temporary differences that have originated but not reversed at the Consolidated Statement of Financial Position date from transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future.
The unrecognised deferred tax asset is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which temporary differences will reverse. Based on tax rates and laws enacted or substantively enacted at the latest balance date, the rate when the above temporary differences are expected to reverse is currently 17% (2018: 19%).
Deferred tax liability
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
--------------------------- ---------- ---------- ------------ -----------
Balance at start of period - 19 - -
Amortisation - (19) - -
Reversal on impairment - - - -
--------------------------- ---------- ---------- ------------ -----------
Balance at end of period - - - -
--------------------------- ---------- ---------- ------------ -----------
A deferred tax liability was recognised due to the temporary difference arising from the recognition of the intangible assets acquired through the reverse acquisition on 14 October 2013 and business combination on 8 December 2015. The deferred tax liability is measured at 19%, the current effective rate of corporation tax in the United Kingdom. The deferred tax liability was amortised using the straight-line method over 5 years, reflecting the estimated useful economic life of the intangible asset. On 14 October 2018, the assets had fully amortised and therefore the deferred tax liability had been released in its entirety.
19. Issued capital and reserves
Ordinary shares and share premium
The Company has 1 class of ordinary shares. The share capital issued has a nominal value of GBP0.01 and all carry the right to one vote at shareholders' meetings and are eligible to receive dividends. Share premium is recognised when the amount paid for a share is in excess of the nominal value.
The Group and Company's opening and closing share capital and share premium reserves are:
Group and Company
Ordinary Share Share
shares capital premium
Number GBP000 GBP000
----------------------------------- ----------- -------- --------
Authorised, issued and fully paid
At 30 September 2018 46,777,000 7,923 84,389
Share options exercised 125,294 2 47
At 30 September 2019 46,902,294 7,925 84,436
----------------------------------- ----------- -------- --------
Exercise of share options
On 20 August 2019, a member of key management personnel exercised 37,647 share options at an exercise price of GBP0.305.
On 10 September 2019, a member of key management personnel exercised 37,647 share options at an exercise price of GBP0.490.
On 10 September 2019, a member of key management personnel exercised 50,000 share options at an exercise price of GBP0.365.
The exercise of these share options resulted in an additional 125,294 shares being issued in the year. This resulted in an increase in share capital of GBP1,253 and an increase in share premium of GBP46,927.
Other reserves
Accumulated losses
This reserve relates to the cumulative results made by the Group and Company in the current and prior periods.
Merger relief reserve
In accordance with Section 612 of the Companies Act 2006 'Merger Relief', the Company issuing shares as consideration for a business combination, accounted at fair value, is obliged, once the necessary conditions are satisfied, to record the share premium to the merger relief reserve.
Reverse acquisition reserve
Reverse accounting under IFRS 3 'Business Combinations' requires that the difference between the equity of the legal parent and the issued equity instruments of the legal subsidiary, pre-combination is recognised as a separate component of equity.
Foreign exchange translation reserve
This reserve represents the cumulative impact of foreign exchange translations in the year.
20. Share-based payments
Certain Directors and employees of the Group hold options to subscribe for shares in the Company under share option schemes. There are 2 separate structures to the share options in operation in the Group (2018: 2). Both structures relate to a single scheme outlined in the EMI Share Option Plan 2014.
Total share options outstanding have a range of exercise prices from GBP0.01 to GBP0.49 per option and the weighted average contractual life is 4.6 years (2018: 5.6 years). The total charge for each period relating to employee share-based payment plans for continuing operations is disclosed in note 9 of the consolidated financial statements.
EMI Share Option Plan 2014
This scheme is open, by invitation, to Executive Directors and key management personnel. Participants are granted share options in the Group which contain standard and enhanced vesting conditions. These are subject to the achievement of individual employee and Group performance criteria as determined by the Board. The vesting period varies by award and the conditions approved by the Board. Options are forfeited if the employee leaves the Group before the options vest.
Details of the share options outstanding during the year are as follows:
2019 2018
--------------------------- ----------------------------- -----------------------------
Number Weighted average Number Weighted average
exercise price exercise price
Outstanding at start of
the period 2,707,835 GBP0.35 2,836,012 GBP0.35
Granted - - 325,000 GBP0.36
Exercised (125,294) GBP0.38 (15,000) GBP0.31
Lapsed (710,491) GBP0.33 (438,177) GBP0.33
--------------------------- ----------
Outstanding at end of the
period 1,872,050 GBP0.35 2,707,835 GBP0.35
Exercisable at end of the
period 1,068,110 GBP0.36 537,096 GBP0.36
--------------------------- ---------- ----------------- ---------- -----------------
There were no grants issued under the EMI Share Option Plan 2014 during the year ended 30 September 2019. The model used to value the grants in the prior year was the Monte Carlo method followed by 'Hull White' trinomial lattice and the inputs used were as follows:
2018
Weighted average share price GBP0.35
Weighted average exercise price GBP0.36
Expected volatility 46.70%
Expected life 6 years
Expected dividend yield 0%
Risk-free interest rate 1.05%
---------------------------------- --------
"Long-Term Incentive Plan"
On 4 June 2018, the Group issued options with an exercise price of GBP0.01 as an alternative approach to incentivising employees under the EMI Share Option Plan 2014. It termed this approach of issuing options with an exercise price of GBP0.01 its Long-Term Incentive Plan ('LTIP'). The 4 June 2018 grant consisted of a grant of 2,571,910 options. The LTIP was approved by shareholders on 29 May 2018. The LTIP operates under the umbrella of the EMI Share Option Plan 2014.
The share options granted are subject to share price performance, measured against the 3-month volume weighted average price of the Company's ordinary shares. The measurement date will be made in the 3 months prior to the third anniversary from the date of the grant. The performance conditions of the LTIP Award are as follows:
- 0% of the LTIP will vest if the share price increases by less than 50%;
- 25% of the LTIP will vest if the share price increases by 50% from the date of issue of the grant;
- 25% - 100% of the LTIP will vest on a straight-line basis if the share price increases by up to 100% from the date of issue of the grant.
The share price at the date of issue of the grant was GBP0.28. Upon vesting, the LTIP Award is subject to a holding period of up to 2 years from the point of exercising. Options are subject to continued employment, malus and clawback provisions.
The Board intends to issue further options under the LTIP structure in future periods and is reviewing the vesting and holding conditions of the 2018 LTIP award as part of its considerations.
Details of the share options outstanding during the year are as follows:
2019 2018
--------------------------- ----------------------------- -----------------------------
Number Weighted average Number Weighted average
exercise price exercise price
Outstanding at start of
the period 2,571,910 GBP0.01 - GBP0.00
Granted - GBP0.00 2,571,910 GBP0.01
Exercised - GBP0.00 - GBP0.00
Lapsed (753,388) GBP0.01 - GBP0.00
Outstanding at end of the
period 1,818,522 GBP0.01 2,571,910 GBP0.01
Exercisable at end of the
period - - - -
--------------------------- ---------- ----------------- ---------- -----------------
There were no grants issued under the LTIP during the year ended 30 September 2019. The model used to value the grants in the prior year was the Monte Carlo method followed by 'Hull White' trinomial lattice and the inputs used were as follows:
2018
Weighted average share price GBP0.35
Weighted average exercise price GBP0.01
Expected volatility 46.70%
Expected life 6 years
Expected dividend yield 0%
Risk-free interest rate 1.05%
---------------------------------- --------
21. Operating lease arrangements
The Group has outstanding commitments relating to future minimum lease payments. The operating lease payments represent the rental payable by the Group for its registered office and other leases, including printers.
Group
2019 2018
GBP000 GBP000
------------------------------------- --- ----------- ----------
Total undiscounted future committed
payments falling due:
Within 1 year 178 129
In the 1 and 5 years 263 430
After more than 5 years - -
------------------------------------- --- ----------- ----------
441 559
----------------------------------------- ----------- ----------
The average length of the leases remaining, excluding any break clauses, is 2.5 years (2018: 3.5 years).
At 30 September 2019, the Company had no operating lease commitments outstanding (2018: GBPnil).
22. Financial risk management
In common with all other areas of the business, the Group is exposed to risks that arise from the use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.
The main risks arising from the Group's financial instruments are liquidity, interest rate, foreign currency and credit risk. The Group's financial instruments comprise cash and various items such as trade receivables and trade payables, which arise directly from its operations.
Categories of financial instruments
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
--------------------------------------- --------- --------- ------------ -----------
Financial assets held at amortised
cost
Trade and other receivables excluding
prepayments 2,082 1,868 4,671 657
Cash and cash equivalents 7,264 7,861 2,187 7,229
--------------------------------------- --------- --------- ------------ -----------
9,346 9,729 6,858 7,886
--------------------------------------- --------- --------- ------------ -----------
Financial liabilities held at
amortised cost
Trade and other payables excluding
statutory liabilities 2,197 1,161 112 140
--------------------------------------- --------- --------- ------------ -----------
2,197 1,161 112 140
--------------------------------------- --------- --------- ------------ -----------
Fair value of financial assets and liabilities
There is no material difference between the fair value and the carrying values of the financial instruments because of the short maturity period of these financial instruments or their intrinsic size and risk.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due through having insufficient resources. The Group monitors its levels of working capital to ensure that it can meet its liabilities as they fall due. Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate framework for the management of the Group's short-, medium- and long-term funding and liquidity requirements.
The principal current asset of the business is cash and cash equivalents and is therefore the principal financial instrument employed by the Group to meet its liquidity requirements. The Board ensure that the business maintains surplus cash reserves to minimise any liquidity risk.
The Group's financial liabilities are all due within 3 months (2018: 3 months) of the Consolidated Statement of Financial Position date. The Group does not have any borrowings or payables on demand which would increase the risk of Group not holding sufficient reserves for repayment.
Market risk
Interest rate risk management
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Group operates an interest rate policy designed to minimise interest costs and reduce volatility in reported earnings.
The Group holds all cash and cash equivalents with institutions with a recognised high credit rating. Interest rates on current accounts are floating. Changes in interest rates may increase or decrease the Group's finance income.
The Group does not have any committed interest-bearing borrowing facilities and consequently there is no material exposure to interest rate risk in respect of financial liabilities.
Foreign currency risk management
Foreign currency risk is the risk that the fair value or future cash flows of a foreign currency exposure will fluctuate because of changes in foreign exchange rates.
The Group's exposure to the risk of changes in foreign exchange rates relates to the Group's overseas operating activities, primarily denominated in US Dollars, Euros and Swiss Francs. There is also an investment by the Company in a foreign subsidiary. The Group's exposure to foreign currency changes for all other currencies is not material.
During the year, the Group has not made use of financial instruments to minimise any foreign exchange gains or losses, and fluctuations in foreign exchange movements are reflected in the results from operating activities. The Group seeks to minimise the exposure to foreign currency risk by matching local currency income with local currency costs where possible. The Group will use financial instruments to minimise foreign exchange fluctuations where it is appropriate to do so.
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities as at 30 September are as follows:
Group Company
2019 2018 2019 2018
US Dollar exposure USD'000 USD'000 USD'000 USD'000
-------------------------- --------- --------- ------------ -----------
Balance at end of period
Monetary assets 944 535 - -
Monetary liabilities (89) (101) - -
-------------------------- --------- --------- ------------ -----------
Total exposure 855 434 - -
-------------------------- --------- --------- ------------ -----------
Group Company
2019 2018 2019 2018
Euro exposure EUR'000 EUR'000 EUR'000 EUR'000
-------------------------- --------- --------- ----------- -----------
Balance at end of period
Monetary assets 284 151 - -
Monetary liabilities (112) (113) - -
-------------------------- --------- --------- ----------- -----------
Total exposure 172 38 - -
-------------------------- --------- --------- ----------- -----------
Group Company
2019 2018 2019 2018
Swiss Franc exposure CHF'000 CHF'000 CHF'000 CHF'000
-------------------------- --------- --------- ----------- -----------
Balance at end of period
Monetary assets 99 79 - -
Monetary liabilities (123) (78) - -
-------------------------- --------- --------- ----------- -----------
Total exposure (24) 1 - -
-------------------------- --------- --------- ----------- -----------
Foreign currency sensitivity analysis
As at 30 September 2019, the sensitivity analysis assumes a +/-10% change of the USD/GBP, EUR/GBP and CHF/GBP exchange rates, which represents management's assessment of a reasonably possible change in foreign exchange rates (2018: 10%). The sensitivity analysis was applied on the fair value of financial assets and liabilities.
2019 2018
10% weaker(1) 10% stronger 10% weaker 10% stronger
GBP000 GBP000 GBP000 GBP000
------------- -------------- ------------- ----------- -------------
US Dollar (70) 70 (78) 95
Euro (15) 15 (56) 67
Swiss Franc 2 (2) (14) 17
------------- -------------- ------------- ----------- -------------
(83) 83 (148) 179
------------- -------------- ------------- ----------- -------------
(1) 10% weaker relates to the Great British Pound strengthening against the currency and therefore the Group would be in a weaker monetary position.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group's financial assets are cash and cash equivalents and trade and other receivables. The carrying value of these assets represents the Group's maximum exposure to credit risk in relation to financial assets.
The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the Consolidated Statement of Financial Position are net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and their assessment of the current economic environment, and any specific criteria identified in respect of individual trade receivables. An allowance for impairment is made where there is an identified loss event, which, based on previous experience, is evidence of a reduction in the recoverability of future cash flows.
Prior to entering in to an agreement to provide services, the Group makes appropriate enquiries of the counterparty and independent third parties to determine credit worthiness. The Group has not identified any significant credit risk exposure to any single counterparty or Group of counterparties as at the period end.
The Group continually reviews client credit limits based on market conditions and historical experience. Any provision for impairment, as well as the ageing analysis of overdue trade receivables, is set out in note 16.
The Group's policy is to minimise the risks associated with cash and cash equivalents by placing these deposits with institutions with a recognised high credit rating.
Capital risk management
The Group considers capital to be shareholders' equity as shown in the Consolidated Statement of Financial Position, as the Group is primarily funded by equity finance and is not yet in a position to pay a dividend. The Group had no borrowings at 30 September 2019.
The objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and for other stakeholders. In order to maintain or adjust the capital structure the Group may return capital to shareholders or issue new shares.
23. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
During the year ended 30 September 2019, the Group was charged monitoring fees totalling GBPnil (2018: GBP23,000) from IP Group plc, a previous shareholder. The amount owed to IP Group plc at 30 September 2019 was GBPnil (2018: GBPnil).
In the previous year to 30 September 2018, the Company was charged consultancy fees totalling GBP18,000 from Panoramic Digital Health SASU, owned by a former Executive Director. The amount owed to Panoramic Digital Health SASU at 30 September 2018 was GBP3,000.
Remuneration and transactions of Directors and key management personnel
Key management remuneration:
2019 2018
GBP000 GBP000
------------------------------ ------- -------
Short-term employee benefits 1,604 1,723
Post-employment benefits 29 39
Share-based payments 70 -
Termination benefits 76 -
------------------------------ ------- -------
Total remuneration 1,779 1,762
------------------------------ ------- -------
Key management includes Executive Directors, Non-Executive Directors and senior management who have the responsibility for managing, directly or indirectly, the activities of the Group.
The aggregate Directors' remuneration, including employers' national insurance and share-based payments' expense, was GBP1,043,000 (2018: GBP958,000) and aggregate pension of GBP8,000 (2018: GBP21,000).
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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