TIDMIXI
RNS Number : 8804Y
IXICO plc
11 December 2017
IXICO plc
("IXICO" or the "Company")
Financial Results for the year ended 30 September 2017
Strong revenue growth and reduced operating losses as momentum
builds
IXICO plc (AIM: IXI), the digital technologies company serving
neuroscience, today announces its final results for the year ended
30 September 2017.
Highlights
Commercial
Multi-year contracts in a broad range of neurological diseases
to drive future top line growth
-- $1.2m phase IIa clinical study in progressive supranuclear palsy ('PSP')
-- $1.5m phase IIb clinical study in PSP
-- Contract with Araclon Biotech for phase II clinical study in Alzheimer's Disease
-- GBP1.2m phase II clinical study in Huntington's Disease
-- $0.7m phase II clinical study in Huntington's Disease
-- Expansion of existing phase II/III contract increasing total value from $6.8m to $7.7m
Financial
-- Revenue of GBP4.1m (2016: GBP3.3m restated*) or 26% growth at transaction exchange rates
-- Revenue of GBP3.7m (2016: GBP3.1m) or 20% growth at Project Exchange Rates ('PER')**
-- Reduced operating loss of GBP1.9m (2016: GBP2.9m) combining
commercially led growth with cost control
-- Reduced loss per share of 5.7 pence (2016: 8.7 pence)
-- Cash of GBP2.4m (2016: GBP3.1m)
Post year-end highlights
First biosensor contracts demonstrating continued commercial
momentum
-- GBP0.5m phase II clinical trial for a neurological disorder
-- GBP0.8m late phase clinical trial for a psychiatric disorder
* An element of the foreign exchange gain previously reported in
general and administrative expenses has been reclassified to
revenue
** PER revenue is recognised from multi-year contracts with
fixed Project Exchange Rates. PER revenue demonstrates the
underlying performance of the business, excluding the impact of
foreign exchange.
Giulio Cerroni, CEO of IXICO, said: "I am pleased to report that
in 2017, the business delivered robust revenue growth strengthened
by the entry into a number of new commercial contracts in a broad
range of neurological diseases. These multi-year contracts underpin
our confidence in building further commercial momentum and I am
excited about the goals we have set ourselves in our drive to
achieve profitability. I look forward to the new year with
confidence".
Notice of AGM
IXICO also announces that its AGM will be held at 9.30am on 22
January 2018 at the offices of FTI Consulting, 200 Aldersgate
Street, London EC1A 4HD. The full annual report and accounts will
be posted to shareholders on 15 December 2017.
For further information please contact:
IXICO plc
Giulio Cerroni, Chief Executive Tel: +44 20 3763 7499
Officer
Susan Lowther, Chief Financial
Officer
Shore Capital (Nomad and Broker)
Edward Mansfield / Anita Ghanekar Tel: +44 20 7408 4090
FTI Consulting Limited (Investor
Relations)
Simon Conway/Mo Noonan Tel: +44 20 3727 1000
About IXICO
IXICO is the digital technologies company serving neuroscience.
Our mission is to transform the pursuit of improving brain health
through the application of digital technologies to neuroscience.
IXICO's specialist data analytics services are used by the global
pharmaceutical industry to select participants for clinical trials,
assess the safety and efficacy of new drugs in development and in
post marketing surveillance. Our neurological disease focus
includes Alzheimer's disease, Huntington's disease, Multiple
Sclerosis, Parkinson's disease and our integrated digital platform
encompasses the entire drug development lifecycle. It is a scalable
and secure infrastructure for the capture and analysis of
regulatory compliant clinical data to enable sponsors to make
rapid, better informed decisions. IXICO is also collaborating with
partners to develop new companion digital health products targeted
at improving patient outcomes.
To learn more about IXICO, please visit: www.IXICO.com
Chairman's Statement
Delivering shareholder return
I am pleased to report a strong performance with increased
revenue and reduced operating losses. This has been a year of
change and a renewed focus on our biopharmaceutical customers.
Board
We were delighted to welcome Giulio Cerroni as he joined the
Board in the year. He has extensive experience in both scaling
operations to build businesses and supplying sophisticated products
and services to the pharmaceutical and research communities. In his
first Chief Executive's report, Giulio has set out his strategy for
accelerating commercially led growth.
Performance
The results for the year represent a positive first step on our
path to profitability.
Revenue growth to GBP4.1 million (2016: GBP3.3 million
restated*) represents 26% growth at actual exchange rates and
underlying 20% growth on a Project Exchange Rate (PER) basis. PER
represents the fixed foreign exchange rate applied to each
individual customer project.
The revenue performance reflected an increased number of
projects and new contract wins. Furthermore, the Assessa(R) PML
collaboration with Biogen expanded in the year as the project scope
broadened to include pharmacovigilance reporting and the
on-boarding of additional clinical sites to the pilot.
This momentum in top-line growth positively impacted gross
profit which improved to GBP2.3m (2016: GBP1.6m restated*) which
represents an improvement of GBP0.7m or 46%. The gross profit
percentage increased by 8% to 57% (2016: 49% restated*).
Importantly, the revenue growth was achieved without a commensurate
growth in our cost base as the underlying operating expenditure
(excluding non-recurring administrative expenses) reduced by
GBP0.1m to GBP4.4m (2016: GBP4.5m restated*).
The operating loss reduced by GBP1.0m to GBP1.9m (2016: GBP2.9m)
which reflects our objective of combining commercially led growth
with appropriate cost control.
Net cash at 30 September 2017 was GBP2.4m (2016: GBP3.1m)
reflecting careful cash management together with grant
reimbursement and R&D tax credits received in the second half
of the year.
Following the Group's change in its commercial focus and
strategy, the value of the behavioural health technology,
associated marketing know-how and commercialisation of the
technology assets has been de-emphasised. Consequently, as at 30
September 2017, the foreseeable recoverable amount was estimated to
be GBPnil (2016: GBP0.3m), resulting in an impairment loss of
GBP0.3m for the year.
*An element of the foreign exchange gain previously reported in
general and administrative expenses has been reclassified to
recognised revenue. More details are set out in note 2 of the
consolidated financial statements.
Key Performance Indicators (KPIs)
The KPIs used to monitor the business are financial and relate
to revenue, gross profit, operating losses and cash resources as
shown below:
KPI 2017 result 2016 result Movement Comments
-------------------- ------------ ------------ ----------------- ----------------------------
Revenue at project GBP3.7m GBP3.1m GBP0.6m increase Increased number of
exchange rate (20%) projects and a broadening
biopharmaceutical customer
base
-------------------- ------------ ------------ ----------------- ----------------------------
Revenue at actual GBP4.1m GBP3.3m GBP0.8m increase
rates (26%)
-------------------- ------------ ------------ ----------------- ----------------------------
Gross Profit GBP2.3m GBP1.6m GBP0.7m increase Increased revenue and
(46%) operational efficiencies
-------------------- ------------ ------------ ----------------- ----------------------------
Gross profit
margin % 57% 49% 8% increase
-------------------- ------------ ------------ ----------------- ----------------------------
Operating loss GBP1.9m GBP2.9m GBP1.0m decrease Improved gross profit
performance, reduced
underlying operating
costs
-------------------- ------------ ------------ ----------------- ----------------------------
Cash balance GBP2.4m GBP3.1m GBP0.7m decrease Reduced operating loss,
receipt of R&D tax
credits and reimbursement
of grant expenditure
-------------------- ------------ ------------ ----------------- ----------------------------
Revenue KPIs are reported at actual exchange and PER which
demonstrate the underlying performance of the business, excluding
the impact of foreign exchange.
The Board monitor progress on a regular basis and it is planned
to establish other key performance indicators including operational
and delivery KPIs reflecting our four core values:
-- Technological and scientific Expertise which has been developed over the last 13 years,
-- Innovative and talented people,
-- Driving Quality in business operations and practices,
-- Conducting our business relationships with Integrity as a trusted partner of choice.
Outlook
We made demonstrable progress executing our business strategy in
the year. We announced two new contracts in September and two new
contracts post year end, which together with existing projects,
means that we look forward with enthusiasm and confidence.
Our partnerships with biopharmaceutical companies demonstrate
their trust in us as a partner and their interest in our digital
technologies and services. We are particularly pleased with the
progress made in our new wearable biosensors offering and believe
that we are at the forefront of remote data capture of real world
data.
We will continue to work closely with our customers,
collaborators and business partners to realise our vision and would
like to thank them as well as all our staff, shareholders and
advisers for their continued commitment, enthusiasm and
support.
Chief Executive's Statement
I was delighted to join IXICO in February 2017 as Chief
Executive Officer, and I am pleased to share the goals we have set
ourselves.
This has been a year of transition for the business. Having
completed a strategic and operational review, we have defined our
commercially led growth plan to deliver double-digit top-line
growth. I am pleased to highlight that in 2017, the business
delivered 20% organic revenue growth at Project Exchange Rate
(PER), with currency gains resulting in reported revenue growth of
26%. PER represents the fixed foreign exchange rate applied to each
individual customer project. This underpins our confidence in
building further commercial momentum.
An attractive growth market
Starting with the market that we operate in, there are a number
of macro and micro market factors, which support and influence our
strategy for sustained growth. The global trend of rising life
expectancy and an ageing population is unprecedented. The growing
awareness and impact of this demographic shift on the global
healthcare system is driving the need for effective, safe new
medicines for people whose lives are, unfortunately, increasingly
impacted by neurological diseases.
Against this backdrop, there is the continuous impact of
technological advances, which could improve the efficiency of the
drug development process and the way that medical care is
delivered. IXICO's digital technology platform has matured to a
point where we have demonstrated our capability, scale and
experience to provide new technology led specialist services across
all phases of drug development and into post marketing
surveillance. We understand the evolving needs of our customers and
are committed to provide highly differentiated and valued digital
technology solutions.
The combination of these demographic, scientific and
technological drivers provide a runway of commercial opportunities
and growth for IXICO.
Targeting double-digit revenue growth
We have established a five-point growth plan led by our
objective of delivering double-digit revenue growth:
1. Focus on delivering scale and operational excellence
2. Accelerate penetration of clinical trials market
3. Target later clinical phases
4. Innovate: Commercialise IXICO's proprietary digital technologies
5. Enhance organic growth through selective M&A
Our organic growth projections are based on our detailed
analysis of how we can better leverage the commercial and
scientific assets that IXICO has established as a trusted partner
to the biopharmaceutical industry. Specifically, we have identified
three key value segments where our technology platform and
capabilities provide mission critical value:
-- Selecting patients for clinical trials
-- Assessing safety and efficacy in every phase of drug development
-- Post marketing surveillance of marketed medicines
Our primary route to market will remain a direct contractual
relationship with our biopharmaceutical customers. However, as a
U.K. headquartered business, we will give further consideration to
our partnering strategy to accelerate traction, with a particular
focus on improving our commercial and operational reach in North
America.
Commercialising new digital technology tools to accelerate
growth
In the last two years, as part of a commercial collaboration
with Biogen and including European clinical centres as part of a
multi-territory pilot, we have made excellent progress in
development of our Assessa(R) PML companion technology platform in
post marketing surveillance. The pilot was expanded during the year
and since September 2017, we have been on-boarding sites in
Germany, Netherlands and Spain, ahead of planning the roll out and
deployment in 22 different countries.
I am also very pleased with our recent progress in expanding our
services to include wearable biosensors as potential digital
biomarkers to measure sleep disturbance. Here we are providing
innovative new tools by combining our longstanding experience of
compliant data collection and management with our new, proprietary
artificial intelligence data analytics. Our approach is to be
device neutral to ensure that our services utilise the most
appropriate device for our customer's needs and build the value we
derive from our proprietary algorithms. We recently announced our
first commercial contracts for adoption in phase II clinical trials
and have a healthy pipeline of identified opportunities. Our
trusted partner position in providing specialist neuro-imaging
services to both our current and new biopharmaceutical customers,
means we are well placed to cross sell these highly valued new
digital tools. I have identified this as an exciting new business
area for IXICO to generate significant growth and further
accelerate our commercially led growth plan on our path to
profitability.
Management and organisation
I would like to thank Derek Hill for his support in the first
months of my new role.
Our Company values of Expertise, Innovation, Quality and
Integrity are demonstrated in many ways every day by our staff. The
success of the business is built upon our ability to understand our
current and prospective customer's needs and be responsive to
changes in the market and competitive environment. We do this
through our highly talented colleagues who support our customers in
their quest to develop and provide safe, effective treatments to
improve brain health. As such, we recognise that our greatest
assets are our people.
Moving forward
Our mission is to transform the pursuit of improving brain
health through the application of digital technologies. I am
pleased with the momentum built in these early months and our
five-point growth plan sets out how we will deliver on our
commitment to our stakeholders.
Put simply, our growth strategy is based on building on our core
strengths and growing our capabilities and technologies into every
stage of the drug development process and into post marketing
surveillance for neurological disorders. To support our
commercially-led accelerated growth plan, we are investing in our
operational delivery and innovation roadmap to commercialise new
products and services to capitalise on the inflection point reached
by digital health technology.
Along the path to profitability, my personal goal is to ensure
that IXICO fully captures its entitlement to the value being
created by disruptive digital health tools gaining adoption for
remote patient monitoring in chronic health conditions.
Principal Risks and Uncertainties
We face a number of risks and uncertainties, which reflect the
business environment within which we operate. We also face risks as
we look to scale up our operational and commercial footprint.
The following are the principal risks and uncertainties that the
Board considers could have a material impact on the Group's
operational results, financial condition and prospects.
Financial
The Group has a history of operating losses, due to investment
in new product development. The Group has a stated objective of a
path to profitability, which depends upon the success of our
products and services together with the execution of our commercial
strategy. The Group carefully monitors costs and cash flow to
ensure that the losses are commensurate with the Group's strategic
plans and ensuring that the Group continues to operate as a going
concern. The Group has instigated financial risk management
policies and procedures in respect of financial instruments, which
are set out in, note 23 of the consolidated financial
statements.
There can be no guarantee that the grant funding or the Research
and Development Expenditure Credit ('RDEC') will continue to be
available to the Group, which could affect the level of investment
in new product development.
Management and employees
The Group's success reflects our stated values and the
contribution of key management and employees. The loss of key
employees could weaken the Group's scientific, technical and
management capabilities and negatively impact our business. It
could also slow down the pace at which we can grow. All employees
are on permanent employment contracts and the remuneration includes
salary, pension and a performance related bonus. The Business
Development team receive performance related sales commission. The
leadership team and key individuals are granted share options in
accordance with the IXICO EMI Share Option Plan 2014.
Industry and competition
A significant proportion of the Group's revenue is dependent on
the biopharmaceutical industry and therefore there is a risk of
reduced revenues resulting from the timing or reduction of
expenditure by customers in this sector. Biopharmaceutical
companies may change their strategic focus away from
neurodegenerative diseases, which could negatively impact our
accessible market. Clinical trials can be stopped at any time if
the drug is deemed not effective or unsafe which could negatively
impact the revenue derived from customer projects.
We face competition in this sector from larger companies or from
consolidation in the market. We face continuous pricing competition
from commercial service providers and academic institutions. As a
technology services provider there is always the risk of new
disruptive technologies that could render IXICO's technology
uncompetitive.
We aim to strengthen our market position and sustain our
competitive advantage by building collaborative, commercial
partnerships. We have been successful in broadening our customer
base and have invested in innovative technology and product
development to build upon a long-standing expertise in Alzheimer's
disease by broadening our therapeutic focus in neurodegenerative
diseases.
Reliance on key customers
We value our customers and work closely with them to ensure that
we meet their timelines, requirements and deliver a quality
service. To maintain an equitable balance we continue to broaden
our customer base to manage the risk of being overly dependent on
any one customer. We have won new contracts with new
biopharmaceutical customers, to mitigate this business risk.
Regulatory and compliance
We operate in a highly regulated environment and any change in
that environment could negatively impact our growth strategy,
revenues and path to profitability. We maintain oversight of
potential changes and participate in collaborative consortia and
industry bodies so that we can anticipate and manage change
accordingly.
We have a project team in place to address the requirements of
the General Data Protection Regulation ('GDPR'). This team is
responsible for reviewing and updating our standard operating
policies and procedures, as required, before the enforcement date
of 25 May 2018.
Macroeconomic conditions
Like many companies we continue to monitor the impact of the
United Kingdom's relationship with the European Union, particularly
in respect of patent protection and data protection regulations
within which we operate.
This year we have reported revenue at actual exchange rates and
also project exchange rates to reflect the impact of foreign
exchange movement. Most of our customer projects are multi-year
contracts and include individual fixed project exchange rate
mechanisms. Revenue reported at the fixed project exchange rates
allows management to focus on the underlying performance excluding
the impact of foreign exchange, which it cannot control.
We continue to closely monitor the impact of the movement of
Sterling against other currencies in which we trade which include
U.S. Dollar, Euro and Swiss Franc.
Intellectual property and proprietary technology
We actively seek to manage, develop and protect our intellectual
property portfolio. Our technologies are based on software and data
analytics, which are considered to be less of a barrier to
competitors than other patents related to hardware devices.
Copyright in the software incorporated into our products is a
further form of potential protection.
We maintain business know-how and knowledge in our quality
management system and standard operating procedures.
Financial review
The financial performance for the year ended 30 September 2017
was in line with expectations. The comparatives refer to the year
ended 30 September 2016.
Revenue
Revenue for the period of GBP4.1 million (2016: GBP3.3 million
restated) was generated from clinical trials services, preliminary
revenues related to Assessa(R) PML and licensing revenues from
BioTelemetry Research (Cardicore &VirtualScopics).
The prior year restatement is due to a reclassification which is
detailed in note 2 of the consolidated financial statements.
Other income
Other income comprised income from grants of GBP0.5 million
(2016: GBP0.6 million) and RDEC of GBP0.1 million (2016: GBP0.1
million). The GBP0.1 million reduction in grant income reflected
the completion of a project which had been ongoing in the prior
year.
Operating expenditure
Operating expenditure in the year reflected investment in people
and product development
-- Research and development expenses of GBP1.3 million (2016:
GBP1.6 million) were in line with Group's plans to innovate by
improving existing products and investing in new product
development.
-- Sales and marketing expenses were unchanged at GBP0.8 million (2016: GBP0.8 million).
-- General and administrative expenses of GBP2.3 million (2016:
GBP2.2 million restated) were in line with expectations.
Non-recurring administrative expenses of GBP0.5 million (2016:
GBP0.7 million) comprised intangible asset impairment charge,
professional fees and reorganisation costs.
Taxation
The Group has elected to take advantage of the RDEC, whereby a
company may surrender corporation tax losses incurred on qualifying
research and development expenditure for a corporation tax refund.
In addition, the Group has claimed research and development tax
credits under the small or medium enterprise research and
development credit scheme.
The corporation tax refund due for the year of GBP0.4 million
(2016: GBP0.6 million) has been recognised as a current tax
receivable.
Non-current assets
Non-current assets at 30 September 2017 included property, plant
and equipment of GBP0.1 million (2016: GBP0.1 million) and
intangible assets of GBP0.1 million (2016: GBP0.6 million). The net
book value of the behavioural health technology and marketing
know-how has been reviewed as part of the Group's commercial
strategy and focus. As at 30 September 2017, the recoverable amount
is estimated to be GBPnil, resulting in an impairment loss of
GBP0.3 million (2016: GBP0.6 million) being recognised for the year
ended 30 September 2017.
The Directors will continue to monitor the investment in IXICO
Technologies Limited if the company's net liabilities continue to
increase.
Current assets
Current assets at 30 September 2017 of GBP4.3 million (2016:
GBP5.0 million) reflected a decrease in cash and cash equivalents
to GBP2.4 million (2016: GBP3.1 million).
The Group holds all cash and cash equivalents in Sterling and
U.S. Dollar accounts with institutions with a recognised high
rating (typically AA or above) or with one of the major clearing
banks.
Current liabilities
Total current liabilities at 30 September 2017 were GBP1.6
million (2016: GBP1.5 million).
Equity
Total equity of GBP2.9 million at 30 September 2017 (2016:
GBP4.1 million) reflected additional accumulated losses of GBP1.5
million.
Cash flow
Operating cash outflows of GBP1.2 million in the year were
offset by an inflow of GBP0.6 million from research and development
tax credits. This resulted in a closing cash balance of GBP2.4
million (2016: GBP3.1 million).
Results and dividends
The Group's net loss after tax for the year decreased to GBP1.5
million (2016: GBP2.2 million).
The Directors do not recommend the payment of a dividend.
Financial risk management
The financial risk management and objectives of the Group are
set out in note 23 of the consolidated financial statements.
Political donations
The Group made no political donations during the period (2016:
GBPnil).
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2017 and 30 September 2016
Year ended Year ended
30 September 30 September
2017 2016
restated*
Note GBP'000 GBP'000
------------------------------------------ ----- ------------- -------------
Revenue 5 4,110 3,268
Cost of sales (1,786) (1,680)
------------------------------------------ ----- ------------- -------------
Gross profit 2,324 1,588
Other income 6 643 752
Operating expenses
Research and development expenses (1,256) (1,583)
Sales and marketing expenses (823) (759)
General and administrative expenses (2,309) (2,162)
Non-recurring administrative expenses 7 (481) (706)
------------------------------------------ ----- ------------- -------------
Total operating expenses 10 (4,869) (5,210)
------------------------------------------ ----- ------------- -------------
Operating loss (1,902) (2,870)
Finance income - 1
Loss on ordinary activities before
taxation (1,902) (2,869)
Taxation 11 375 750
------------------------------------------ ----- ------------- -------------
Loss and total comprehensive expense
attributable
to equity holders for the period (1,527) (2,119)
------------------------------------------ ----- ------------- -------------
Other comprehensive expense:
Foreign exchange translation differences (13) (66)
------------------------------------------ ----- ------------- -------------
Total other comprehensive expense (13) (66)
Total comprehensive expense attributable
to equity holders for the period (1,540) (2,185)
------------------------------------------ ----- ------------- -------------
Loss per share (pence) 12
------------------------------------------ ----- ------------- -------------
Basic loss per share (5.7) (8.7)
Diluted loss per share (5.7) (8.7)
------------------------------------------ ----- ------------- -------------
* Revenue and general and administrative expenses reflect a
reclassification which is set out in note 2 of the consolidated
financial statements.
Consolidated and Company Statements of Financial Position
as at 30 September 2017 and 30 September 2016
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------- ------------- ------------- -------------
Assets
Non-current assets
Property, plant and equipment 13 60 88 - -
Intangible assets 14 128 559 - -
Investments in Group
undertakings 15 - - 5,320 5,505
Amounts due from subsidiary
undertakings 16 - - 3,553 5,515
------------------------------- ----- ------------- ------------- ------------- -------------
Total non-current assets 188 647 8,873 11,020
Current assets
Trade and other receivables 16 1,487 1,353 42 22
Current tax receivables 11 420 562 - -
Cash and cash equivalents 2,414 3,120 396 1,168
------------------------------- ----- ------------- ------------- ------------- -------------
Total current assets 4,321 5,035 438 1,190
Total assets 4,509 5,682 9,311 12,210
------------------------------- ----- ------------- ------------- ------------- -------------
Liabilities and equity
Current liabilities
Trade and other payables 18 1,575 1,311 113 73
Deferred consideration 3 - 174 - 174
Total current liabilities 1,575 1,485 113 247
Non-current liabilities
Deferred tax liabilities 19 19 112 - -
Amounts due to subsidiary
undertakings 18 - - - 1,748
------------------------------- ----- ------------- ------------- ------------- -------------
Total non-current liabilities 19 112 - 1,748
Equity
Ordinary shares 20 7,727 7,720 7,727 7,720
Share premium 20 79,421 79,421 79,421 79,421
Merger relief reserve 20 1,480 1,312 1,480 1,312
Reverse acquisition reserve 20 (75,308) (75,307) - -
Foreign exchange translation
reserve (79) (66) - -
Accumulated losses (10,326) (8,995) (79,430) (78,238)
------------------------------- ----- ------------- ------------- ------------- -------------
Total equity 2,915 4,085 9,198 10,215
Total liabilities and
equity 4,509 5,682 9,311 12,210
------------------------------- ----- ------------- ------------- ------------- -------------
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
GBP1,388,000 (2016: GBP802,000).
Consolidated Statement of Changes in Equity
for the year ended 30 September 2017 and 30 September 2016
Foreign
Merger Reverse exchange
Ordinary Share relief acquisition translation Accumulated
shares premium reserve reserve reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Balance at 30 September
2015 7,529 76,804 641 (75,229) - (7,036) 2,709
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Total comprehensive
expense
Loss for the period - - - - - (2,119) (2,119)
Other comprehensive
expense:
Foreign exchange
translation - - - - (66) - (66)
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Total comprehensive
expense - - - - (66) (2,119) (2,185)
Transactions with
owners
Charge in respect
of share options - - - - - 126 126
Exercise of share
options 78 - - (78) - - -
Proceeds from shares
issued 89 2,617 - - - - 2,706
Cost of acquisition 24 - 671 - - 34 729
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Total transactions
with owners 191 2,617 671 (78) - 160 3,561
Balance at 30 September
2016 7,720 79,421 1,312 (75,307) (66) (8,995) 4,085
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Total comprehensive
expense
Loss for the period - - - - - (1,527) (1,527)
Other comprehensive
expense:
Foreign exchange
translation - - - - (13) - (13)
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Total comprehensive
expense - - - - (13) (1,527) (1,540)
Transactions with
owners
Charge in respect
of share options - - - - - 196 196
Exercise of share
options 1 - - (1) - - -
Issue of deferred
consideration shares 6 - 168 - - - 174
Total transactions
with owners 7 - 168 (1) - 196 370
Balance at 30 September
2017 7,727 79,421 1,480 (75,308) (79) (10,326) 2,915
------------------------- --------- -------- -------- ------------ ------------ ------------ --------
Company Statement of Changes in Equity
for the year ended 30 September 2017 and 30 September 2016
Merger
Ordinary Share relief Accumulated
shares premium reserve losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ --------- -------- -------- ------------ --------
Balance at 30 September 2015 7,529 76,804 641 (77,572) 7,402
------------------------------------ --------- -------- -------- ------------ --------
Total comprehensive expense
for the period - - - (802) (802)
Transactions with owners
Charge in respect of share options - - - 126 126
Exercise of share options 78 - - (24) 54
Proceeds from shares issued 89 2,617 - - 2,706
Cost of acquisition 24 - 671 34 729
------------------------------------ --------- -------- -------- ------------ --------
Total transactions with owners 191 2,617 671 136 3,615
Balance at 30 September 2016 7,720 79,421 1,312 (78,238) 10,215
------------------------------------ --------- -------- -------- ------------ --------
Total comprehensive expense
for the period - - - (1,388) (1,388)
Transactions with owners
Exercise of share options 1 - - - 1
Charge in respect of share options - - - 196 196
Issue of deferred consideration
shares 6 - 168 - 174
------------------------------------ --------- -------- -------- ------------ --------
Total transactions with owners 7 - 168 196 371
Balance at 30 September 2017 7,727 79,421 1,480 (79,430) 9,198
------------------------------------ --------- -------- -------- ------------ --------
Consolidated and Company Statements of Cash Flows
for the year ended 30 September 2017 and September 2016
Group Company
Year ended Year ended Year ended Year ended
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- ------------- -------------
Cash flows from operating
activities
Loss for the period (1,527) (2,119) (1,388) (802)
Finance income - (1) - -
Taxation (375) (750) - -
Depreciation 49 55 - -
Amortisation of acquired
intangibles 143 292 - -
Impairment of acquired intangibles 316 603 - -
Impairment of investment
in subsidiary undertakings - - 360 543
Research and development
expenditure credit (137) (135) - -
Share option charge 196 126 22 14
(1,335) (1,929) (1,006) (245)
Changes in working capital
(Increase)/decrease in trade
and other receivables (134) 287 1,942 (1,968)
Increase/(decrease) in trade
and other payables 264 (323) (1,708) 124
-------------------------------------- ------------- ------------- ------------- -------------
Cash used in operations (1,205) (1,965) (772) (2,089)
Taxation received 561 430 - -
-------------------------------------- ------------- ------------- ------------- -------------
Net cash used in operating
activities (644) (1,535) (772) (2,089)
Cash flows from investing
activities
Cash and cash equivalents - 98 - -
acquired
Purchase of property, plant
and equipment and software (49) (24) - -
Finance income - 1 - -
Net cash (used in)/generated
from investing activities (49) 75 - -
Cash flows from financing
activities
Issue of shares - 2,706 - 2,706
Net cash generated from financing
activities - 2,706 - 2,706
Movements in cash and cash
equivalents in the period (693) 1,246 (772) 617
-------------------------------------- ------------- ------------- ------------- -------------
Cash and cash equivalents
at start of period 3,120 1,934 1,168 551
Effect of exchange rate fluctuations
on cash held (13) (60) - -
-------------------------------------- ------------- ------------- ------------- -------------
Cash and cash equivalents
at end of period 2,414 3,120 396 1,168
-------------------------------------- ------------- ------------- ------------- -------------
Notes to the Financial Statements
1. 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 an established provider of technology enabled
speciality services to the global biopharmaceutical industry. The
Company's services are used to select patients for clinical trials,
assess the safety and efficacy of new drugs in development and in
post marketing surveillance.
2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION
Basis of preparation
The consolidated financial statements have been prepared 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 have been prepared under
the historical cost convention modified by the revaluation of
certain financial instruments.
The consolidated financial statements are presented in Sterling
(GBP). This is the predominant functional currency of the Company,
and is the currency of the primary economic environment in which it
operates. Foreign transactions are accounted in accordance with the
policies set out below.
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. When necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with the Group's
accounting policies.
Subsidiaries are entities controlled by the Group. Control
exists when the Group has the control, directly or indirectly, to
govern the financial and operating policies of an entity so as to
obtain economic benefits from its activities. 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, including goodwill and fair
value adjustments arising on consolidation, are translated into
Sterling at exchange rates ruling at the end of the reporting
period. Income statements and cash flows of foreign operations are
translated into Sterling 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.
The acquisition method is used to account for the acquisition of
subsidiaries.
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, sales pipeline and funded
collaborations. Changes to the operating cost base are made in the
normal course of business, so that expenditure and investment are
in line with the Group's strategy and financial resources. After
due consideration and taking into account management's estimate of
future revenues 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. Thus they have adopted the going concern basis of
accounting in preparing the consolidated financial statements.
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 with regard to amounts chargeable
to customers under service contracts and an agreed scope of work or
work order. The service contracts are typically multi-year and may
be amended through a change order process. As such, change orders
represent a contract modification where deliverables are added or
de-scoped from the original customer contract.
The Group provides technology enabled services and 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 service activity on such
contracts. Recognising revenue also requires the Group to track the
performance of the contractual obligations to determine that actual
work performed is in accordance with the contract and agreed change
orders. The scope of the project and contract terms is also
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.
The Group's revenue is recognised in two main categories:
service revenue and licensing revenue.
Service revenue is mainly derived from activities related to
technology services provided to biopharmaceutical customers engaged
in clinical development. Service revenue also includes revenue
arising from a commercial partnership where the Group acts as an
agent. The Group identified one agency relationship in the year
ended 30 September 2017 (2016: one).
Licensing revenue includes one agreement, which grants a right
to use the Group's TrialTracker software in their normal course of
business.
Significant judgement is required in determining the period and
terms and conditions under which revenue is recognised.
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.
Expenditure on research and development is recognised as an expense
as incurred. No internal development costs have been recognised as
meeting the criteria for capitalisation in the year.
Recovery of deferred tax assets
Deferred tax assets have not been recognised for deductible
temporary differences and tax losses as the Directors consider that
there is not sufficient certainty that future taxable profits will
be available to utilise those temporary differences and tax
losses.
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. Actual results
may be substantially different.
Fair value measurements on business combinations
The measurement of fair values on a business combination
requires the recognition and measurement of the identifiable
assets, liabilities and contingent liabilities. The key judgements
involved are the identification and valuation of intangible assets,
which require the estimation of future cash flows and the selection
of a suitable discount rate.
Impairment of intangible assets
Amortised intangibles are tested for impairment where there are
indications of impairment. These impairment tests require the Group
to make an estimate of the expected cash flows and to select
suitable discount rates. These require an estimation of the value
in use of these assets.
Directors will continue to monitor the value of the investment
in IXICO Technologies Limited.
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, detailed in note 21 of the consolidated financial
statements.
Changes in accounting policies
The Group has not applied any new accounting policies that have
a material effect on the consolidated statement of financial
position for the year ended 30 September 2017.
Prior period reclassification
In the year ended 30 September 2017, the Company performed a
detailed review of the treatment of foreign exchange in its
customer projects and the impact of foreign currency translation on
recognised revenue.
The customer projects reflect work performed against multi-year
service contracts, which include fixed exchange rate mechanisms. In
the year ended 30 September 2017, revenue has been reported at
transaction rates and project exchange rates to reflect the impact
of foreign exchange movements. The project exchange rate represents
the fixed foreign exchange rate applied to each individual customer
project.
An element of the foreign exchange gain previously recorded in
general and administrative expenses has been reclassified to
recognised revenue as follows:
Year ended
30 September
2016
GBP'000
------------------------------------- -------------
Revenue 157
General and administrative expenses (157)
------------------------------------- -------------
Net impact on the operating loss -
------------------------------------- -------------
Accounting developments
At the date of approval of the consolidated financial
statements, the following Standards and Interpretations which have
not been applied in the consolidated financial statements were in
issue but not yet effective (and in some cases had not yet been
adopted by the EU):
-- IFRS 9 Financial Instruments (effective date 1 January 2018)
-- IFRS 15 Revenue from contracts with customers (effective date 1 January 2018)
-- IFRS 2 Classification and Measurement of Share-based Payment
Transactions - Amendments to IFRS 2 (effective date 1 January
2018)
-- IFRIC Interpretation 22 Foreign Currency Transactions and
Advance Consideration (effective date 1 January 2018)
-- Amended by Annual Improvements to IFRS Standards 2014-2016
Cycle (effective date 1 January 2018)
-- IFRS 16 Leases (effective date 1 January 2019)
-- Amendments to IAS 12: Recognition of Deferred Tax Assets for
Unrealised Losses (effective date 1 January 2017)
-- Amendments to IFRS 2: Classification and Measurement of
Share-based Payment Transactions (effective date 1 January
2017)
-- Amendments to IAS 7: Disclosure Initiative (effective date 1 January 2017)
The Group is preparing for the introduction of IFRS 15 and IFRS
16. Apart from these, the Directors anticipate, based on the
current business processes, that the future introduction of the
standards, amendments and interpretations listed above will not
have a material impact on the consolidated and Company financial
statements.
Revenue
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services provided in the normal course of business, net of
discounts, VAT and other sales-related taxes.
Revenue from short-term contracts, such as consultancy and
training, is recognised as the service is performed.
Revenue on longer-term contracts for services is recognised
according to the substance of the Group's obligations under a
contract. Where the substance of a transaction is that the Group's
contractual obligations are performed gradually over time, revenue
is recognised as contract activity progresses, to reflect the
Group's partial performance of its contractual obligations. Where
the substance of a contract is that a right to consideration does
not arise until the occurrence of a critical event, revenue is not
recognised until the event occurs.
Where longer-term contracts for services allow for the
reimbursement of certain expenses incurred by the Group in the
execution of the service contract, revenue is recognised only to
the extent that the expenses incurred are eligible to be recovered.
These reimbursements are included in revenue and are subject to a
nil gross margin.
Where it has been assessed that the Group is acting as agent in
respect of an agency relationship, revenues are recognised on a net
basis after deducting revenue earned by the principal.
Revenue relating to licence income is recognised on an accruals
basis in accordance with the substance of the relevant
agreement.
Revenue recognised in the income statement but not yet invoiced
is held on the consolidated statement of financial position within
'trade and other receivables'. Revenue invoiced but not yet
recognised in the income statement is held on the consolidated
statement of financial position within 'trade and other
payables'.
Other income
Government grants received relating to tangible fixed assets are
treated as deferred income and released to the consolidated
statement of comprehensive income over the expected useful lives of
the assets concerned.
Other government or European grants received are recognised on a
work performed and delivered basis.
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 11% 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.
Research and development expenditure
Research and development costs are written off to the
consolidated statement of comprehensive income in the year in which
they are incurred. All research and development costs, whether
funded by grant or not, are included within operating expenses and
classified as research and development costs.
All ongoing development expenditure is expensed in the year in
which it is incurred. Due to the regulatory and other uncertainties
inherent in the development of the Group's programmes, the criteria
for development costs to be recognised as an asset, as prescribed
by IAS 38 'Intangible assets', are not met until the product has
been submitted for regulatory approval, such approval has been
received and it is probable that future economic benefits will flow
to the Group. The Group does not currently have any such internal
development costs that qualify for capitalisation as intangible
assets.
Exceptional items
Exceptional items are disclosed separately in the consolidated
financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group.
They are material items of income or expense that have been shown
separately due to the significance of their nature or amount. These
amounts are of a non-recurring nature.
Share-based payments
Equity-settled share-based payments are measured at the fair
value of the equity instruments at the grant date. Details
regarding the determination of the fair value of equity-settled
share-based transactions are set out in note 21 of the consolidated
financial statements. 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
balance sheet 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.
The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
equity reserves.
Employee benefits
All employee benefit costs, notably holiday pay and
contributions to the Group or personal defined contribution plans,
are recognised in the statement of comprehensive income as they are
incurred.
As at 30 September 2017, all employees have been automatically
enrolled into the Group's defined contribution plan and the Group
is no longer contributing to individual personal plans. 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.
Employee share trust
The Group recognises the assets and liabilities of the trust in
its own accounts and shares held by the trust are recorded at cost
as a deduction at arriving at total equity until such time as the
shares vest unconditionally to employees. The trust is a separately
administered trust, funded by contributions from employees and the
Group.
The IXICO Share Incentive Plan 2007 was closed on 15 November
2013 and during the year ended 30 September 2017, there were no
shares held by the employee trust.
Operating leases
Rentals payable under operating leases are charged to the
consolidated statement of comprehensive income on a straight-line
basis over the lease term.
Property, plant and equipment
Property, plant and equipment are stated at historic purchase
cost less accumulated depreciation.
The cost of property, plant and equipment is its purchase cost,
together with any directly attributable expenses of acquisition.
Depreciation is calculated so as to write off the cost of property,
plant and equipment, less its estimated residual value, on a
straight-line basis over the expected useful economic lives of the
assets concerned.
The principal rates used for this purpose are:
-- Leasehold improvements: straight-line over the shorter of 5 years or the lease term
-- Fixtures and fittings: 33% straight-line
-- Equipment: 33% straight-line
The assets' residual values and useful lives are reviewed, and
adjusted if necessary, at each balance sheet date.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within the
consolidated statement of comprehensive income.
Intangible assets
Acquired intangible assets are recognised as an intangible asset
if it is separable from the acquired business or arises from
contractual or legal rights, is expected to generate future
economic benefits and its fair value can be reliably measured.
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. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses.
Intangible assets are amortised using the straight-line method
over their estimated useful economic life of 5 years. Amortisation
is disclosed under general and administrative expenses in the
consolidated statement of comprehensive income.
The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at
the end of each reporting period. Changes are treated as changes in
accounting estimates.
Intangible assets are assessed for impairment whenever there is
an indication that the intangible asset may be impaired.
Impairment of assets
Non-current assets are reviewed for impairment both annually and
when there is an indication that an asset may be impaired (when
events or changes in circumstances indicate that 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.
Investments in Group undertakings
Investments in Group undertakings are carried at cost less any
impairment provision. Such investments are subject to an annual
impairment review.
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 delinquency in payments (exceeding credit terms) are
considered indicators that the trade receivable is impaired.
The amount of the provision is the difference between the
asset's carrying amount and the present value of estimated future
cash flows, discounted at the original effective interest rate. The
carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in the
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.
Current tax
Current tax represents United Kingdom tax recoverable and is
provided at amounts expected to be recovered using the tax rates
and laws that have been enacted at the balance sheet date.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand with
original maturities at inception of three months or less.
Foreign currency translation
Transactions denominated in foreign currencies are translated
into sterling at actual rates of exchange ruling at the date of
transaction. Monetary assets and liabilities expressed in foreign
currencies are translated into sterling at rates of exchange ruling
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.
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.
Equity instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Financial instruments
Financial assets and financial liabilities are recognised on the
consolidated statement of financial position when the Group 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.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting
period.
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 and 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.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantively enacted by the balance
sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability
is settled.
3. BUSINESS COMBINATION
On 8 December 2015, the Company acquired the entire issued share
capital of Optimal Medicine Limited. The aggregate consideration
for the acquisition was GBP1,498,000 in consideration shares at a
consideration share price of 49 pence comprising:
-- the initial issue of 2,355,295 new ordinary shares upon completion of the acquisition;
-- the issue of 590,093 deferred consideration shares on 31
December 2016, subject to the satisfaction of any claims made
against warranties given by the sellers; and
-- call options over 111,401 shares which in substance reflect
replacement awards issued by IXICO plc to satisfy outstanding share
options under the Optimal Medicine Limited unapproved share option
scheme.
On 4 January 2017, the Company issued 590,093 new ordinary
shares in respect of the deferred consideration for the acquisition
of Optimal Medicine Limited.
On 7 December 2016, 10,209 share option instruments which were
not exercised by their expiry date duly lapsed.
On 29 March 2017, 55,846 new ordinary shares were issued and
allotted in the Company pursuant to the put and call arrangement in
respect of the Optimal Medicine Limited approved share option
instruments. The options were exercised at a weighted average share
price of GBP0.26.
On 7 June 2017, 45,346 share option instruments which were not
exercised by their expiry date duly lapsed.
Group
The Group has identified that the value of the behavioural
health technology and marketing know-how has diminished following
the Group's change in its commercial focus and strategy. As at 30
September 2017, the recoverable amount was estimated to be GBPnil
(2016: GBP359,000), resulting in an impairment loss of GBP316,000
(2016: GBP603,000) for the year ended 30 September 2017.
Company
The Company has identified that the value of the investment in
Optimal Medicine Limited has diminished following a change in
commercial focus and strategy. As at 30 September 2017, the
recoverable amount was estimated to be GBPnil (2016: GBP359,000),
resulting in an impairment loss of GBP360,000 (2016: GBP543,000)
for the year ended 30 September 2017.
4. INVESTMENTS IN SUBSIDIARIES
The consolidated financial statements of the Group as at 30
September 2017 include:
Proportion Proportion
of of
Place of Principal ownership voting
rights
Name of subsidiary Class of incorporation activities interest held
share
-------------------- ----------- ---------------- ------------------ ----------- -----------
Data collection
and analysis
IXICO Technologies of neurological
Limited Ordinary United Kingdom diseases 100% 100%
IXITech Limited Ordinary United Kingdom Dormant 100% 100%
Members
IXICO US LLC interest United States Dormant 100% 100%
Optimal Medicine
Limited Ordinary United Kingdom Dormant 100% 100%
IXICO Technologies
Inc. Ordinary United States Dormant 100% 100%
-------------------- ----------- ---------------- ------------------ ----------- -----------
As at 25 July 2017, Phytodevelopments Limited was dissolved
As at 21 August 2017, Optimal Medicine SARL was dissolved.
At 30 September 2017, the trade and assets of IXITech Limited
and Optimal Medicine Limited were transferred to IXICO Technologies
Limited.
5. SEGMENTAL INFORMATION
The Group's development, commercial and operational delivery
teams operate across all of the Company's activities. The Group's
customer projects are managed by Project Managers with inputs to
each project provided by other functional team members. The
leadership team review the Group's management information reports
to assess performance and allocate resources. The customer projects
are reported as a single business unit and Executive management
monitor the operating performance of the business based on these
reports. The chief operating decision maker has been identified as
the Chief Executive Officer.
Accordingly, the Directors consider that there is only one
reporting segment.
The Group is domiciled in the United Kingdom with all sales
originating in the United Kingdom.
In the year ended 30 September 2017, the Group had four
customers that exceeded 10% of total revenue, being 14%, 13%, 11%
and 10%. In the year ended 30 September 2016, the Group had three
customers that exceeded 10% of total revenue, being 15%, 14% and
11%.
An analysis of the Group's revenue by type is as follows:
Year ended Year ended
30 September 30 September
2017 2016
restated*
GBP'000 GBP'000
------------------- ------------- -------------
Service revenue 3,908 3,081
Licencing revenue 202 187
------------------- ------------- -------------
Revenue 4,110 3,268
------------------- ------------- -------------
An analysis of the Group's revenue by geographic location of its
customers is as follows:
Year ended Year ended
30 September 30 September
2017 2016
restated*
GBP'000 GBP'000
---------------- ------------- -------------
United States 2,641 1,856
United Kingdom 708 862
Europe 676 500
China 85 50
---------------- ------------- -------------
Revenue 4,110 3,268
---------------- ------------- -------------
An analysis of the Group's non-current assets by geographic
location is as follows:
As at As at
30 September 30 September
2017 2016
GBP'000 GBP'000
-------------------- ------------- -------------
United Kingdom 188 646
United States - 1
Non-current assets 188 647
-------------------- ------------- -------------
* Reflect a reclassification, which is set out in note 2 of the
consolidated financial statements.
6. OTHER INCOME
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
-------------- ------------- -------------
Grant income 506 617
RDEC 137 135
-------------- ------------- -------------
Other income 643 752
-------------- ------------- -------------
All grant income originates in the United Kingdom.
The Group recognised RDEC as an item of other income, taking
advantage of the above the line presentation.
7. EXCEPTIONAL EXPENSES
During the year ended 30 September 2017, exceptional expenses
included the impairment of an intangible asset, redundancy costs
and professional fees incurred in the dissolution of Optimal
Medicine SARL together with the transfer of trade and assets of
IXITech Limited and Optimal Medicine Limited to IXICO Technologies
Limited.
During the year ended 30 September 2016, exceptional expenses
included the impairment of an intangible asset, professional fees
incurred in the acquisition of Optimal Medicine Limited and
post-acquisition costs.
These expenses have been recognised in the consolidated
statement of comprehensive income as exceptional expenses due to
their non-recurring nature.
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
--------------------------------------- ------------- -------------
Impairment of intangible asset 316 603
Professional fees 44 64
Redundancy costs 121 -
Restructuring costs - 39
--------------------------------------- ------------- -------------
Non-recurring administrative expenses 481 706
--------------------------------------- ------------- -------------
8. AUDITORS' REMUNERATION
The analysis of the auditors' remuneration is as follows:
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
------------------------------------------------ ------------- -------------
Fees payable to the Group's auditors for the
audit of the Company's annual accounts 16 15
Fees payable to the Group's auditors for other
services:
Audit of the subsidiaries' annual accounts 24 21
Audit related assurance services 5 5
Tax compliance services 12 9
Tax advisory services 5 7
------------------------------------------------ ------------- -------------
Total auditors' remuneration 62 57
------------------------------------------------ ------------- -------------
9. EMPLOYEES AND DIRECTORS
The average monthly number of persons (including Executive
Directors) employed by the Group was:
Year ended Year ended
30 September 30 September
2017 2016
Number Number
-------------------------------------- ------------- -------------
Administration 12 13
Operations, research and development 49 56
-------------------------------------- ------------- -------------
Average total persons employed 61 69
-------------------------------------- ------------- -------------
At 30 September 2017 the Group had 59 employees (2016: 67).
Staff costs in respect of these employees were:
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
----------------------- ------------- -------------
Wages and salaries 3,530 3,594
Social security costs 398 427
Other pension costs 175 186
Share-based payments 196 126
----------------------- ------------- -------------
Total remuneration 4,299 4,333
----------------------- ------------- -------------
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 2017 in respect of pension costs were
GBP21,000 (2016: GBP43,000).
Key management remuneration:
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
------------------------------ ------------- -------------
Short-term employee benefits 1,819 1,428
Post-employment benefits 70 71
------------------------------ ------------- -------------
Total remuneration 1,889 1,499
------------------------------ ------------- -------------
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 was GBP665,000 (2016:
GBP646,000) and aggregate pension of GBP28,000 (2016:
GBP30,000).
10. OPERATING LOSS
An analysis of the Group's operating loss has been arrived at
after charging:
Year ended Year ended
30 September 30 September
2017 2016
restated*
GBP'000 GBP'000
------------------------------------------------------------ ------------- -------------
Research and development expenses 1,256 1,583
Sales and marketing expenses 823 759
Operating lease charges: land and building 130 131
Depreciation of property, plant and equipment 49 55
Amortisation of intangible assets 143 292
Impairment of intangible assets(1) 316 603
Foreign exchange loss/(gain) 102 (142)
Administrative expenses 1,885 1,826
Non-recurring administrative expenses excluding impairment
of intangible assets(1) 165 103
------------------------------------------------------------ ------------- -------------
Total operating expenses 4,869 5,210
------------------------------------------------------------ ------------- -------------
(1) Impairment charge of GBP316,000 for the year ended 30
September 2017 (2016: GBP603,000) is disclosed under exceptional
expenses. See note 7 of the consolidated financial statements for
further information.
11. TAXATION
The tax charge for each period can be reconciled to the loss per
consolidated statement of comprehensive income as follows:
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
------------------------------------------------------------ ------------- -------------
Loss on ordinary activities before taxation (1,902) (2,869)
Loss before tax at the effective rate of corporation
tax
in the United Kingdom of 19.50% (2016: 20%) (371) (574)
Effects of:
Expenses not deductible for tax purposes (50) 96
Temporary differences 18 (2)
Adjustment in respect of prior years - (2)
Adjustment in respect of prior years - Optimal Medicine
Limited - (142)
Tax rates other than the United Kingdom standard
rate - 27
Research and development uplifts net of losses surrendered
for tax credits 28 (153)
------------------------------------------------------------ ------------- -------------
Tax credit for the period (375) (750)
------------------------------------------------------------ ------------- -------------
The tax credit for each period can be reconciled as follows:
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
--------------------------------------------------------- ------------- -------------
Small or medium enterprise research and development
credit (311) (455)
Deduction for corporation tax on RDEC 27 27
Adjustment in respect of prior years - (2)
Adjustment in respect of prior years - Optimal Medicine
Limited - (142)
Tax due by foreign subsidiary undertakings 2 1
Deferred tax movement on amortisation (93) (179)
Tax credit for the period (375) (750)
--------------------------------------------------------- ------------- -------------
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:
As at As at
30 September 30 September
2017 2016
GBP'000 GBP'000
------------------------------------------- ------------- -------------
Current tax receivable at start of period 562 286
Current period credit 419 706
Corporation tax repayment (561) (430)
------------------------------------------- ------------- -------------
Current tax receivable at end of period 420 562
------------------------------------------- ------------- -------------
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:
As at As at
30 September 30 September
2017 2016
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Tax credit for the year 375 750
Deferred tax movement on amortisation (93) (179)
RDEC gross of corporation tax deduction 137 135
----------------------------------------- ------------- -------------
Current period credit 419 706
----------------------------------------- ------------- -------------
12. LOSS PER SHARE
Basic loss per share is calculated by dividing the loss for the
period attributable to equity holders by the weighted average
number of ordinary shares outstanding during the period after the
deduction of the weighted average number of the ordinary shares
held by the employee benefit trust during the period. At 30
September 2017, there were no shares held by the employee benefit
trust.
For diluted loss per share, the loss for the period attributable
to equity holders and the weighted average number of ordinary
shares outstanding during the period is adjusted to assume
conversion of all dilutive potential ordinary shares. As the effect
of the share options would be to reduce the loss per share, the
diluted loss per share is the same as the basic loss per share.
At 30 September 2017 and 30 September 2016, the Group has no
dilutive potential ordinary shares in issue.
The calculation of the Group's basic and diluted loss per share
is based on the following data:
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Loss for the period attributable to equity holders
for basic loss and adjusted for the effects of dilution (1,527) (2,119)
---------------------------------------------------------- ------------- -------------
As at As at
30 September 30 September
2017 2016
Number Number
------------------------------------------------------ ------------- -------------
Weighted ordinary shares in issue 26,929,554 24,350,856
Shares held by Trustees in respect to the Company's
Share Incentive Plan 2007 - (1,740)
------------------------------------------------------ ------------- -------------
Weighted average number of ordinary shares for basic
loss per share 26,929,554 24,349,116
------------------------------------------------------ ------------- -------------
13. PROPERTY, PLANT AND EQUIPMENT
Leasehold Fixtures
and
improvement fittings Equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
----------------------------------- ------------ ---------- ---------- --------
At 1 October 2015 62 7 277 346
----------------------------------- ------------ ---------- ---------- --------
Additions - other - 7 17 24
Additions - business combination - - 7 7
----------------------------------- ------------ ---------- ---------- --------
At 30 September 2016 62 14 301 377
----------------------------------- ------------ ---------- ---------- --------
Additions - other - - 21 21
Disposals - (7) (115) (122)
----------------------------------- ------------ ---------- ---------- --------
At 30 September 2017 62 7 207 276
----------------------------------- ------------ ---------- ---------- --------
Accumulated depreciation
----------------------------------- ------------ ---------- ---------- --------
At 1 October 2015 17 7 206 230
----------------------------------- ------------ ---------- ---------- --------
Additions - business combinations - - 4 4
Charge for the period 12 3 40 55
----------------------------------- ------------ ---------- ---------- --------
At 30 September 2016 29 10 250 289
----------------------------------- ------------ ---------- ---------- --------
Charge for the period 12 2 35 49
Disposals - (7) (115) (122)
----------------------------------- ------------ ---------- ---------- --------
At 30 September 2017 41 5 170 216
----------------------------------- ------------ ---------- ---------- --------
Net book value
At 30 September 2016 33 4 51 88
----------------------------------- ------------ ---------- ---------- --------
At 30 September 2017 21 2 37 60
----------------------------------- ------------ ---------- ---------- --------
At 30 September 2017 and 30 September 2016, the Company had no
property, plant and equipment.
14. INTANGIBLE ASSETS
Neurodegenerative Behavioural
disease health
Registered technology technology
Computer intellectual and marketing and marketing
Software property know-how know-how Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2015 - 150 500 - 650
----------------------------- --------- ------------- ------------------ -------------- --------
Additions - business
combination - - - 1,154 1,154
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2016 - 150 500 1,154 1,804
----------------------------- --------- ------------- ------------------ -------------- --------
Additions 28 - - - 28
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2017 28 150 500 1,154 1,832
----------------------------- --------- ------------- ------------------ -------------- --------
Amortisation and impairment
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2015 - 150 200 - 350
----------------------------- --------- ------------- ------------------ -------------- --------
Amortisation - - 100 192 292
Impairment - - - 603 603
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2016 - 150 300 795 1,245
----------------------------- --------- ------------- ------------------ -------------- --------
Amortisation - - 100 43 143
Impairment - - - 316 316
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2017 - 150 400 1,154 1,704
----------------------------- --------- ------------- ------------------ -------------- --------
Net book value
At 30 September 2016 - - 200 359 559
----------------------------- --------- ------------- ------------------ -------------- --------
At 30 September 2017 28 - 100 - 128
----------------------------- --------- ------------- ------------------ -------------- --------
Computer Software
Computer Software costs included the purchase of business
software as part of the Group's investment in management
information systems.
Registered intellectual property, neurodegenerative disease
technology and marketing know-how
Intangible assets were acquired through the reverse acquisition
on 14 October 2013 and recognised at their fair value at the date
of acquisition. Intangible assets include registered intellectual
property (royalty income from a third party), technology and
marketing related intangibles associated with neurodegenerative
disease conditions arising from IXICO plc's historic research and
development activities.
Registered intellectual property
The Group identified that the value of the registered
intellectual property had diminished as the estimated future cash
flows were GBPnil following the licensor's notification that the
study was terminated. Following this termination there would be no
further clinical development and therefore the intellectual
property will not generate future cash flows from milestones or
commercialisation.
Neurodegenerative disease technology and marketing know-how
During the reporting period, the Group identified no evidence
that indicate the neurodegenerative disease technology and
marketing know-how intangible asset may be impaired. The
assumptions in respect of the future cash flows and discount rate
have not changed since initial recognition.
Behavioural health technology and marketing know-how
Intangible assets were acquired through the business combination
on 8 December 2015 and recognised at their fair value at the date
of acquisition. Intangible assets represent technology and
marketing related intangibles associated with behavioural health
arising from Optimal Medicine Limited's research and development
activities.
The Group has identified that the value of the behavioural
health technology and marketing know-how has diminished in value
following a change in commercial focus and strategy. As at 30
September 2017, the recoverable amount was estimated to be GBPnil
(2016: GBP359,000), resulting in an impairment loss of GBP316,000
(2016: GBP603,000) being recognised for the year ended 30 September
2017.
At 30 September 2017 and 30 September 2016, the Company had no
intangible assets.
15. INVESTMENTS IN GROUP UNDERTAKINGS
Company
As at As at
30 September 30 September
2017 2016
GBP'000 GBP'000
IXITech Limited
At 1 October 2 2
At 30 September 2 2
-------------------------------------------------------- ------------- -------------
IXICO Technologies Limited
At 1 October 5,144 4,977
Issue of 142,581 shares on 2 October 2015 for the
exercise of share options at an average share price
of GBP0.302 - 44
Issue of 14,101 shares on 12 October 2015 for the
exercise of share options at an average share price
of GBP0.306 - 4
Issue of 29,773 shares on 30 September 2016 for the
exercise of share options at a share price of GBP0.24 - 7
Increase in capital contribution relating to share
option charge 174 112
At 30 September 5,318 5,144
-------------------------------------------------------- ------------- -------------
Optimal Medicine Limited
At 1 October 359 -
Consideration shares: 2,355,295 new ordinary shares
at GBP0.295 per share - 695
Deferred consideration shares: 590,093 new ordinary
shares at GBP0.295 per share - 174
Replacement share option scheme: 111,401 new ordinary
shares at GBP0.295 per share - 33
Exercise of OM Replacement Scheme 55,846 shares at 1 -
GBP0.01 per share
Impairment charge (360) (543)
-------------------------------------------------------- ------------- -------------
At 30 September - 359
-------------------------------------------------------- ------------- -------------
Total investments in Group undertakings 5,320 5,505
-------------------------------------------------------- ------------- -------------
IXITech Limited
The investment in IXITech Limited amounts to the par value of
the ordinary share capital of GBP2,000. As at 30 September 2017,
the business, trade and assets of IXITech Limited were transferred
to IXICO Technologies Limited.
IXICO Technologies Limited
The capital contribution relating to share-based payments
relates to share options granted by the Company to employees of
subsidiary undertakings in the Group in respect of the IXICO EMI
Share Option Plan 2014.
Optimal Medicine Limited
On 29 March 2017, 55,846 new ordinary shares were issued and
allotted in the Company pursuant to the put and call arrangement in
respect of the Optimal Medicine Limited share option instruments.
The options were exercised at a weighted average share price of
GBP0.26.
The Company has identified that the cost of investment in
Optimal Medicine Limited has diminished in value following a change
in commercial focus and strategy. As at 30 September 2017, the
recoverable amount is estimated to be GBPnil (2016: GBP359,000),
resulting in an impairment loss of GBP360,000 (2016: GBP543,000)
being recognised for the year ended 30 September 2017.
At 30 September 2017, the business trade and assets of Optimal
Medicine Limited was transferred to IXICO Technologies Limited.
16. TRADE AND OTHER RECEIVABLES
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ ------------- ------------- ------------- -------------
Amounts receivable within 1 year
Trade receivables 1,247 1,014 - -
Other receivables 55 151 - -
Other taxation and social security - - 2 1
Prepayments 185 188 40 21
------------------------------------------ ------------- ------------- ------------- -------------
Trade and other receivables 1,487 1,353 42 22
------------------------------------------ ------------- ------------- ------------- -------------
Amounts receivable after more
than 1 year
Amounts due from subsidiary undertakings - - 3,553 5,515
------------------------------------------ ------------- ------------- ------------- -------------
Amounts due from subsidiary undertakings - - 3,553 5,515
------------------------------------------ ------------- ------------- ------------- -------------
The average credit period granted to customers ranges from 30 to
90 days (2016: 30 to 90 days).
As at 30 September 2017, the Group had not recognised an
allowance for doubtful debts which are estimated to be
irrecoverable amounts.
Trade receivables include amounts which are past due at the year
end but against which the Group has not recognised an allowance for
doubtful receivables based on previous experience of payment
timings with these customers. There has not been a significant
change in credit quality and the amounts (which include interest
accrued on overdue receivable balances) are still considered
recoverable. As at 30 September 2017, the average age of the
receivables is 82 days (2016: 120 days).
As at the year end, the ageing of trade receivables which are
past due but not impaired is as follows:
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- ------------- -------------
Less than 30 days past due 79 25 - -
31-60 days past due 39 - - -
61-90 days past due - - - -
More than 90 days past due - - - -
---------------------------------- ------------- ------------- ------------- -------------
Total trade receivables past due
but not impaired 118 25 - -
---------------------------------- ------------- ------------- ------------- -------------
The fair value of trade and other receivables approximate their
current book values. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of financial
assets disclosed in note 23 of the consolidated financial
statements.
Amounts due from subsidiary undertakings are interest bearing
(2016: interest bearing), unsecured and have no fixed date of
repayment but are not anticipated to be receivable until after more
than one year.
17. DEFERRED TAX ASSET (UNRECOGNISED)
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- ------------- -------------
Tax effect of temporary differences:
Depreciation in excess of tax
allowances (84) (101) (2) (2)
Accumulated losses (12,422) (11,542) (1,680) (1,442)
Deductible temporary differences (4) (56) (4) (3)
-------------------------------------- ------------- ------------- ------------- -------------
Deferred tax asset (unrecognised) (12,510) (11,699) (1,686) (1,447)
-------------------------------------- ------------- ------------- ------------- -------------
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 reverse, based on tax
rates and laws enacted or substantively enacted at the latest
balance date, currently 19% (2016: 20%).
The unrecognised deferred tax is based on material temporary
differences that have originated but not reversed at the balance
sheet 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.
18. TRADE AND OTHER PAYABLES
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------------- ------------- -------------
Amounts falling due within 1 year
Trade payables 270 216 40 12
Other taxation and social security 174 130 - -
Accrued expenses 1,108 922 73 61
Other payables 23 43 - -
---------------------------------------- ------------- ------------- ------------- -------------
Trade and other payables 1,575 1,311 113 73
---------------------------------------- ------------- ------------- ------------- -------------
Amounts falling due after more
than 1 year
Amounts due to subsidiary undertakings - - - 1,748
---------------------------------------- ------------- ------------- ------------- -------------
Amounts due to subsidiary undertakings - - - 1,748
---------------------------------------- ------------- ------------- ------------- -------------
Trade payables and accrued expenses principally comprise amounts
outstanding for trade purchases and ongoing costs. As at 30
September 2017, the average credit period taken for trade purchases
is 58 days (2016: 47 days). No interest is charged on the trade
payables. The Company'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.
Amounts due to subsidiary undertakings are interest bearing
(2016: interest bearing), unsecured and have no fixed date of
repayment but are not anticipated to be payable until after more
than one year.
19. DEFERRED TAX LIABILITY
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------------- ------------- -------------
Balance at start of period 112 60 - -
Deferred tax liability resulting - 231 - -
from the business combination
Amortisation (30) (58) - -
Reversal on impairment (63) (121) - -
---------------------------------- ------------- ------------- ------------- -------------
Balance at end of period 19 112 - -
---------------------------------- ------------- ------------- ------------- -------------
The 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
was initially measured at 20% and subsequently measured at 19%, the
current effective rate of corporation tax in the United Kingdom.
The deferred tax liability is being amortised using the
straight-line method over five years, reflecting the estimated
useful economic life of the intangible asset. Amortisation is
disclosed under general and administrative expenses in the
consolidated statement of comprehensive income.
Behavioural health technology and marketing know-how
As at 30 September 2017, the Group recognised an impairment loss
of GBP316,000 in the year ended 30 September 2017 (2016:
GBP603,000). This results in a GBP63,000 (2016: GBP121,000)
reduction in the associated deferred tax liability.
Further information of the Group's intangible asset can be found
in note 14 of the consolidated financial statements.
20. ISSUED CAPITAL AND RESERVES
Ordinary shares and share premium
Group and Company
Ordinary
shares of Share Share
1 pence Capital premium
Number GBP'000 GBP'000
---------------------------------------------- ----------- -------- --------
At 30 September 2015 15,058,982 7,529 76,804
---------------------------------------------- ----------- -------- --------
Issued on 2 October 2015 for the exercise
of share options 142,581 71 -
Issued on 12 October 2015 for the exercise
of share options 14,101 7 -
Issued on 8 December 2015 for placement 8,872,459 89 2,617
Issued on 8 December 2015 for the cost of
acquisition 2,355,295 24 -
Issued on 30 September 2016 for the exercise 29,773 - -
of share options
---------------------------------------------- ----------- -------- --------
At 30 September 2016 26,473,191 7,720 79,421
---------------------------------------------- ----------- -------- --------
Issued on 4 January 2017 for the issue of
deferred consideration shares 590,093 1 -
Issued on 29 March 2017 for the exercise
of share options 55,846 6 -
At 30 September 2017 27,119,130 7,727 79,421
---------------------------------------------- ----------- -------- --------
Share capital
On 8 December 2015, the Company effected a restructuring of the
share capital of the Company whereby each existing ordinary share
was sub-divided and re-designated each into 1 ordinary share of 1
pence and 1 deferred share of 49 pence.
The ordinary shares retain all the rights currently attaching to
the existing ordinary shares in respect of dividends, voting and
any return on capital. Other than the change in nominal value
therefore, the ordinary shares are identical to the existing
ordinary shares.
The deferred shares carry minimal rights thereby rendering them
effectively valueless. The rights attaching to the deferred shares
can be summarised as follows:
-- the holders thereof do not have any right to participate in
the profits or income or reserves of the Company;
-- on a return of capital on a winding up the holders thereof
will only be entitled to an amount equal to the nominal value of
the deferred shares but only after the holders of ordinary shares
have received GBP10,000,000 in respect of each ordinary share;
-- the holders thereof have no right to receive notice of or
attend or vote at any general meeting of the Company; and
-- the Company may acquire the deferred shares for a nominal consideration at any time.
No application has been made to the London Stock Exchange for
the deferred shares to be admitted to trading on the AIM market or
any other stock exchange.
Issue of deferred consideration shares
On the 4 January 2017, the Company issued 590,093 new ordinary
shares in respect of the deferred consideration for the acquisition
of Optimal Medicine Limited.
Exercise of share options
On 29 March 2017, 55,846 new ordinary shares were issued and
allotted in the Company pursuant to the put and call arrangement in
respect of the Optimal Medicine Limited share option instruments.
The options were exercised at a weighted average share price of
GBP0.26.
The Group and Company does not have an authorised share capital
as provided by the Companies Act 2006.
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
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.
IXICO Share Incentive Plan 2007
The IXICO Share Incentive Plan 2007 was closed on 15 November
2013 and at 30 September 2017, there were no shares held by the
employee trust.
21. SHARE-BASED PAYMENTS
Certain Directors and employees of the Group hold options to
subscribe for shares in the Group under share option schemes. The
number of shares subject to options, the periods in which they were
granted and the period in which they may be exercised are given
below.
The Group operates 2 share option schemes (2016: 3), all of
which are equity settled. The change in the number of share options
outstanding at end of period and the number weighted average
exercise prices during the year were as follows:
Grant date Outstanding Granted Exercised Lapsed Outstanding
at start at end of
of period period
----------------- ------------ ---------- ---------- ------------ ------------
IXICO EMI Share Option Plan
2014
------------------------------- ---------- ---------- ------------ ------------
1 October 2014 441,725 - - (283,605) 158,120
29 March 2016 1,740,627 - - (773,687) 966,940
7 February 2017 - 1,044,698 - (47,686) 997,012
7 August 2017 - 713,940 - - 713,940
TOTAL 2,182,352 1,758,638 - (1,104,978) 2,836,012
----------------- ------------ ---------- ---------- ------------ ------------
IXICO plc replacement share option scheme: Optimal Medicine Limited
8 December 2015 111,401 - (55,846) (55,555) -
TOTAL 111,401 - (55,846) (55,555) -
----------------- ------------ ---------- ---------- ------------ ------------
2,293,753 1,758,638 (55,846) (1,160,533) 2,836,012
----------------- ------------ ---------- ---------- ------------ ------------
IXICO 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. Vesting
period varies by award and the conditions approved by the
Board.
If the options remain unexercised by 7 May 2024 from the date of
grant, the options expire. The options lapse if an employee leaves
the Company before the options vest.
IXICO plc replacement share option scheme: Optimal Medicine
Limited
IXICO plc established a put and call arrangement to satisfy the
exercise of outstanding Optimal Medicine Limited unapproved share
option instruments, granting 111,401 restated ordinary shares
(2,948 shares). The exercise of these options is at the option of
the holder with a fixed conversion rate of 37.79 for the effective
issue of new IXICO plc shares.
On 29 March 2017, 55,846 restated new ordinary shares (1,475
shares) were issued and allotted in the Company pursuant to the put
and call arrangement in respect of the Optimal Medicine Limited
unapproved share option instruments. The options were exercised at
a weighted average share price of GBP0.26.
As at 30 September As at 30 September
2017 2016
Weighted Weighted
average average
exercise exercise
Number price Number price
-------------------------------- ------------ --------- ---------------- -------------
Outstanding at start of period 2,293,753 GBP0.33 1,473,159 GBP0.94
Granted 1,758,638 GBP0.35 1,889,675 GBP0.29
Exercised (55,846) GBP0.26 (186,454) GBP0.01
Lapsed (1,160,533) GBP0.34 (882,627) GBP1.33
-------------------------------- ------------ --------- ---------------- -------------
Outstanding at end of period 2,836,012 GBP0.35 2,293,753 GBP0.33
Exercisable at end of period 248,470 GBP0.31 111,401 GBP0.00
-------------------------------- ------------ --------- ---------------- -------------
The number of share options outstanding at the end of the period
was 2,836,012 or 84% of the total share option pool. The total
share option pool represents 12.5% of the total ordinary shares in
issue.
During the year ended 30 September 2017, 1,758,638 options were
granted under the IXICO EMI Share Option Plan 2014 (2016:
1,778,274). The estimated fair value of the options granted is
GBP207,484 (2016: GBP244,000). The inputs used in the measurement
of fair value at grant date of the share options issued are as
follows:
IXICO plc IXICO plc IXICO plc
7 August 2017 7 February 2017 29 March 2016 grant
grant grant
--------------------- --------------------- --------------------- ---------------------
Weighted average GBP0.34 GBP0.37 GBP0.39
share price
Weighted average GBP0.34 GBP0.37 GBP0.31
exercise price
Expected volatility 29.7% 58% 42.8%
Expected life 7 years 7 years 8 years
Expected dividends 0% 0% 0%
Risk free interest
rate 0.78% 0.86% 1.5%
Model used Monte Carlo followed Monte Carlo followed Monte Carlo followed
by 'Hull White' by 'Hull White' by 'Hull White'
trinomial lattice trinomial lattice trinomial lattice
--------------------- --------------------- --------------------- ---------------------
Note to assumptions:
Expected volatility
Expected volatility is based on historical performance of the
share price using exponentially weighted moving average ("EWMA")
function. This model uses exponential smoothing to give more weight
to recent closing share prices than to more historic share prices.
The share price period incorporated into the model spans from the
reverse acquisition date on 14 October 2013 to the grant date.
The movement in expected volatility between the 7 February 2017
and 7 August 2017 share option grant was a result of the EWMA model
applying different weighting to the 2 December 2016 share price
peak of GBP0.44 in the year ended 30 September 2017 (average:
GBP0.31). This share price peak was given more weighting under the
7 February 2017 share option grant, resulting in an expected
volatility of 58%, as the share price peak was closer to the 7
February 2017 share option grant, than to the 7 August 2017 share
option grant which had an expected volatility of 29.7%.
Expected life
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
Expected dividends
The historical dividend yield is 0.0%.
Risk free interest rate
The risk free rate has been taken from the United Kingdom gilts
over the expected life of the share options.
Share options granted during the year ended September 2017 have
a 3 year vesting period with vesting triggered on the achievement
of strategic corporate goals.
Total share options outstanding have a range of exercise prices
from GBP0.23 to GBP0.49 per option and the weighted average
contractual life is 6.6 years (2016: 5.8 years).The total charge
for each period relating to employee share-based payments plans for
continuing operations is disclosed in note 9 of the consolidated
financial statements.
22. OPERATING LEASE ARRANGEMENTS
Year ended Year ended
30 September 30 September
2017 2016
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Minimum lease payments under operating leases recognised
as an expense in the period 130 131
---------------------------------------------------------- ------------- -------------
As at the year end, the Group has outstanding commitments under
non-cancellable operating leases, which fall due as follows:
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------------- ------------- ------------- -------------
Within 1 year 145 143 - -
In the 2 to 5 years inclusive 73 212 - -
After 5 years - - - -
------------------------------- ------------- ------------- ------------- -------------
Operating lease payments represent rental payable by the Group
for its registered office and printers. As at 30 September 2017,
the building lease has 1.5 years to run and the printer lease has 3
years to run.
23. FINANCIAL RISK MANAGEMENT
In common with all other areas of the business, the Group is
exposed to risks that arise from the use of financial instruments.
The 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.
Liquidity risk management
Liquidity risk is the risk that the Group will not be able to
meet its obligations without incurring excessive losses. The Group
monitors its levels of working capital to ensure that it can meet
its repayments as they fall due. Ultimate responsibility for
liquidity risk management rests with the Board of Directors, which
has built an appropriate management framework for the management of
the Group's short, medium and long-term funding and liquidity
management requirements.
The table below analyses the Group's financial assets and
liabilities:
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
--------------------------------------- ------------- ------------- ------------- -------------
Loans and Loans and Loans and Loans and
receivables receivables Receivables receivables
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- ------------- ------------- -------------
Assets as per statement of financial
position
Trade and other receivables excluding
prepayments 1,302 1,165 3,553 5,515
Cash and cash equivalents 2,414 3,120 396 1,168
--------------------------------------- ------------- ------------- ------------- -------------
3,716 4,285 3,949 6,683
--------------------------------------- ------------- ------------- ------------- -------------
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
------------------------------------ ------------- ------------- ------------- -------------
Financial Financial Financial Financial
liabilities liabilities liabilities liabilities
at at at at
amortised amortised amortised amortised
cost cost cost cost
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ------------- ------------- -------------
Liabilities as per statement of
financial position
Trade and other payables excluding
statutory liabilities 1,401 1,181 113 1,821
Deferred consideration - 174 - 174
------------------------------------ ------------- ------------- ------------- -------------
1,401 1,355 113 1,995
------------------------------------ ------------- ------------- ------------- -------------
The Group's financial liabilities are all due within three
months of the balance sheet date and it does not have any
borrowings or payables on demand which would increase the risk of
Group not holding sufficient reserves for repayment.
The principal current asset of the business is cash and cash
equivalents, therefore it is the principal financial instrument
employed by the Group. The Directors ensure that the business
maintains surplus cash reserves to minimise any liquidity risk.
Financial instruments are measured at amortised cost.
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 optimise
interest costs and reduce volatility in reported earnings.
The Group does not have any committed interest bearing borrowing
facilities. Consequently, there is no material exposure to interest
rate risk in respect of financial liabilities.
The Group holds all cash and cash equivalents with institutions
with a recognised high rating. Interest rates on current accounts
are floating. Changes in interest rates may increase or decrease
the Group's finance income.
Foreign currency risk management
Foreign currency risk is the risk that the fair value or future
cash flows of an exposure will fluctuate because of changes in
foreign exchange rates.
The Group's exposure to the risk of changes in foreign exchange
rates relates primarily to the Group's overseas operating
activities, primarily denominated in U.S. Dollars, Euro and Swiss
Franc and the Group's net investments in foreign subsidiaries. The
Group's exposure to foreign currency changes for all other
currencies is not material.
At present, the Group does not make use of financial instruments
to minimise any foreign exchange gains or losses so any
fluctuations in foreign exchange movements may have a material
adverse impact on the results from operating activities. However
the Group does seek to minimise the exposure to such risk by
matching local currency income with local currency costs where
possible. The Group will also 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
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
US Dollar exposure USD'000 USD'000 USD'000 USD'000
-------------------------- ------------- ------------- ------------- -------------
Balance at end of period
Monetary assets 894 1,124 - -
Monetary liabilities (28) (53) - -
-------------------------- ------------- ------------- ------------- -------------
Total exposure 866 1,071 - -
-------------------------- ------------- ------------- ------------- -------------
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
Euro exposure EUR'000 EUR'000 EUR'000 EUR'000
-------------------------- ------------- ------------- ------------- -------------
Balance at end of period
Monetary assets 565 353 - -
Monetary liabilities (126) (7) - -
-------------------------- ------------- ------------- ------------- -------------
Total exposure 439 346 - -
-------------------------- ------------- ------------- ------------- -------------
Group Company
As at As at As at As at
30 September 30 September 30 September 30 September
2017 2016 2017 2016
Swiss Franc exposure CHF'000 CHF'000 CHF'000 CHF'000
-------------------------- ------------- ------------- ------------- -------------
Balance at end of period
Monetary assets 146 79 - -
Monetary liabilities (124) (47) - -
-------------------------- ------------- ------------- ------------- -------------
Total exposure 22 32 - -
-------------------------- ------------- ------------- ------------- -------------
Foreign currency sensitivity analysis
As at 30 September 2017, 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 (2016: 10%). The sensitivity
analysis was applied on the fair value of financial assets and
liabilities.
If Sterling had been 10% (2016: 10%) weaker in relation to the
U.S. Dollar, Euro and Swiss Franc then the impact would have been
as follows:
Group
GBP'000 GBP'000 GBP'000 GBP'000
USD EUR CHF Total
------------------------------ -------- -------- -------- --------
Year ended 30 September 2017 (59) (35) (2) (96)
Year ended 30 September 2016 (75) (27) (2) (104)
------------------------------ -------- -------- -------- --------
If Sterling had been 10% (30 September 2016: 10%) stronger in
relation to the U.S. Dollar, Euro and Swiss Franc then the impact
would have been as follows:
Group
GBP'000 GBP'000 GBP'000 GBP'000
USD EUR CHF Total
------------------------------ -------- -------- -------- --------
Year ended 30 September 2017 72 43 2 117
Year ended 30 September 2016 92 33 3 128
------------------------------ -------- -------- -------- --------
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.
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 makes appropriate enquiries of the
counterparty and independent third parties to determine credit
worthiness. The Group does not have any significant credit risk
exposure to any single counterparty or Group of counterparties
having similar characteristics.
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 rating.
The Group's credit risk is primarily attributable to its trade
receivables. The amounts presented in the balance sheet 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. 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 the
cash flows. The Group continually reviews customer credit limits
based on market conditions and historical experience. Note 16 in
the consolidated financial statements sets out the impairment
provision for credit losses on trade receivables and the ageing
analysis of overdue trade receivables.
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
2017.
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 and issue new shares.
24. RELATED PARTY TRANSACTIONS
Group
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Key management compensation is disclosed in note 9 of the
consolidated financial statements.
During the year ended 30 September 2017, the Group sold project
management services totalling GBPnil (2016: GBP39,000) to
University College London Business plc, a shareholder. The amount
owed by University College London Business plc at 30 September 2017
was GBPnil (2016: GBP5,700).
During the year ended 30 September 2017, the Group purchased
services totalling GBP30,000 (2016: GBP34,000) from University
College London Business Plc, a shareholder. The amount owed to
University College London Business Plc at 30 September 2017 was
GBP6,000 (2016: GBP2,000).
During the year ended 30 September 2017, the Group purchased
services totalling GBP1,000 (2016: GBPnil) from King's College
London, a shareholder. The amount owed to King's College London at
30 September 2017 was GBPnil (2016: GBPnil).
During the year ended 30 September 2017, the Group was charged
GBP7,000 (2016: GBP10,000) from Imperial Innovations Businesses
LLP, a shareholder, in respect of a joint intellectual property
licence agreement. The amount owed to Imperial Innovations
Businesses LLP at 30 September 2017 was GBPnil (2016: GBPnil).
During the year ended 30 September 2017, the Group was charged
monitoring fees totalling GBP16,000 (2016: GBP1,000) from IP Group
plc, a shareholder. The amount owed to IP Group plc at 30 September
2017 was GBPnil (2016: GBPnil).
Company
The Company is responsible for financing and setting Group
strategy. The Company's subsidiaries carried out the Group's
research and development strategy, employed all the staff including
the Executive Directors and managed the Group's intellectual
property. The Company provides interest bearing and unsecured
funding to its subsidiaries with no fixed date of repayment. The
Company manages the Group's funds and makes payments, including
managing the payments of the Company.
During the year ended 30 September 2017, the Company has been
charged GBP335,000 (2016: GBP260,000) for corporate services
provided by subsidiary undertakings. Details of the inter-company
balances can be found on the face of the Company statement of
financial position.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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December 11, 2017 02:00 ET (07:00 GMT)
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