TIDMIXI
RNS Number : 2580A
IXICO plc
23 May 2023
23 May 2023
IXICO plc
("IXICO", the "Company" or the "Group")
Half yearly report to 31 March 2023
IXICO plc (AIM: IXI), the medical imaging advanced analytics
company delivering intelligent insights in neuroscience , announces
its unaudited interim results for the six months ended 31 March
2023.
Commercial and operational highlights
-- Client contracts worth GBP2.8m signed during the period;
-- Order book of GBP13.3 million at 31 March 2023 (H1 2022:
GBP12.6m) following the signing of contracts totalling GBP11.6m
across the last twelve months;
-- Expansion of core imaging (MRI, PET and SPECT) services to
provide an extended offering to address clinical trial
opportunities in Alzheimer's Disease (AD), Multiple Sclerosis (MS)
and Parkinson's Disease (PD); and
-- GBP1.0m additional funding secured for the IXICO-led HD-IH
Consortium which is now committed to the analysis of over 6,000
Huntington's disease MRI data sets utilising IXICO's proprietary
IXIQ.Ai analysis platform.
Financial highlights
-- Revenues of GBP3.2 million for the six months to 31 March 2023 (H1 2022: GBP3.9m);
-- Gross margin at 46.1% (H1 2022: 59.8%);
-- Loss before interest, taxation, depreciation and amortisation
('EBITDA') of GBP0.6m (H1 2022: GBP0.5m profit);
-- GBP5.0 million cash as at 31 March 2023 (H1 2022: GBP5.8m);
-- GBP0.2m operational cash inflow (H1 2022: GBP0.2m);
-- Net assets of GBP11.9m (H1 2022: GBP11.8m); and
-- Loss per share of 1.50p (H1 2022: 0.35p profit).
Giulio Cerroni, CEO of IXICO, commented:
"We complete the first six months of the year on track to
achieve our full year guidance of GBP7.0m revenues for the year. We
expect the combination of our diversified order book and near-term
opportunities to deliver revenue growth in the second half of this
financial year, relative to the first half, and return the Company
to year-on-year revenue growth in 2024.
Following a multi-year programme of ongoing investment in our IT
infrastructure, we are excited by the anticipated launch of our
next generation TrialTracker image data collection and management
system in the coming year.
This highly scalable platform will ensure that IXICO continues
to be able to satisfy our clients' increasingly stringent data
security requirements as we look to further penetrate a highly
regulated clinical trials market. The new platform ensures that our
business can easily scale as we anticipate levels of investment in
neurological development to accelerate further as tangible drug
development progress in disease areas such as Alzheimer's disease
is delivered by the biopharmaceutical industry.
As we look forward, the development of our order book remains a
priority which we are addressing through further investment in our
commercial capabilities.
Successfully executing on our five-pillar strategy will enable
IXICO to secure more contracts from a more extensive customer base
and capture a more substantial share of the growing market
opportunity from the investments made in addressing a broader range
of neurological diseases."
A recording of the results presentation will be made available
on the Group's website here:
https://ixico.com/investors/company-information/investor-videos/
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as amended by The
Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the
publication of this announcement via the Regulatory Information
Service, this inside information is now considered to be in the
public domain.
For further information please contact:
IXICO plc +44 (0)20 3763 7499
Giulio Cerroni, Chief Executive Officer
Grant Nash, Chief Financial Officer
Cenkos Securities PLC (Nominated adviser
and sole broker) +44 (0)20 7397 8900
Giles Balleny / Max Gould (Corporate
Finance)
Michael F Johnson / Tamar Cranford-Smith
(Sales)
About IXICO
IXICO is dedicated to delivering insights in neuroscience to
help transform the advancement of investigational therapies for
neurological diseases, such as Huntington's disease, Parkinson's
disease and Alzheimer's disease. The Company's purpose is to
advance medicine and human health by turning data into clinically
meaningful information, providing valuable new insights in
neuroscience by supporting pharmaceutical companies across all
phases of CNS clinical research. IXICO's goal is to be a leading
advocate of artificial intelligence in medical image analysis.
IXICO has developed and deployed breakthrough data analytics, at
scale, through its remote access technology platform, to improve
the return on investment in drug development and reduce risk and
uncertainty in clinical trials for the Company's pharmaceutical
clients.
More information is available on www.IXICO.com
CHIEF EXECUTIVE OFFICER'S STATEMENT
Statement from Giulio Cerroni
Across the past six months, we have delivered revenues of GBP3.2
million (H1 2022: GBP3.9m) and, as at 31 March 2023, our order book
totalled GBP13.3 million (H1 2022: GBP12.6 million). These two
figures reflect the full and final negative revenue impact in 2023
of the large client trial cessations reported in 2021 and 2022 and
also provide improved visibility to future contracted revenues, as
compared to twelve months ago. This supports our expectation that
revenues would bottom out during the first half of 2023 before
returning to revenue growth, relative to H1 2023, across H2 2023
and 2024.
As previously communicated, our revenue mix has shifted
significantly across the last three years from revenues principally
related to a single large late phase clinical trial, to revenues
from a greater number of individually smaller, early phase clinical
trials. This highlights the requirement to build operational
capabilities and scale to service all phases of development in
servicing the clinical trials market. Clinical trials commence with
relatively small, more labour-intensive, early phase trials before,
if successful, progressing into much larger trials requiring
significant analysis of imaging data. Whilst this change in mix to
early phase trials is accompanied by a reduction in gross margin
over the last few months at 46% (H1 2022: 60%), we are well
positioned to accompany more successful trials to later phases in
the coming years, which can be expected to deliver revenues at
higher margins.
Our strengthened order book compared to twelve months ago,
continues to reflect the recent trend of a more diversified client
base with our largest client expected to deliver approximately 20%
of our 2023 revenues, as compared to almost 40% in the prior year.
Similarly, whilst we continue to see our expertise contracted in
Huntington's disease ('HD') we are also delivering over 25% of our
revenues from Alzheimer's disease ('AD') studies as we pursue
growth in this important and large neurological clinical trials
market.
Despite recent reports by multiple pharma companies of cuts to
R&D budgets, AD continues to represent a multi-billion-dollar
market for successful disease modifying drugs and the recent
progress achieved in this therapeutic indication is anticipated to
attract long term investment into AD research and development. This
is exemplified by the accelerated FDA approval of Eisai's Leqembi
drug and reported successes of Eli Lilly's Donanemab, which has
been shown to reduce clinical decline by approximately a third
compared to placebo in early-stage AD patients. Further, the
approval of these drugs, and their application in the clinic, opens
further opportunities for image analysis service providers such as
IXICO, particularly around safety monitoring. The monitoring of
known potential side effects of these drugs such as the risk of
ARIA (Amyloid-related imaging abnormalities) will be an important
accompaniment in the healthcare setting to the prescription of
these drugs.
At IXICO, this confidence in the growth opportunity for a
specialist provider of neurological disease biomarker analysis has
underpinned our continued investment program. A significant and
critical investment for IXICO is our next generation image capture
and analysis platform, which is approaching completion. In an
increasingly regulated market environment, the platform will
provide regulation and cyber-security risk-driven capabilities that
are required to achieve seamless image data collection in an
efficient, robust and secure CFR 11 compliant manner; irrespective
of the global location of the original data collection. The nature
of the technology that forms the basis of this platform (developed
using Microsoft's Azure cloud platform) will provide IXICO with a
highly scalable, extensible platform and it underpins our growth
ambitions to become a leading neuroimaging clinical-trials service
provider to the global pharmaceutical industry.
Alongside this we continue to strengthen our portfolio in both
MRI and PET imaging technologies, including novel PET and SPECT
analysis solutions that will launch later in the year, to provide a
full offering across a wide range of CNS clinical trials, across
all stages of development.
These investments follow the success of our IXIQ.Ai MRI imaging
analysis platform, launched in 2022, which led to the formation of
the HD-IH consortium. The consortium now constitutes three
biopharmaceutical companies alongside IXICO and CHDI, securing
additional funding to accelerate and complete the analysis of over
6,000 HD datasets which will enhance research and drug development
in this therapeutic indication.
In reporting an EBITDA loss of GBP0.6m for the first six months
of 2023 (H1 2022: GBP0.5m profit), careful cost management will
continue to be a focus in 2023 as we balance a period of lower
revenues and increased inflationary pressures alongside the
commitment to investments designed to enhance growth across the
medium- and long-term. As we rebuild our order book, we expect to
see increased revenues in 2024.
We hold a strong, debt-free, cash position of GBP5.0m as at 31
March 2023 (H1 2022: GBP5.8m), and have generated GBP0.2m operating
cash inflows across the six month period (H1 2022: GBP0.2m), which
provide a resilience to our financial position, important at a time
of wider global and market uncertainty, and which allows us to
continue to pursue the growth opportunities presented by the
attractive CNS clinical trials space.
Financial Review
KPI H1-23 H1-22 Movement FY22
---------------------- --------- -------- ------------------ ----------
Revenue GBP3.2m GBP3.9m (GBP0.7m) GBP8.6m
â
Gross profit GBP1.5m GBP2.3m (GBP0.8m) GBP5.2m
â
Gross margin 46.1% 59.8% (13.7%) â 60.7%
EBITDA profit /(loss) (GBP0.6m) GBP0.5m (GBP1.1m) GBP1.5m
â
EBITDA margin (18.9%) 12.5% (31.6%) â 17.9%
Operating profit / (GBP0.9m) GBP0.2m (GBP1.1m) GBP0.9m
(loss) â
Profit / (loss) per
share (1.50p) 0.35p (1.85p) â 2.14p
Order book(1) GBP13.3m GBP12.6m GBP0.7m GBP16.0m
á
Cash GBP5.0m GBP5.8m (GBP0.8m) GBP5.8m
â
Net Assets GBP11.9m GBP11.8m GBP0.1m GBP12.5m
á
---------------------- --------- -------- --------- ------- --------
(1) Order book is contracted but not yet recognised revenue
adjusted down to reflect the Company's best estimate of
delivery.
Revenue
-- The Company reports revenue of GBP3.2 million (H1 2022:
GBP3.9m) representing an 18.3% decrease on the prior period.
-- This reduction was caused by the final tail effects of large
client trials being cancelled during 2021 and 2022. The contract
cycle typical of the clinical trials market leads to a recovery in
the contracted order book before it is seen in revenue.
-- The Company anticipates a stronger second half of the
financial year as the trials relating to contracts won over the
last 12 months commence and progress beyond start-up phases.
Gross profit and margin
-- Gross profit of GBP1.5 million (H1 2022: GBP2.3m) with a
gross margin of 46.1% (H1 2022: 59.8%).
-- The year-on-year change is reflective of reduced revenue, and
a greater proportion of this revenue consisting of services to
smaller-scale early-phase clinical trials. These earlier phase
trials tend to be more labour intensive and therefore lower
margin.
-- The Company has been impacted by high market-driven
inflation, both in relation to its employee and non-employee cost
base. These cost increases are seen within the Company's margins
when it has not been possible to pass these onto clients.
Operating expenses and capital expenditure
-- Operating expenditure of GBP2.6 million (H1 2022: GBP2.6m)
-- Careful management of operating expenditure has been offset
by the impact of inflation plus increased expenditure within sales
and marketing as the Company continues to rebuild its commercial
team.
-- Capitalised R&D expenditure in the period totalled GBP0.8
million (H1 2022: GBP1.0m), predominantly in the Company's next
generation image capture and analysis platform and also in new
image analysis capabilities.
EBITDA and operating profit / (loss)
-- EBITDA loss of GBP0.6 million (H1 2022: GBP0.5m profit) and
operating loss of GBP0.9m (H1 2022: GBP0.2m profit). Both
reflecting the reduced revenues across the period whilst the
Company's cost base has remained largely flat (with cost management
actions largely offset by inflation and increased sales and
marketing expenditure).
Order book
-- Order book of GBP13.3m at 31 March 2023 (H1 2022: GBP12.6m).
Across the last twelve months the order book has increased by
GBP0.7m reflecting GBP11.6m of new contract wins, offset by GBP7.9m
revenues recognised and GBP2.9m of contract value reductions
reflecting the cancellation or descope of a small number of
clinical trials, the most significant resulting in a descope of
GBP0.6m from the order book (as announced on 8 December 2022).
-- The order book has also seen a relatively minor (GBP0.1m)
negative foreign exchange impact driven by the strengthening of GBP
relative to USD across the past twelve months.
Cash
-- Cash of GBP5.0 million at 31 March 2023 (H1 2022: GBP5.8m).
This reflects operating cash inflows of GBP0.2m (H1 2022: GBP0.2m)
offset by capital investment of GBP0.9m (H1 2022: GBP1.1m).
Net Assets
-- Reported net assets at 31 March 2023 of GBP11.9m (H1 2022:
GBP11.8m). This reflects the increase of the Company's non-current
asset position to GBP6.0m (H1 2022: GBP4.5m) partially offset by a
reduction in its working capital to GBP6.3m (H1 2022: GBP7.7m).
Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2023 - unaudited
31-Mar-23 31-Mar-22 30-Sep-22
6 months 6 months 12 months
Restated
Unaudited Unaudited Audited
Notes GBP000 GBP000 GBP000
-------------------------------------------------- ------ ---------- ----------- ----------
Revenue 3,203 3,922 8,643
Cost of sales (1,727) (1,576) (3,400)
-------------------------------------------------- ------ ---------- ----------- ----------
Gross profit 1,476 2,346 5,243
Other income 175 393 689
Operating expenses
Research and development expenses (464) (631) (1,217)
Sales and marketing expenses (617) (545) (1,226)
General and administrative expenses (1,483) (1,394) (2,581)
Total operating expenses (2,564) (2,570) (5,024)
-------------------------------------------------- ------ ---------- ----------- ----------
Operating profit / (loss) (913) 169 908
Finance income 44 - 10
Finance expense (15) (16) (33)
Profit / (loss) on ordinary activities
before taxation (884) 153 885
Taxation 159 15 147
-------------------------------------------------- ------ ---------- ----------- ----------
Profit / (loss) attributable to equity
holders for the period (725) 168 1,032
-------------------------------------------------- ------ ---------- ----------- ----------
Other comprehensive expense:
Items that will be reclassified subsequently
to profit or loss
Foreign exchange translation differences (21) 12 14
Movement in fair value of cash flow hedges 135 (5) (214)
Cash flow hedges recycled to revenue 16 - 103
-------------------------------------------------- ------ ---------- ----------- ----------
Total other comprehensive expense 130 7 (97)
Total comprehensive income / (loss) attributable (595) 175 935
------
to equity holders for the period
-------------------------------------------------- ------ ---------- ----------- ----------
Profit / (loss) per share (pence)
-------------------------------------------------- ------ ---------- ----------- ----------
Basic profit / (loss) per share 3 (1.50) 0.35 2.14
Diluted profit / (loss) per share 3 (1.50) 0.33 2.03
-------------------------------------------------- ------ ---------- ----------- ----------
Consolidated Statement of Financial Position
As at 31 March 2023 - unaudited
31-Mar-23 31-Mar-22 30-Sep-22
6 months 6 months 12 months
Restated
Unaudited Unaudited Audited
Notes GBP000 GBP000 GBP000
-------------------------------------- ------ ---------- ----------- ----------
Assets
Non-current assets
Property, plant and equipment 707 890 817
Intangible assets 5,309 3,647 4,587
Total non-current assets 6,016 4,537 5,404
Current assets
Trade and other receivables 1,962 2,671 3,029
Current tax receivables 789 658 453
Derivative financial asset 39 - -
Cash and cash equivalents 5,021 5,801 5,769
--------------------------------------- ------ ---------- ----------- ----------
Total current assets 7,811 9,130 9,251
Total assets 13,827 13,667 14,655
--------------------------------------- ------ ---------- ----------- ----------
Liabilities and equity
Non-current liabilities
Trade and other payables 17 51 33
Lease liabilities 321 469 394
--------------------------------------- ------ ---------- ----------- ----------
Total non-current liabilities 338 520 427
Current liabilities
Trade and other payables 1,373 1,308 1,502
Derivative financial liability - 5 111
Lease liabilities 186 76 122
--------------------------------------- ------ ---------- ----------- ----------
Total current liabilities 1,559 1,389 1,735
--------------------------------------- ------ ---------- ----------- ----------
Total liabilities 1,897 1,909 2,162
--------------------------------------- ------ ---------- ----------- ----------
Equity
Ordinary shares 4 484 482 482
Share premium 4 84,802 84,802 84,802
Merger relief reserve 1,480 1,480 1,480
Reverse acquisition reserve (75,308) (75,308) (75,308)
Cash flow hedge reserve 40 (5) (111)
Foreign exchange translation reserve (95) (76) (74)
Capital redemption reserve 7,456 7,456 7,456
Accumulated losses (6,929) (7,073) (6,234)
--------------------------------------- ------ ---------- ----------- ----------
Total equity 11,930 11,758 12,493
Total liabilities and equity 13,827 13,667 14,655
--------------------------------------- ------ ---------- ----------- ----------
Consolidated Statement of Changes in Equity
For the six months ended 31 March 2023 - unaudited
Foreign Cash
Merger Reverse exchange flow Capital
Ordinary Share relief acquisition translation hedge redemption Accumulated
shares premium reserve reserve reserve reserve reserve Losses Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Balance at 30
September
2021 482 84,802 1,480 (75,308) (88) - 7,456 (7,345) 11,479
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Total
comprehensive
income
Profit for the
period - - - - - - - 1,032 1,032
Other comprehensive income:
Foreign
exchange
translation - - - - 14 - - - 14
Movement in
fair value of
cash flow
hedges - - - - - (214) - - (214)
Cash flow
hedges
recycled
to revenue - - - - - 103 - - 103
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Total
comprehensive
income - - - - 14 (111) - 1,032 935
Transactions with owners
Charge in
respect of
share
options - - - - - - - 79 79
Exercise of - - - - - - - - -
share options
Total
transactions
with
owners - - - - - - - 79 79
Balance at 30
September
2022 482 84,802 1,480 (75,308) (74) (111) 7,456 (6,234) 12,493
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Total
comprehensive
income
/ (expense)
Loss for the
period - - - - - - - (725) (725)
Other - - - - - - - - -
comprehensive
expense:
Foreign
exchange
translation - - - - (21) - - - (21)
Movement in
fair value of
cash flow
hedges 135 135
Cash flow
hedges
recycled
to revenue - - - - - 16 - - 16
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Total
comprehensive
income
/ (loss) - - - - (21) 151 - (725) (595)
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Transactions with owners
Charge in
respect of
share
options - - - - - - - 30 30
Exercise of
share options 2 - - - - - - - 2
--------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Total
transactions
with
owners 2 - - - - - - 30 32
Balance at 31
March 2023 484 84,802 1,480 (75,308) (95) 40 7,456 (6,929) 11,930
--------------- --------- -------- -------- ------------ ------------ -------- ----------- ------------ -------
Consolidated Statement of Cashflows
For the six months ended 31 March 2023 - unaudited
31-Mar-23 31-Mar-22 30-Sep-22
6 months 6 months 12 months
Restated
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
---------------------------------------------- ---------- ----------- ----------
Cash flows from operating activities
Profit / (loss) for the period (725) 168 1,032
Finance income (44) - (10)
Finance expense 15 16 33
Taxation (159) (15) (147)
Depreciation of fixed assets 202 228 451
Amortisation of intangibles 103 91 188
Dilapidation provision release - - -
Impairment of intangible assets - - 41
Research and development expenditure
credit (136) (153) (316)
Share option charge 30 104 79
(714) 439 1,351
Decrease in trade and other receivables 1,047 639 280
Decrease in trade and other payables (145) (850) (696)
----------------------------------------------- ---------- ----------- ----------
Cash generated from operations 188 228 935
Taxation received - - 499
Taxation paid (15) (10) (10)
----------------------------------------------- ---------- ----------- ----------
Net cash generated from operating activities 173 218 1,424
Purchase of property, plant and equipment (89) (37) (187)
Purchase of intangible assets including
staff costs capitalised (828) (1,032) (2,058)
Finance income 39 - 6
Net cash used in investing activities (878) (1,069) (2,239)
Issue of shares 2 - -
Repayment of lease liabilities (25) (44) (114)
Net cash generated from financing activities (23) (44) (114)
Movements in cash and cash equivalents
in the period (728) (895) (929)
----------------------------------------------- ---------- ----------- ----------
Cash and cash equivalents at start of
period 5,769 6,684 6,684
Effect of exchange rate fluctuations
on cash held (20) 12 14
----------------------------------------------- ---------- ----------- ----------
Cash and cash equivalents at end of
period 5,021 5,801 5,769
----------------------------------------------- ---------- ----------- ----------
Notes to the financial statements
1. Presentation of the financial statements
a. General information
IXICO plc (the 'Company') is a public limited company
incorporated in England and Wales and is admitted to trading on the
AIM market of the London Stock Exchange under the symbol IXI. The
address of its registered office is 4th Floor, Griffin Court, 15
Long Lane, London EC1A 9PN.
The Company is a parent of a number of subsidiaries, together
referred to throughout as 'the Group'. The Group is an established
provider of technology-enabled imaging services to the global
biopharmaceutical industry. The Group's services are used to select
patients for clinical trials and assess the safety and efficacy of
new drugs in development within the field of neurological
disease.
b. Basis of preparation
The condensed consolidated interim financial statements were
approved by the Board of Directors for issue on 23(rd) May 2023.
The condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. The condensed consolidated interim
financial statements for the six months ended 31 March 2023,
together with the comparative information for the six months ended
31 March 2022, are unaudited.
The statutory accounts of the Company for the year ended 30
September 2022 were approved by the Board of Directors on 6
December 2022 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006.
The condensed consolidated interim financial statements comprise
a Statement of Comprehensive Income, a Statement of Financial
Position, a Statement of Changes in Equity, a Statement of Cash
Flows, and accompanying notes. These financial statements have been
prepared under the historical cost convention modified by the
revaluation of certain financial instruments.
The condensed consolidated interim financial statements are
presented in Great British Pounds ('GBP' or 'GBP') and are rounded
to the nearest thousand unless otherwise stated. This is the
functional currency of the Group, and is the currency of the
primary economic environment in which it operates. Foreign currency
transactions are accounted for in accordance with the policies set
out below.
c. Basis of consolidation
The condensed consolidated interim 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.
The Group controls a subsidiary when the Group is exposed to, or
has rights to, variable returns from its involvement with a
subsidiary and has the ability to affect those returns through its
power over a subsidiary. In assessing control, potential voting
rights that are currently exercisable or convertible are taken into
account.
The results of subsidiary companies are included in the
condensed consolidated financial statements from the date that
control commences until the date that control ceases. The assets
and liabilities of foreign operations are translated into GBP at
exchange rates prevailing at the end of the reporting period.
Income statements and cash flows of foreign operations are
translated into GBP at average monthly exchange rates which
approximate foreign exchange rates at the date of the transaction.
Foreign exchange differences arising on retranslation are
recognised directly in a separate translation reserve.
d. Going concern
At the time of approving the condensed consolidated financial
statements, the Directors have considered the expected future
performance together with the Group's estimated future cash inflows
from existing long-term contracts and sales pipeline.
In assessing going concern, management prepare forecasts which
are updated monthly that consider different scenarios throughout
the course of the financial year, as well as ad-hoc forecasts that
extend into future years. The Directors have considered these
forecasts, alongside the Group's strong balance sheet and cash
balance as well as the ability for the Group to mitigate costs if
necessary.
After due consideration of these forecasts, the Directors
concluded with confidence that the Group has adequate financial
resources to continue in operation for the foreseeable future.
2. Significant accounting policies, judgements, and estimation uncertainty
The unaudited condensed consolidated interim financial
statements have been prepared using the accounting policies as
described in the 30 September 2022 audited year end Annual Report
and have been consistently applied.
When preparing the condensed consolidated interim financial
statements, the Directors make a number of judgements, estimates
and assumptions about the recognition and measurement of assets,
liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying
the accounting policies of the Group that have the most significant
effect on the consolidated financial statements.
Determination of acting as agent or principal
The scope of the project or contract terms are reviewed to
determine whether the Group is acting as principal or agent. This
determination depends on the facts and circumstances of each
individual project or contract and requires judgement, which are
made in accordance with the applicable standards. The primary
indicator used to determine whether the Group is acting as a
principal is whether control of the good or service is gained prior
to the good or service transferring to the client. If control is
gained, revenue is recognised on a gross basis. If no control is
achieved, then revenue is recognised on a net basis. The Group has
entered into a contract with a client to arrange the delivery of
products from a third party to various client trial sites. The
Group determined this was an agency relationship. If this judgement
was incorrect and the Group was acting as principal, it would
result in a material increase in revenue and cost of sales
recognised in the period and a decrease in profit margins
achieved.
Capitalisation of internally developed software
Distinguishing the research and development phases of a new
software product and determining whether the requirements for the
capitalisation of development costs are met requires judgement.
Management will assess whether a project meets the recognition
criteria as set out in IAS 38 based on an individual project basis.
Where the criteria are not met, the research and development
expenditure will be expensed in the Consolidated Statement of
Comprehensive Income. Where the recognition criteria are met, the
items will be capitalised as an intangible asset.
During the period ended 31 March 2023, research and development
expenses totalled GBP1,035,000 (H1 2022: GBP1,678,000). Of this
amount, GBP571,000 (H1 2022: GBP1,027,000) was capitalised as an
intangible asset relating to employee costs. The balance of
expenditure being GBP464,000 (H1 2022: GBP631,000) is recognised in
the Consolidated Statement of Comprehensive Income as an
expense.
Recovery of deferred tax assets
Deferred tax assets have not been recognised for deductible
temporary differences and tax losses. The Directors consider that
there is not sufficient certainty that future taxable profits will
be available to utilise those temporary differences and tax
losses.
Estimation uncertainty
Information about estimates and assumptions that have the most
significant effect on recognition and measurement of assets,
liabilities, income and expenses is provided below. Changes to
these estimations may result in substantially different results for
the period.
Determination of transaction prices in revenue recognition
Client contracts include an agreed work order so the transaction
price for a contract is allocated against each distinct performance
obligations for each service, based on their relative stand-alone
selling prices. For legacy contracts prior to the adoption of IFRS
15, management were required to estimate the standalone price
allocated to each distinct service that were previously grouped in
a single price. For new contracts, the fair value of individual
components is based on actual amounts charged by the Group on a
stand-alone basis. Management have determined that for items
recognised on a straight-line basis, including project, site and
data management, the demands of this on the company are spread
evenly over the life of the revenue stream. This was determined
through an understanding of the work required to deliver the
various revenue streams and the obligations within the contract
needing to be met.
Share-based payments
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value of the
options granted is measured using an option valuation model, taking
into account the terms and conditions upon which the options were
granted.
Useful lives of depreciable assets
The useful lives of depreciable assets are determined by
management at the date of purchase based on the expected useful
lives of the assets. These are subsequently monitored and reviewed
annually and where there is objective evidence of changes in the
useful economic lives, these estimates are adjusted. Any changes to
these estimates may result in significantly different results for
the period.
Commission assets
The Group capitalises incremental costs incurred through
contracts in line with IFRS 15. These costs are spread over 3 years
which is the average length of a contract, as opposed to using a
tailored time period for each project. Management annually reviews
this assessment to determine that there are no material
variances.
3. Earnings per share
The calculation of basic and diluted earnings per share ('EPS')
of the Group is based on the following data:
31 Mar 23 31 Mar 22 30 Sep 22
6 months 6 months 12 months
Unaudited Unaudited Audited
Earnings
Earnings for the purposes of basic
and diluted EPS, being net profit
attributable to the owners of the
Company (GBP000) (725) 168 1,032
Number of shares
Weighted average number of shares
for the purposes of basic EPS 48,267,395 48,151,373 48,151,373
Effect of potentially dilutive
ordinary shares:
* Weighted average number of share options - 2,487,018 2,606,350
Weighted average number of shares
for the purposes of diluted EPS 48,267,395 50,638,391 50,757,723
Basic earnings per share is calculated by dividing earnings
attributable to the owners of the Company by the weighted average
number of shares in issue during the period. The diluted EPS is
calculated by dividing earnings attributable to the owners of the
Company by the weighted average number of shares in issue taking
into account the share options outstanding during the period. For
the 6 months to 31 March 2023, there was no dilutive effect as the
share options in issue would have decreased the loss per share.
The basic and diluted earnings per share for the Group and
Company is:
31 Mar 31 Mar 22 30 Sep 22
23
6 months 6 months 12 months
Restated
Unaudited Unaudited Audited
---------------------------- ------------ ----------- -----------
Basic earnings per share (1.50p) 0.35p 2.14p
Diluted earnings per share (1.50p) 0.33p 2.03p
---------------------------- ------------ ----------- -----------
4. Issued capital and reserves
Ordinary shares and share premium
The Company has one class of ordinary shares. The share capital
issued has a nominal value of GBP0.01 and all carry the right to
one vote at shareholders' meetings and are eligible to receive
dividends. Share premium is recognised when the amount paid for a
share is in excess of the nominal value.
The Group and Company's opening and closing share capital and
share premium reserves are:
Group and Company
Ordinary Share Share
shares capital premium
Number GBP000 GBP000
----------------------------------- ----------- -------- --------
Authorised, issued and fully paid
At 30 September 2022 48,151,373 482 84,802
Share options exercised 200,000 2 -
At 31 March 2023 48,351,373 484 84,802
----------------------------------- ----------- -------- --------
Exercise of share options
During the period, the following share options were
exercised:
Key management Other Exercise
personnel Employees Total price Value
Date of exercise Shares Shares Shares Pence GBP000
------------------ --------------- ----------- -------- --------- -------
16 December 2022 200,000 - 200,000 0.01 2
Total 200,000 - 200,000 0.01 2
------------------ --------------- ----------- -------- --------- -------
5. Share-based payments
Certain Directors and employees of the Group hold options to
subscribe for shares in the Company under share option schemes.
There are 2 distinct structures to the share options in operation
in the Group (H1 2022: 2). Both structures relate to a single
scheme outlined in the EMI Share Option Plan 2014.
The scheme is open, by invitation, to both Executive Directors
and employees. Participants are granted share options in the
Company which contain vesting conditions. These are subject to the
achievement of individual employee and Group performance criteria
as determined by the Board. The vesting period varies by award and
the conditions approved by the Board. Options are usually forfeited
if the employee leaves the Group before the options vest.
Total share options outstanding have a range of exercise prices
from GBP0.01 to GBP0.70 per option and the weighted average
contractual life is 7.2 years (H1 2022: 7.3 years). The total
charge for the period relating to employee share-based payment
plans for continuing operations is GBP30,000 (H1 2022:
GBP104,000).
Details of the share options under the scheme outstanding during
the period are as follows:
As at 31 March 2023 As at 30 September 2022
----------------------------- ----------------------------- -----------------------------
Number Weighted average Number Weighted average
exercise price exercise price
Outstanding at start of the
period 4,490,931 GBP0.18 3,815,931 GBP0.18
Granted - - 900,000 GBP0.20
Exercised (200,000) GBP0.01 - -
Lapsed (444,583) GBP0.01 (225,000) GBP0.35
----------------------------- ---------- ----------------- ---------- -----------------
Outstanding at end of the
period 3,846,348 GBP0.20 4,490,931 GBP0.18
Exercisable at end of the
period 1,883,014 GBP0.06 1,719,680 GBP0.07
----------------------------- ---------- ----------------- ---------- -----------------
6. Prior period adjustment
The Company restated its financials in the year ended 30
September 2022. This related to the capitalisation of commission
and the subsequent amortisation of this, as outlined in IFRS 15.
This restatement is required for our interim statements for prior
period comparative information.
The full extent of the restatement is to increase net assets by
GBP210,000 for the six months ending 31 March 2022:
31 March 2022 Restatement 31 March 2022
Consolidated statement of financial as originally restated
position presented
------------------------------------- --------------- ------------ --------------
Trade and other receivables 2,589 82 2,671
Trade and other payables 1,436 (128) 1,308
------------------------------------- --------------- ------------ --------------
Net assets 11,548 210 11,758
31 March 2022 Restatement 31 March 2022
Consolidated statement of comprehensive as originally restated
income presented
----------------------------------------- ----------------- ---------------- -----------------
Sales and marketing expenses (497) (48) (545)
Total operating expenses (2,522) (48) (2,570)
Operating profit 217 (48) 169
Profit on ordinary activities before
taxation 201 (48) 153
Profit attributable to equity holders
for the period 216 (48) 168
----------------------------------------- ----------------- ---------------- -----------------
Total comprehensive income attributable
to equity holders for the period 223 (48) 175
31 March 2022 Restatement 31 March 2022
Consolidated statement of cash as originally restated
flows presented
------------------------------------------ ----------------- ------------ -----------------
Profit for the period 216 (48) 168
------------------------------------------ ----------------- ------------ -----------------
(Increase)/decrease in trade and
other receivables 609 30 639
Increase/(decrease) in trade and
other payables (868) 18 (850)
------------------------------------------ ----------------- ------------ -----------------
Cash (used in)/generated from operations 228 - 228
------------------------------------------ ----------------- ------------ -----------------
31 March 2022 Restatement 31 March 2022
as originally restated
presented
---------------------------- --------------- ------------ -----------------
Basic earnings per share 0.45 (0.10) 0.35
Diluted earnings per share 0.43 (0.10) 0.33
Please see the published full year accounts for the year ended
30 September 2022 for more details on this.
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END
IR DLLFLXELLBBB
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