There is no material difference between the timing of cash receipts and the timing of revenue recognition in respect of revenue contracts.

STEP 4 Allocating the transaction price to the separate performance obligations

There is only one performance obligation and accordingly the transaction price is allocated to the delivery of the product.

STEP 5 Recognising revenue when performance obligations are satisfied

The performance obligation is satisfied at the point in time when the product is delivered to the customer. Each transaction is recognised as a separate chargeable event. There are no further obligations.

Agent vs principal considerations

Upon inception of a contract with a customer, the Group considers whether it is acting as agent or as principal in accordance with IFRS 15. The Group considers that it is acting as a principal if it controls the specified good or service before that good or service is transferred to a customer. In doing so, the Group has determined that it has acted as a principal and not as an agent as part of all of its contracts with customers. In reaching this conclusion, the Directors considered the following arrangements:

Arrangements for sales through distributors

For all distributor arrangements, the distributor is invoiced at the time of delivery and title to the product passes upon full and final settlement of the invoice to which the delivery relates. The distributor has full discretion over the setting of the final selling price to the end customer and is responsible for all customer returns of product.

Arrangements for sales through agents

For all agreements with agents, the agent places orders with the Group and goods are then shipped to them. The Group, however, holds title to these products until they are sold on to a third party.

The selling price to the end user is set by the relevant government body and the agent receives a fixed percentage of this selling price. The agent notifies the Group monthly on stock levels and this is reconciled to a statement which generates an invoice for payment by the agent. The Group is responsible for any customer returns of product. Revenue is recognised by the Group when the products are sold by the agent.

Statutory rebates

In Germany, pharmaceutical companies are required to pay a manufacturer's rebate to the government as a contribution to the cost of medicines paid for by the state and private health funds. The rebates are not considered to meet the definition of variable consideration as set out in IFRS 15.50-53. This is because at the point of entering into a contract with a customer on which a rebate is likely to apply (for example, the supply of an allergy vaccine to a patient in Germany), there is no variability relating to the consideration to be received by the Group in exchange for the supply of the goods - the sales price and associated rebate is crystallised at the point of the supply. The calculation of the rebate to be repaid by the Group is carried out and invoiced in arrears by the various health insurer rebate centres in Germany. Accordingly, the rebate is considered to be a reduction in the selling price and is therefore deducted from the transaction price.

IFRS 15 other disclosures

All revenue recognised in the income statement is from contracts with customers and no other revenue has been recognised.

Disclosures regarding impairment losses are detailed in Note 10, Trade and other receivables.

A disaggregation of revenue is reported in Note 3, Revenue. Revenue by segment is reported in Note 4, Segmental reporting.

Revenue for each item is recognised when the goods are provided to the client and the obligation to pay the Group arises at the same time. Control passes to the customer once the goods are delivered, at which point the Group becomes entitled to consideration for the goods provided. The Group sells on credit and debtors are typically recovered between 20 to 90 days later. Further details regarding this are detailed in Note 10, Trade and other receivables.

As at 30 June 2023 there were no remaining performance obligations for revenue recognised in the year.

All obligations pertaining to revenue recognised have been met. No revenue was recognised relating to obligations not yet performed. No revenue has been recognised in the period relating to obligations met in the preceding period.

Significant judgements regarding the timing of transactions or price are detailed in Note 2, Judgements in applying accounting policies.

The transaction price is set out in individual contractual agreements and there is a range of prices based on the goods sold.

No assets were recognised from costs to obtain or fulfil a contract with any customer.

Presentation of material items

In preparing the financial statements the Directors consider whether there have been any material or unusual items. These items are disclosed separately on the face of the primary financial statements.

Expenditure recognition

Operating expenses are recognised in the consolidated income statement upon utilisation of the service or at the date of their origin.

Leasing

The right-of-use asset is initially measured at the amount of the lease liability plus any lease payments made at or before the commencement date (less any lease incentives received), plus any initial direct costs incurred in agreeing the lease, plus an estimate of future dismantling, removal and restoration costs. After the initial measurement, the right-of-use asset is accounted for using the cost model set out in IAS 16, Property, Plant and Equipment, which is based on depreciating the asset over the estimated useful economic life.

In connection with the Group's right-of-use assets, as at 30 June 2023 there were no lease payments that had been made prior to the commencement of the lease, nor any lease incentives, nor has the Group made any structural or other changes to any right-of-use assets that would require material costs in respect of dismantling, removal or restoration.

The initial recognition of the lease liability has been based on discounting the cash flows associated with the lease using the rate implicit in the lease agreement, or where this is not available, the Group's incremental borrowing rate, which the Directors consider to be similar to the Group's bank borrowing rate. After initial measurement the Group charges the lease liability with the interest cost to unwind the discount factor and reduces the liability by the amount of contractual payments made annually.

In reviewing the leases, the Directors took into consideration those which were long-term leases, those which were short-term leases, the underlying asset value and the lease and non-lease components.

Leases of low-value assets and short-term leases with a term of 12 months or less have continued to be recognised as an operating expense and it was determined that all of these short-term leases had termination clauses of three months or less and therefore could be readily terminated if required. The Directors have set a guideline of £5,000 or less lease value as the threshold for determining the value of a potential lease asset. All the short-term leases are therefore also considered low-value assets and have been excluded from right-of-use assets.

Low-value and short-term leases

Where the Group is a lessee, payments on low-value and short-term operating lease agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Inventories

Inventory is carried at the lower of cost or net realisable value. The costs of raw materials, consumables, work in progress and finished goods are measured by means of weighted average cost using standard costing techniques. The cost of finished goods and work in progress comprises direct production costs such as raw materials, consumables, utilities and labour, and production overheads such as employee costs, depreciation on equipment used in production, maintenance and indirect factory costs. Standard costs are reviewed regularly to ensure relevant measures of utilisation, production lead time and appropriate levels of manufacturing expense are reflected in the standards.

Net realisable value is calculated based on the selling price in the normal course of business less any costs to sell.

Warrants

Pursuant to the subscription and debt financing announced in September 2022, the Group received £6.5m of net share proceeds from the issue of new ordinary shares in October 2022 and received £10.0m from the issue of loan notes on 28 February 2023, together with the issue of 33,333,332 warrants to subscribe for new ordinary shares at a warrant exercise price of 30 pence per warrant.

The loan notes and the warrants are considered to be one hybrid financial instrument and were fair valued at inception and recognised on this basis. The loan notes were repaid during the year and the warrants will continue to be held at their initial fair value without subsequent revaluation until redemption. The fair value of the warrants was determined by an independent third party using a Black Scholes valuation model.

Contingent Payment

Under the terms the G306 Contingent Payment Letter, the Group will be obliged to pay a finance premium equal to 250 per cent. of the outstanding principal amount of the loan outstanding under the Loan Facility to the Lenders on a successful data read-out. The Group therefore intends, subject to satisfaction (or waiver, if capable of being waived) of the equity conditions, to complete the Equity Financing and repay all amounts outstanding under the Loan Facility within nine months of the date of its announcement, thereby avoiding the G306 Contingent Payment being triggered.

The valuation of the G306 Contingent Payment has been determined by Management using a weighted average approach and various assumptions as at 30 June 2023 around the probabilities of success of the G306 clinical trial, the value and timing of the planned Equity Financing and the amount of drawn Loan Facility principal at the point when the G306 clinical trial is successful.

The contingent payment liability is fair valued through profit and loss at each reporting period and there have been no changes to the fair value since initial recognition. The valuation of the contingent payment liability is necessarily dependent on the assumptions that underpin it and the valuation will change over time as estimates and assumptions are updated. In certain circumstances where the G306 clinical trial is successful but the full amount of the Loan Facility is repaid, no contingent payment will be payable.

Use of accounting estimates and judgements

Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on Management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements and the key areas are summarised below:

Judgements in applying accounting policies

a)   Capitalisation of development costs requires analysis of the technical feasibility and commercial viability of the project concerned. Capitalisation of the costs will be made only where there is evidence that an economic benefit will accrue to the Group. To date, no development costs have been capitalised and all costs have been expensed in the income statement as R&D costs. Costs expensed in the year amounted to £20.1m (2022: £15.7m).

b)   In respect of net revenue relating to certain products there is a risk that up to £13.6m cumulative

revenue recognised (2022: £11.2m cumulative) may be reversed due to a retrospective change in

the level of rebate being applied.

Sources of estimation uncertainty

a)    Determining whether goodwill is impaired requires an estimation of the value-in-use of the CGU to which the goodwill has been allocated. This value-in-use calculation requires an estimation of the future cash flows expected to arise from the CGU and a suitable discount rate to calculate the present value.

Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably possible changes in these key assumptions, both individually and in combination.

Management has considered reasonably possible changes in key assumptions that would cause the carrying amounts of goodwill or brands to exceed the value in use for each asset. For both the German CGU and the Spanish CGU respectively, there are no reasonably possible changes in key assumptions that would lead to an impairment and the assumptions do not give rise to a key source of estimation uncertainty.

b)    The Group operates equity-settled share-based compensation plans for remuneration of its employees comprising LTIP schemes. Employee services received in exchange for the grant of any share-based compensation are measured at their fair values and expensed over the vesting period. The fair value of this compensation is dependent on whether the provisional share awards will ultimately vest, which in turn is dependent on future events which are uncertain. The Directors use their judgement and experience of previous awards to estimate the probability that the awards will vest, which impacts the fair valuation of the compensation.

The key variables to be estimated are the number of awards that will lapse before the vesting date due to leavers, and the number of awards that will vest in relation to the non-market condition performance tests.

c)  The Group operates a partly funded non-contributory defined benefit pension scheme for certain employees in Germany. The defined assets and liabilities of this scheme are estimated using actuarial methods by an independent expert.

d)  Under the terms of the G306 Contingent Payment Letter, the Group will be obligated to pay the G306 Contingent Payment equal to 250 per cent of the principal amount of the loan outstanding under the facility to the Lenders at the date of a successful G306 data read-out if at 6 January 2024 any liability remains outstanding under the terms of the facility agreement. The fair value of the contingent payment requires an estimation of certain variables that form part of the contingent payment.

3. Revenue

An analysis of revenue by category is set out in the table below:

4. Segmental reporting

The Group's operating segments are reported based on the financial information provided to the Executive Directors, who are defined as the CODM, to enable them to allocate resources and make strategic decisions.

The CODM reviews information based on geographical market sectors and assesses performance at an EBITDA (operating profit before interest, tax, depreciation and amortisation) and operating profit level. Management have identified that the reportable segments are Central Europe (which includes the following operating segments: Germany, Austria, Switzerland and the Netherlands), Southern Europe (Italy, Spain and Other), and the Rest of World (including UK).

For all material regions that have been aggregated, management consider that they share similar economic characteristics. They are also similar in respect of the products sold, types of customer, distribution channels and regulatory environments.

Revenue by segment

Revenues from external customers in all segments are derived principally from the sale of a range of pharmaceutical products designed for the immunological treatment of the allergic condition.

Rest of World revenues include sales through distributors and agents in several markets including the Czech Republic, Slovakia, Canada and South Korea. Inter-segment revenues represent sales of product from the UK to the operating subsidiaries. The price is set on an arm's-length basis which is eliminated on consolidation.

The CODM also reviews revenue by segment on a budgeted constant currency basis, to provide relevant year-on-year comparisons.

The Group has no customers which individually account for 10% or more of the Group's revenue.

Depreciation and amortisation by segment

EBITDA by segment

Total assets by segment

Included within Central Europe are non-current assets to the value of £2.6m (2022: £2.6m) relating to goodwill and within Southern Europe assets to the value of £3.7m (2022: £3.5m) relating to freehold land and buildings. There were no material additions (excluding foreign exchange differences) to non-current assets in any country except the UK where non-current asset additions totalled £4.3m and comprised plant and machinery £3.5m, fixtures and fittings £0.1m, computer equipment £0.2m, computer software £0.2m and trademarks and registrations £0.3m (2022: £2.6m total).

Total liabilities by segment

5. Other income

6. Finance income

Other finance income relates to the unwinding of the discount on accrued revenue.

7. Finance expense

8. Loss per share

The diluted loss per share for 2023 does not differ from the basic loss per share as the exercise of share options and warrants would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.

9. Inventories

The value of inventories measured at fair value less cost to sell was £303,000 (2022: £719,000).

The movement in the value of inventories measured at fair value less cost to sell during the year gave rise to a credit of £416,000 which was included within the costs of goods sold in the consolidated income statement.

10. Trade and other receivables

All amounts due as shown above are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value. All trade and other receivables have been reviewed for indicators of impairment. During the year, £38,000 of trade receivables were written back and £43,000 of the provision utilised. The impaired trade receivables are mostly due from private customers in the Italian market who are experiencing financial difficulties.

The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component.

All of the Group's trade receivables in the comparative periods have been reviewed for indicators of impairment. The impaired trade receivables are mostly due from customers in the private market that are experiencing financial difficulties.

In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and according to the geographical location of customers.

The expected loss rates are based on the payment profile over the past 24 months to 30 June 2023 and 30 June 2022 respectively as well as the corresponding historical credit losses during that period.

The historical rates are adjusted to reflect current and forward-looking macroeconomic factors affecting the customer's ability to settle the amount outstanding.

Trade receivables are written off (i.e., derecognised) where there is no reasonable expectation of recovery. An allowance is made for credit losses when there is an indication that the debt may not be recovered. Failure to make payments within five months from the invoice due date is considered an indicator of possible non-recovery.

Expected loss allowance

This note includes disclosures relating to the credit risk exposures and analysis relating to the allowance for expected credit losses. Both the current and comparative impairment provisions apply the IFRS 9 expected loss model.

On the above basis, the expected credit loss for trade receivables as at 30 June 2023 and 30 June 2022 was determined as follows:

11. Borrowings

In February 2023, the Group issued loan notes to two of its substantial shareholders, Southern Fox Investments Limited and ZQ Capital Management Limited, to raise £10.0m.

In April 2023, the Group entered into a senior secured facility agreement pursuant to which the Group's existing substantial shareholders ZQ Capital Management Limited (acting through its affiliate SkyGem International Holdings Limited) and Southern Fox Investments Limited, agreed to make available to the Group a secured term Loan Facility in an aggregate principal amount of £40.75 million.

The purpose of the facility was to refinance the existing £10.0 million loan notes issued in February 2023 (which were duly repaid), to facilitate the continuation of the Group's pivotal Phase III G306 trial for Grass MATA MPL, to continue other key clinical trial activities including the Phase I study for Peanut allergy and to finance trading and provide working capital.

At 30 June 2023, £26.0m of the secured facility had been drawn with £10.0m used to repay the loan notes.

Interest accrues on the secured facility at the rate of 18% per annum and is payable in full on redemption of the facilities. No interest was paid in the year ended 30 June 2023.

In addition to the Loan Facility, the loans below were previously taken out by Allergy Therapeutics Iberica S.L. The Bank Inter Loan is secured by way of a charge on land and buildings owned by Allergy Therapeutics Iberica S.L.

12. Issued share capital

The deferred shares have no voting rights, dividend rights or value attached to them.

No share options issued on vesting of LTIP awards were exercised in the year (2022: £2,000)

13. Contingent liabilities

As previously reported in the Group's trading update for the year ended 30 June 2023, the Group's German subsidiary has received notification from the German national health insurance association that manufacturer's rebates are due on sales of certain products launched on the market from 1 September 2017.

After taking legal advice, the Group had considered the likelihood of any payment of a rebate or other cash outflow in relation to this matter to be below 50% and accordingly no provision has been made in the financial statements for the year ended 30 June 2023. However, there is a risk that up to £13.6 million cumulative revenue recognised in respect of certain products in periods up to and including 30 June 2023 may need to be reversed due to the level of rebate being claimed.

Subsequent to publication of the Group's unaudited preliminary results for the year ended 30 June 2023 and following further discussions with the German national health insurance association, it is possible that a provision for rebates may be required in the results for the year ended 30 June 2023, however the Group expects that any liability would be very significantly less than the maximum rebate. The unaudited operating loss above is before any provision for historic rebates.

14. Related party transactions and ultimate control

The Group's related parties include its subsidiary companies and its key management and its key shareholders'.

There is no overall ultimate controlling party.

15. Post balance sheet events

On 26 September 2023, the Group entered into an amendment to the Loan Facility with Southern Fox and ZQ Capital (acting through an affiliate) pursuant to which, subject to completion of the Equity Financing, the repayment of all amounts due under the Loan Facility in full and the grant of the Additional Security, the Lenders have agreed, on an uncommitted basis, to make available to the Group an additional total principal sum of up to £15.0m. Under the Extension Facility, the Additional Facility Amount may be drawn by the Group during the period to 31 January 2024 with a minimum drawdown amount of £3 million per utilisation, and interest of 18 per cent. per annum shall be payable on any such amounts drawn. A drawdown under the Extension Facility shall require the consent of the Lenders and as such the Additional Facility Amount does not represent committed funding. The Extension Facility must be repaid in full by 31 December 2025. To provide security for any amounts drawn under the Extension Facility, the existing security package under the Loan Facility will remain in place following repayment of the Loan Facility on or around completion of the Equity Financing and the Additional Security will be granted.