Consolidated and Company Statements of Cash Flows

for the years ended 30 September 2021 and 30 September 2020

 

	Group		Company
	2021	2020	2021	2020
		Restated
	£000	£000	£000	£000
Cash flows from operating activities
Profit / (loss) for the period	1,575	952	(966)	(1,040)
Finance income	(1)	(20)	-	(4)
Finance expense	22	18	29	1
Taxation	(415)	(94)	-	-
Depreciation	464	356	-	-
Amortisation of intangibles	145	82	-	-
Disposal of fixed assets	-	1	-	-
Dilapidation provision release	(53)	-	-	-
Impairment of intangible assets	-	2	-	-
Research and development expenditure credit	(160)	(162)	-	-
Share option charge	204	184	78	76
	1,781	1,319	(859)	(967)
Changes in working capital
(Increase)/decrease in trade and other receivables	(1,112)	297	706	455
Decrease in trade and other payables	(410)	(146)	(21)	(39)
Cash generated from / (used in) operations	259	1,470	(174)	(551)
Taxation received	354	447	-	-
Net cash generated from / (used in) operating activities	613	1,917	(174)	(551)
Cash flows from investing activities
Purchase of property, plant and equipment	(170)	(686)	-	-
Purchase of intangible assets including staff costs capitalised	(1,984)	(456)	-	-
Finance income	1	20	-	4
Net cash (used in) / generated from investing activities	(2,153)	(1,122)	-	4
Cash flows from financing activities
Issue of shares	314	65	314	65
Repayment of lease liability	(44)	(177)	-	-
Net cash generated from / (used in) financing activities	270	(112)	314	65
Movements in cash and cash equivalents in the period	(1,270)	683	140	(482)
Cash and cash equivalents at start of period	7,945	7,264	1,705	2,187
Effect of exchange rate fluctuations on cash held	9	(2)	-	-
Cash and cash equivalents at end of period	6,684	7,945	1,845	1,705

 

 

 

 

 

 

Notes to the financial statements

For the years ended 30 September 2021 and 30 September 2020

 

 

The financial information set out in these results does not constitute the Group's consolidated statutory accounts for the years ended 30 September 2021 or 2020. Statutory accounts for the year ended 30 September 2020 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 September 2021 will be delivered to the Registrar in due course. Those accounts have been reported on by the Independent Auditors; their report for the accounts for both financial years was (i) unqualfied; (ii) did not include a reference of any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under 498 (2) or 498 (3) of the Companies act 2006.

 

Copies of the Annual Report 2021 will be posted to shareholders on or about 17 December 2021.

 

 

1.       Presentation of the financial statements

 

a.       General information

 

IXICO plc (the 'Company') is a public limited company incorporated in England and Wales and is admitted to trading on the AIM market of the London Stock Exchange under the symbol IXI. The address of its registered office is 4th Floor, Griffin Court, 15 Long Lane, London EC1A 9PN.

 

The Company is a parent of a number of subsidiaries detailed in note 15, together referred to throughout as 'the Group'. The Group is an established provider of technology-enabled services to the global biopharmaceutical industry. The Group's services are used to select participants for clinical trials and assess the safety and efficacy of new drugs in development within the field of neurological disease.

 

b.       Basis of preparation

 

The consolidated financial statements have been prepared on a going concern basis and in accordance with international accounting standards in conformity with the requirement of the Companies Act 2006.

 

The consolidated financial statements comprise a Statement of Comprehensive Income, a Statement of Financial Position, a Statement of Changes in Equity, a Statement of Cash Flows, and accompanying notes. These financial statements have been prepared under the historical cost convention modified by the revaluation of certain financial instruments.

 

The consolidated financial statements are presented in Great British Pounds ('£' or 'GBP') and are rounded to the nearest thousand unless otherwise stated. This is the predominant functional currency of the Group, and is the currency of the primary economic environment in which it operates. Foreign currency transactions are accounted in accordance with the policies set out below.

 

c.       Basis of consolidation

 

The consolidated financial statements incorporate the accounts of the Company and its subsidiary companies adjusted to eliminate intra-Group balances and any unrealised gains and losses or income and expenses arising from intra-Group transactions. The Company's subsidiaries are detailed in note 15. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

 

The Group controls a subsidiary when the Group is exposed to, or has rights to, variable returns from its involvement with a subsidiary and has the ability to affect those returns through its power over a subsidiary. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account.

 

The results of subsidiary companies are included in the consolidated financial statements from the date that control commences until the date that control ceases. The assets and liabilities of foreign operations are translated into GBP at exchange rates prevailing at the end of the reporting period. Income statements and cash flows of foreign operations are translated into GBP at average monthly exchange rates which approximate foreign exchange rates at the date of the transaction. Foreign exchange differences arising on retranslation are recognised directly in a separate translation reserve.

 

d.       Going concern

 

The ongoing COVID-19 pandemic continues to cause uncertainty across global markets for the short and medium term. During the year, the Group continued to react quickly to the changing operational landscape caused by the pandemic, including a continuous assessment of any financial implications through the preparation of revised forecasts. The Group also continued to successfully operate a fully remote model for employees through the year. Whilst there was a notable contract loss in the year, and a further contract loss shortly after the period end, there was a significant increase in new trials and contract wins during the year. These new contract wins significantly diversify the client base of the Group and reduce the reliance it has on its largest client.

 

In assessing going concern, management has prepared detailed sensitised forecasts which consider different scenarios throughout the course of the next 12 months. These include the risk to current projects and expected future sales pipelines, the ability for participants to attend imaging centres (due to the ongoing COVID-19 pandemic) and potential delays in new trial start-up timelines. 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.       New and amended accounting standards and interpretations

 

a.       Adoption of new accounting standards for the year ended 30 September 2021

 

The Group has adopted all new and amended accounting standards and interpretations issued by the International Accounting Standards Board ('IASB') that are mandatory for the current reporting period. The standards and amendments that are now effective and have been adopted by the Group include:

•       Amendments to References to Conceptual Framework in IFRS Standards

•       Definition of Material (Amendments to IAS 1 and IAS 8)

•       Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

There was no impact on the Group's financial statements as a result of adopting these standards.

b.       Accounting developments affecting financial statements in subsequent periods

 

At the date of authorisation of these financial statements, several new, but not yet effective, standards and amendments to existing standards and interpretations have been published by the IASB. The standards and amendments that are not yet effective and have not been adopted early by the Group include:

•       Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

•       Classification of liabilities as current or non-current (Amendments to IAS 1)

The Directors anticipate, based on current business processes, that the introduction of the above standards and amendments will not have a material impact on the Group and Company financial statements and therefore the impact of these changes on the financial statements has not been assessed.

 

3.       Significant accounting policies

 

3.1    Revenue

Revenue is principally derived from service revenue. This revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.

 

In determining whether to recognise revenue, the Group follows a 5-step process:

 

1.     Identifying the contract with a client;

2.     Identifying the performance obligations;

3.     Determining the transaction price;

4.     Allocating the transaction price to the performance obligations; and

5.     Recognising revenue when/as performance obligation(s) are satisfied.

 

All services provided to clients are agreed at the inception of a project through contracts. A critical part of the contract is a detailed schedule of work that provides the list of services to be provided by the Group. Under the requirements of IFRS 15 - Revenue from Contracts with Customers, the Group is required to identify individual and distinct performance obligations within each contract. This represents a judgement, and the Group has considered whether each individual service provided meets these requirements in its own right and in the context of the contract, by assessing in particular the level of interrelationship between each type of service and the nature of the contract entered in to with clients.  The Group has identified performance obligations within each of the revenue streams as set out below. The transaction price associated to each performance obligation is allocated based on their relative stand-alone selling price. Revenue is recognised once the performance obligation is met for each distinct service.

 

Revenue types

The Group's contracts comprise a variety of performance obligations. These obligations are all considered streams of a single revenue type, being service revenue. Most of the Group's revenue is recognised at a point in time; the Group recognises this revenue once control is passed to the client, or once the service has been delivered on behalf of the client.

 

The Group's most significant streams of service revenue are outlined below and have the respective recognition criteria:

 

Service type	Performance obligations	Revenue recognition policy
Project & site set up Training materials and delivery Scientific reports	This service type includes the initial project set up documentation, such as scientific protocols and operational guides, and close out activities such as scientific reports. Where a tangible product is created, the performance obligation is met once the item is transferred to the client.   In respect of training, materials are prepared in advance and provided to clients as tools for site training. Site training is provided either through live online training or through a self-paced training module. The performance obligation is met once each individual site has completed the training.	Revenue for this service is recognised at a point in time once the Group has delivered the relevant material on behalf of the client.   For training materials and delivery, revenue is recognised at the point in time when a site has completed its training.
Project management Site management	Each contract requires various project management activities. These services are provided throughout the duration of a contract. Site management services are provided throughout the duration of a site being operational and would typically be shorter than the project management cycle. For both activities, the costs and time spent delivering these services are generally spread evenly over the project lifetime. As such the performance obligation is met when the specific service is provided each month.	The services provided for project and site management represents a provision of ongoing services. As the fee is charged monthly to the client over the duration for which management services are provided, revenue for these items is recognised over a series of points in time across the contract.
TrialTracker configuration and access	The TrialTracker platform delivers a robust and comprehensive set of centralised imaging services designed to efficiently manage the complex imaging workflow, including image upload, quality control, reading and analysis. The platform also allows for reporting and data transfer. This involves the initial configuration and deployment of TrialTracker, and the access granted to client trial sites for upload of clinical information.   Due to the lack of interrelationship between the 2 distinct services provided, each are recognised independently. The performance obligations for each are:   1.     The performance obligation for deployment is met once TrialTracker is deployed and granted to the client.   2.     The performance obligation for ongoing access to TrialTracker for the upload of data by client trial sites is recognised over the duration of the project once TrialTracker is deployed.	The deployment of TrialTracker is recognised once the platform is appropriately configured and is ready for use through the receipt of images from client trial sites.   The ongoing access fee is charged monthly to the client and so revenue is recognised over a series of points in time across the contract.
Data management and quality control	Ensuring data are managed appropriately and that the data are of a high quality is critical in the delivery of the Group's service. The data management and imaging teams work in collaboration to ensure ongoing integrity of data.   The data will go through a series of quality control reviews prior to being used in the Group's performance of reading and analysis. Therefore, the performance obligation is met once the data is quality checked.   Data management is an ongoing service performed throughout the duration of a project whilst data is being received and managed on a project. The respective costs and time spent delivering this service is generally spread evenly over the duration in which data is being managed and as such the performance obligation is met when the specific service is provided each month.	In respect of data quality control, revenue will be recognised at the point in time when data is quality checked.   The services provided for data management represents a provision of ongoing services. As the fee is charged monthly to the client over the duration for which data management is required, revenue for these items is recognised over a series of points in time across the contract.
Data reading and analysis	The Group provides data analysis services across a range of biomarkers, providing high-quality, clinically meaningful data. The performance obligation for these services is met once the analysis is completed.	Revenue from reading and analysis of clinical data is recognised at the point in time when the work is complete.
Licence revenue	Revenue relating to licencing is entirely attributable to TrialTracker. Each agreement will grant the user rights to access the software for their own use and receive associated technical support during the licence period.   The granting of the licence and its associated support are distinct performance obligations and are met on a straight-line basis over the contract term.	Revenue for both the licencing and support are recognised on a straight-line basis over the duration of the contract and is therefore recognised over time. Licence revenue in the current year is not material.

 

Change orders

Throughout the duration of a contract, the client may request additional services or service changes to be made. For revenue recognition purposes, the Group treats a change order or contract modification to a client agreement as a separate contract, if both:

 

·      the scope changes due to the addition of 'distinct' services; and

·      the price change reflects the services stand-alone selling prices ('SSP') under the circumstances of the modified contract.

 

The revenue recognition for the change order is applied in the same way as the original contract, as detailed above, with the original client agreement remaining unchanged.

 

3.2    Other income

Government grants

A government grant is recognised only when there is reasonable assurance that the Group will comply with any conditions attached to the grant and the grant will be received. The grants are recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis. The Group recognises grant income as an item of other income.

 

Research and Development Expenditure Credit ('RDEC')

The Group has elected to take advantage of the RDEC introduced in the Finance Act 2013. A company may surrender corporation tax losses on research and development expenditure incurred on or after 1 April 2013 for a corporation tax refund. Relief is given as a taxable credit on 13% (which increased from 12% from 1 April 2020) 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, and is recognised in the year for which the research and development relates.
 

3.3    Research and development expenditure

In all instances across the Group, research expenditure is expensed through the income statement. For development expenditure, items will be expensed where the recognition criteria for internally generated intangible assets is not met.

 

The main criteria used to assess this, as required under IAS 38 - Intangible Assets, are:

-       Demonstrating technical feasibility of completing the intangible asset;

-       Intention to complete the asset;

-       Ability to use or sell the asset in order to generate future economic benefit;

-       Availability of adequate technical or other resources to complete development; and

-       Ability to measure reliably the expenditure attributable to the asset.

It was determined that the Group continued to meet the above criteria in respect of specific developments to its TrialTracker platform and data analytics service offering. As a result, associated development costs are capitalised in the year in relation to TrialTracker and an intangible asset is recognised as set out in note 14.

 

 

3.4    Share-based payments

Equity-settled share-based payments are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions.

 

Any changes that impact the original estimates, for example the effect of employees who have left the Group in the year and have forfeited their options, is recognised in the Consolidated Statement of Comprehensive Income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.

 

Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 22 of the consolidated financial statements.

 

3.5    Employee benefits

All employee benefit costs are recognised in the Consolidated Statement of Comprehensive Income as they are incurred. These principally relate to holiday pay and contributions to the Group defined contribution plan.

 

The assets of the Group scheme are held separately from those of the Group in independently administered funds. The Group does not offer any other post-retirement benefits.

 

3.6    Leased assets

A lease is defined as a contract that gives the Group the right to use an asset for a period of time in exchange for consideration. The Group identifies from the contract the total length and cost of the lease contract, and determines whether it meets the definition of a right-of-use asset. Recognition of a right-of-use asset is met if it is longer than 12 months and of a high value. For those leases that do not meet these criteria, the rental charge payable under these leases are charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the lease term.

 

The initial recognition and subsequent measurement of right-of-use asset leases are:

 

Initial recognition

At the commencement date, the Group measures the lease liability at the present value of future lease payments, discounted using the Group's incremental borrowing rate. The Group also recognises a right-of-use asset which is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs and an estimate of any costs to reinstate the asset to its original condition. 

 

Subsequent measurement

The lease liability is reduced for payments made and increased for interest, and is remeasured for any modifications made to the lease. The right-of-use asset is depreciated on a straight-line basis over the expected lease term. The asset is also assessed for impairment when such indicators exist.

 

On the statement of financial position, right-of-use assets are included in property, plant and equipment and lease liabilities are shown separately.

 

3.7    Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and, where appropriate, less provisions for impairment. The initial recognition and subsequent measurement of property, plant and equipment are:

 

Initial recognition

Property, plant and equipment is initially recognised at acquisition cost, including any costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of operating. In most circumstances, the cost will be its purchase cost, together with the cost of delivery.

 

Subsequent measurement

An asset will only be depreciated once it is ready for use. Depreciation is charged so as to write off the cost of property, plant and equipment, less its estimated residual value, over the expected useful economic lives of the assets.
 

Depreciation is charged on a straight-line basis as follows:

 

Office buildings	over expected lease term
Leasehold improvements	shorter of 5 years or the lease term
Fixtures and fittings	3 years
Equipment	3 years

 

The disposal or retirement of an asset is determined by comparing the sales proceeds with the carrying amount. Any gains or losses are recognised within the Consolidated Statement of Comprehensive Income.

3.8    Intangible assets

Acquired intangibles

Intangible assets that are acquired through business combinations are recognised as intangible assets if they are separable from the acquired business or arises from contractual or legal rights. These assets will only be recognised if they are also expected to generate future economic benefits and their fair value can be reliably measured.

 

Initial recognition

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.

 

Subsequent measurement

Following capitalisation, the intangible assets are carried at cost less any accumulated amortisation, and where appropriate, less provisions for impairment.

 

Intangible assets are amortised using the straight-line method over their estimated useful economic life as follows:

 

-       Intangibles acquired through business combinations	5 years
-       Computer software	3 years
-       Data acquisition	5 years

 

Amortisation is charged to the Consolidated Statement of Comprehensive Income and is included within cost of sales for those items directly related to project activities, or otherwise within general and administrative expenses.

 

Internally generated intangible assets

Intangible assets that are capitalised internally are deemed to have met the recognition criteria set out in IAS 38. These items relate to research and development costs and are considered in note 3.3.

 

Initial recognition

Internally generated intangible assets are initially recognised at cost once the recognition criteria of IAS 38 are met.

 

Subsequent measurement

Any assets that are not yet ready for use will be capitalised as assets under construction and will not be amortised. Once the asset is ready for use, amortisation will begin. The amortisation rates adopted are based on the expected useful economic life of the projects to which they relate. The assets useful economic life is as follows:

 

Internally generated technology

3 - 10 years

 

3.9    Impairment of non-current assets

Each category of non-current assets is reviewed for impairment both annually and when there is an indication that an asset may be impaired, being when events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognised in the Consolidated Statement of Comprehensive Income for the amount by which the asset's carrying value exceeds its recoverable amount.

 

The recoverable amount is the higher of an asset's fair value less cost to sell and value in use. Non-financial assets, other than goodwill, which have suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
 

3.10  Investments in Group undertakings

Investments in Group undertakings are initially recognised at cost and subsequently measured at cost less any impairment provision. Investments are subject to an annual impairment review, with any impairment charge being recognised through the Consolidated Statement of Comprehensive Income. Additions to investments are amounts relating to share options for the services performed by employees of the subsidiaries of the Company and are classified as capital contributions within note 15. 

 

3.11  Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently stated at amortised cost using the effective interest method, less any expected credit losses. The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses.

The Group assess impairment of trade receivables on an individual basis as they possess individual credit risk characteristics based on each client. Refer to note 16 for further information on aging of trade receivables and an analysis of any expected credit losses.

 

3.12  Taxation

Current tax
Current tax represents amounts recoverable within the United Kingdom and is provided at amounts expected to be recovered using the tax rates and laws that have been enacted at the Statement of Financial Position date.

Research and development credits
The benefit associated with UK-based research and development is recognised under the UK's Research and Development Expenditure Credit scheme. Details of the recognition are set out in note 3.3.

Deferred taxation
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements in accordance with IAS 12 - Income taxes. Deferred tax liabilities are recognised for all taxable temporary differences. A deferred tax asset is recognised only to the extent that it is probable that sufficient taxable profit will be available in future years to utilise the temporary difference. Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither the accounting, nor taxable profit or loss.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial Position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

 

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities, they relate to income taxes levied by the same taxation authority and the Group intends to settle these on a net basis.

 

3.13  Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand with original maturities at inception of 3 months or less.

 

3.14  Foreign currency translation

Transactions denominated in foreign currencies are translated into Great British Pounds at actual rates of exchange prevailing at the date of transaction. Monetary assets and liabilities expressed in foreign currencies are translated into Great British Pounds at rates of exchange prevailing at the end of the financial year. All foreign currency exchange differences are taken to the Consolidated Statement of Comprehensive Income in the year in which they arise.

 

Non-monetary items are not retranslated at year end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

 

3.15  Trade and other payables

Trade and other payables are non-interest-bearing and are initially recognised at fair value and subsequently stated at amortised cost.

 

3.16  Provisions, contingent assets and contingent liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. The timing of such outflows may still be uncertain. Such provisions are measured at the estimated expenditure required to settle the present obligation based on the most reliable estimate available at the reporting date, discounted to the present value where material.

Any reimbursement that the Group is virtually certain to collect from a third party in relation to the related provision will be recognised as a separate asset.

Liabilities are not recognised where the outflow of economic resources is not probable, but are instead disclosed as contingent liabilities.
 

3.17  Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
 

3.18  Financial instruments

Financial assets and financial liabilities are recognised on the Consolidated Statement of Financial Position when the Group or the Company becomes a party to the contractual provisions of the instrument. Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

 

Further information relating to financial instruments and the policies adopted by the Group to manage risk is found in note 23.

 

4.       Significant management judgement in applying accounting policies and estimation uncertainty

 

When preparing the consolidated financial statements, the Directors make a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses.

 

Significant management judgements

The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the consolidated financial statements.

 

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. During the year, the Group 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 year 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. More detail is included in note 3.3 as to the specific considerations given to each project when determining whether to capitalise internally developed software. Where the criteria are not met, the research and development expenditure will be expensed in the Consolidated Statement of Comprehensive Income. Where the recognition criteria are met, the items will be capitalised as an intangible asset.

 

During the year ended 30 September 2021, total research and development expenses totalled £2,270,000 (2020: £1,553,000). Of this amount, £1,030,000 (2020: £244,000) was capitalised as an intangible asset. The balance of expenditure being £1,240,000 (2020: £1,309,000) is recognised in the Consolidated Statement of Comprehensive Income as an expense.

 

Recovery of deferred tax assets

Deferred tax assets have not been recognised for deductible temporary differences and tax losses. The Directors consider that there is not sufficient certainty that future taxable profits will be available to utilise those temporary differences and tax losses. Further information on the Group's deferred tax asset can be found in note 20 of the consolidated financial statements.

 

Estimation uncertainty

Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Changes to these estimations may result in substantially different results for the year.

 

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. Details of the estimations used in determining the fair value of the options in issue are detailed in note 22.

 

Useful lives of depreciable assets

The useful lives of depreciable assets are determined by management at the date of purchase based on the expected useful lives of the assets. These are subsequently monitored and reviewed annually and where there is objective evidence of changes in the useful economic lives, these estimates are adjusted. Any changes to these estimates may result in significantly different results for the period.  

 

 

 

5.       Revenue

 

An analysis of the Group's revenue by type is as follows:

 

					2021	2020
					£000	£000
Service revenue					9,190	9,532

 

 

All material revenue streams derived by the Group relate to the delivery of services in support of clinical trials. As such, all revenue is deemed to belong to one stream, being service revenue.

 

Revenue derived from services provided over time do not constitute a material portion of revenue and therefore disclosure distinguishing between revenue recognised at a point in time versus over time is not made.

 

For the year ended 30 September 2021, revenue includes £438,000 (2020: £227,000) held in contract liabilities within trade and other payables at the beginning of the period. This amount includes the satisfaction of performance obligations relating to legacy contracts whereby TrialTracker deployments and access are combined in to a single fee, with the access fee being recognised over the duration of the project. This also includes the completion of performance obligations for advance payments held at the end of the prior year. Advance payments are charged to clients to de-risk start-up activities and are recognised at a point in time once an activities performance obligation is met.

 

 

6.       Segmental information

 

The Board considers there to be only one core operating segment for the Group's activities. This is based on the Group's development, commercial and operational delivery teams operating across the entirety of the Group, which is primarily based in the United Kingdom. The projects undertaken by the Group are managed by project managers, who receive inputs for each project by other team members. Performance information is reported as a single business unit to the management team, who review the Group's management information.

 

The information gathered for each project is subsequently reported to the Group's Chief Executive Officer, who is considered to be the chief operating decision-maker. This information is used for resource allocation and assessment of performance. Therefore, the entirety of the Group's revenue and assets can be attributed wholly to this operating segment with reference to the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position.

 

During the year ended 30 September 2021, the Group had two clients (2020: one client) that exceeded 10% of total revenue. In 2021 the individual percentage revenue associated with these clients was 55% (£5,012,000) and 14% (£1,248,000). In 2020, the individual percentage revenue associated with the largest client was 65% (£6,232,000).

 

Geographical information

 

The Group's revenue can be categorised by type of revenue and by country, based on the location of the contracting client. Sometimes clients of the Group, which include global pharmaceutical companies with offices in multiple locations across the world, request the Group to contract directly with their regional offices in the United Kingdom or European locations. In such circumstances the associated revenues are reported as being based in the contracting location even though much of the operational execution of the contract will include entities of the client based elsewhere in the world.

 

					2021	2020
					£000	£000
Switzerland					3,247	4,950
United Kingdom					1,983	1,473
United States of America					1,860	1,995
Netherlands					1,248	370
Ireland					482	522
Other - Europe					370	222
Revenue					9,190	9,532

 

As the Group is domiciled in the United Kingdom, the entirety of the revenue originates from this location.

 

 

7.       Other income

 

Items of other income principally relate to government grants received, originating solely in the United Kingdom. Grants are recognised as income over the period required to match them with the related costs, for which they are intended to compensate, on a systematic basis.

 

The Group also recognises Research and Development Expenditure Credit ('RDEC') as other income.

 

 

	2021	2020
	£000	£000
Grant income	288	444
RDEC	160	162
Other income	448	606

 

 

8.       Auditor's remuneration

 

	2021	2020
	£000	£000
Audit services
- Group and Parent Company	33	33
- subsidiary companies	22	22
Total audit fees	55	55
Audit-related assurance services	6	6
Total auditor's remuneration	61	61

 

 

 

 

9.       Employees and Directors

 

The average monthly number of persons (including Executive and Non-Executive Directors) employed by the Group was:

               

	2021	2020
	Number	Number
Administration	16	15
Operations, research and development	77	67
Average total persons employed	93	82

 

The Group uses a different metric in the measurement of key performance indicators, and includes both the number of employees and contractors, adjusted for the number of hours worked during the year (to account for part-time employees). This is known as average full-time equivalents, or FTE's, and for the year ended 30 September 2021, the average number of FTE's was 95 (2020: 78).

 

The aggregate remuneration of employees in the Group was:

 

	2021	2020
	£000	£000
Wages and salaries	5,778	5,480
Social security costs	625	845
Other pension costs	269	203
Share-based payments charge	204	184
Total remuneration for staff	6,876	6,712
Staff costs capitalised	(1,030)	(244)
Net staff costs	5,846	6,468

 

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 2021 in respect of pension costs were £42,000 (2020: £31,000).

 

The remuneration of the Group's Directors is set out in the Directors' Remuneration Report in the full annual report, as well as in note 24 under related party transactions.

 

The Company did not directly employ any staff and therefore there is no cost recognised in respect of staff costs.

 

10.    Operating profit

 

An analysis of the Group's operating profit has been arrived at after charging:

               

	2021	2020
	£000	£000
Research and development expenses	1,240	1,309
Sales and marketing expenses	1,146	1,579
Operating lease charges: land, buildings and printers	2	21
Depreciation of tangible assets	464	356
Loss on disposal of tangible and intangible assets	-	3
Dilapidation provision release	(53)	-
Amortisation of intangible assets	26	26
Foreign exchange (gain) / loss	28	(17)
Administrative expenses	2,438	2,819
Total operating expenses	5,291	6,096

 

There is a further amortisation charge of £118,000 (2020: £56,000) recognised in cost of sales for those items directly related to project activities. The total amortisation charge for the year is £144,000 (2020: £82,000).

 

 

 

11.    Taxation

 

The tax charge for each period can be reconciled to the result per the Consolidated Statement of Comprehensive Income as follows:

 

	2021		2020
	£000		£000
Profit on ordinary activities before taxation	1,160		858
Profit before tax at the effective rate of corporation tax
in the United Kingdom of 19% (2020: 19%)	220		163
Effects of:
Expenses not deductible for tax purposes	4		16
Origination and reversal of temporary differences	(415)		(131)
Research and development uplifts net of losses surrendered for tax credits	(319)		(145)
Prior period adjustment	95		3
Tax credit for the period	(415)		(94)

 

The tax credit for each period can be reconciled as follows:

 

	2021		2020
	£000		£000
Small or medium enterprise research and development credit	(350)		(127)
Deduction for corporation tax on RDEC	30		30
Prior period adjustment	(95)		3
Tax credit for the period	(415)		(94)

 

 

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:

	2021	2020
	£000	£000
Current tax receivable at start of period	259	450
Current period credit	575	256
Corporation tax repayment	(354)	(447)
Current tax receivable at end of period	480	259

 

 

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:

 

	2021	2020
	£000	£000
Tax credit for the year	415	94
RDEC gross of corporation tax deduction	160	162
Current period credit	575	256

 

 

 

12.    Earnings per share

 

The calculation of basic and diluted earnings per share ('EPS') of the Group is based on the following data:

	2021		2020
Earnings
Earnings for the purposes of basic and diluted EPS, being net profit attributable to the owners of the Company (£000)	1,575		952
Number of shares
Weighted average number of shares for the purposes of basic EPS	47,664,319		47,036,398
Effect of potentially dilutive ordinary shares:
-       Weighted average number of share options	2,749,423		513,521
Weighted average number of shares for the purposes of diluted EPS	50,413,742		47,549,919

 

Basic earnings per share is calculated by dividing earnings attributable to the owners of the Company by the weighted average number of shares in issue during the year. The diluted EPS is calculated by dividing earnings attributable to the owners of the Company by the weighted average number of shares in issue taking into account the share options outstanding during the year.

The basic and diluted earnings per share for the Group and Company is:

	2021	2020
Basic earnings per share	3.30p	2.02p
Diluted earnings per share	3.12p	2.00p

 

 

13.    Property, plant and equipment

 

Group

 

	Office	Leasehold	Fixtures and
	building	improvement	fittings	Equipment	Total
Cost	£000	£000	£000	£000	£000
At 30 September 2019	-	102	5	283	390
Adjustment on transition to IFRS 16	462	-	-	-	462
Additions	-	44	-	549	593
Disposals	-	-	-	(1)	(1)
At 30 September 2020	462	146	5	831	1,444
Additions	405	39	-	124	568
Dilapidation provision release	(90)	-	-	-	(90)
At 30 September 2021	777	185	5	955	1,922
Accumulated depreciation
At 30 September 2019	-	2	2	70	74
Charge for the period	191	45	2	118	356
Disposals	-	-	-	-	-
At 30 September 2020	191	47	4	188	430
Charge for the period	139	51	1	273	464
Dilapidation provision release	(53)	-	-	-	(53)
At 30 September 2021	277	98	5	461	841
Net book value
At 30 September 2020	271	99	1	643	1,014
At 30 September 2021	500	87	-	494	1,081

 

The only right-of-use asset is held within the office building category. At 30 September 2021, the carrying amount of the right-of-use asset was £500,000 (2020: £271,000).

 

Company

At 30 September 2021 and 30 September 2020, the Company had no property, plant and equipment.