Ixico Regulatory News (IXI)

IXICO plc

("IXICO", "the Company" or "the Group")

Financial Results for the year ended 30 September 2020

Strong double-digit revenue growth and a more than doubling of profit

IXICO plc (AIM: IXI), the AI data analytics company delivering insights in neuroscience, announces its final results for the year ended 30 September 2020, another record set of results, achieving the Company's fourth successive year of greater than 25% revenue growth and a year which has demonstrated the resilience of the business model. The Company has demonstrated double-digit revenue growth and a more than doubling of profit despite COVID-19.

Highlights

Financial

· EBITDA* of £1.3 million; more than double prior year (2019: £0.5 million) reflecting revenue growth and sales mix arising from multi-year phase III clinical trials contracts;

· A further year of record revenues, at £9.5 million (2019: £7.6 million) representing 26% growth over prior year;

· Gross margin accretion to 66.6% (2019: 65.4%) reflects sustained strong margin achievement;

· Operating profit of £0.9 million (2019: £0.4 million);

· Profit per share of 2.02 pence (2019: 0.92 pence);

· Closing cash of £7.9 million (2019: £7.3 million), with operating cash inflows of £1.5 million (2019: outflow of £0.1 million);

· 36% increase in contracted order book of £21.7 million (2019: £15.9 million); and

· Net assets increase to £9.1 million (2019: £7.9 million) reflecting cash generation and investments made for future growth.

*Earnings before interest, tax, depreciation and amortisation

Commercial and Operational

· Secured net £15.4 million of additional multi-year contracts across all phases of clinical development, including single largest contract signed in April 2020 in Huntington's disease ('HD') for £10.5 million;

· Record contracted order book of £21.7 million provides strong visibility for continued growth, although ongoing COVID-19 disruption to clinical trial start-up times is anticipated to impact growth rates in the short term;

· Expansion of key scientific collaborations to develop new artificial intelligence algorithms for imaging biomarkers; and

· Investment in headcount, process improvement and infrastructure to underpin future profitable growth and scale of operations.

Giulio Cerroni, CEO of IXICO, said: "2020 has been a fourth successive year of greater than 25% revenue growth for IXICO and one in which we have demonstrated the resilience of our business model. In addition, the Group has more than doubled its EBITDA profitability to £1.3 million, generated significant operational cashflows, strengthened the balance sheet and increased its contracted order book by 36% to £21.7 million.

I am delighted with these financial achievements, but even more so, I am proud of the way that IXICO has responded to the COVID-19 pandemic and continued to provide valuable new insights in clinical development to our global pharmaceutical clients. Our dedicated employees adapted rapidly to the changing circumstances and redoubled their focus and efforts on supporting our clients, who in turn continue to look to IXICO for neuroimaging expertise across a wide range of therapeutic areas in new clinical trials scheduled to commence during 2021 and beyond. With a record order book and a clear investment programme, the Group is well positioned for the year ahead."

Notice of AGM

IXICO also announces that its 2021 Annual General Meeting ("AGM") will be held at IXICO plc, 4th Floor Griffin Court, 15 Long Lane, London, EC1A 9PN on 21 January 2021 at 10:30am. However, in light of the current UK Government's public health advice in response to the COVID-19 outbreak, including to limit travel and public gatherings, and the likelihood that this advice may remain in place for the foreseeable future, there are changes to the usual AGM arrangements this year. Therefore regrettably, shareholders will be unable to attend the AGM in person and, instead, the Company is facilitating arrangements for shareholders to join the AGM via virtual link, details of which will be provided closer to the time.

The full Annual Report and Accounts, along with Notice of AGM, will be posted to shareholders on 18 December 2020 and at the same time will be made available on the Company's website in accordance with AIM Rule 20.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR)

For further information please contact:

About IXICO

IXICO is dedicated to delivering insights in neuroscience. Our purpose is to advance medicine and human health by turning data into clinically meaningful information, providing valuable new insights in neuroscience and our goal is to be a leading proponent of artificial intelligence in medical image analysis. We will achieve this by developing and deploying breakthrough data analytics, at scale, through our remote access technology platform, to improve the return on investment in drug development and reduce risk and uncertainty in clinical trials for our pharmaceutical clients.

More information is available on www.IXICO.com and follow us on Twitter @IXICOplc 

Chairman's Statement

Continued growth and profitability

I am delighted to report that IXICO has delivered 26% revenue growth and more than double the profitability compared to the prior year. This strong achievement is on the back of three previous years of similar growth and underlines the effectiveness of the strategy being pursued by the Board and leadership team. This is particularly pleasing when considered in the context of the market challenges created by COVID-19.

Overview

IXICO is an Artificial Intelligence ('AI') data analytics company delivering intelligent insights in neuroscience.

Our purpose is to advance medicine and human health in neuroscience by converting raw clinical trial data into clinically meaningful information. Our data analytics services provide insights to improve the efficiency of biopharma clinical development. Through the deployment of novel AI algorithms, we analyse and interpret brain scans and wearable biosensor data to enable better trial design, patient selection and ultimately clinical outcomes across all phases of clinical evaluation.

In FY20, we have reported record revenue, sustained strong gross margins, and achieved over double the earnings before interest, tax, depreciation and amortisation ('EBITDA') as compared to the prior year.

Despite the challenging impact of COVID-19, the Group has a contracted order book at 30 September 2020 of £21.7 million, which is the highest year end order book in the Group's history. This comprises multi-year contracts which give visibility to future revenue and provide confidence that we enter the new financial year with a continued growth trajectory.

We close the year with a strong balance sheet which will underpin our continued investment in the business over the coming years. Our investment programme is designed to drive our ambitious growth plans for further international market penetration and achieve our full potential in the growing neuroscience market.

Governance and people

During the year, the Group rapidly leveraged its remote working business model to seamlessly adapt to the requirement for all employees to work from home. The success and speed of this transition reflected the alignment, accountability, and agility of the IXICO team. This rapid response to the COVID-19 lockdown measures, alongside close and continued communication with our clients, meant we were able to adapt our service offering to support the additional challenges faced by clinical trials and add additional value to our client programmes. On behalf of the Board, I would like to thank all of our employees who adapted so promptly and positively to remote working and pay particular tribute to our IT, HR and team leaders who helped make it all happen.

As in any successful, high-growth business, IXICO's future depends on its people. In the past 12 months we have invested significantly in our team, increasing our headcount by more than 20%, attracting new expertise into the Group whilst developing the talent already in position. We have worked hard to promote our values - Aspiration, Ability, Agility and Accountability - to augment our positive, motivated, and effective culture which aligns our team with our Group purpose.

The Board uses the ten principles outlined in the Quoted Companies Alliance ('QCA') Corporate Governance Code to ensure it maintains appropriate governance arrangements. The Board conducts itself in a manner which places IXICO's values and the QCA principles at the core of the Group's culture.

Board

During the year we have focused as a Board on the challenges of COVID-19. The impact on clinical trials has been significant with as much as a 40% reduction in new clinical trials starting in mid-2020 compared to 2019 (and of which 20% in 2020 are COVID-19 related). The Board has worked closely with the leadership team to assess the impact of this as the pandemic continues and to ensure plans are in place to address both the short-term market slow down and expected medium and long-term rapid rebound in new clinical trials as delayed trials initiate.

At the 2021 Annual General Meeting ('AGM'), in accordance with the Company's Articles of Association, John Bradshaw and Mark Warne will stand for re-election, supported by the Board of Directors' recommendation.

Shareholders

The Group holds a stable and impressive list of leading institutions which have invested in the Company over the last three years and we would like to thank all our shareholders for their continued support and enthusiasm. As we reflect on 2020, it is also pleasing to note the continued recognition in the market of our commercially led growth strategy, and the effectiveness of this in delivering value to our clients.

Outlook

The impact of COVID-19 has been far-reaching, and the clinical trials market has not been immune, creating short-term delays to new clinical trial start ups. The Board therefore views the next financial year as an opportunity for the Group to focus on investing for a rapid initiation of clinical trials as the pandemic subsides, whilst continuing to grow. Effective investment at this time will position the Group well for continued high growth as more normal times resume.

Chief Executive's Statement

A year of growth that demonstrates the resilience of our business modelInvestments in data analytics service strategy delivering profitable growth

Despite the COVID-19 impacts upon global clinical trial timelines, 2020 has been another year of significant profitable growth. Our considerably strengthened contracted order book and the ability to deploy our technology across all clinical development phases means there are compelling incentives to continue investing in the scaling of our business to achieve our ambitious long-term growth goals.

Impactful purpose and highly differentiated proposition

IXICO's purpose is to provide new insights in neuroscience to improve medicine and human health by turning data into clinically meaningful information. With an ageing population and the number of people with dementia expected to increase significantly by 2050, the urgency to develop drugs that slow down or reverse the progression of these diseases is acute.

IXICO is built on a world-renowned bedrock of scientific expertise in interrogation of imaging data in neurological disease. This means that whenever a client speaks to someone at IXICO they are speaking to a neuroscience expert and this sets the Group apart from our commercial competitors.

Scientific expertise in neurological disease

IXICO is well positioned to address the increasing use of biomarkers in neurological clinical trials. This stems from our core capability to combine our deep neuroscience expertise with access to highly curated patient data from neurological disease-specific clinical trials and pipeline of algorithms designed to measure biomarkers in the brain.

Our market position benefits from participation in disease progression studies (natural history studies) and in private-public partnerships seeking to better understand neurological diseases. It is this in-house expertise and network of collaborations that has resulted in a unique and proprietary portfolio of proven software algorithms deployed to identify biomarkers associated with a diverse range of neurological diseases.

Proven underlying resilience of the technology business model

During 2020, we demonstrated the underlying resilience of our technology and ability to support our clients whilst operating remotely. We successfully transitioned to a remote working model in response to the pandemic, providing all employees with access to support and equipment to help them work effectively. Following a detailed review of the expected impact of COVID-19 on our business, focused on close co-operation with our clients, we had no requirement to furlough employees or seek any assistance from other financial support schemes implemented by the UK Government. We responded robustly to the challenges of COVID-19 such that the impact of the pandemic to client deliverables and to our 2020 financial performance was modest.

However, whilst our existing clinical trials have broadly continued as originally planned, several new trials anticipated to initiate during 2020 have not yet commenced, which is expected to create headwinds to revenue growth into 2021. Importantly these trials are not cancelled, rather they are simply delayed and we continue to work closely with our biopharmaceutical clients to ensure that, where trial start dates have been impacted, we are ready to initiate quickly when the pandemic abates.

Our forward-looking strategy of sustained and growing profitability 

Recent focus on executing our commercially led growth strategy means that the business is benefiting from revenue-driven operational leverage, positive operating cashflows and a more than doubling of profitability to £1.3 million EBITDA in 2020 (2019: £0.5 million); further bolstering an already strong balance sheet.

The business has continued to build its order book, which at the 2020 year-end stood at a record £21.7 million (2019: £15.9 million). This provides strong forward revenue visibility and further underpins management's confidence to commit to a far-reaching investment programme to build long-term market leadership positions in our target markets.

Consequently, despite the challenging COVID-19 business environment, we look to the next year with cautious optimism and firm conviction for our medium and long-term prospects. Whilst we anticipate COVID-19 will mean our growth across the next year will be more muted, our strong financial position and macro trends indicating a growing market opportunity mean we have the confidence to further accelerate our investment plans. This will include investments which are designed to further our penetration of existing and adjacent neurological disease indications, diversify and broaden our client base to address client concentration, build scale and improve efficiency to further strengthen our market position.

I sign off this year, as last year, in thanking all my colleagues at IXICO for another year of exceptional progress both operationally and financially. Our increasing market presence and sustained strong financial performance means we are more able to achieve our purpose of advancing medicine and human health in neurological disease. I look forward to 2021 being another year in which IXICO further develops its position as a globally trusted technology partner to the biopharmaceutical industry.

Financial review

Consolidating growth, profitability, and cash in a year of uncertainty

The Group has delivered another period of strong financial performance across the year to 30 September 2020. This builds on three previous years of strengthening financial performance, resulting in a transition to double-digit EBITDA profitability margins and net cash inflows.

This review includes a comparison of the financial KPIs that we use to measure our progress over the prior year, a summary of which is shown below:

Revenue

Revenue for the year of £9.5 million (2019: £7.6 million) represents a year-on-year increase of 26%. This growth was driven by increasing traction within Phase III clinical trials as the Group's success in earlier phases has been carried through into this later, larger scale phase of the drug development process.

Gross profit

The Group reports gross profit of £6.3 million in the year. This is an increase of £1.4 million or 28% compared to 2019 and equates to a gross margin of 67% (2019: 65%). This strong gross profit performance reflects a combination of a favourable sales mix, linked to the growth in proportion of image analytics within its revenues driven by increased traction in Phase III clinical trials, and the leveraging of operational efficiencies as the Group grows.

Earnings before interest, tax, depreciation and amortisation ('EBITDA')

The Group more than doubled its EBITDA profit in the year, having become sustainably profitable for the first time in the prior year. This profit of £1.3 million (2019: £0.5 million) reflects the impact of strong revenue growth, improved operational leverage (and productivity), and control of administrative costs whilst enabling a level of investment in research and development and in sales and marketing. EBITDA was positively impacted by the introduction of IFRS 16, which requires companies to recognise depreciation and interest on leases rather than as rent directly to operating expense. This increased EBITDA by £0.2 million in the year (2019: £nil).

Operating profit

Operating expenditure in the year reflected investment in people and product development:

· research and development expenses of £1.3 million (2019: £1.0 million) included the development of new algorithms to support image analysis as well as enhancements of the Group's platforms to enable operational scalability. The Group, in addition, capitalised £0.2 million of internal development expenditure in the year (2019: £0.2 million);

· sales and marketing expenses were £1.6 million (2019: £1.2 million) reflecting increased investment to support continued future growth; and

· general and administrative expenses were controlled at £3.2 million (2019: £3.0 million).

The reported operating profit of £0.9 million reflected 26% revenue growth, strong gross profit performance and controlled operating expenditures. This equated to an operating profit margin of 9% (2019: 5%).

Order book

The Group continues to benefit from a healthy contracted order book. At 30 September 2020 this totalled £21.7 million (2019: £15.9 million), which takes account of £9.5 million of business executed during the year and net £15.3 million of (both new and expanded) multi-year contracts secured across all phases of clinical development. This means that the Group retains a strong position to deliver continued revenue growth.

Cash

The Group reported operating cash inflows of £1.5 million before tax receipts in the year (2019: £0.1 million cash outflow) reflecting the Group's strengthening profitability and the beneficial timing of payments on customer contracts.

The Group had a closing cash balance at 30 September 2020 of £7.9 million (2019: £7.3 million) with the increase reflecting the operating cash inflows partly offset by capital investment in the Group to support future scalability and improved IT infrastructure. The strengthened, and substantial, debt-free cash balance means the Group is well positioned to invest for continued growth. Further consideration of the Group as a going concern is discussed in the Director's report.

Net assets

The Group's net asset position increased by £1.2 million to £9.1 million (2019: £7.9 million). This is reflective of the Group's ability to turn profitability into operating cash inflows, as well as the Group's commitment to invest in order to meet the future growth demands. This strong net asset position provides the foundation to support the Group's investment programme for the next year.

Profit per share

The Group reports a profit per share of 2.02p (2019: 0.92p) reflecting the significant uplift in financial performance achieved across the year.

The Group is delivering against its growth strategy, is profitable, and is well capitalised, providing a strong basis to further accelerate investment across 2021, despite the challenges created by COVID-19, and thereby continues to be fully focused on the execution of its commercially-led growth strategy.

Risk management

The Board holds responsibility for monitoring risks to which the Group is exposed, and for reviewing and assessing the effectiveness of the internal control framework used by the Group to manage those risks.

The Group has designed its internal controls with the aim of providing a proportionate level of assurance for the organisation, taking account of its size, stage of development and risk exposure. Whilst the Board is confident that the control framework is fit for purpose, it continues to seek ways to further mitigate against the risk of material misstatement or loss.

In assessing the risks faced by the Group, a detailed risk identification and control framework is adopted. It is the responsibility of each department head to update the risk and control matrix for their area and these are then consolidated into a single matrix which is reviewed by the Senior Leadership Team on a quarterly basis. The Board receives a summary of the risk and control matrix which sets out the current status of controls in place to manage identified risks and ranks the risks by their potential impact and likelihood on the Group's operations. This matrix also details the additional actions which are being implemented to further manage such risks. The Board reviews and challenges the Executive Directors on this risk and control matrix as necessary.

Principal risks and uncertainties

The following table presents the principal risks and uncertainties that the Board considers could have a material impact on the Group's operational results, financial condition and prospects.

These risks and uncertainties reflect the business environment within which the Group operates, together with risks in the execution of its business strategy. The risks are separated into four specific risk areas being Strategic, Financial, Operational, and Legal/Compliance & Reputational.

Strategic risks

Operational risks

Financial risks

Legal/Compliance & Reputational risks

Corporate Governance Report

The Board has adopted, and complies with, the Quoted Companies Alliance ('QCA') Corporate Governance Code ('Code') and has published a statement on the Group website that sets out, in broad terms, how the Group complies with the Code at the date of this report. The Board provides annual updates about compliance with the Code. The Board is responsible for ensuring that IXICO is managed for the long-term benefit of all shareholders, through effective and efficient decision-making. Corporate governance is an important part of the Board's role by providing oversight and guidance to help manage risk and build long-term value.

The Code comprises 10 principles, with which companies undertake to comply as part of their corporate governance arrangements. The Board conducts itself in a manner which places IXICO's values and the principles of the Code at the core of the Group's culture.

A summary of how the Group complies with these principles is outlined below with further detail being available on the Group's website (https://ixico.com/investors/governance/oversight/).

The Board and its subcommittees

The Board meets at least 4 times per year in accordance with a pre-determined meeting calendar. The Board is supported by 3 subcommittees: the Audit Committee, the Remuneration Committee and the Share Transaction Committee. The subcommittees discharge responsibilities on behalf of the Board and are entitled to such internal or external advice as is required to allow them to fulfil their duties.

The table below shows the membership of the Board and each subcommittee as at the end of 30 September 2020:

The Board and its subcommittees receive appropriate and timely information prior to each meeting including a formal agenda. Any Director may challenge Group proposals. Decisions are taken democratically after appropriate discussion. Specific actions arising from Board meetings are agreed by the Board or relevant subcommittee and are then followed up by the Executive Directors.

The Board and subcommittees all operate against terms of reference which are summarised on the Group website (https://ixico.com/investors/governance/).

Audit Committee

The Audit Committee is chaired by John Bradshaw. Mark Warne is a member of the Committee. The terms of reference of the Audit Committee include the following responsibilities:

· monitor the integrity of the Group's financial statements and application of accounting policies;

· review the effectiveness of the Group's internal control and risk management systems; and

· oversight of the Group's external auditors, including assessment of their independence from the Group.

Audit Committee meetings are usually held twice per financial year.

During the year, the Audit Committee reviewed other services provided by the Group's auditor and took the decision to move tax advisory and compliance services to another firm. This means the Group auditor now only provides audit services to the Group.

Remuneration Committee

The Remuneration Committee is chaired by Mark Warne. John Bradshaw is a member of the Committee.

The terms of reference of the Remuneration Committee include the following responsibilities:

· determine and agree with the Board the framework or broad policy for the remuneration of the Executive Directors and other such members of the executive management as it is designated to consider;

· approve the design of, and determine targets for, any performance-related pay schemes and approve the total annual payments made under such schemes;

· approve all long-term incentive scheme structures and option schemes;

· approve all option grants for ratification by the Board; and

· within the terms of the agreed policy, determine the total individual remuneration package of each Executive Director including, where appropriate, bonuses, incentive payments and share options.

Remuneration Committee meetings are usually held twice per financial year.

Share Transaction Committee

The Share Transaction Committee is chaired by Mark Warne. Grant Nash is a member of the Committee.

The terms of reference of the Share Transaction Committee include the following responsibilities:

· review, consider and, where deemed appropriate, approve the exercise of share options by option holders of the Group and the issuance of shares in connection with such exercises; and

· review, consider and approve the request to transact shares by employees or other individuals closely related to the Group (and all ancillary matters) in accordance with the relevant policies of the Group, applicable law and any directions of the Group's nominated adviser.

The Share Transaction Committee meetings are held on an ad hoc basis as required.

Consolidated Statement of Comprehensive Income

for the years ended 30 September 2020 and 30 September 2019

Consolidated Statement of Financial Position

as at 30 September 2020, 30 September 2019 and 30 September 2018

Company Statement of Financial Position

as at 30 September 2020, 30 September 2019 and 30 September 2018

Parent Company Income Statement

As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial statements. The Company's loss for the financial year was £1,040,000 (2019: £1,069,000).

Consolidated Statement of Changes in Equity

for the years ended 30 September 2020 and 30 September 2019

Company Statement of Changes in Equity

for the years ended 30 September 2020 and 30 September 2019

Consolidated and Company Statements of Cash Flows

for the years ended 30 September 2020 and 30 September 2019

Notes to the financial statements

For the years ended 30 September 2020 and 30 September 2019

The financial information set out in these results does not constitute the company's statutory accounts for 2020 or 2019. Statutory accounts for the years ended 30 September 2020 and 30 September 2019 have been reported on by the Independent Auditors; their report was (i) unqualfied; (ii) did not draw attention to any matters by way of emphasis; and (iii) did not contain a statement under 498 (2) or 498 (3) of the Companies act 2006.

Statutory accounts for the year ended 30 September 2019 have been filed with the Registrar of Companies. The statutory accounts for the year ended 30 September 2020 will be delivered to the Registrar in due course. Copies of the Annual Report 2020 will be posted to shareholders on or about 18 December 2020.

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 16, together referred to throughout as 'the Group'. The Group is an established provider of technology-enabled services to the global biopharmaceutical industry. The Group's services are used to select patients for clinical trials and assess the safety and efficacy of new drugs in development within the field of neurological disease.

b. Basis of preparation

The consolidated financial statements have been prepared on a going concern basis and in accordance with IFRS as adopted by the EU, IFRIC interpretations and the Companies Act 2006 applicable to companies operating under IFRS.

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

The consolidated financial statements are presented in Great British Pounds ('£' 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 16. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

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

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

d. Going concern

At the time of approving the consolidated financial statements, the Directors have considered the expected future performance together with the Group's estimated future cash inflows from existing long-term contracts and sales pipeline.

The ongoing COVID-19 pandemic is causing significant uncertainty across global markets for the short and medium term. During 2020, the Group reacted quickly to this by preparing a series of financial scenario forecasts based on discussions with clients over the likely impact of the pandemic on their clinical trials. In parallel the Group moved rapidly to a fully remote model, which included providing additional equipment to employees enabling all to work from home effectively and allowing the Group to trade uninterrupted throughout the year.

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 patients to attend imaging centres (due to global COVID-19 lockdown restrictions) 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 2020

The Group has adopted all new and amended accounting standards and interpretations issued by the International Accounting Standards Board ('IASB') that are mandatory for the current reporting period. Analysis of the impacts of these standards are set out below.

IFRS 16 - LeasesThe Group adopted IFRS 16 from 1 October 2019. IFRS 16 requires a lessee to recognise lease assets and liabilities, previously accounted for as operating leases, on the Statement of Financial Position. Subsequently, depreciation of the lease assets and interest on the lease liabilities is recognised within the Statement of Comprehensive Income over the remaining term of the lease. The Group has applied the modified retrospective approach requiring the Group to calculate lease assets and liabilities at the beginning of the current period and therefore the comparative information has not been restated and continues to be reported under IAS 17.

The adoption of this new Standard has resulted in the Group recognising a right-of-use asset and related lease liability in connection with all operating leases except for those identified as low-value or having a remaining lease term of less than 12 months which continue to be recognised on a straight-line basis as a lease expense over the remaining lease term. The incremental borrowing rate used for discounting purposes and applied to the lease liabilities recognised under the new Standard is 6%, being the expected rate at which the Group could reasonably borrow at from banking institutions.

The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 at 30 September 2019 to the carrying amount at 1 October 2019:

The following is a reconciliation of total operating lease commitments at 30 September 2019 (as disclosed in the financial statements to 30 September 2019) to the lease liabilities recognised at 1 October 2019:

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:

• 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)

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

3. Prior period adjustment

During the year to 30 September 2016, a subdivision of shares occurred, dividing the existing share capital of 15,215,664 ordinary shares of nominal value £0.50 into 15,215,664 ordinary shares of nominal value £0.01 and 15,215,664 deferred shares of nominal value £0.49. The deferred shares were rendered effectively worthless by virtue of the rights attached to them. On 22 December 2016, the deferred shares were repurchased for £1 and subsequently cancelled, however no accounting entries were made in respect of this transaction.

As a result of the deferred share cancellation, the share capital for the years ended 30 September 2017, 30 September 2018 and 30 September 2019 is overstated by £7,455,675, whilst the capital redemption reserve is understated in the same periods by £7,455,675.

There is no impact on total profit or loss in any year and subsequently no impact on taxation. The number of shares in issue in each of the periods was correct and therefore there is no impact on the earnings per share or diluted earnings per share in each of the periods.

4. Significant accounting policies

4.1 Revenue

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

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

1. Identifying the contract with a client;

2. Identifying the performance obligations;

3. Determining the transaction price;

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

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

Each type of revenue has separate recognition criteria depending on the type of service provided. These services are agreed at the inception of a project through contracts with clients. A critical part of the contract is a detailed schedule of work that provides the list of services to be provided by the Group. Performance obligations are attached to each service, with revenue being recognised once these are satisfied. The transaction price associated to each performance obligation is allocated based on their relative stand-alone selling price.

Revenue types

The Group's contracts comprise a variety of performance obligations. These obligations are all considered streams of a single revenue type, being service revenue. The Group's most significant streams of service revenue are outlined below and have the respective recognition criteria:

Project and site set-up

At the point a client approaches the Group to complete work, a project manager is assigned. The project manager co-ordinates the project set-up and ongoing delivery of the service. At inception, the project manager will also prepare the clinical study protocol and other essential study documents.

Once the project and/or the site is set up, all performance obligations are satisfied. These services are therefore recognised at a point in time, being when the Group has delivered the relevant material to the client.

Project and site management

Each contract requires various project management activities, provided by the project manager. These services are provided throughout the duration of a contract. Site management services are provided throughout the duration of a site being operational, typically being shorter than the project management cycle.

The services provided for project and site management represents a provision of on going services. Therefore, revenue for these items is recognised on a straight-line basis.

Site training and materials

A contract will typically include training of each individual site. Various materials are prepared in advance and provided to clients as tools for site training. Site training is provided either through live online training or through a self-paced training module. These activities are combined in one revenue transaction per site.

Revenue from site training is recognised when each site has completed the training activity.

TrialTracker configuration and access

The TrialTracker platform delivers a robust and comprehensive set of centralised imaging services designed to efficiently manage the complex imaging workflow from: image upload, quality control, reading and analysis. The platform also allows for reporting and data transfer.

The Group has identified 2 separate performance obligations in the TrialTracker platform:

1. A set-up fee is recognised at a point in time once TrialTracker access is provided to the client;

2. An ongoing access fee is recognised over the duration of the project, with revenue being recognised on a straight-line basis.

Data reading and analysis

The Group provides data analysis services across a range of biomarkers, providing high-quality, clinically meaningful data. Fees are charged to clients on a 'per data read'.

As these services have no ongoing obligations from the Group, revenue is recognised once the data read and analysis has taken place.

Data management and quality control

Ensuring data are managed appropriately and that the data are of a high quality is critical in the delivery of the Group's service. The data management and imaging teams work in collaboration to ensure ongoing integrity of data.

The performance of data management represents the provision of an on going service and so the straight-line method of recognition is used.

Revenue recorded from data quality control is recognised at a point in time when the Group has delivered the service to the client.

Scientific reportsScientific reports are provided at interim points and at the end of a study. Such reports contain data analysis and statistical interpretation.

These reports represent an individual performance obligation with no further work required by the Group. Revenue from these services is recognised at a point in time when the Group provides the report to the client.

Licence revenue

Revenue relating to licensing is entirely attributable to TrialTracker. Each agreement will grant the user rights to use the software and receive associated technical support during the licence period.

The licence is a distinct performance obligation and revenue is recognised over the contract term.

Change orders

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

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

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

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

4.2 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.

4.3 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 15.

4.4 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 23 of the consolidated financial statements.

4.5 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.

4.6 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 within trade and other payables.

4.7 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:

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.

4.8 Intangible assets

Acquired intangibles

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

Initial recognition

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

Subsequent measurement

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

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

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 4.3.

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:

4.9 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.

4.10 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 16.

4.11 Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently stated at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or significant delinquency in payments (exceeding credit terms) are considered indicators that the trade receivable should be impaired.

The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income within general and administrative expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against general and administrative expenses in the Consolidated Statement of Comprehensive Income.

4.12 Taxation

Current taxCurrent 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 creditsThe 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 4.3.

Deferred taxationDeferred 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.

4.13 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.

4.14 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.

4.15 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.

4.16 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.

4.17 Equity instruments

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

4.18 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 24.

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

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

Significant management judgements

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

Revenue recognition

The Group recognises revenue in accordance with amounts charged to clients under service contracts. All contracts include an agreed, detailed work order which defines the deliverables. The service contracts are typically multi-year and may be amended through a change order process, which may include changes to data volumes (increased or decreased), different methods of data analysis or changes to the timing of providing the deliverables.

Revenue is recognised upon achievement of deliverables set out in the service contract. The recognition is expected to approximate to the timing of the physical performance of the contracts. The Group records the performance of the contractual obligations to determine that the deliverables and actual work performed is in accordance with the contract and agreed change orders. The scope of the project and contract terms are reviewed to determine whether the Group is acting as principal or agent in respect of the project, which depends on facts and circumstances and requires judgement.

Client contracts include an agreed work order so the transaction price for a contract is allocated against distinct performance obligations based on their relative stand-alone selling prices. Management determines the fair value of individual components based on actual amounts charged by the Group on a stand-alone basis. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Capitalisation of internally developed software

Distinguishing the research and development phases of a new software product and determining whether the requirements for the capitalisation of development costs are met requires judgement. Management will assess whether a project meets the recognition criteria as set out in IAS 38 based on an individual project basis. Where the criteria are not met, the research and development expenditure will be expensed in the Consolidated Statement of Comprehensive Income. Where the recognition criteria are met, the items will be capitalised as an intangible asset.

During the year ended 30 September 2020, total research and development expenses totalled £1,553,000 (2019: £1,147,000). Of this amount, £244,000 (2019: £161,000) was capitalised as an intangible asset. The balance of expenditure being £1,309,000 (2019: £986,000) 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 21 of the consolidated financial statements.

Estimation uncertainty

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

Share-based payments

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. Details of the estimations used in determining the fair value of the options in issue are detailed in note 23.

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.

Provisions

The amounts included in both long- and short-term provisions are based on estimates provided by professionals relevant to the field the provision relates. These were reviewed by management and are considered to be a reasonable estimate of the expected cost of fulfilling these provisions.

6. Revenue

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

For the year ended 30 September 2020, revenue includes £227,000 (2019: £1,271,000) held in contract liabilities within trade and other payables at the beginning of the period.

7. Segmental information

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

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

During the year ended 30 September 2020, the Group had 1 client (2019: 2 clients) that exceeded 10% of total revenue. In 2020 the individual percentage revenue associated with this client was 65% (£6,232,000). In 2019 the individual percentage revenue associated with this client was 39% (£2,976,000) and 14% (£1,086,000) related to the other client which exceeded 10% of total revenue.

Geographical information

The Group's revenue can be categorised by type of revenue and by country, based on the contracting client location of the contracting client entity.

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

8. 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.

9. Auditor's remuneration

10. Employees and Directors

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

The aggregate remuneration of employees in the Group was:

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 2020 in respect of pension costs were £31,000 (2019: £27,000).

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 25 under related party transactions.

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

11. Operating profit

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

There is a further amortisation charge of £56,000 (2019: £nil) recognised in cost of sales for those items directly related to project activities. The total amortisation charge for the year is £82,000 (2019: £40,000).

12. Taxation

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

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

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: