IXICO plc
Annual Report 2023

Plain-text annual report

IXICO plc Annual Report and Accounts 2023 Company registration number 03131723 Addresses and Advisers IXICO plc Registered office: 4th Floor, Griffin Court 15 Long Lane London, EC1A 9PN Tel: +44 (0)20 3763 7499 Website: www.IXICO.com Registered number: 03131723 Domiciled in the United Kingdom Registered in England and Wales Statutory auditors Grant Thornton UK LLP Statutory Auditors 30 Finsbury Square London, EC2A 1AG Tel: +44 (0)20 7383 5100 Website: www.grantthornton.co.uk Nominated adviser and broker Cavendish Securities plc 1 Bartholomew Close London, EC1A 7BL Tel: +44 (0)20 7220 0500 Website: www.cenkos.com Registrar Equiniti Registrars Limited Aspect House Spencer Road Lancing West Sussex, BN99 6DA Tel: +44 (0)871 384 2030 Website: www.equiniti.com Legal advisers Bristows LLP 100 Victoria Embankment London, EC4Y 0DH Tel: + 44 (0)20 7400 8000 Website: www.bristows.com 2 Contents Addresses and Advisers .................................................................................................................................................. 2 Strategic report ................................................................................................................................................................. 4 Chair’s statement .............................................................................................................................................................................. 4 Chief Executive’s statement ............................................................................................................................................................. 6 Stakeholder engagement ............................................................................................................................................................... 12 Our ESG journey ............................................................................................................................................................................ 15 Financial review .............................................................................................................................................................................. 18 Risk management ........................................................................................................................................................................... 21 Corporate Governance Report ...................................................................................................................................... 26 Statement of Directors’ Responsibilities ......................................................................................................................................... 29 Audit Committee Report ................................................................................................................................................................. 30 The Board of Directors ................................................................................................................................................................... 32 Board activities and timeline ........................................................................................................................................................... 33 Directors’ Report ............................................................................................................................................................................. 35 Directors’ Remuneration Report ..................................................................................................................................................... 39 Financial Statements ...................................................................................................................................................... 41 Independent Auditor’s Report ......................................................................................................................................................... 41 Consolidated Statement of Comprehensive Income ...................................................................................................................... 53 Consolidated Statement of Financial Position ................................................................................................................................ 54 Company Statement of Financial Position ...................................................................................................................................... 55 Consolidated Statement of Changes in Equity ............................................................................................................................... 56 Company Statement of Changes in Equity ..................................................................................................................................... 57 Consolidated Statements of Cash Flows ........................................................................................................................................ 58 Notes to the financial statements ................................................................................................................................................... 59 3 IXICO plc Strategic Report for the year ended 30 September 2023 Strategic report Chair’s statement This is my last statement as Chair as, after ten years on the Board and seven as Chair, I will step down at the AGM in January 2024 and be succeeded by my fellow non-executive director, Mark Warne. I am proud of all that the Group has achieved over the last decade. IXICO now leads the market in neurological image analysis capabilities. We support academic and industry partnerships investigating and illuminating disease progression in the challenging conditions of Huntingdon’s disease (HD) and Alzheimer’s disease (AD) and have seamlessly delivered image analysis services to the world’s largest HD clinical trial. This year, Eisai announced FDA approval for a drug to treat AD and Eli Lilly reported positive late stage trial results that together, by showing disease modification benefits, herald a new era for neurological drug development. Such positive progress towards mechanisms that slow, halt and potentially even reverse the progression of AD, coupled with the global epidemic of dementia and the rapid growth in associated international healthcare costs, creates a compelling investment case for the biopharma industry generally and IXICO in particular. Despite the currently challenging neurological disease clinical trials market, typified by high profile drug failures and decades of research to achieve even minor progress, IXICO has progressed in its technical, scientific and operational capabilities and is strongly positioned to scale. In the last few months, we have streamlined our cost base whilst sharpening our focus on the growth opportunity ahead. The next generation TrialTracker platform is now production ready and our recent investments in IT infrastructure provide the Group with the highest levels of data security and resilience. Overview Our purpose is to advance medicine and human health in neuroscience by converting raw imaging data, captured as part of the clinical trial process, into clinically meaningful information. We accurately measure changes (which can be very small) in biomarkers relevant to diseases of the brain. By doing so, our data analytics services provide objective insights into the efficacy and safety of the drugs being trialled and so deliver greater efficiency and accuracy to the clinical development process. These services are underpinned by our TrialTracker end-to-end technology platform which supports the capture, management, analysis and reporting of data on behalf of each clinical trial in a seamless, centralised, regulatory compliant system that removes the need for travel to global imaging sites. A step backwards to move forwards. It has been an especially challenging year for the biopharmaceutical industry and the clinical trials service providers that support it. Across the Contract Research Organization (CRO) market we have seen fewer clinical trial initiations as large pharma companies scrutinise their existing trial pipelines. Meanwhile, biotech companies, facing tight capital market conditions, are making cash conservation their primary priority. Consequently, cost restructuring and market consolidation have been widely reported. In this context, IXICO has performed satisfactorily. Despite reduced revenues (which we communicated this time last year) the Group has delivered an earnings performance in line with market expectations and retains a strong, debt-free, cash balance. As the Group looks to return to growth, we have carefully adjusted expectations based on the wider market challenges and the Board took the important, but uncomfortable, decision to right-size our cost base. I thank the IXICO team for the professional, sensitive and respectful way in which this was managed by all involved. Governance and people IXICO’s future depends on our people and the Board thanks all our employees for their hard work, dedication, and flexibility in this particularly challenging year. We continue to promote our values – Aspiration, Ability, Agility and Accountability – to augment our culture and align our team with our purpose. The Group uses the ten principles outlined in the Quoted Companies Alliance (‘QCA’) Corporate Governance Code to ensure it maintains appropriate governance arrangements and the Board conducts itself in a manner that places IXICO’s values and the QCA principles at the core of our culture. The Board met formally thirteen times during the year with several additional ad-hoc meetings or calls to discuss specific topics. 4 IXICO plc Strategic Report for the year ended 30 September 2023 I am delighted that Dr Dipti Amin has joined us as a Non-Executive Director. An experienced NED with an executive career that includes more than twenty years with IQVIA, where she occupied senior positions in compliance, drug safety and medical affairs. Dipti brings significant additional pharmaceutical and CRO experience to the Board. At the 2024 Annual General Meeting (‘AGM’), in accordance with the Company’s Articles of Association, Dipti Amin and Mark Warne will stand for election, supported by the Board of Directors’ recommendation. I will retire from the Board on the same date and Mark Warne will step up to the Board Chair position. I am delighted that Mark has agreed to do so, thereby creating a smooth succession, and wish him, our fellow directors and the wider IXICO team the best of luck for the future. Shareholders The Group has an impressive list of leading institutional investors, and we would like to thank all our shareholders for their continued support and enthusiasm for IXICO’s important work. Outlook While we expect 2024 to be largely flat on 2023, we anticipate growth in our orderbook of client contracts should position the Group for a return to double digit revenue growth in 2025. IXICO is well positioned in its wider market which we expect to grow and therefore attract new investment in the global pursuit of medical solutions to those neurological diseases so that impact the lives of millions of patients and impose wider significant social and economic burdens. We are a small but important part of the solution to this high unmet medical need and the Board is proud of the way that the Group approaches its business activities with this significant responsibility held firmly at the front of mind. Charles Spicer Non-Executive Chair 4 December 2023 5 IXICO plc Strategic Report for the year ended 30 September 2023 Chief Executive’s statement Executive Summary As I look back and reflect on 2023, it is with mixed feelings. On the one hand, the Alzheimer’s Disease (AD) research landscape continues to experience a significant resurgence, with regulatory approvals for new therapies with blockbuster potential imminent. After nearly two decades of high-profile disappointing results in Phase 3 trials, Biogen’s Aducanumab approval in 2021 was followed in 2023 by the accelerated and then full FDA approval granted for Eisai’s Lecanemab and positive Phase 3 readouts for Eli Lilly's Donanemab. Our view is that these major milestones will be a trigger for more investment in neurological disease areas by the biopharmaceutical industry. With this favourable backdrop, we took significant strides in 2023 in the delivery of our purpose of harnessing medical imaging data to advance human health, investing to strengthen our position as a specialist provider of neuroscience imaging data analytics solutions to the clinical trials industry. Conversely, macro-economic impacts of a challenging political landscape, high global inflation, and continuing regional conflicts resulted in the biopharmaceutical industry cutting back on development pipelines and/or delaying new clinical trial start-ups. Like many other CRO companies supporting the clinical trials market, IXICO was not immune to the financial impacts of these conditions, resulting in a weaker year of new contract bookings than had been anticipated. Despite lower than planned revenues, I am pleased to report earnings that align with market expectations. However, given that we expect the challenging business environment to continue across 2024, we recently took the difficult decision to reduce headcount to right size our cost base as we reset the business for growth. During the year we supported two important enhancements to neurological disease knowledge in AD and Huntington’s disease (HD). We supported the Global Alzheimer’s Platform (GAP) by providing PET Amyloid visual reads for their 1,000 participant BioHermes trial, completing data transfers ahead of the requested timelines. The study was notable for achieving a secondary recruitment target requiring a minimum of 20% of the study participants to be from traditionally underrepresented populations, enabling IXICO to report on initial findings on differences between racial and ethnic groups at the CTAD opening symposium (Boston, October 2023). We also led, alongside the CHDI Foundation, the Huntington’s Disease Imaging Harmonization Consortium (HD-IH) in securing funding to ensure the full analysis of more than 6,000 HD datasets using IXICO’s leading IXIQ.Ai analytics platform. We anticipate that the insights derived from the work of the HD-IH consortium will create long term value to the biopharmaceutical partners to support them in their clinical development programmes and to the broader HD research community. We delivered seamlessly for our clients, providing image analysis services to more than 30 studies, broadening our offering across therapeutic indications whilst improving our service level metrics to exceed our clients’ expectations. In tandem, we further developed our PET imaging capabilities, including an enhanced service offering for PET tracer management, deepening our reach into the AD market. Our next generation TrialTracker platform is production ready, and we are looking forward to deploying this Microsoft Azure enabled technology in support of our client trials during 2024 and in the years ahead. We have made strides in executing our 2022 to 2027 “Precision in Neuroscience” strategy. We enter our new financial year with an order book of signed contracts valued at £14.8m and a stronger pipeline of client opportunities, with visibility of new contracts to provide a platform for double digit growth in 2025 and beyond. Considering the longer term, I am also excited by the progress made with the “Bridge Pillar” of our strategy, with a recent funding award to develop our plans for post-market decision support; this development will provide the bridge between clinical trials and diagnostic tools to enable the right patients to safely access novel therapies in AD. There remains significant opportunity in this space, and our intention is to accelerate further development in this area during 2024. I would like to thank my team at IXICO for their incredible hard work over the last twelve months, and for the approach and professionalism that they have brought to both meeting the opportunities and supporting the challenges that we and our current and prospective clients face in developing new therapies across many neurological diseases. As I look forward to 2024, it is with cautious optimism underpinned by a deep-rooted confidence that IXICO is better placed than it has ever been to deliver seamlessly for our clients on our purpose of harnessing medical imaging data to advance human health within neuroscience. 6 IXICO plc Strategic Report for the year ended 30 September 2023 Market overview The burden of degenerative neurological disease continues to increase, driven by an aging population. Research in this area continues to advance; greater understanding of neurological disease has been recently driven by insights derived from multi-modal approaches combing genomics, biomarkers, diagnostics, and imaging techniques, and this, along with emerging new drug mechanisms, is changing the fundamentals of innovation in the sector. Recent regulatory progress in AD for Biogen, Eisai and Eli Lilly has given pharma companies greater certainty of commercial returns in what has been historically a very challenging indication. This has encouraged further investment in neuroscience portfolios and, consequently, the market for clinical trials in neuroscience is expected to continue to grow at pace. Central Nervous System disorders account for the second largest segment of pharmaceutical R&D investment, behind only that of oncology. The CNS disorders segment accounted for 10.6% of the clinical trial imaging market in 2020. This segment has been valued at $108 million in 2021 and it is expected to grow to $157 million in 2026 with a CAGR of 7.7% Neuroimaging is widely deployed in CNS trials at all phases, firstly to screen patients for safety and eligibility and then at regular intervals to detect and measure changes in brain structure caused by disease progression and interventions. Although many imaging biomarkers are exploratory, objectively detecting and measuring even small changes can deliver significant insights to the sponsor on treatment mode of action and efficacy. The core of IXICO’s imaging offer is in its proprietary, validated artificial intelligence technology which is deployed to deliver standardised and repeatable analysis generating reliable insights; IXIQ.Ai can more than double the amount of usable data compared to widely used tools delivering greater value to clients in extracting insights from its trial investments. In addition, IXICO offers its clients deep expertise, in imaging techniques and endpoints with specialist Biomarker Scientists dedicated to each study to help clients plan the imaging approach and protocol, and to provide quality assurance for the study output. IXICO’s TrialTracker platform ensures robust data management and security which is of the highest importance to clients operating in the highly regulated field of clinical trials, particularly when deploying studies in multiple jurisdictions. Outlook of the neurological drug development segment by indication Alzheimer’s Disease (AD) Historically, over 99% of novel treatments in development for AD have failed to achieve regulatory approval, with many of these failures occurring in the late stage of trial, representing a loss of many billions of dollars of investment. More recently, Biogen and Eisai have achieved approval by the FDA and, with a further asset now in regulatory review (Eli Lilly), there is renewed confidence in the validity of the research approach. This has paved the way for even greater focus in this area of research and development. The IXIQ.Ai brain segmentation platform can improve success rates by providing more usable data, enabling more targeted patient selection to lower the biggest driver of costs and inefficiencies while increasing the chance of success. Currently there are over 140 drugs in the global AD development pipeline; many of these drugs are exploring new modes of action, increasing the value of imaging biomarkers to closely monitor patients for safety, as well as to study disease progression and drug efficacy. Parkinson’s Disease (PD) Until recently, treatments for PD have focused on reducing the severity and impact of the physical symptoms of this debilitating disorder. However, decades of research into the underlying causes of PD are now bearing fruit with the development of newer drugs that focus on slowing, halting, or even reversing disease progression, particularly in the early stages. To date, IXICO has provided neuroimaging services to 14 trials in parkinsonian syndromes and more recently has introduced algorithms for DAT SPECT imaging modalities, specifically to support the growing portfolio of PD trials. Multiple Sclerosis (MS) MS tends to affect a younger patient population compared to AD and PD, and a wide portfolio of therapies has been available for treatment for many years. However, the disease is increasingly now well-understood, and research has identified new clinical subtypes, ushering in new approaches to treatment and management, and fuelling an increasing development pipeline. IXICO is partnering with leading clinical centres on the development of new algorithms to support subtype detection and monitoring, providing leading-edge services to MS studies. The Group also recently introduced 7 IXICO plc Strategic Report for the year ended 30 September 2023 an early engagement programme to enable sponsors to fully take advantage of novel imaging approaches on their studies to unlock new insights. Huntington’s Disease (HD) HD is a relatively rare neurodegenerative disease caused by a faulty gene. Although there have been recent setbacks in the progress of drug development for this indication, the genetic nature of HD means that patients can be reliably identified earlier in the disease pathway, long before symptoms are apparent. This may enable earlier intervention and raises the possibility of gene therapies, supporting the continued growth of the HD development pipeline. IXICO is a leader in neuroimaging in HD, having supported many HD studies in the past decade and has strengthened its leadership position through its close collaboration with the CHDI Foundation and the HD-IH consortium (see the Science review). Orphan and Rare Diseases Initiatives by the EU EMA and US FDA such as orphan drug designation, and the increasing use of genomic sequencing technology to screen newborns and to investigate early childhood development disorders, have encouraged significant investment into a wide range of rare diseases. In the past five years a new wave of rare disease neurological treatments, including dozens with orphan designation, have been approved. With its expertise in imaging and biomarker development, IXICO has successfully adapted many biomarkers for rare neurodegenerative diseases to support a wide range of studies in rare indications such as Friedreich’s Ataxia, Multiple System Atrophy and Progressive Supranuclear Palsy. Operational review During 2023, the Group worked on more than 30 studies across a broadening range of neurodegenerative indications, supporting all phases of clinical research from small early phase studies to larger Phase 3 trials. Delivering operational excellence As a highly specialised provider of tailored solutions, we strive to deliver an excellent service to our biopharmaceutical clients and to the imaging sites we work with. We achieve our high standards by being agile in decision-making and through our ability to customise the solutions we offer. Examples of 2023 performance metrics include: • Project performance: we monitor our performance through customer satisfaction, quality, resources and deliverables. Our metrics have exceeded both those agreed with our sponsors and our own internal targets. • Geographies: We supported more than 30 studies across 25 countries. During 2023 we added more than 10 SPECT sites to our network of qualified sites, bringing our total qualified site number for MRI, PET and SPECT to over 1,000 sites across the globe. • Analysis units: we analysed over 30,000 image endpoints this year for over 4,000 patient visits. The number of endpoints analysed increased by 37% compared to FY22. • Turnaround timelines: fast turnarounds of radiology reports are key to ensure patient eligibility and treatment decisions are not delayed. During 2023, IXICO consistently delivered radiology reports in an average of 3 working days or less, meeting or exceeding the high standards of expectation by clients for brain scans. We strive to stay at the forefront when developing best practice and have reduced the timelines for transferring data and images to our clients. We know how critical it is for biopharmaceutical companies to have quick access to the full set of high-quality data collected in their study to allow regulatory filing, early publication and conference presentations. We continue to streamline our processes to ensure that client requirements are fulfilled or exceeded to achieve these important milestones. We are proud of our easy-to-work with operations processes, exemplified by a webinar (December 2022) in collaboration with Re:Cognition Health showcasing our best-in-class approach in setting up imaging studies quickly and efficiently. 8 IXICO plc Strategic Report for the year ended 30 September 2023 Enhancing operational capabilities 1. PET Tracer management During 2023, IXICO enhanced its service offering to our sponsors to provide PET Tracer management solution for AD and PD studies. PET imaging uses a radioactive tracer during the scan. The tracer’s uptake provides information to help determine patient eligibility and treatment efficacy. Due to their radioactive nature, these tracers have a short half-life (e.g., 110 minutes for the most widely used), and require special transportation, licencing and storage conditions. They are complex to produce and therefore their availability may be limited. Due to all these characteristics, tracer management is increasingly of interest to biopharmaceutical companies. IXICO is able to support these activities by facilitating the coordination of the Tracer manufacturing company, the logistics companies and the imaging sites. 2. Next generation of TrialTracker Over the past three years, IXICO has utilised its in-house development resources, augmented by contracted expertise, to bring to market a next generation of its TrialTracker platform. As with the Group’s existing TrialTracker, this is an end-to-end data management platform enabling imaging sites, wherever they are in the world, to upload brain scans whilst automatically checking scan quality and pseudonymising the scan. The platform seamlessly transfers the scan to IXICO’s radiological team, to provide image reads and safety checks, and hosts its AI enabled, automated proprietary analysis pipelines. The next generation TrialTracker platform has been developed using Microsoft’s Azure cloud technologies, providing the Group and its clients with state-of-the-art, secure, resilient, regulatory compliant infrastructure benefitting from highly flexible microservice capabilities. This enables the Group to adapt the platform to suit the specific (and often bespoke) clinical trial needs of its clients and partners. The platform is ready to be deployed on client trials having completed extensive testing and validation activities in 2023. Science review Significant progress was made across 2023 in further developing, validating and positioning IXICO’s clinical trial product portfolio across therapeutic indications. In addition, the Group made further progress in developing core technology to ‘bridge’ into potential new markets in clinical applications as the field is experiencing significant momentum in the approval of new therapies, specifically in AD. Throughout 2023, IXICO has actively participated in the scientific discussion across core therapeutic areas as demonstrated by the attendance at eight conference and the (co-) presentation of more than 20 posters and (invited) talks. IXICO has furthermore, hosted three scientific webinars with key opinion leaders in AD, gene therapies, and HD. A key R&D focus was on the extension of IXICO’s PET analysis capabilities to extend the service offerings across both relevant (MRI and PET) imaging modalities within a broadening range of neuroscience clinical trials. Specifically, IXICO has now deployed PET visual read and quantitative analysis solutions across core PET tracers in AD and PD. During 2023, we have completed PET analysis of the Bio-Hermes trial for the Global Alzheimer’s Platform (GAP). Co- sponsored by pharma companies with an interest in AD clinical development, the landmark 1,000-participant Bio- Hermes study was designed to evaluate the ability of blood-based and digital biomarkers to reflect the presence of brain amyloid in participants enrolled in AD clinical trials. A secondary objective of Bio-Hermes was to include a significant representation of ethnic and racial minority participants, building a highly valuable database as regulatory requirements in AD clinical trials increasingly require improved representation of traditionally underrepresented populations. IXICO provided all PET data collection services as well as the visual radiology read to determine gold-standard amyloid pathology. Following study completion, IXICO’s scientific team led an initial analysis of the collected PET biomarkers, specifically focusing on the analysis across ethnic and racial groups. The work was selected for presentation and discussion in the opening symposium at the high-impact CTAD (Clinical Trials in Alzheimer’s Disease) conference, held in Boston, Massachusetts, between 24th and 27th October 2023. Selection by the organising committee for this prestigious presentation slot highlights the importance of the work performed for the AD community and provided a significant opportunity for IXICO to demonstrate cutting edge scientific and technical capabilities in AD PET imaging to participating pharma sponsors and academic researchers. As a Bio-Hermes partner with an R&D license on the data collected, IXICO is well-positioned to further investigate the unique dataset and thereby advance scientific knowledge in this critical field of AD development. 9 IXICO plc Strategic Report for the year ended 30 September 2023 Huntington’s disease continues to be a key market for IXICO, and good progress was made during 2023 to further underline the Group’s leading position by progressing the IXICO-initiated HD Imaging Harmonization (HD-IH) consortium. HD-IH was founded in 2022 by IXICO, the CHDI Foundation Inc. (CHDI) and pharma partners uniQure and PTC Therapeutics to conduct an unprecedented harmonization analysis of more than 6,000 participant-visit magnetic resonance images (MRIs) acquired from over 2,000 research participants. During 2023, the project has completed the initial phase and, through the onboarding of a third pharma partner, Asklepios BioPharmaceutical, Inc. (AskBio) and additional funding commitments by both CHDI and IXICO, secured the necessary financing to complete the project. These analyses are expected to support the development of therapeutic strategies targeting specific HD sub- populations (“precision-medicine”), inform eligibility and dosing decisions for clinical trials, and aid in associated trial design decisions and biomarker development to enable interventional studies earlier in the disease course. IXICO presented an update on progress of HD-IH at the 18th Huntington’s Disease Therapeutics Conference (HDTC) held in Dubrovnik, Croatia, from 24-27 April 2023. Further steps were taken in the development of an extended offering for demyelinating disorders. The Group has previously announced the award of two phase-III trials in MOG antibody-associated disease (MOG-AD) and during 2023 we have extended our service offering to provide automated lesion quantification into one of those trials. With these extended capabilities, the Group can now serve core imaging requirements across demyelinating disorders, including Multiple Sclerosis (MS) as the most prevalent and widely researched disease area. IXICO presented a poster on its quantitative MS analysis at the 9th conference by the European Committee for Treatment and Research in MS, ECTRIMS, held in Milan, Italy, from 11-13 October 2023. The Group continues an active R&D program exploring opportunities to develop its core clinical trial analytics technology for applications that support treatment-related decision-making in new post-market applications. During 2023, we have actively progressed several partnership opportunities on the development of solutions to provide diagnostic decision-support in clinical practice and safety monitoring of ARIA (amyloid related imaging abnormality), the core side effect of recently approved anti-amyloid therapy. To further support development of a post-market decision support tool, the Group has secured funding that will support and complement IXICO’s internal R&D program during 2024. Growth strategy & Corporate outlook Our focus remains on neuroscience with neurology global medicine spending expected to grow at 3–6% to more than $140 billion by 2025. This includes much higher growth subsegments, as a range of rare neurological diseases have had new treatments approved or showing positive progression as well as the potential that large population diseases like AD or PD will see further investment consequent to the approval of new treatments. During 2023, IXICO was impacted by a slow-down in trial start-ups and near-term cutbacks in pharma R&D pipelines resulting from a tighter funding environment affecting the biopharmaceutical industry. Whilst we anticipate these conditions continuing in 2024, we view them as near-term headwinds. We remain resolute in our conviction that the unmet clinical need in neurodegenerative diseases provides significant runway for growth for IXICO, reflected in our “Precision in Neuroscience” strategy. Our 5-point Precision in Neuroscience strategy IXICO continued to make good progress in several strategic areas: Build Pillar: Robust operational performance and cost control measures for the period enabled financial earnings in line with market expectations, despite lower year over year revenues. Investments made during 2023 to build our commercial infrastructure have led to notable increase in the client contract opportunities pipeline providing management visibility to significantly larger numbers of Requests for Proposal (RFP) over the next 24 months, each valued at between £0.25m to £2.5m, across a broadening range of therapeutic areas. This, combined with an order book at the end of 2023 of £14.8m, provides good future revenue visibility and a basis for targeting our commercial efforts to return to double digit revenue growth in 2025 and beyond. Innovate Pillar: We believe that IXICO will lead in our addressable markets by developing proprietary algorithms that the biopharmaceutical industry rely on to establish both the safety and efficacy of new treatments. Data analysis undertaken by IXICO as part of the GAP Bio-Hermes study (see Science review) completed in 2023 were presented in the opening symposium at the prestigious CTAD (Boston, October 24th), AD clinical trials scientific conference. Presenting important data at large disease specific conferences is expected to increase awareness of IXICO’s capabilities to the global pharma industry and provide significant potential future business development opportunities. 10 IXICO plc Strategic Report for the year ended 30 September 2023 In 2023, the HD-IH consortium was expanded (see Science review). The HD-IH consortium deploys IXICO’s proprietary IXIQ.Ai brain segmentation platform to conduct a harmonized analysis of more than 6,000 participant-visit magnetic resonance images (MRIs) acquired from over 2,000 research participants. These analyses will support the development of therapeutic strategies targeting more specific sub-populations, inform eligibility and dosing decisions for HD clinical trials, and aid in associated trial design decisions and biomarker development to enable interventional studies earlier in the disease course. Penetrate Pillar: Despite delays in clinical trial start-ups, we continue to make good progress in pursuing our strategy of penetrating early stage (phase 1 and 2) programmes, accessing the potential to stay with the client for several years as the asset, if successful, moves along the development continuum. Broadening the client base with more early phase studies reduces the risk associated with any single large, late phase project, while providing multiple opportunities to move into larger, later stage (phases 3 and 4) clinical trials in the future. Developing drugs takes a long time and is expensive. The overall likelihood of approval (LOA) from Phase 1 for all developmental candidates over 2011–2020 was 7.9%. However, rare disease therapies (of which many are in neurology) are notably more successful with an overall LOA of 17.0% and development programs with trials employing patient preselection biomarkers have two-fold higher LOAs (15.9%), driven by a Phase 2 success rate of nearly one-in- two. This insight supports our strategy of becoming the partner of choice across a broader range of rare diseases, as we have done in HD. In addition, we will be looking to leverage our next generation TrialTracker platform to increase commercial success in new trials of large population diseases like AD, MS, or PD, in particular those employing imaging biomarkers combined with potential analysis of non-imaging biomarkers, such as blood-based and digital biomarkers. Bridge Pillar: There is incredible potential for real world evidence (RWE) to play a much broader role in the advancement of drug development, delivering insights that ensure efficacy and safety, while increasing patient-centricity and trial feasibility. With our recent and ongoing investments in artificial intelligence (AI) and cloud analytics together with our next generation TrialTracker data sharing and AI analysis platform, IXICO’s ambition is to address many of the challenges to analysing and interpreting RWE Imaging data. We expect this to expand IXICO’s addressable clinical trials market whilst creating a bridge into post marketing and clinical practice markets. Enhance Pillar: With long lead times, significant regulatory and procurement barriers to entry into the clinical trials market, IXICO is uniquely positioned to partner with innovative analytics organisations to provide a market channel to the global biopharmaceutical industry. This partnering strategy supplements our own innovation roadmap with additional enhancements to our offering to provide cutting edge innovations across a broad range of CNS disease areas. Progress made during 2023 means that we are hopeful to be able to announce our first significant partnership agreement early in 2024. Giulio Cerroni Chief Executive Officer 4 December 2023 11 IXICO plc Strategic Report for the year ended 30 September 2023 Stakeholder engagement The Board recognises that effective stakeholder engagement enables improved, impactful decision-making. It is committed to further strengthening its relationships across all stakeholders impacted by the Group’s activities. The principal strategic decision made during the year was in relation to assessing the operational cost of the Group. This included critically analysing the cost base of the Group, covering both fixed and variable costs to identify cost savings, as well as making the decision to reduce headcount to reflect known short-to-medium term challenges in the clinical trial market. The Board prioritised this to ensure that the Group continues to be well positioned to respond to expected market growth generated by material progress in the development of drugs to address AD and rare neurological diseases. This decision supports IXICO’s offering to the neurological clinical trials market, utilising efficient, secure and highly resilient technology that delivers the highest levels of drug safety and efficacy and trial patient stratification assessments. Our stakeholders Employees IXICO employs highly qualified employees in a range of scientific, technical, operational, and supporting roles What’s important to them How we engage Employee engagement is critical to employee happiness, wellbeing and retention. One of the primary topics of engagement is emphasising the Group’s purpose and societal benefit arising from its activities. Additionally, employees need to understand their opportunities for development, and how their roles contribute directly and indirectly to the Group’s successes. Collaboration and idea sharing along with communication to, within and between teams is crucial. The Group holds regular Townhalls with employees to communicate material matters and topics including strategic, scientific, operational, commercial and financial. Development and training plans are defined as part of annual performance reviews to support personal growth as well as a wider contribution to the Group. These plans are reviewed and revisited each year by line managers and their direct reports. During the year a survey was conducted to obtain feedback from employees. Impact of key strategic decision Right sizing the organisation by removing a small number of roles in the Group affected all employees, not just those directly impacted. A focus on clear communication, accompanied by a transparent approach and rationale for the change supported employees in understanding the change and their response to it. Shareholders IXICO has a strong list of institutional and individual shareholders What’s important to them How we engage Engagement with shareholders focusses on the Group’s purpose and its strategy for delivering this. Shareholders want to see a return to growth and have the confidence that the Group’s management are making decisions that place the Group in the best possible position to capitalise on market opportunities as they arise. This includes responding to challenges in a measured and rational manner. Shareholders are communicated to via LSE RNS, IXICO’s website, investor presentations and social media. The Group delivers twice-yearly results briefings to communicate developments to, and receive feedback from, shareholders. Our Executive Directors, Non-Executive Chairman and other Non-Executive Directors make themselves available to meet with shareholders as appropriate. Impact of key strategic decision Key shareholders have been impacted within their portfolios by companies that have found the lack of available capital in the market challenging. IXICO’s careful management of its financial reserves, whilst continuing important investments that support future growth supports shareholder confidence that the Group is addressing short term challenges whilst securing capabilities to respond to both expected and unexpected opportunities as they arise. 12 IXICO plc Strategic Report for the year ended 30 September 2023 Pharmaceutical and biotech clients Clients rely on data analytics services to support critical decisions in their clinical development programs What’s important to them How we engage Clients expect high levels of quality assurance, with consistent and reliable service levels. They also seek more efficient ways to run trials, alongside utilising new product development and innovation. Scientific leadership and consultancy are also highly valued. Each project has a dedicated project manager accountable for service delivery, where weekly project calls are standard practice. Our science team is closely involved in projects enabling clients to take advantage of the latest advances in the IXICO analysis portfolio and expertise. The Group supports all client audit requirements, and operates under a Quality Management System, accredited to ISO 13485. Impact of key strategic decision The Group has ensured that it continues to achieve the highest levels of client satisfaction and service quality across the year, prioritising these metrics as it seeks to become the partner of choice across neurological clinical trials. Scientific Partners IXICO is a member of several scientific consortia and scientific partnerships What’s important to them How we engage These partners require scientific and operational capabilities, with a focus on investment in innovation. It’s also important to develop relationships that support the community’s wider purpose of advancing human health. IXICO is engaged in several scientific collaborations and contributes at conferences dedicated to specific disease areas. The Group provides discounted and/or in-kind services to collaborations designed to advance knowledge of neurological diseases. During the year, the Group CSO undertook detailed analysis on behalf of a partner resulting in a prestigious symposium presentation at this year’s CTAD conference. Impact of key strategic decision A careful review of the most impactful scientific developments to support clients and partners has increased the focus of the Group in its investments to the long-term benefit of these stakeholders. Imaging Centres Imaging centres perform brain scans on participants involved in clinical trials. The centres upload images to IXICO’s systems for analysis What’s important to them How we engage The centres used by IXICOs clients require training and qualification of their personnel to deliver accurate imaging data. During a project, technical support and timely issue resolution is critical in successfully delivering for our mutual client. Our online imaging-centre-support model enables centres to receive training and qualification at a time that suits them. Access to support is also managed through an online helpdesk. Impact of key strategic decision The Group continues to provide the highest levels of support for the qualification of new imaging centres, thereby accelerating centre onboarding to a trial and reducing the burden on scarce healthcare resources. Positive feedback from sites continues to separate IXICO from its competition in this respect. 13 IXICO plc Strategic Report for the year ended 30 September 2023 Participants Our clients recruit participants to take part in the clinical trials of their drug candidates What’s important to them How we engage Participants rely on IXICO to provide objective measurement of the impact of trial drugs on the brain. A participant’s confidence in the safety of enrolling in a clinical trial is of the highest importance and they rely on accurate and timely readings to ensure this. Whilst we do not directly communicate with trial participants, we engage with patient representatives to understand the challenges of living with neurological diseases. Impact of key strategic decision The right sizing of the organisation ensures that IXICO can provide sustained delivery of its purpose which places the improvement of health outcomes for patients suffering from neurological disease at the core of everything that it does. S172(1) statement: As required by Section 172 of the Companies Act 2006, a director of a company must act in the way he or she considers, in good faith, would most likely promote the success of the company for the benefit of its shareholders. In so doing, the director must have regards, amongst other matters, to the: • Likely consequences of any decision in the long term; • Interests of the Group’s employees; • Need to foster the Group’s business relationships with suppliers, customers and others; • Impact of the Group’s actions on the community and environment; • Desirability of the Group maintaining a reputation for high standards of business conduct; and • Need to act fairly between members of the Group. The Directors continue to consider specific stakeholder groups (as outlined in more detail within the governance section). This includes the regularity and means by which the Group engages with its stakeholders. 14 d e t a r e n e g l e u f l i s s o f n o e c n a i l e r g n i r e w o l y b t n i r p t o o f n o b r a c ’ s p u o r G e h t e c u d e r o T e h t t i m i l l y d a o r b e r o m d n a e b a v l i y l l i a c m o n o c e d n a e b s s o p e r e h w i l r e w o p i . s n o i t a r e p o s s e n s u b d n a s e e y o p m e p u o r G l f o t c a p m i l t a n e m n o r i v n e f o s d r a d n a t s h g h s t p o d a O C X I i I t a h t l a i t n e s s e s i t i , e s o p r u p s t i r e v i l e d o t r e d r o n I i s h t d n a i y t e c o s n o t c a p m i e v i t i s o p a i g n k a m t s l i h w e c n a i l p m o c d n a e c n a n r e v o g s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 e w i h c h w i s c p o t l a i r e a m t e h t d n a k r o w e m a r f G S E r u o d e p o e v e d l i g n v a H . k r o w e m a r f G S E s O C X I ’ I i f o s s a b e h t s m r o f e p c n i r p i l g n i l b a n e e m i t t s r i f e h t r o f a t a d d e t c e l l o c e w , y t i C e h t f o t r a e H f o t r o p p u s e h t h t i W d n a 2 , 1 s e p o c S r o f i i i s n o s s m e e d x o d n o b r a c d e t a m i i t s e e t a u c a c o l l t p u o r G e h t r o t i n o m o t y l r e t r a u q s t e e m d n a d e h s i l b a t s e l l e w s i e c r o f k s a T G S E O C X I I 2 O C f o s n o t 0 0 2 , 1 y e t a m x o r p p a : i l 3 e p o c S 2 O C l f o s n o t 0 1 y e t a m x o r p p a : i 2 e p o c S 2 O C l f o s n o t 5 y e t a m x o r p p a : i 1 e p o c S - - - e h T o t n w o h s e b n a c e s e h t e r e h w s e g e t a r t s g n i t t e s f f o n o b r a c i i r e d s n o c o s a l l l i w e w i . ’ g n h s a w n e e r g ‘ n a h t e r o m t n e s e r p e r d n a t s u b o r e b , t n i r p t o o f n o b r a c r u o e c u d e r o t s y a w e t a g i t s e v n i o t s i s u c o f y r a m i r p r u o t s l i h W y e n r u o j G S E s O C X I ’ I h t i w t n e m e g a g n e e e y o p m e e o m o r p d n a t l . : s w o l l o f s a s i s e t a m i t s e l a u n n a e s e h t f o e m o c t u o e h T . 3 - - - e v a h t a h w e w , t h w o r g s s e n s u b i l e b a n a t s u s i i g n v e h c a i n i l a i t n e s s e e b o t d e r e d s n o c i t a i g n k o o l , d n a k r o w e m a r f i s h t i g n p o e v e d l r e h t r u f n o i g n s u c o f 3 2 0 2 t n e p s e w , s h i t f o t r a p s A . s c p o i t l t a i r e a m d e i f i t n e d i r u o g n v o r p m i i f o s m r e t n i o d n a c e w . 1 y t i C e h t f o t r a e H f o t r o p p u s e h t h t i w t n i r p t o o f n o b r a c t s r i f r u o l d e t a u c a c l e v a h e w w o h e v o r p m i o t e u n i t n o c l l i w e w d n a y e n r u o j G S E r u o f o t r a t s e h t t s u j s i i s h T g n n o i i t i s o p G S E r u o f o y t i l i b a i l e r e h t e v o r p m i l l i w n r u t n i i h c h w a t a d G S E t c e l l o c e b l l i w s h T i . r e h t r u f i s h t e v o r p m i o t e k a t o t d e e n e w s n o i t c a e h t f o y t i r a c l e h t d n a . l w o e b d e l i a t e d r e h t r u f s a 4 2 0 2 r o f s u c o f y e k a r u o f o n o i t l a u c a c l e h t , y c n a n f i s t i n i s i y e n r u o j n o i t c e l l o c a t a d G S E r u o t s l i h W r u o r o f t a a d i s n o s s m e i e h t i e s n i t u r c s o t h c a o r p p a i s h t e s u l l i w e w , y l r a l i m S i h t i w e g a g n e d n a t r o p p u s n a c e w r e t t e b w o h d n a e m o h m o r f i g n k r o w s e e y o p m e l . a e r a s h t n i i t n i r p t o o f i r u o g n c u d e r n i l s e e y o p m e r u o 5 1 ) m o c . y t i c e h t f o t r a e h e h t ( d o o g r o f e c r o f a e b n a c s s e n i s u b y r e v e e v e i l e b e W | y t i C e h t f o t r a e H 1 e g n a r a i g n c u d o r t n i e r a o h w s r e i l p p u s r u o m o r f k c a b d e e f e v i t i s o p y r e v d a h e v a h s y a w . t a a d t a k o o l o t d e e n e r o e r e h f t e w d n a t n i r p t o o f n o b r a c r i e h t e c u d e r o t s e v i t a i t i n i f o r u o n h i t i w s n o i t c u d e r n o b r a c d n a s e v i t a i t i n i G S E e s e h t t c e l f e r n a c e w e W . t a a d i s h t e s n i i t u r c s r e t t e b o t d e e n e r o f e r e h t e w d n a i n o s s m e i t s e g r a l r u o r a f o t k r o w n a c e w e r e h w s a e r a e s o h t d e i f i t n e d i y d a e r l a s a h e r u g i f 3 2 0 2 e n i l e s a b y b s i i s e c v r e s d n a s d o o g d e s a h c r u p , 3 e p o c S n I . t c a p m i e t a m i l c ’ s O C X I I e c u d e r s t e g r a T d n a s s e r g o r P G S E t n e m n o r i v n e n o t c a p m I L A T N E M N O R I V N E - l a c n i i l c g n i t r e v n o c y b h t l i a e h n a m u h d n a e n c d e m e c n a v d a o t s i i e s o p r u p s O C X I ’ I 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S y e n r u o j G S E r u O c l p O C X I I t n e m t i m m o C o t i h c h w n o p u i s s a b t n a t r o p m i n a i e d v o r p o s a l t u b e s o p r u p s t i f o y r e v i l e d o t y e k e r a s e u a v s O C X I l ’ I . n o i t a m r o f n i l i u f g n n a e m y l l a c n i i l c o t n i a t a d g n g a m i i l a i r t e h t l . s a o g G S E r e v i l e d t n e m t i m m o C n i p u o r G e h t f o e s o p r u p e h t e t o m o r p o T l f o s e n n a h c e t a i r p o r p p a t n e m e p m l i o T s e c r u o s e r l , s o o t t e a i r p o r p p a p o e v e d o T l i y t i s r e v d t r o p p u s d n a e t o m o r p s y a w a o T l t n e m t i m m o C t n e m t i m m o C t n e m t i m m o C f o d e e n l i a c d e m t e m n u h g h e h t i s s e r d d a . e s a e s d i l l i a c g o o r u e n o t l s g u r d f o t n e m p o e v e d e h t g n i t r o p p u s i n o i t a c n u m m o c y a w - o w t r o f t n e m e g a g n e t n e a l t i t n a e r d n a t c a r t t a o t s e c i i l o p d n a e c r o f k r o w e h t n h t i i i w n o s u c n l i d n a s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 t c a p m i & t i f e n e b l a t e i c o S t n e m e g a g n E l t n e m p o e v e d d n a n o i t n e t e r t n e l a T n o i s u l c n i d n a y t i u q e , y t i s r e v D i l . e o h w a s a y t e c o s g n i i t t i f e n e b f i o m a y r a m i r p e h t h t i w l , s a u d v d n i i i i i l d e t n e a t g n n a t e r d n a g n i t c a r t t a s e d u c n l i i s h T . h t l a e h n a m u h d n a e n c d e m g n c n a v d a i i i f o e s o p r u p s p u o r G e h ’ t o t d e n g i l a s i t a h t e c r o f k r o w d e l l i k s d n a e s r e v d a s e r i u q e r i O C X I I 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S Y T E I C O S D N A E L P O E P c l p O C X I I d n a w e n f o t n e m p o e v e d d e u n i t n o C l . s e n i l i i l e p p s s y a n a d e v o r p m i l n o i t e p m o c e h t g n i l b a n e m u i t r o s n o c i l r e v o f o s s y a n a e v i t c e p s o r t e r e h t f o i g n y f i t a r t s o t s e h c a o r p p a d e v o r p m i l e b a n e l l i w j t c e o r p e h t f o t u p t u o e h T . s t e s a t a d g n g a m i i D H 0 0 0 , 6 H I - D H e h t f o h t w o r g d e u n i t n o C l l e w s a s a i r t l l a c n i i l c D H n i s t n e i t a p e c n e r e f n o c D A T C 3 2 0 2 r e b o t c O e h t d n a e c a r f o s t c e f f e e h t f o t c e p s e r n i i d n a y t i v i t i s o p d o y m a n o r e d n e g l t a s t l u s e r i l s s y a n a a t a d d e t n e s e r P e h t m o r f a t a d g n s u D A i i f o s s o n g a d i j . t c e o r p s e m r e H o B P A G i s g u r d f o s t n e m e r u s a e m y c a c i f f e i i f o n o s c e r p e h t g n s a e r c n i i s a l . s a i r t l a c n i i l c D H n h t i i w - - - d n a s y e v r u s e e y o p m e g n l i t c u d n o C s s o r c f o e m m a r g o r p g n o g n o i i i a v n o i t a c n u m m o c n o i t i a s n a g r o l . s r e t t e s w e n d n a s g n i t e e m f f a t s s t n e v e t n e m e g a g n e . 4 2 0 2 o t n i e u n i t n o c f f a t s d e H l l l i w h c h w i - - r e v o c e r a c h t l a e h e a v i r p t f o h c n u a L l . s e e y o p m e r o f i . r e d v o r p g n n a r t i i d e u n i t n o c r i e h t n i f f a t s g n i t r o p p u S d n a n o i t a c u d e l i a n o s s e o r p f f o t n e m e v e h c a e h i t h t i w s e e y o p m e l n i j s e v i t c e b o y n a p m o c d n a l a n o s r e p t r o p p u s o t k r o w e m a r f a d e h c n u a L . t n e m p o e v e d l t n e m p o e v e d l l i a n o s s e o r p d n a f e n i l - n o s O C X I ’ I h t i l w s e u d o m 6 1 . s e u a v l s A 4 s O C X I ’ I h t i w e n i l l a n o s r e p l a n o i t i t d d a d e n e m e p m l I I & D d e c n a h n e n a g n h c n u a i l . y g e a r t s t n o 4 2 0 2 n i s u c o f a h t i w s e c i i l o p R H d e c n a h n e d n a d e h s e r f e R - - - - - . p u o r G e h t o t n i s l l i k s c i f i c e p s t c a r t t a i s a e s r e v o f o p h s r o s n o p s d e t a i t i n I o t s t n e m e r i u q e r a s v e e y o p m e i l i g n c u d o r t n i y b y g e t a r t s n o s u c n I i l d n a e g a r e v a e r u s a e m o t s c i r t e m . y a p r e d n e g n a d e m i i & y t i s r e v D s O C X I ’ I d e p o e v e D l - - e c n a n r e v o g e v i t c e f f e d n a t n e r a p s n a r t e v a h o t s i t n e m t i m m o c y r a m i r p e h T . ) 6 2 e g a p e e s ( e d o c e c n a n r e v o g A C Q e h t h t i l w y p m o c o t e v i r t s e w , I M A n o d e t o u q p u o r G a s A d u a r f d n a t c u d n o c s i m o t e c n a r e l o t o r e Z n o i t a v o n n I e c n a n r e v o g a t a D t n e m e g a g n e r e d o h e k a t S l l . s r e d o h e k a t s s t i l l a o t e c n a r u s s a e r e d v o r p o t i s e s s e c o r p t n e m t i m m o C t n e m t i m m o C t n e m t i m m o C t n e m t i m m o C . s e i r t s u d n i l t d e a u g e r l y e s o c l ’ t s o m s d l r o w e h t f o e n o s i 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S S S E N I S U B E L B I S N O P S E R c l p O C X I I i h c h w , r o t c e s l a c i t u e c a m r a h p o b e h t o t i i s e c v r e s i s e d v o r p O C X I I e c u d e r o t s e r u d e c o r p d n a s e c i i l o p h s i l b a t s e o T e s a e s d i l l i a c g o o r u e n e d v o r p o T i d n a e s y a n a l , e r o t s , s s e c o r p , t e r u p a c o T d n a , s r e d o h e k a t s l l l a h t i w e g a g n e o T r o f t n e m n o r i v n e n e p o n a e g a r u o c n e d n a d u a r f e h t s t r o p p u s t a h t i l s s y a n a r e k r a m o b i e r u c e s , d e l l o r t n o c a n i t a a d t r o p e r s d r a w o t i s e g e t a r t s ’ s p u o r G e h t t p a d a a , 4 2 0 2 n i , r e v e w o H . e m m a r g o r p n o i t c u d n i R H e h t f o t r a p s m r o f g n n a r t i i . e r u t l u c r u o y r e b i r b - i t n A i f o d e t c e p x e r u o v a h e b f o s d r a d n a t s h g h i t r o p p u s o t s e c i i l o p R H l a r e n e g f o e t a d p U - - D A i f o n o s s e r g o r p e h t o n t i s t h g s n i i . D H d n a l i s s y a n a f o e m m a r g o r p g n o g n O i l l e b a u a v e b a n e o l t s e n i l e p p i ’ s O C X I I n e e w t e b n o i t a r o b a l l o C l l o r e h t h t i w n o i t c n u n o c n j i d e t n e m e p m l i e b l i l a c g o o n h c e t ’ s O C X I I t r o p p u s l l i w g n n a r t i i y r e b i r b - i t n a f o h s e r f e r l a r e n e g o t s m a e t l y g o o n h c e T d n a e c n e c S i . t c u d n o c f o e d o c O C X I I n a f o t u o s t i f o h c n u a l s t i n i s t n e m e c n a v d a . l m r o f t a p s s y a n a n o i l i t a r e n e g t x e n - - 7 1 e h t f o t r a p s m r o f i g n n a r t i r e h s e r f e r t n e u q e s b u s d n a g n n a r t i i R P D G . e m m a r g o r p n o i t c u d n i R H s e c i i l o p n o t t i t c e o r p a a d d e c n a h n E ’ s O C X I I n i s t n e m t s e v n i d e u n i t n o C t a a d d n a e r u t c u r t s a r f n i . m a r g o r p e c n a n r e v o g . 3 2 0 2 n i d e h c n u a l - - - t n e i t a p , s r e i l p p u s , s t n e i l i c g n d u c n l i o t 4 2 0 2 o t n i e u n i t n o c l l i w s e v i t a i t i n i s i h c a o r p p a s O C X I ’ I e r u s n e e s e h T . s t n e m t i m m o c G S E n o n g i l a o t s r o t s e v n i d n a s p u o r g d n a s t n e m t i m m o c e h t h t i w d e n g i l a l . s r e d o h e k a t s s t i f o s n o i t a r i p s a l s r e d o h e k a t s h t i w t n e m e g a g n E - . e s a e s d i s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 s e i t i r o i r p d n a s s e r g o r p 3 2 0 2 i l g n w o b e l t s h w i t e m n u h g h e h i t s s e r d d a o t d e n g s e d i i i s e n c d e m w e n f o t n e m p o e v e d l l i l a c g o o r u e n n h i t i w d e e n l i a c d e m h t i w e c n a i l p m o c n i d n a r e n n a m t n e i l i s e r d n a s n o i t l a u g e r n o t i t c e o r p a t a d . s n o i t a t c e p x e r e d o h e k a t s l d n a s e m e h t n o m m o c g n i r e v i l e d s e i t i r o i r p IXICO plc Strategic Report for the year ended 30 September 2023 Financial review Right sizing the Group for future growth. In 2023, the Group has navigated a challenging trading environment. This was anticipated, and the Group has delivered financial earnings for 2023 in line with market expectations. Looking to 2024, ongoing macro-economic and political challenges continue to weigh down on the clinical trials market, and, in particular, the availability of capital. This has led to cost restructuring and consolidation across the pharma, biotech and CRO space, and has softened the Group’s revenue outlook for 2024, as announced in September 2023. To anticipate this, the Group has undertaken cost reduction measures, including a ‘right sizing’ of the employee base seeking to balance the weaker short-term outlook and the medium-long term market opportunity (which, if anything, has strengthened in the year). The Group expects to deliver flat revenue across 2024, before returning to revenue growth in 2025. This review includes a comparison of the financial KPIs used to measure progress over the prior year, a summary of which is shown below: KPI Revenue Gross profit Gross margin EBITDA (loss)/profit Operating (loss)/profit (Loss)/profit per share Order book Net assets Cash Non-current asset investments Revenue 2023 result 2022 result Movement £6.7m £3.3m 49.1% (£0.8m) (£1.4m) (2.44p) £14.8m £11.4m £4.0m £1.9m £8.6m £5.2m 60.7% £1.5m £0.9m 2.14p £16.0m £12.5m £5.8m £2.3m £1.9m ↓ £1.9m ↓ 1,160bps ↓ £2.3m ↓ £2.3m ↓ 4.58p ↓ £1.2m ↓ £1.1m ↓ £1.8m ↓ £0.4m ↓ Revenue for the year of £6.7 million (2022: £8.6 million) represents a year-on-year contraction of 23%. This contraction was expected, and was caused by the final year impact of large client trial cessations arising across 2021 and early 2022, each materially impacting future revenues. Replacing the revenues lost from these trials takes time, both in contracting and initiating new trials and those new trials will tend to be lower value, earlier phase trials compared to the large, failed trials (which were predominantly late stage). Across 2023, the Group has seen lower levels of new contract bookings than it anticipated, a trend seen across the clinical trials market. The Group will deliver approximately flat revenues in 2024 before an expected return to revenue growth in 2025. Gross profit The Group reports gross profit of £3.3 million for the year (2022: £5.2 million). This equates to a gross margin of 49% (2022: 61%). Whilst this remains a strong gross margin, the reduction on the prior year reflects both the reduction in revenues and a revenue mix increasingly reflective of earlier phase trials, which tend to be lower margin. Whilst in the short term, a portfolio of early phase trials results in lower gross margins, this portfolio also provides a strong base for future growth, as those trials that successfully move from early to late phase provide the Group with the opportunity to continue providing services as these trials transition to larger, later phase trials. 18 IXICO plc Strategic Report for the year ended 30 September 2023 Earnings before interest, tax, depreciation, and amortisation (‘EBITDA’) The Group delivered an EBITDA loss of £0.8 million in the year (2022: £1.5 million profit). This reflects the reduction in revenues, tighter margins, a lower level of grant income, several non-recurring benefits that supported profitability in 2022 and a reduced level of cost capitalisation. These negative impacts have then been partially offset by careful cost management including the completion of a headcount reduction exercise immediately post the financial year end. Profit attributable to equity holders Depreciation of fixed assets Amortisation of fixed assets Interest on lease liabilities Interest on cash held at bank Taxation EBITDA Operating profit 2023 £000 (1,178) 400 225 29 (105) (183) (812) 2022 £000 1,032 451 188 33 (10) (147) 1,547 Operating expenditure in the year reflected careful cost management alongside targeted investment, specifically: • research and development expenses of £0.9 million (2022: £1.2 million) included the development of new algorithms to support image analysis in new and existing therapeutic indications. In addition, the Group capitalised £1.2 million of internal development expenditure primarily in respect of its next generation TrialTracker platform (2022: £0.9 million); • sales and marketing expenses of £1.3 million (2022: £1.2 million) reflecting increased investment in this team in particular, sales executives and marketing and product capabilities; and • general and administrative expenses of £2.9 million (2022: £2.6 million) reflecting several non-recurring positive impacts on profit in the prior year that included positive foreign exchange movements and the write back of long term incentive charges on share options that did not, or were not expected to, meet their performance conditions. Operating losses totalled £1.4 million (2022: £0.9 million profit) equated to an operating loss margin of 22% (2022: 11% profit margin). Order book The Group continues to benefit from a healthy contracted order book. On 30 September 2023 this totalled £14.8 million (2022: £16.0 million), which takes account of £6.7 million of revenues delivered during the financial year, £8.0 million of new and expanded multi-year contracts secured during the year and £2.6 million of trial descopes due to client trial failures and minor foreign exchange movement in the year. This net contraction in the order book reflects the notable slowdown in new trial initiations during 2023. This is a short-term challenge reflective of the tight capital markets and is counter to the medium and longer term trends for increased investment in this market driven by aging populations, increased global healthcare costs and scientific breakthroughs in the area of neurological disease. New contracts won were across 7 clients with contract extensions across 13 clients. Opening orderbook New wins Revenue Net descoping, inflation and FX Closing orderbook 19 2023 £000 16,019 8,030 (6,665) (2,631) 14,753 2022 £000 18,776 12,617 (8,643) (6,731) 16,019 IXICO plc Strategic Report for the year ended 30 September 2023 Cash The Group reported operating cash inflows after tax receipts of £0.3 million in the year (2022: £1.4 million). This reflects the timing of operational cash inflows and outflows with strong client payment volumes early in the year supporting an overall positive operational cash position. The Group had a closing cash balance at 30 September 2023 of £4.0 million (2022: £5.8 million) with the reduction in cash reflecting £1.9 million (2022: £2.2 million) of investment in data and technology assets designed to support future scalability and £0.2m of lease payments on the Group offices (2022: £0.1m). These investments were partially offset by the £0.3m of operating cash and taxation inflows (2022: £1.4 million). Non-current asset investments The Group capitalised £1.9 million of non-current assets in the year to 30 September 2023 (2022: £2.3 million). This decrease in non-current assets reflects the 2023 investment in bringing to operational readiness of the Group’s next generation TrialTracker platform totalling £1.6 million (2022: £2.0 million). 2024 capitalised investment in this platform to deliver additional functionality is expected to be less than £1.0 million. The next generation TrialTracker platform further enhances the Group’s capabilities to remotely collect, and centrally analyse, brain images in support of clinical trials. The platform has been developed on Microsoft Azure’s cloud infrastructure supporting further improvements in system resilience, security, scalability, and efficiency. Net assets The Group’s net asset position decreased by £1.1 million to £11.4 million across the year (2022: £12.5 million). This reflects the losses reported partially offset by the investments made in technology assets to underpin long-term future growth aspirations and market demands. Loss per share The Group reports a loss per share of 2.44p (2022: 2.14p profit per share). Grant Nash Chief Financial Officer 4 December 2023 20 IXICO plc Strategic Report for the year ended 30 September 2023 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. In assessing the risks faced by the Group, a detailed risk identification and control framework is adopted. It is the responsibility of each department leader within the Group to update the risk and control matrix for their department and each matrix is reviewed by management on a quarterly basis. The Board receives a summary of the consolidated risk and control matrices every six months. The matrix sets out the status of controls in place to manage identified risks and ranks the risks by their likelihood of occurrence and the potential impact of this on the Group’s operations. This matrix also details actions which are identified to further manage such risks. The Board reviews, discusses and challenges this risk and control matrix with the Executive Directors. 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. This is not an exhaustive list of risks and is intended to provide visibility of those risks the Board considers the most material based on the information it currently has available to it. 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, Operational, Financial, and Legal, Compliance & Regulatory. 21 e g n a h C k s i R ó ó l d n a t n e m p o e v e D s s e n s u B i l a n o i t i d d a h t i w r a e y e h t g n i r u d d e n e h t g n e r t s n e e b s a h m a e t l i a c r e m m o C e h T - i . d e t n o p p a s e o r g n l i t e k r a m f o s e i r e s a h g u o r h t e l i f o r p s t i d e s a r i s a h p u o r G e h T - - s e i t i l i b a p a c l a n o i t a r e p o d n a - n o i t a c d n i i c i t u e p a r e h t y e k h t i i w p h s r e n t r a p n i d e t n e s e r p , s r a n b e w d e s a b i . t e k r a m s O C X I ’ I n i s r e d a e l i n o n p o i s e i t i n u t r o p p o f o e n i l i e p p s t i d e n e h t g n e r t s s a h p u o r G e h T - f o r e b m u n r e g r a l a g n i t e g r a t s i t i i g n n a e m , r a e y e h t n i . o g a s h t n o m e v e w l t s a w t i n a h t s t c a r t n o c i s p h s n o i t l a e r l i a c n a n i f t n e i l c d l i u b r o s d n e r t t e k r a m d n a t s r e d n u o t e r u l i a F d e c u d e r d n a s e i t i n u t r o p p o t n e i l c t s o l n i t l u s e r y a m . s n r u t e r e n i l i e p p a d l i u b o t e r u l i a f d n a s e c y c l l s e a s g n o l e v a h s a i r t l l a c n i i l C n o i t c n u f l i a c r e m m o c e h t n h i t i l w s e e y o p m e f o r e v o n r u t t n a c i f i n g s A i . e c n a m r o f r e p s e a s e r u u t l f n o t c a p m i l l i w s e i t i n u t r o p p o f o r e b m u n e h t d e t c a p m i s a h t n e m n o r i v n e g n d n u f e h t i i f o g n n e t h g i t A . t m u n e m o m l i a c r e m m o c m r e t t r o h s t c a p m i y a m . r o t c e s h c e o b e h t i t n i l y l r a u c i t r a p , 3 2 0 2 n i d e t a i t i n i l s a i r t l a c n i i l c f o e h t i y b d e v e h c a s e u n e v e r n i t h w o r g f o e t a r e h t t c a p m i l l i w s h T i k s i R l a i c r e m m o C e r o c S k s R i h g H i . s l i a m e e s e h t t o p s o t s e e y o p m e l 2 2 . s t e g r a t h t w o r g e v e h c a o t e m a r f e m i i t r e g n o l d e t c e p x e n a t c e l f e r o t e s a b t s o c s t i d e c u d e r s a h p u o r G e h T - p u o r G d u o c l f o e s u g n d u c n l i i , e r u t c u r t s a r f n i T I n i t n e m t s e v n I - l i a c n a n i f , l a n o i t a r e p o e a e r c t y a m k c a t t a - r e b y c l u f s s e c c u s y n A r e b y c f o t a e r h T s m e t s y s d e d a r g p u d n a w e n f o n o i t a t n e m e p m l i i , s e c v r e s i - h g h a n a m e r i l l i w k s i r i s h T . p u o r G e h t r o f k s i r l a n o i t a t u p e r r o / d n a i . t n e m p u q e d n a n i t c i l f n o c e h t i g n d u c n l i s e u s s i l a c i t i l o p o e g o t g n w o k s i r i l e v e l l d n a s n a p n o i t c a f o n o i t a t n e m e p m l i d n a n o i t l a u m r o f d n a s e i t i l i b a r e n u v l l a i t n e t o p f o w e v e r g n o g n O i i l y e m i t a n i s e e y o p m e l l l a r o f g n n a r t i i y t i r u c e s r e b y C s e t a d p u y g o o n h c e t l t s e t a l f o t n e m y o p e D l . r e n n a m s m e t s y s t n e m e g a n a m h c t a p s s e s s a o t n e k a t r e d n u s t s e t n o i t a r t e n e p t n e d n e p e d n I . y t i r u c e s m e t s y s f o s e v e l l i i e s m n m o t i y t i r u c e s l i a m e n i s t n e m t s e v n I r o f y t i l i b a e h t e v o r p m i d n a d e v e c e r i s l i a m e g n h s h p i i - - - - - . l e b o g e h t s s o r c a s k c a t t a e r a w m o s n a r f o s s e c c u s e h t d n a e p o r u E k s i r r e r u s n i d e t c a p m i s a h k c a t t a - r e b y c f o e c n e d c n i i d e s a e r c n I t a r e v o c r e b y c e r u c e s o t y t i l i b a e h t i g n n a e m k s i r i s h t r o f e t i t e p p a . t l u c i f f i d e r o m e m o c e b s a h ) l l a t a r o ( i s m u m e r p e b s n e s l i e r o c S k s R i s k c a t t a h g H i n o i t a g i t i M t x e t n o C s k s i R l a p i c n i r P s k s i R l a n o i t a r e p O 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S - c l p O C X I I e g n a h C k s i R ñ ò p u o r G e h t l f o s e u a v d n a e s o p r u p e h t n o s u c o f g n o r t S l , s e e y o p m e r o f s t i f e n e b d n a s e i r a a s e v i t i t l e p m o C d e c u d o r t n i i s a w h c h w e r a c h t l a e h e t a v i r p g n d u c n i l i . r a e y e h t g n i r u d l i a n o s s e f o r p h t i w d e n b m o c i s e i t i n u t r o p p o g n n a r T i i i e c n a t s s s a n o i t a c i f i l a u q l s e v e l t n e m e g a g n e e n m r e t e d o t i s y e v r u s e e y o p m E l s e i t i n u t r o p p o t n e m d n o c e S s e o r l y e k d e i f i t n e d i i l r o f g n n n a p n o s s e c c u S i n i e r a t n e m e g a g n e e e y o p m e e c n a h n e o t l s e v i t a i t i n I - - - - - - - t l u s e r y a m s s e n s u b e h i t n h i t i w t n e a l t i t n a e r d n a t c a r t t a o t e r u l i a f A . s l l i k s y e k f o s s o l r o e g a t r o h s a n i d e s a e r c n i n i s t l u s e r r a e y e h t g n i r u d t n u o c d a e h n i n o i t c u d e r A . p u o r G e h t n h i t i l w s a u d v d n i i i c i f i c e p s n o e c n a i l e r e e y o p m E l e r o c S k s R i n o i t n e t e r i m u d e M n o i t a g i t i M t x e t n o C s k s i R l a p i c n i r P 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S - c l p O C X I I d e s a b - d u o c l l i s s y a n a d n a e r u t p a c a t a d n o i t a r e n e g t x e N - . s g n i t e e m ’ l l a h n w o t ‘ l y h t n o m s a h c u s , e c a p l n o i t c u d o r p e h t o t n i l d e y o p e d d n a d e p o e v e d m r o l f t a p l ’ s p u o r G e h t g n i t c a p m i l k s i r d u o w e r u t c u r t s a r f n i i s h t n i e r u l i a f y n A . e r u t c u r t s a r f n i l y g o o n h c e t s t i a v i i s e c v r e s s t i l s y o p e d p u o r G e h T e r u t c u r t s a r f n I T I e r o c S k s R i i m u d e M s e t a g i t i m s e r t n e c a t a d n e e w t e b d n a n h t i i w p u k c a b l l u F i o t d e n g s e d s t s e t n o i t a r t e n e p t n e d n e p e d n i l a n r e t x E . s s o l a t a d f o s k s i r . s u c o f t n e m t s e v n i r o f s a e r a y e k y f i t n e d i r e h t r u f o t d e n n a p s t n e m t s e v n l i f o m a r g o r p g n o g n O i . e r u t c u r t s a r f n i T I e d a r g p u e v o r p m i d n a e t a d p u o t e r u t c u r t s a r f n i n i s t n e m t s e v n I . e c n e i l i s e r d n a y t i r u c e s - - - - t l u c i f f i d e b y a m t i , y t i r u c e s r e b y c n o s u c o f d n a y n i t u r c s d e s a e r c n i i y b d e n a p m o c c a , t l n e m n o r i v n e y g o o n h c e t g n v o v e y d p a r a n I l l i i T I 3 2 l l a s s e r d d a o t t n e m t s e v n i T I f l o s e v e l i t n e c i f f u s e r u s n e o t l . s k s i r d e t a e r - s m e t s y s . t n e m n o r i v n e . e c n a m r o f r e p l a n o i t a r e p o r o / d n a l i a c n a n i f e g n a h C k s i R ó ñ ñ f o k s i r e h t t a h t n o i t i n g o c e r n i s t s a c e r o f d n a s t e g d u b l i l a c g o o r u e n n i i h g h y l r a u c i t r a p s l i n o i t a l l e c n a c y l r a e l . s a i r t l a c n i i l c , s t s a c e r o f d n a s t e g d u b d e l i a t e d s e k a t r e d n u p u o r G e h T s t i o t n i n o i t a l l e c n a c l a i r t f o l e v e l a s d l i u b p u o r G e h T d n a y r e v o c e r t s o c t u o - e s o c l , s t n e m y a p e b a d n u e r f l - n o n t n o r f - p u e d u c n l i n a c s t c a r t n o c l i a c r e m m o C l . s e s u a c e c i t o n n o i t i a n m r e t - - - h t i w s t n e m y a p t n o r f - p u e t a i t o g e n o t s k e e s p u o r G e h T - i i i . g n k a m n o s c e d t n e m t s e v n i d n a s w o l f h s a c s t i i g n v o r p m i , n a c t i e r e h w s t n e i l c . e r u l i a f l a i r t f o t n e v e e h t n i k s i r g n c u d e r i t i h o t d e t c e p x e e m a r f e m i t r e g n o l e h t o t e s a b t s o c s t i e z s i i t h g i r o t e s c r e x e n o i t c u d e r t s o c a k o o t r e d n u p u o r G e h T . s e c n a t s m u c r i c n i s e g n a h c d e t c e p x e n u . s t e g r a t h t w o r g s t i s k s i r e s e h t d n u o r a d e i l l p p a e r a s o r t n o c d r a d n a S t t n e i l c a d n a n o i t i s o p h s a c g n o r t s a s a h p u o r G e h T i s n o i t a s n a g r o d e d n u f - l l e w , e g r a l s e d u c n l i i h c h w o i l o f t r o p y c n e r r u c h t i l i w y h t n o m d e w e v e r d n a t s a c e r o f e r a s e v e l l y c n e r r u c d n a P B G n i i d e t a n m o n e d e r a s t c a r t n o c t s o M i g n k n a b s t i h t i w s t n u o c c a t i s o p e d s e s i l i t u p u o r G e h T i g n i t s x e s t i n o n r u t e r a s e v e h c a t i i e r u s n e o t r e n t r a p . s e v r e s e r h s a c e t a i r p o r p p a e r e h w d e s i l i t u s e g d e h y n a o t i l y d p a r t c a e r o t t i i g n w o l l a e l i g a s i p u o r G e h T - - - - - - t n e d u r p e r u s n e o t l i , s s y a n a y t i v i t i s n e s s a l l e w s a l a i r t w e n f o e n i l e p p i d e u n i t n o c a s e r i u q e r e r o f e r e h t d n a e u n e v e r l l a m s o t s e n i l i j e p p t c e o r p d n a t n e i l c ’ s p u o r G e h t g n p o e v e d l i t a a d m i r e n t i s ’ t n e i l c a m o r f t l u s e r y l l a m r o n e s e h T . n o i t a n m r e t i r o , e g n s l i y n a n o p u o r G e h t y b e c n a i l e r e h t e c u d e r r o , g u r d l a i r t e h t f o t i f e n e b l t a i r e a m o n g n i t a r t s n o m e d w e v e r i l . s a i r t l a c n i i l c , f o r e b m u n . g u r d l a i r t s ’ t n e i l c e h t y b d e s u a c s t n e v e y t e f a s e s r e v d a n i m a e t l i a c r e m m o c e h t y b n o i t a c i f i s r e v d n o s u c o i f A - y l r a e f o k s i r a r a e b s t c a r t n o c l a i r t l a c n i i l c t n e i l c ’ s p u o r G e h T n o i t a g i t i M t x e t n o C s k s i R l a p i c n i r P s k s i R l a i c n a n F i 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S - c l p O C X I I s e k a t r e d n u p u o r G e h t f I . n o i t i s o p l i a c n a n i f n o t c a p m i s t i f o k c a b e h t n o s t n e m t i m m o c t n e m t s e v n i l i a c n a n i f n a c h c h w i t n a c i f i n g s i d e s a e r c n i f o k s i r e h t o t d e s o p x e s i t i k o o b r e d r o d e t c a r t n o c e r u l i a f l a i r t y n a f o t c a p m i l i a c n a n i f s e r u l i a f l a i r t o t e b l i t p e c s u s o s a s l i t I . s e u n e v e r r e v i l e d o t s n w i l a r e v e s f o n o i t i a n m r e t y l r a e e h t i y b d e c n e d v e n e e b s a h k s i r i s h T o t d e t c e p x e s i d n a s r a e y t n e c e r s s o r c a s a i r t l l a c n i i l c t n e i l c p u o r G . e r u t u f e h t n i r u c c o k o o b r e d r o d e t c a r t n o c ’ s p u o r G e h t f o n o i t i a c i f i s r e v d d e s a e r c n i e h T s a w t a h t t c a p m i r e w o l a e v a h l l i w l a i r t l e g n s i y n a f o s s o l e h t n a e m i l . y s u o v e r p e s a c e h t t a e p e r f l o s e v e l w o l s a h t a h t t e k r a m a s e s s e r d d a p u o r G e h T s e v r e s e r h s a C f o n o i t a n m r e T i l a c i n i l c t n e i l c e r o c S k s R i i m u d e M s l a i r t e r o c S k s R i i m u d e M l i a c r e m m o c l l a f o l i a c p y t s k s i r l i a c n a n i f o t d e s o p x e s i p u o r G e h T t i d e r c , y t i d u q L i i f o s t s e r e n t i e h t i t s n a g a s i i h c h w n o i t a u t c u l f e t a r y c n e r r u c n g e r o f i a o t e r u s o p x e , y a e d l t n e m y a p t n e i l c t i n a c i f i n g s a g n c n e i r e p x e i , l l a f t r o h s h s a c a f o s k s i r e h t e d u c n l i e s e h T i . s e n a p m o c s i f e r o e r e h t d n a x a t r o f l n a p o t s l i a f p u o r G e h t r o / d n a p u o r G e h t 4 2 . y r a s s e c e n l e v e l e h t d n o y e b s e i t i l i b a i l x a t o t d e s o p x e y c n e r r u c d n a e r o c S k s R i i m u d e M e g n a h C k s i R n o i t a g i t i M t x e t n o C s k s i R l a p i c n i r P s k s i R c i g e t a r t S 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f t r o p e R c i g e t a r t S - c l p O C X I I ñ . y g e t a r t s i t s n a g a s s e r g o r p s a l l e w s a s e i t i r o i r p t e g d u b d n a y g e t a r t s p u o r G f o d r a o B e h t y b w e v e r i l a u n n A s d n u f e r o f e b s t n e m t s e v n i t n a c i f i n g s i f o l i a s a r p p a d r a o B h c a e f o w e v e r i t n e u q e s b u s d n a d e t t i m m o c e r a . s e v i t a i t i n i i c g e a r t s t . e c n a m r o f r e p d n a y r e v i l e d s ’ t n e m t s e v n i i c g e t a r t s m r o f n i o t i t h g u o s e c v d a d n a e s i t r e p x e l a n r e t x E . s e v i t a i t i n i i r o f e d v o r p d n a t n e m n o r i v n e g n g n e i l l a h c e r o m e h t t c e l f e r i o t e s c r e x e n o i t c u d e r t s o c a n e k a t r e d n u s a h p u o r G e h T n o s u c o f o t t n e m e g a n a m f o t n e m n g i l a d n a n o i t t a n e i r O l . s n a p c g e t a r t s i ’ s p u o r G e h t f o y r e v i l e d c i f i c e p s f o y r e v i l i e d f o w e v e r p h s r e d a e i l l t y h n o M - - - - - - o t n r u t e r o t e n i l e m i i t d e t a p c i t n a y s u o v e r p n a h t l i r e g n o l a e g n a h C k s i R ò i n o d e s m y n o d u e s p s i s e t i s t n e i l c m o r f d e r u t p a c a a D t s i r e y a l i e v s n e f e d g n o r t s a e r u s n e s e r u s a e m y t i r u c e S l l m r o f t a p r e k c a r T a i r T s p u o r G e h t o t n ’ i t i p e c e r - - i ’ g n s s e c o r p s p u o r G e h t n h t i i w d e t a r g e t n i e r a ) R P D G f o y t i r u c e s d n a y t i r g e t n i i i e h t n a t n a m o t d e y o p e d l s a h c u s ( s t n e m e r i u q e r n o i t a s g e l i l n o i t c e t o r p a a D t - n o i t a m r o f n i l a c i t i r c r o e v i t i s n e s . h t w o r g e u n e v e r n o i t a g i t i M t i n e m n o r i v n e c m o n o c e g n g n e i l l a h c a y b d e t c a p m i n e e b s a h 3 2 0 2 a s e d u c n l i t i t a h t s i e v i t a i t i n i i c g e a r t s t y n a f o e r u t a n e h T . p u o r G e h t . k s i r t n e m e g d u j f o e e r g e d r o f s e i t i n u t r o p p o t e k r a m w e n d n a n o i t a r t e n e p t e k r a m d e s a e r c n i t o n y a m s n a p c g e a r t s t i l s t i r o , l i i e b s s o p s a y l t n e c i f f e r o y e v i t c e f f e l l s a s n a p c g e a r t s t i s t i t n o e u c e x e t o n y a m p u o r G e h t , r e h t r u F l i a c r e m m o c e h t i i e s m x a m o t g n i l i a f y b e r e h t , l a m i t p o t s o m e h t e b . p u o r G e h t o t e b a l l i a v a y t i n u t r o p p o s e i t i n u t r o p p o l a i c r e m m o c e r o c S k s R i i m u d e M r e v i l e d l l i w s t c e p x e t i t a h t s e v i t a i t i n i i c g e t a r t s s t e s d r a o B e h T l t i o p x e o t e r u l i a F d n a s t c a r t n o c w e n g n n g s i i f o e a r t s p u o r G e h t d e t c a p m i i h c h w . e s a b t s o c s t i o t s e s a e r c n i y r a n o i t a l f n i d e d d a s t c e b u s j l a i r t l a c n i i l c m o r f t a a d l a n o s r e p s e r u t p a c p u o r G e h T n o i t c e t o r P a t a D k s i r y r o t a l u g e r d n a e c n a i l p m o c , l a g e L t x e t n o C s k s i R l a p i c n i r P i t d e a c o s s a d n a ( s k s i r y t i r u c e s a a d o t t t i i g n s o p x e y b e r e h t . ) k a e l t a a d a f o t n e v e e h t n i s k s i r l a n o i t a t u p e r e r o c S k s R i w o L l a u n n a d n a g n n a r t i i R P D G o g r e d n u s e e y o p m e l l l A - s e c i t c a r p d n a s e i t i v i t c a i g n n a r t i r e h s e r f e r : y b d r a o B e h t f i o r e d r o y b d e n g s d n a 3 2 0 2 r e b m e c e D 4 n o d r a o B e h t y b d e v o r p p a s a w t r o p e R c g e t a r t i S e h T 5 2 3 2 0 2 r e b m e c e D 4 r e c i f f O e v i t u c e x E f i e h C i n o r r e C o i l u G i IXICO plc Corporate Governance Report for the year ended 30 September 2023 Corporate Governance Report The Board has adopted, and strives towards compliance with, the Quoted Companies Alliance (‘QCA’) Corporate Governance Code (‘Code’). It 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 ten 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/). Principle Group approach DELIVER VALUE IN A MANNER ALIGNED TO SHAREHOLDER AND WIDER STAKEHOLDER ASPIRATIONS 1: Establish a strategy and business model which promotes long-term value for shareholders The Group delivers insights to biopharmaceutical companies developing drugs to address neurological disease. During 2022 the Group refreshed its strategy focussing on the next phase of its growth across the period 2022 to 2027. This was presented to stakeholders (including shareholders) in December 2022. Progress against this strategy is reviewed regularly at Board meetings and at least annually in a full day strategy review day. This last took place in June 2023. 2: Seek to understand and meet shareholder needs and expectations Further updates to stakeholders occurred across 2023 and will be part of the presentations made to stakeholders in December 2023. The strategy is focussed on achieving scale, which the Group sees as critical to it achieving its long-term goals and purpose and will be reflected in the creation of long-term value for shareholders. Our 5-point growth plan for the period 2022 to 2027 is discussed in the Chief Executive’s Statement on pages 10 to 11. The Board is committed to encouraging open communication between itself and shareholders. The CEO and CFO arrange to meet with major shareholders at least twice a year to update them on strategy, progress against this strategy and obtain feedback. The Chair also makes himself available for discussions with major shareholders as and when appropriate. Further, should the Board consider any significant divergence from strategy it will seek feedback from major shareholders as part of its deliberations. The Board uses publications on its website and its Annual Report to keep all shareholders informed of its progress. It uses the AGM to invite feedback from any shareholder. The CEO and CFO are responsible for investor relations and any feedback received from shareholders is communicated to the wider Board. Shareholder expectations are discussed further in stakeholder engagement on pages 12 to 14. 26 IXICO plc Corporate Governance Report for the year ended 30 September 2023 Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success Group approach The Group is highly conscious of the requirements of its wider stakeholders in supporting its long-term success. It views its wider stakeholders as its shareholders, clients, suppliers, employees and the participants of the clinical trials it serves. The Group’s purpose is to generate societal benefits via supporting the development of drugs which deliver improved health outcomes for those impacted by neurological diseases. To bring life to this purpose, the Board engenders a culture which translates this purpose into an ethos and culture by which the Group operates. This is emphasised in our ESG section (page 12) where the Group discusses our investments in our employees and how this contributes to long term success. 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation In working closely with its stakeholders, the Board has implemented approaches that align the considerations of each stakeholder group with the Group’s purpose and ‘way of working’. Our stakeholders are described in our stakeholder engagement on pages 12 to 14. The Board has ultimate responsibility for the Group’s system of risk management and internal control and for reviewing its effectiveness. The Board instils control to the Group’s operations by overseeing the following: • • competent and prudent management; sound planning; • adequate systems of control, including regular review of risk; • adequate and accurate accounting records; and • compliance with statutory and regulatory obligations. The Risk Management Report is provided on pages 21 to 25. MAINTAIN A STRONG AND DYNAMIC MANAGEMENT FRAMEWORK THAT PLACES VALUE ON DEVELOPING THE GROUP IN AN ETHICAL MANNER 5: Maintain the Board as a well- functioning, balanced team led by the Chair The Board comprises the Non-Executive Chair, two Executive Directors and two Non-Executive Directors, one of whom acts as Senior Independent Director. A further Non-Executive Director was appointed after the year end. The Board has an appropriate balance between independence and knowledge of the Group and its target markets which allows it to discharge its duties and responsibilities effectively. The Directors use their independent judgement and challenge matters affecting the business whether strategic or operational. The Non-Executive Directors are in regular contact with the Executive Directors and the Chair has regular one-to-one meetings with the Chief Executive Officer. The Board has access to independent external advisers to support it In its decisions, where additional skills or expertise is deemed necessary. The Board has procedures in place to deal with a situation in which a Director has, or may have, a conflict of interest. The Board is aware of other commitments and interests as they are disclosed by each Board member. The Board meets formally (either face-to-face or via video conference) not fewer than four times per year in addition to the annual strategy day. The Board is also supported by three subcommittees: the Audit Committee, the Remuneration Committee and the Share Transaction Committee. The Board and its subcommittees all operate the Company website against (https://ixico.com/investors/governance/). reference which are summarised on terms of More information on Board membership is provided on page 32. 27 IXICO plc Corporate Governance Report for the year ended 30 September 2023 Group approach The Board has an appropriate balance of skills and experience and is mindful of the need to continuously review the needs of the business to ensure that this remains true, so that the Board can drive performance as well as comply with regulations. The Group’s Articles of Association require that all Directors must stand for re-election every three years and that any new Directors appointed during the year must stand for election at the AGM following their appointment. The Board undertakes self-reviews from time to time in order to assess its performance. The Chair provides leadership to the Board and assesses the individual Directors to ensure that their contribution is relevant and effective and that they are committed members of the Board. Further details of the Board’s skills and experience can be found on page 32. Principle 6: Ensure that between them the Directors have the necessary up-to- date experience, skills and capabilities 7: Evaluate all elements of Board performance based on clear and relevant objectives, seeking continuous improvement 8: Promote a corporate culture that is based on ethical values and behaviours The Group operates in a highly regulated environment in accordance with an Integrated Management System which is subject to third-party audit. The Group is focussed on a therapeutic area which has a high unmet medical need, and our employees are motivated to support our clients in their quest to develop and provide safe, effective treatments for people living with neurological diseases. The Group employs a diverse workforce and embraces a culture where employees are treated equitably within an environment of mutual respect and understanding. The Group adopts a zero-tolerance position to fraud, bribery, modern slavery and other unethical behaviours and is committed to meeting high standards in this regard throughout its operational practices and wider stakeholder engagements. The Company’s corporate responsibility approach is to ensure that as a company we focus on the environmental, social and governance (‘ESG’) consequences of all our activities and to strive to be an organisation that individuals wish to interact with, whether employees, clients or suppliers. The Company is committed to integrating ESG within its business model. The Group’s values are described on page 4. The Board is collectively responsible for the long-term success of the Group. Its principal function is to provide the Group with a framework of prudent and effective controls, which enables risk to be assessed and managed and its strategy executed. Further details as to how the governance processes are structured to achieve this are outlined within this Governance Report. The Group’s risk management approach is described on page 21 to 25. 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board 28 IXICO plc Corporate Governance Report for the year ended 30 September 2023 The Group communicates with shareholders (and other stakeholders) via its website, its Annual Report, and the AGM as well as via issuing RNS announcements and presenting to major shareholders and analysts. Group approach Principle BUILD TRUST BASED ON OPEN COMMUNICATION WITH STAKEHOLDERS 10: Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders This Governance Report and the wider Strategic and Directors’ Reports are designed to provide full and relevant updates on how the Group is governed and how it is performing. These are drafted with both shareholders and the wider stakeholder community in mind. Further reading can be found in the Strategic Report on pages 4 to 25, stakeholder engagement on pages 12 to 14, the Directors’ Report on pages 35 to 38, and the Financial Review pages 18 to 20. Statement of Directors’ Responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Parent Company financial statements in accordance with UK-adopted international accounting standards. Under Company Law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to: – select suitable accounting policies and then apply them consistently; – make judgements and accounting estimates that are reasonable and prudent; – state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business, in which case there should be supporting assumptions or qualifications as necessary. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. By order of the Board of Directors ______________________________ Charles Spicer Non-Executive Chair 4 December 2023 29 IXICO plc Corporate Governance Report for the year ended 30 September 2023 Audit Committee Report The Audit Committee is charged with monitoring the integrity of the Group’s financial statements and the application of accounting policies. The Committee also assesses the effectiveness of the internal control and risk management systems. Risk management discussions take place bi-annually and are included within the agenda of Board meetings. The Committee is chaired by Kate Rogers; Mark Warne and Dipti Amin are members of the Committee. Additional attendees are invited to join by the Committee where appropriate. In the year ending 30 September 2023, this included the Chief Financial Officer, Group Financial Controller, General Counsel, and senior representatives of the Group’s auditor Grant Thornton UK LLP. FY23 Audit Committee agenda items During FY23, the Audit Committee met three times, with a variety of agenda items discussed. These are set out below, with further additional details about the FY24 Audit Tender presented, which is considered to be the Key Decision for FY23. NOVEMBER 2022 MAY 2023 SEPTEMBER 2023 External audit Reviewed external audit findings report with Grant Thornton. Reviewed and approved accounting approach to areas of judgement or those deemed to be of higher risk. External audit Reviewed interim review report for the half year unaudited results with Grant Thornton. Reviewed and approved accounting approach to areas of judgement or those deemed to be of higher risk. External audit Reviewed the audit plan for the 2023 financial year with Grant Thornton with particular focus on areas of judgement or those deemed to be of higher risk. Anti-Bribery and Corruption The Group’s Anti Bribery and Corruption policies were reviewed and agreed fit for purpose. FY24 Audit Tender The Audit Committee agreed next steps to finalise the appointment of the Group’s FY24 auditors. Interim results The interim results and associated announcement were reviewed ahead of recommending them for approval by the Board. Internal control The Group’s internal control framework was reviewed and agreed fit for purpose. FY24 Audit Tender It was confirmed that the Group would tender the audit services for the financial year 2024 as well as the process that would be followed to complete this. Accounting policies, judgements, and estimates Following a review into the Group’s policies on IFRS 15 – Revenue, the impact of changes on accounting for commissions was presented and confirmed. Full year results Review of full year preliminary results announcement and draft Annual Report ahead of recommending them for approval by the Board. Other Completed annual review of the Audit Committee Terms of Reference and completed checklist to ensure appropriate actions had been taken to fulfil the duties of the Audit Committee. 30 IXICO plc Corporate Governance Report for the year ended 30 September 2023 FY24 Audit Tender Process In the year, the Audit Committee agreed to put out the financial year 2024 Group audit to tender. This is in line with good practice, seeks to ensure the achievement of ongoing high-quality audits, balanced with obtaining fee levels that reflect value for money. A Selection Panel was established to assist the Audit Committee in its proposal to the Board. The Selection Panel consisted of the Audit Committee Chair the Chief Financial Officer and the Group Financial Controller. Throughout the process, the Selection Panel used the following criteria to assess each audit firm: • Audit approach including understanding of the key risk areas and use of technology during audits; • Reputation and experience in AIM and within the life sciences and technology industries; • Understanding of IXICO, its industry and the identification of risks; • Approach to client service to ensure quality audits are delivered for all stakeholders; • Quality of communication throughout the selection process and ability to develop a robust relationship; and • Delivery of a value for money audit for stakeholder value. The initial scoping phase included obtaining a list of potential audit firms and detailed each audit firms experience on AIM, as well as their industry specific experiences, and the firm’s size and network. A longlist of eight firms were identified, each of which were invited to take part in the process. The Group received tender proposals from six audit firms. Each proposal was assessed based on their merits and were discussed in detail by the Selection Panel. Following this, a shortlist of three firms were progressed to present their audit services to the Selection Panel. Following the completion of the presentations, the Selection Panel presented their findings to the Audit Committee in September 2023. Based on the above criteria, the Audit Committee will advise the Board on their recommendation, and the appointment of the auditors for the year ending 30 September 2024 will be proposed as a resolution at the 2024 AGM. Going concern The financial statements are prepared on a going concern basis after considering the Group’s and the Company’s current cash position, and in reviewing the cash flow forecasts and budgets for a period of 12 months following the approval of these financial statements. The Audit Committee are satisfied with the going concern basis through obtaining a sensitised cashflow forecast which consisted of several adjustments which are not in the ordinary course of business. These included but were not limited to: • Increasing the level of expected cancellations and delays on clinical trials beyond the level that would normally be expected in this environment; and • Reducing the number of new contracts expected to sign during the next 12 months. Other mitigating factors in the event of a significant downturn in business include careful cost management and opportunities to raise additional financial capital. In addition, the Audit Committee reviewed a reverse stress test based on the Group’s existing cash and current receivable position, considering the plausibility of these assets being insufficient to enable the Group to continue to trade for twelve months. Based on its review the Committee concluded that it is appropriate that the Group continue to report as a going concern. 31 IXICO plc Corporate Governance Report for the year ended 30 September 2023 The Board of Directors Giulio Cerroni Chief Executive Officer Giulio has over 35 years of experience in the life sciences sector and a track record of growing business operations in Europe, the US and Asia. Prior to IXICO, Giulio held global leadership roles at Thermo Fisher Scientific, Inc. and LGC Limited, where he transformed the scale of LGC’s Genomics division, completing three acquisitions in under 18 months. Giulio was a member of the executive leadership team responsible for the successful sale of LGC Limited to global investment firm, KKR & Co. Inc. External appointments None Grant Nash Chief Financial Officer & Company Secretary Grant has worked in the life sciences sector for almost 20 years. In his Executive Director role, Grant leads the Group’s Finance, Legal, IT and Quality functions. Grant joined IXICO in 2019. He was previously Finance Director at UK Biobank, an international health research data resource. Previous to this he was SVP Finance at Evotec, an early-stage drug discovery CRO. Grant is a member of the Share Transaction Committee and also acts as Secretary to the Board and its subcommittees. External appointments None Charles Spicer Non-Executive Director Chair Charles is an experienced director of public and private companies, primarily in the MedTech sector. In addition to his other appointments below, Charles is Chair of the UK Department of Health’s Invention for Innovation (i4i). External appointments Creo Medical Group plc, Non-Executive Chair Korn Wall Limited, Non-Executive Chair NetScientific plc, Non-Executive Chair Mark Warne Non-Executive Director Senior Independent Director Mark is widely recognised in the UK and international life sciences sector, having spent almost ten years at IP Group Plc, a leading intellectual property commercialisation company, where he led the Healthcare team. External appointments Deep Matter Group plc, Chief Executive Officer Angelini Ventures, Advisor Kate Rogers Non-Executive Director Kate is qualified as a chartered accountant and holds a Bachelor of Science degree in Engineering from Oxford University. Kate previous experience includes a 20-year career with Glaxo SmithKline. At GSK Kate led the transformation of GSK’s global finance organisation, having previously worked as CFO for Laboratoire Glaxo SmithKline SaS (GSK France) and other senior finance roles within GSK. External appointments Follicular Lymphoma Foundation, Chief Executive Officer Dipti Amin Non-Executive Director Dipti is an experienced non-executive director having previously sat on the Boards of companies in both the private and public sector. Before this, Dipti spent over 20 years of her executive career at IQVIA occupying senior positions in compliance, drug safety and medical affairs. Dipti is medically trained and is a Fellow of the Faculty of Pharmaceutical Medicine. Dipti joined the Board on 1 October 2023. External appointments University of Hertfordshire, Non-Executive Director Lineage Cell Therapeutics, Non-Executive Director 32 IXICO plc Corporate Governance Report for the year ended 30 September 2023 Board activities and timeline The Board and its subcommittees The Board meets at least four times per year in accordance with a pre-determined meeting calendar. The Board is supported by three 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 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/). Board and sub-committee responsibilities Board meetings The Board is responsible to shareholders for the proper management of the Group. It comprises the Non-Executive Chair, two Executive Directors and three Non-Executive Directors, one of whom acts as Senior Independent Director. The Board is chaired by Charles Spicer. Kate Rogers, Mark Warne and Dipti Amin are considered to be independent of the Executive Directors and free from any relationship which could materially affect the exercise of their independent judgement. Non- Executive Directors receive a fee for their services. The Board has agreed terms that are reserved for its consideration including the Group’s strategy, budgets, financial reporting, and internal controls, together with the monitoring of the progress to achieve its goals. Remuneration 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 held at least twice per financial year. Audit 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 held at least twice per financial year. The Group auditor only provides audit services to the Group. 33 IXICO plc Corporate Governance Report for the year ended 30 September 2023 Share Transaction Committee The terms of reference of the Share Transaction Committee include the following responsibilities: • • review, consider and, where 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 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. Board and sub-committee meetings in the 2023 financial year Board meeting Audit Committee Remuneration Committee Share Transaction Committee Number of meetings G Cerroni G Nash K Rogers (NED) C Spicer (NED) M Warne (NED) Attendance percentage 13 12 Member 13 Member 13 Member 13 Member 13 Member 98.7% 3 6 1 3 Chair 3 Member 100.0% 6 Member 6 Chair 100.0% 1 Member 1 Chair 100.0% Note: Dipti Amin (NED) joined the Board on 1 October 2023, immediately after the end of the 2023 financial year 34 IXICO plc Directors’ Report for the year ended 30 September 2023 Directors’ Report The Board of Directors of IXICO plc (registered in England and Wales: 03131723) presents its report together with the audited consolidated Group and Company financial statements for the year ended 30 September 2023. Principal activities The Group provides specialist data analytics services to the global biopharmaceutical industry. The services include the collection, analysis, management and reporting on data generated in the course of a clinical study. The outputs from the data analysis are used to improve patient selection, monitor drug safety and assess clinical efficacy of the drug under development. Results and dividends The Group achieved a net loss after tax of £1.2 million for the year (2022: £1.0 million profit). The Board of Directors does not recommend the payment of a dividend. Financial risk management The financial risk management and objectives of the Group are set out in note 22 of the consolidated financial statements. Specific financial risks are set out on page 24 of the Strategic Report. Political donations The Group made no political donations during the period (2022: £nil). Charitable donations The Group made £1,000 in charitable donations during the period (2022: £nil). Directors The Directors of the Company, who served during the period and up to the date of this report, unless otherwise indicated, are as follows: Director Capacity Appointed date Resignation date Giulio Cerroni Chief Executive Officer Grant Nash Chief Financial Officer Company Secretary Charles Spicer Non-Executive Chair 6 February 2017 21 August 2019 31 May 2019 14 October 2013 Mark Warne Non-Executive and Senior Independent Director 16 September 2016 Kate Rogers Non-Executive Director Dipti Amin Non-Executive Director 21 January 2022 05 October 2023 Biographical details of IXICO plc’s Directors are shown on page 32. Directors’ remuneration and share options Details of the Directors’ remuneration and share options are set out in the Directors’ Remuneration Report on page 39 and 40. Re-election of Directors At the 2023 AGM, in accordance with the Company’s Articles of Association, Kate Rogers was elected as a Non- Executive Director and Giulio Cerroni was re-elected as a Director of the Company. In accordance with section 992 of the Companies Act 2006, the Directors disclose that the rules regarding the appointment and replacement of Directors are contained in the Company’s Articles of Association, which may be 35 IXICO plc Directors’ Report for the year ended 30 September 2023 amended with shareholder approval in accordance with relevant legislation. The powers of the Directors are contained in the Company’s Articles of Association or in accordance with the provisions of the Companies Act 2006. The Companies Act 2006 provides that Directors may issue and buy back the Company’s shares on behalf of the Company, subject to authority being given to the Directors by shareholders in a general meeting. No authority to buy back the Company’s ordinary shares of 1 pence per share has been sought. Directors’ interests At 4 December 2023, the table below sets out the interests in the Company’s shares of Directors who served during the period and their connected persons: Director Giulio Cerroni Grant Nash Charles Spicer John Bradshaw1 Mark Warne Kate Rogers Ordinary shares of 1 pence Ordinary shares of 1 pence 2023 491,333 200,000 333,196 N/A 19,650 - 2022 491,333 - 333,196 35,500 19,650 - 1John Bradshaw left the company in April 2022, his shareholding is therefore not disclosed for the year ended 30 September 2023 The Directors’ interests are beneficially held by each Director unless otherwise stated. Apart from these interests and share options (as disclosed on pages 39 and 40), no Director had any further interest in the period in the share capital of the Company or other Group companies. There have been no changes in the Directors’ interests in the share capital of the Group since the year end. Directors’ indemnities The Group had in place for the whole of the period, and at the date of signing the consolidated financial statements, qualifying third-party indemnity insurance for all Directors and officers. Going concern The ongoing conflict in eastern Europe and recent re-commencement of hostilities in the middle east, accompanied by rising inflation, interest rates and a broad degree of macro-economic and political disruption continue to create challenges for the global economy. These have resulted in a lowered risk appetite which has impacted capital markets around the world, reducing capital availability and investment in areas deemed higher risk. The impact of this has been visible in the clinical trials market both through a slow down in the initiation of new clinical trials, increased focus on development pipelines by the biopharmaceutical companies and restructuring and consolidation announcements within both biopharma and CROs. The Group has seen the impact of this and, whilst it remains well capitalised and debt-free, it has seen an elongation of the timeframes to sign new clinical trials and therefore has lowered its expectations for revenues in 2024 ahead of a return to growth in 2025. Irrespective, the Group has a strong balance sheet for its size with financial year end net assets of £11.4 million, a £4.0 million cash balance and has secured £8.0 million of new contracts in the year providing it with good visibility of future revenues across a diversified portfolio of clients and projects. In assessing going concern, management has prepared detailed sensitised forecasts which consider different scenarios through to December 2024. These include the risk to current projects and expected future sales pipelines. 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 36 IXICO plc Directors’ Report for the year ended 30 September 2023 concluded with confidence that the Group has adequate financial resources to continue in operation for the foreseeable future. Structure of the Company’s capital The Company’s share capital comprises a single class of ordinary shares of 1 pence per share, each carrying 1 voting right and all ranking equally with each other. At 30 September 2023, 48,351,373 (2022: 48,151,373) shares were allotted and fully paid. Note 20 of the consolidated financial statements provides full details of movements in the Company’s share capital. Holders of ordinary shares are entitled to receive all shareholder documents, to attend, speak and exercise voting rights, either in person or by proxy, on resolutions proposed at general meetings and participate in any distribution of income or capital. There are no restrictions on the transfer of shares in the Company or in respect of voting rights attached to the shares. None of the shares carries any special rights with regard to the control of the Company. Participants in employee share option schemes have no voting or other rights in respect of the shares which are subject to their awards until the options are exercised, at which time the shares rank pari passu in all respects with shares already in issue. Details of employee share option schemes are set out in note 21 of the consolidated financial statements. Authority to issue shares At the general meeting held on 20 January 2023, shareholders authorised the Directors to allot relevant securities up to an aggregate nominal value of £160,505 (representing 33.33% of the issued share capital) and to allot for cash equity securities having a nominal value not exceeding in aggregate £48,151 (representing 10.0% of the issued share capital). These authorities expire at the close of business on 26 January 2024, or if earlier, the conclusion of the next AGM. At the 2024 AGM, similar authorities will be sought from shareholders, and the Company does not intend to seek authority for a fully pre-emptive rights issue. Substantial shareholdings At 4 December 2023, the Company had received notification from the following financial institutions of their and their clients’ interest in the following disclosable holdings, which represent 3% or more of the voting rights of the issued share capital of the Company. Shareholders having a major interest BGF Investment Management Octopus Investments Gresham House Asset Management Amati Global Investors CIP Merchant Capital Limited City Asset Management Number of shares held 8,924,000 6,408,400 5,357,100 5,031,300 3,857,566 1,864,493 % of issued Shares 18.46 13.25 11.08 10.41 7.98 3.86 AGM The notice convening and giving details of the 2024 AGM will be posted to shareholders on or before 17 December 2023. The 2024 AGM of the Company will be held at the offices of CCT Venues Smithfield, 2 East Poultry Avenue, London, EC1A 9PT on Thursday 25 January 2024. 37 IXICO plc Directors’ Report for the year ended 30 September 2023 Other matters Matters required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 which have not been covered in the Directors’ Report have been included in the Strategic Report in accordance with Section 414c(11) of the Companies Act 2006. No post balance sheet events have been noted. Disclosure of information to auditors The Directors confirm that: • So far as each Director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and • The Directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. On behalf of the Board of Directors ______________________________ Charles Spicer Non-Executive Chair 4 December 2023 38 IXICO plc Directors’ Remuneration Report Directors’ Remuneration Report Remuneration policy for Executive Directors The remuneration policy and practice are intended to align the remuneration of Executive Directors with the Group’s business model and achievement of the Group’s strategy. The policy seeks to strike an appropriate balance between a base salary and a discretionary, performance-related element. Base salary The Remuneration Committee approves the base salary of Executive Directors, having regard to the individual role and responsibilities. Pension contribution The Group operates a money purchase Group personal pension plan for all employees. The Group contributes to the scheme 8% of base salary in respect of the Chief Financial Officer. The Chief Executive Officer does not receive pension contributions. Performance-related bonus The Group operates a discretionary bonus scheme that takes account of the underlying financial performance of the Group, meeting KPIs and achieving strategic objectives, specifically focussed on revenue and contract wins. All performance targets are set by the Remuneration Committee. The award of bonus payments to employees, including Executive Directors, are subject to the Remuneration Committee’s review and approval. For the year to 30 September 2023, the Remuneration Committee determined that bonus related KPIs and strategic objectives were not met, resulting in no bonus entitlements being achieved. Bonus payments are not pensionable. IXICO EMI Share Option Plan 2014 Share options granted to Executive Directors are in accordance with the rules of the IXICO EMI Share Option Plan 2014. The share options include performance-related vesting criteria related to the achievement of strategic goals or a significant corporate development transaction. The exercise of share options is subject to the Remuneration Committee’s review, and approval, of whether such performance targets have been achieved. Share dilution limits The aggregate number of new ordinary shares which may be issued on the realisation of the EMI Share Option Plan 2014 in any 10-year period may not exceed 15% of the number of ordinary shares in issue. At 30 September 2023, and assuming satisfaction of all performance conditions, the total number of the Company’s shares issuable under awards made under the EMI Share Option Plan 2014 (and including any awards already exercised) was 5,119,111 or 10.6% of the number of ordinary shares in issue at that date. Other benefits The Executive Directors are part of a Group Life Assurance scheme and a private medical insurance scheme that is maintained and paid by the Group for all employees. Income protection insurance are not provided. Executive Directors’ service contracts and termination provisions The service contracts of Executive Directors are approved by the Remuneration Committee and then the Board. The service contracts may be terminated by either party giving notice to the other as set out below: Giulio Cerroni Grant Nash Date of contract 6 February 2017 29 April 2019 Notice period 12 months 6 months Non-Executive Directors The Non-Executive Directors have letters of appointment with the Company. Fees paid to the Non-Executive Directors are determined by the Board, giving due consideration to market rates and comparative businesses. The Non- Executive Directors do not receive pension contributions and do not participate in any discretionary bonus or Company share option schemes. Current contracts together with notice periods are as follows: 39 IXICO plc Directors’ Remuneration Report Charles Spicer (as Chair) Mark Warne Kate Rogers Dipti Amin Directors’ remuneration Date of contract 16 September 2016 16 September 2016 21 January 2022 01 October 2023 Notice period 3 months 3 months 3 months 3 months Year ended 30 September 2023 Salary and fees £000 Pension Bonus contributions £000 £000 Year ended 30 September 2022 Salary and fees £000 Pension contributions £000 Bonus £000 Executive Giulio Cerroni Grant Nash Non-Executive Charles Spicer John Bradshaw Mark Warne Kate Rogers Aggregate emoluments 328 200 528 53 - 31 31 115 643 - - - - - - - - - - 16 16 - - - - - 16 316 186 502 51 14 28 21 114 616 2 2 4 - - - - - 4 - 15 15 - - - - - 15 No Directors waived emoluments in the year ended 30 September 2023 (2022: £nil). Directors’ options Details of options over shares in the Company held by Directors who served during the period, all of which have been granted at no cost to the Directors, are set out below: Number of options At 30 September 2022 Granted during the year Exercised during the year Lapsed during the year At 30 September 2023 Exercise price Date of grant Vesting date Giulio Cerroni Grant Nash 584,525 584,525 245,000 245,000 1,659,050 300,000 300,000 600,000 Total 2,259,050 - - - - - - - - - - - - - - - - (81,666) (81,666) (163,332) 584,525 584,525 163,334 163,334 1,495,718 £0.010 4-Jun-18 £0.010 4-Jun-18 £0.010 5-Dec-19 £0.010 5-Dec-19 3-Jun-21 3-Jun-22 4-Dec-22 4-Dec-23 (200,000) - (200,000) (100,000) (100,000) (200,000) - 200,000 200,000 £0.010 5-Dec-19 £0.010 5-Dec-19 4-Dec-22 4-Dec-23 (200,000) (363,332) 1,695,718 During the year ended 30 September 2023, the Company’s share price ranged from £0.175 to £0.34. Further details of the share option schemes are set out in note 21 of the consolidated financial statements. 40 IXICO plc Independent auditor’s report to the members of IXICO plc Financial Statements Independent Auditor’s Report Independent auditor’s report to the members of IXICO plc Opinion Our opinion on the financial statements is unmodified We have audited the financial statements of IXICO plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 September 2023, which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Statements of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 September 2023 and of the group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; the parent company financial statements have been properly prepared in accordance with UK-adopted international accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Conclusions relating to going concern We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to continue as a going concern. A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of accounting, and the key observations arising with respect to that evaluation is included in the Key Audit Matters section of our report. 41 IXICO plc Independent auditor’s report to the members of IXICO plc In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our approach to the audit Materiality Key audit matters Scoping Overview of our audit approach Overall materiality: - Group: £132,000, which represents 2% of the group’s total revenue. - Parent company: £118,800, which represents 2% of the parent company’s total assets, capped at 90% of group materiality. Key audit matters were identified as: - Revenue recognition – Occurrence of data imaging and analysis (same as previous year) - Going concern (same as previous year). - Impairment of intangibles assets (new) - Valuation of investment and intercompany receivables (company only) (new). Our auditor’s report for the year ended 30 September 2022 included no key audit matters that have not been reported as a key audit matter in our current year’s report. We performed full scope audit procedures on the financial information of the significant components of the Group. This includes IXICO Technologies Limited. We performed analytical procedures on the financial information of IXICO Technologies Inc. There were no changes to scope of the group audit from the prior year. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In the graph below, we have presented the key audit matters, significant risks, and other risks relevant to the audit. Description Audit response KAM Disclosures Our results 42 IXICO plc Independent auditor’s report to the members of IXICO plc Key Audit Matter – Group How our scope addressed the matter – Group Revenue Recognition – Occurrence of data imaging and analysis In responding to the key audit matter, we performed the following audit procedures: We identified revenue recognition as one of the most significant assessed risks of material misstatement due to the risk of fraud. Under ISA (UK) 240 ‘The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements’, there is a rebuttable presumption that there are risks of fraud in revenue recognition. Group revenue of £6,665k (2022: £8,643k) has been recognised for the year ended 30 September 2023. The Group’s contracts comprise a variety of tasks. These tasks are all considered types of a single revenue stream, being service revenue. The key audit matter has been pinpointed to the data imaging and analysis related obligations. The data imaging and analysis revenue of £2,770k (2022: £3,106k) is determined to have the most significant risk of fraud because the units, being each analysed image, fluctuate based on usage each month Occurrence (significant risk) • Obtaining management’s IFRS 15 Revenue from Contracts with Customers accounting paper and confirming if the revenue policy is consistent and in accordance with IFRS 15. Considering new contracts and whether the revenue policies have been consistently applied. • Forming an expectation of revenue based on cash received during the year. • Confirming the occurrence of data imaging and analysis revenue through the performance of the following audit procedures: - Agreeing a sample of tasks to planning sheets, contracts, invoices and payment; - Corroborating the tasks’ unit price to the signed contracts; 43 IXICO plc Independent auditor’s report to the members of IXICO plc Key Audit Matter – Group How our scope addressed the matter – Group and this is where the opportunity to fraudulently manipulate revenue would arise. - Agreeing the number of units to the group’s internal project tracker system; Further, the occurrence assertion is considered where the greatest risk of fraud exists. For each contract the number of units billed each month varies, depending on the number of images analysed in the month. Therefore, there is opportunity for the unit values of any contract to be inflated and for increased revenue to be recognised as there is no set expectation of billing each month. - Assessing whether the performance obligations of each task are being recognised in accordance with IFRS 15; and - Testing credit notes raised during the year and post-year end to assess the size and qualitative nature of these and ensure they are recorded in the correct period. Relevant disclosures in the Annual Report & Accounts 2023 Our results • Financial statements: Note 3 Significant accounting policies, subsection 3.1 – Revenue, Note 4 Significant management judgements in applying accounting policies and estimation uncertainty, Note 5 Revenue and Note 6 Segmental information. Going concern We identified going concern as one of the most significant assessed risks of material misstatement due to error. Macro-economic uncertainties currently faced by the UK have ongoing impacts on businesses, and at the date of this report its effects continue to result in uncertainty. The impact of cost increases combined with the risk of further cancelled contracts could adversely impact the future trading performance of the group and the parent company and as such increases the extent of judgement and estimation uncertainty associated with the forecasts prepared, as well as management’s decision to adopt the going concern basis of accounting in the preparation of the financial statements. Our audit testing did not identify any material misstatements in relation to revenue. In responding to the key audit matter, we performed the following audit procedures: • Obtaining management’s base case scenario for the period to 31 December 2024, together with supporting evidence for all key trading, working capital and cash flow assumptions. We assessed how these cash flow forecasts were compiled and assessed their appropriateness by applying relevant sensitivities to the underlying assumptions and challenging the nature of those assumptions. • Obtaining management’s downside scenarios, including a Reverse Stress Test, which reflect management’s assessment of uncertainties. We evaluated the assumptions regarding the forecast period and reduced trading levels under each of these scenarios including the impact of early termination of clinical trials, failure to convert expected bookings to contracted bookings and the impact of macro-economic uncertainties on the cost base of the group. • Determining whether the assumptions are consistent with our understanding of the business obtained during the course of the audit and the changing external macro-economic circumstances. • Assessing the accuracy of management’s past forecasting by comparing management’s forecasts for previous years to the actual results for previous years and considering the impact on the base case cash flow forecast. 44 IXICO plc Independent auditor’s report to the members of IXICO plc Key Audit Matter – Group How our scope addressed the matter – Group • Obtaining post year end management accounts and comparing against amounts forecasted to assess accuracy of forecasts; • Obtaining and reading post year end board minutes to confirm that any post year end events have been factored into management’s forecasts. • Assessing the impact of the mitigating factors available to management in respect of the ability to restrict cash impact, including the level of available facilities. • Consulting with our transaction advisory service to provide a specialist assessment of going concern. • Assessing the adequacy of related disclosure within the Annual Report and Accounts. Our results We have nothing to report in addition to that stated in the ‘Conclusions relating to going concern’ section of our report. We did not identify any material uncertainties related to going concern. Relevant disclosures in the Annual Report & Accounts 2023 • Financial statements: Note 1(d) Going concern Impairment of intangible assets We identified the valuation of the intangible balance as one of the most significant assessed risks of material misstatement due to error. There is a significant intangibles balance of £6,147k (PY £4,587k) in the group financial statements which needs to be considered for impairment in accordance with IAS 36 Impairment of assets. Based on IAS 36, intangible assets that are not ready for use should be tested annually for impairment and all assets within the standard’s scope are to be tested for impairment where there are visible impairment indicators. With the decline in revenues, the reported trading loss and the declining market capitalisation of the group at 30 September 2023 (being close to the carrying value of intangibles at the balance sheet date), there is a significant risk that the carrying value is not recoverable and that impairment is required. As a result, management prepared an impairment assessment in relation to the carrying value of the CGU to determine their recoverability. In responding to the key audit matter, we performed the following audit procedures: • Assessing any indicators of impairment in line with IAS 36 that may trigger a requirement of an impairment for all intangibles. • Obtained management’s impairment assessment, including determination of assets included in the CGU. Assessing and challenging the trading, working capital, and cash flow assumptions applied to the value-in-use model to ensure they are reasonable and supportable. • Agreeing inputs to the value-in-use calculations by reference to the forecasts tested in our audit of going concern and ensuring consistency of the forecasts, where appropriate. • Checking mathematical accuracy of the Value in Use calculations. • Engaging our internal valuations experts to inform our challenge of management, to confirm that the assumptions used within the calculation of the discount rate are reasonable and consistent with industry data. 45 IXICO plc Independent auditor’s report to the members of IXICO plc Key Audit Matter – Group How our scope addressed the matter – Group • Obtaining details of management’s sensitivity analysis and further sensitising growth rates within the model, by reference to industry and market data. • Assessing the accuracy and completeness of financial statement disclosures relating to the impairment of intangible assets. Our results Our audit testing did not identify any material misstatement to the impairment of intangibles. Relevant disclosures in the Annual Report & Accounts 2023 • Financial statements: Note 3 Significant accounting policies, subsection 3.9 – Impairment of non-current assets and Note 14 Intangibles. Key Audit Matter – Parent company How our scope addressed the matter – Parent Company Valuation of investment and intercompany receivables (company only) In responding to the key audit matter, we performed the following audit procedures: We identified the valuation of the investment and intercompany balance in the parent company financial statements as one of the most significant assessed risks of material misstatement due to error. This relates to the investment held by IXICO plc in the subsidiary IXICO Technologies Ltd and amounts due from IXICO Technologies Ltd. There is a significant investment balance of £5,857k (PY £5,805k) and intercompany balance of £2,451k (PY £3,507k) in the parent company financial statements which needs to be considered for impairment in accordance with IAS 36 Impairment of assets and IFRS 9 Financial instruments. With the decline in revenues, the reported trading loss and the declining market capitalisation of the group at 30 September 2023 (being close to the carrying value of intangibles at the balance sheet date), there is a significant risk that the carrying value is not recoverable and that that impairment is required. As a result, management prepared an impairment assessment in relation to the carrying value of the investment and intercompany receivables to determine their recoverability. • Assessing any indicators of impairments in line with IAS 36 that may trigger a requirement of an impairment. • Obtaining management’s paper and assessing and challenging the trading, working capital, and cash flow assumptions applied to the client-prepared value-in-use model to ensure they are reasonable and supportable. • Reviewing the cash balance of IXICO Technologies and ensuring that the company has enough cash to repay the intercompany debt. • Agreeing inputs to the value-in-use calculations by reference to the forecasts tested in our audit of going concern and ensuring consistency of the forecasts, where appropriate. • Checking mathematical accuracy of the Value in Use calculations. • Engaging our internal valuations experts to inform our challenge of management, to confirm that the assumptions used within the calculation of the discount rate are reasonable and consistent with industry data. • Obtaining details of management’s sensitivity analysis and further sensitising growth rates within the model, by reference to industry and market data. 46 IXICO plc Independent auditor’s report to the members of IXICO plc Key Audit Matter – Parent company How our scope addressed the matter – Parent Company Relevant disclosures in the Annual Report & Accounts 2023 Our results • Financial statements: Note 3 Significant accounting policies, subsection 3.10 – Investments in Group undertaking and Note 15 Investments. Our audit testing did not identify any material misstatement to the impairment of investment and intercompany balance. Our application of materiality We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report. Materiality was determined as follows: Materiality measure Group Parent company Materiality for financial statements as a whole We define materiality as the magnitude of misstatement in the financial statements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of these financial statements. We use materiality in determining the nature, timing and extent of our audit work. £118,800, based on 2% of the parent company’s total assets, and then capped at an amount less than group materiality. This benchmark is considered the most appropriate because the company’s principal activity is that of a holding company for the group and this judgement is consistent with the prior year. Materiality for the current year is lower than the level that we determined for the year ended 30 September 2022 owing to the reduction in group materiality. Materiality threshold £132,000, which is 2% of the group’s total revenue. Significant judgements made by auditor in determining the materiality We have selected revenue as the most appropriate benchmark because this is a key measure used by the directors to report on the financial performance of the group. We have also consistently used revenue to determine materiality due to the year-on-year volatility in profit or loss before tax, meaning it is not a stable and appropriate benchmark. Materiality for the current year is lower than the level that we determined for the year ended 30 September 2022 owing to the decrease in revenue in the current year. Performance materiality used to drive the extent of our testing We set performance materiality at an amount less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the 47 IXICO plc Independent auditor’s report to the members of IXICO plc Materiality measure Group Parent company aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. Performance materiality threshold £99,000, which is 75% of financial statement materiality. £89,100 which is approximately 75% of financial statement materiality. Significant judgements made by auditor in determining the performance materiality In determining performance materiality, we made the following significant judgements: - whether there were any significant adjustments made to the company financial statements in the prior year - whether there were any significant control deficiencies identified in prior years - whether there were any changes in senior management of the company during the period - whether there were any significant changes in business objectives/strategy In determining performance materiality, we made the following significant judgements: - whether there were any significant adjustments made to the group financial statements in the prior year - whether there were any significant control deficiencies identified in prior years - whether there were any changes in senior management of the group during the period - whether there were any significant changes in business objectives/strategy Specific materiality Specific materiality Communication of misstatements to the audit committee Threshold for communication We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. We determined a lower level of specific materiality for the following areas: - Related party transactions - Directors’ remuneration We determined a lower level of specific materiality for the following areas: - Related party transactions - Directors’ remuneration We determine a threshold for reporting unadjusted differences to the audit committee. £6,600 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. £5,900 and misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected misstatements. 48 IXICO plc Independent auditor’s report to the members of IXICO plc Overall materiality – Group Overall materiality – Parent company (Capped at 90% of group materiality) Revenue £6,665,000 PM £99,000, 75% FSM £132,000, 2% TFPUM £33,000, 25% Total assets £10,322,000 PM £89,100, 75% FSM £118,800, 2% TFPUM £29,700, 25% FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements An overview of the scope of our audit We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters related to: Understanding the group, its components, and their environments, including group-wide controls • The engagement team obtained an understanding of the group and its environment, including group-wide controls, and assessed the risks of material misstatement at the group level; and • The engagement team obtained an understanding of the effect of the group organisational structure on the scope of the audit, identifying that there are centralised processes and controls over the key areas of audit focus. Group management are responsible for all judgemental processes and significant risk areas. All accounting is centralised, and we have tailored our audit response accordingly. In assessing the risk of material misstatement to the group financial statements we considered the transactions undertaken by each entity and therefore where the focus of our audit work was required. Identifying significant components • Significant components were identified through assessing their relative share of key financial metrics including total revenue, profit before taxation and total assets. If any of these individual metrics were >15% of the group total amounts, then the related component was classified as ‘individually financially significant to the group’ and an audit of the financial information of the component using component materiality (full-scope audit) was performed. • Other than IXICO Technologies Limited, which was scoped as a significant component, the only other component of the group (IXICO Technologies Inc) was selected as ‘neither significant nor material’ and was subject to analytical procedures. 49 IXICO plc Independent auditor’s report to the members of IXICO plc Performance of our audit • The year-end audit was conducted both remotely and at the head office. This hybrid approach was supported through the use of software collaboration platforms for the secure and timely delivery of requested audit evidence. The audit team held pre-scheduled video calls throughout the audit fieldwork. • Our audit approach in the current year is consistent with the audit approach adopted for the year ended 30 September 2022, being wholly substantive in nature. Audit approach Full-scope audit Analytical procedures Total Other information No. of components 2 % coverage Total assets 100 % coverage Revenue 100 % coverage PBT 100 1 3 - 100 - 100 - 100 The other information comprises the information included in the Annual Report & Accounts 2023, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the Annual Report & Accounts 2023. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Our opinion on other matters prescribed by the Companies Act 2006 is unmodified In our opinion, based on the work undertaken in the course of the audit: • • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matter on which we are required to report under the Companies Act 2006 In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. 50 IXICO plc Independent auditor’s report to the members of IXICO plc Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • • the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of directors As explained more fully in the directors’ responsibilities statement, set out on page 28, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: • We obtained an understanding of the legal and regulatory frameworks applicable to the parent company and the group and determined that the most significant which are directly relevant to specific assertions in the financial statements are those related to the reporting frameworks (UK-adopted international accounting standards and the Companies Act 2006). • We understood how the company and the group is complying with those legal and regulatory frameworks by making inquiries of management, including general counsel. We corroborated our inquiries through our review of board minutes and walkthrough tests performed with management. • In assessing the potential risks of material misstatement, we obtained an understanding of the entity’s operations, including the nature of its revenue sources, products, and services and of its objectives and strategies to understand the classes of transactions, account balances, expected financial statement disclosure and business risks that may result in risks of material misstatement. • We assessed the susceptibility of the company’s and group’s financial statements to material misstatement, including how fraud might occur, by evaluating management’s incentives and opportunities for manipulation of the financial statements. This included the evaluation of the risk of management override of controls. Audit procedures performed by the group engagement team included: - Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud; - Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process; 51 IXICO plc Independent auditor’s report to the members of IXICO plc - Challenging assumptions and judgements made by management in its significant accounting estimates such as capitalised development costs, carrying value of intangible assets and the valuation of the parent company investments and intercompany balances in group undertakings, - Identifying and testing journal entries, in particular any journal entries posted with large values, unusual account combinations and those posted at the year-end or those posted by certain users during the year; - Assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item; and - Holding discussions with those outside the finance team including human resources, key management including the Chief Executive Officer and operations personnel, and general counsel. • These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as fraud may involve collusion, deliberate concealment, forgery, or intentional misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we would become aware of it; • The engagement partner assessed whether the engagement team collectively has the appropriate competence and capabilities. This included consideration of the engagement tam’s understanding of, and practical experience with, audit engagements of a similar nature and complexity, knowledge of the industry in which the client operates, and understanding of the legal and regulatory requirements specific to the entity. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Paul Naylor Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 4 December 2023 52 IXICO plc Financial Statements for the year ended 30 September 2023 Consolidated Statement of Comprehensive Income for the years ended 30 September 2023 and for 30 September 2022 Revenue Cost of sales Gross profit Other income Operating expenses Research and development expenses Sales and marketing expenses General and administrative expenses Total operating expenses Operating (loss) / profit Finance income Finance expense (Loss) / profit on ordinary activities before taxation Taxation (Loss) / profit attributable to equity holders for the period Other comprehensive income / (expense): Items that will be reclassified subsequently to profit or loss Foreign exchange translation differences Movement in fair value of cash flow hedges Cash flow hedges recycled to revenue Total other comprehensive income / (expense) Total comprehensive (expense) / income attributable to equity holders for the period (Loss) / profit per share (pence) Basic (loss) / profit per share Diluted (loss) / profit per share Notes 5 7 10 11 22 22 12 12 30-Sep-23 30-Sep-22 £000 6,665 (3,395) 3,270 393 (925) (1,321) (2,854) (5,100) (1,437) 105 (29) (1,361) 183 (1,178) (21) 111 (27) 63 (1,115) £000 8,643 (3,400) 5,243 689 (1,217) (1,226) (2,581) (5,024) 908 10 (33) 885 147 1,032 14 (214) 103 (97) 935 (2.44) (2.44) 2.14 2.03 53 IXICO plc Financial Statements for the year ended 30 September 2023 Consolidated Statement of Financial Position as at 30 September 2023 and 30 September 2022 Assets Non-current assets Property, plant and equipment Intangible assets Commission assets Total non-current assets Current assets Trade and other receivables Current tax receivables Cash and cash equivalents Total current assets Total assets Liabilities and equity Non-current liabilities Trade and other payables Lease liabilities Total non-current liabilities Current liabilities Trade and other payables Derivative financial liabilities Lease liabilities Total current liabilities Total liabilities Equity Ordinary shares Share premium Merger relief reserve Reverse acquisition reserve Cash flow hedge reserve Foreign exchange translation reserve Capital redemption reserve Accumulated losses Total equity Notes 30-Sep-23 £000 30-Sep-22 £000 13 14 16 16 11 17 18 17 22 18 20 20 20 20 20,22 20 20 20 518 6,147 39 6,704 1,706 549 4,031 6,286 817 4,587 - 5,404 3,029 453 5,769 9,251 12,990 14,655 2 275 277 1,142 27 112 1,281 1,558 484 84,802 1,480 (75,308) (27) (95) 7,456 (7,360) 11,432 33 394 427 1,502 111 122 1,735 2,162 482 84,802 1,480 (75,308) (111) (74) 7,456 (6,234) 12,493 Total liabilities and equity 12,990 14,655 The financial statements on pages to 53 to 87 were approved by the Board of Directors and authorised for issue on 4 December 2023 and were signed on its behalf by: ______________________________ Grant Nash Chief Financial Officer 4 December 2023 IXICO plc, Registered number: 03131723 54 IXICO plc Financial Statements for the year ended 30 September 2023 Company Statement of Financial Position as at 30 September 2023 and 30 September 2022 Assets Non-current assets Investments in Group undertakings Total non-current assets Current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Liabilities and equity Current liabilities Trade and other payables Total current liabilities Equity Ordinary shares Share premium Merger relief reserve Capital redemption reserve Accumulated losses Total equity Total liabilities and equity Notes 30-Sep-23 £000 30-Sep-22 £000 15 16 17 20 20 20 20 20 5,857 5,857 2,481 1,469 3,950 9,807 60 60 484 84,802 1,480 7,456 (84,475) 9,747 5,805 5,805 3,088 1,590 4,678 10,483 83 83 482 84,802 1,480 7,456 (83,820) 10,400 9,807 10,483 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 £707,000 (2022: £741,000). The financial statements on pages 53 to 87 were approved by the Board of Directors and authorised for issue on 4 December 2023 and were signed on its behalf by: ______________________________ Grant Nash Chief Financial Officer 4 December 2023 IXICO plc, Registered number: 03131723 55 2 3 4 , 1 1 ) 0 6 3 , 7 ( 6 5 4 , 7 ) 7 2 ( ) 5 9 ( ) 8 0 3 5 7 ( , 0 8 4 1 , 2 0 8 4 8 , 4 8 4 6 5 l a t o T 0 0 0 £ 9 7 4 , 1 1 2 3 0 , 1 4 1 ) 4 1 2 ( 3 0 1 5 3 9 9 7 3 9 4 , 2 1 s e s s o L 0 0 0 £ ) 5 4 3 , 7 ( 2 3 0 , 1 - - - 2 3 0 , 1 9 7 ) 4 3 2 , 6 ( ) 8 7 1 , 1 ( ) 8 7 1 , 1 ( ) 1 2 ( 1 1 1 ) 7 2 ( - - - ) 5 1 1 , 1 ( ) 8 7 1 , 1 ( 2 2 5 4 5 - 2 5 2 5 0 0 0 £ 6 5 4 , 7 - - - - - - 6 5 4 , 7 - - - - - - - - - - - 0 0 0 £ ) 4 1 2 ( 3 0 1 ) 1 1 1 ( - ) 1 1 1 ( - - 1 1 1 ) 7 2 ( 4 8 - - - ) 8 8 ( 0 0 0 £ - 4 1 - - 4 1 - ) 4 7 ( - - - ) 1 2 ( ) 1 2 ( - - - e v r e s e r e v r e s e r e v r e s e r - - - - - - - - - - - - - - - - - - - - - - - - ) 8 0 3 5 7 ( , 0 8 4 1 , 2 0 8 4 8 , 2 8 4 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 2 e s n e p x e / e m o c n i e v i s n e h e r p m o c r e h t O e m o c n i e v i s n e h e r p m o c l a t o T d o i r e p e h t r o f t i f o r P 1 2 0 2 r e b m e t p e S 0 3 t a e c n a a B l l n o i t a s n a r t e g n a h c x e n g e r o F i e s n e p x e / e m o c n i e v i s n e h e r p m o c l a t o T e u n e v e r o t d e c y c e r l s e g d e h w o l f h s a C w o l f h s a c f o e u a v l r i a f n i t n e m e v o M s e g d e h e s n e p x e / e m o c n i e v i s n e h e r p m o c r e h t O d o i r e p e h t r o f s s o L s n o i t p o e r a h s f o t c e p s e r n i e g r a h C 2 2 0 2 r e b m e t p e S 0 3 t a e c n a a B l s r e n w o h t i w s n o i t c a s n a r T e m o c n i e v i s n e h e r p m o c l a t o T e s n e p x e / e m o c n i e v i s n e h e r p m o c l a t o T e u n e v e r o t d e c y c e r l s e g d e h w o l f h s a C w o l f h s a c f o e u a v l r i a f n i t n e m e v o M s n o i t p o e r a h s f o t c e p s e r n i e g r a h C s n o i t p o e r a h s i f o e s c r e x E s r e n w o h t i w s n o i t c a s n a r t l a t o T 3 2 0 2 r e b m e t p e S 0 3 t a e c n a a B l s r e n w o h t i w s n o i t c a s n a r T l n o i t a s n a r t e g n a h c x e n g e r o F i d e t a l u m u c c A n o i t p m e d e r e g d e h n o i t a l s n a r t n o i t i s u q c a i f e i l e r e v r e s e r 0 0 0 £ ) 8 0 3 5 7 ( , 0 0 0 £ 0 8 4 1 , e v r e s e r 0 0 0 £ 2 0 8 4 8 , e r a h S i m u m e r p 2 8 4 0 0 0 £ s e r a h s y r a n d r O i l a t i p a C w o l f h s a C n g i e r o F e g n a h c x e e s r e v e R r e g r e M 2 2 0 2 r e b m e t p e S 0 3 d n a 3 2 0 2 r e b m e t p e S 0 3 d e d n e s r a e y e h t r o f y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f s t n e m e t a t S l a i c n a n F i c l p O C X I I l a t o T 0 0 0 £ 2 6 0 , 1 1 ) 1 4 7 ( 9 7 0 0 4 , 0 1 ) 7 0 7 ( 2 2 5 4 5 0 0 0 £ s e s s o l ) 8 5 1 , 3 8 ( ) 1 4 7 ( 9 7 - - - - 0 0 0 £ 6 5 4 , 7 e v r e s e r 0 0 0 £ 0 8 4 , 1 e v r e s e r l a t i p a C d e t a l u m u c c A n o i t p m e d e r f e i l e r r e g r e M - - - - 0 0 0 £ 2 0 8 4 8 , e r a h S i m u m e r p 2 8 4 0 0 0 £ s e r a h s y r a n d r O i d o i r e p e h t r o f e s n e p x e e v s n e h e r p m o c i l t a o T 1 2 0 2 r e b m e t p e S 0 3 t a e c n a a B l s n o i t p o e r a h s f o t c e p s e r n i e g r a h C s r e n w o h t i w s n o i t c a s n a r T ) 0 2 8 , 3 8 ( 6 5 4 , 7 0 8 4 , 1 2 0 8 4 8 , 2 8 4 2 2 0 2 r e b m e t p e S 0 3 t a e c n a a B l - 2 5 2 5 ) 7 0 7 ( - - - - - - - - - - - - - - 2 2 d o i r e p e h t r o f e s n e p x e e v s n e h e r p m o c i l t a o T s n o i t p o e r a h s f o t c e p s e r n i e g r a h C s r e n w o h t i w s n o i t c a s n a r T s n o i t p o e r a h s i f o e s c r e x E s r e n w o h t i w s n o i t c a s n a r t l a t o T 7 4 7 , 9 ) 5 7 4 , 4 8 ( 6 5 4 , 7 0 8 4 , 1 2 0 8 4 8 , 4 8 4 3 2 0 2 r e b m e t p e S 0 3 t a e c n a a B l 7 5 3 2 0 2 r e b m e t p e S 0 3 d e d n e r a e y e h t r o f s t n e m e t a t S l a i c n a n F i 2 2 0 2 r e b m e t p e S 0 3 d n a 3 2 0 2 r e b m e t p e S 0 3 d e d n e s r a e y e h t r o f y t i u q E n i s e g n a h C f o t n e m e t a t S y n a p m o C c l p O C X I I IXICO plc Financial Statements for the year ended 30 September 2023 Consolidated Statements of Cash Flows for the years ended 30 September 2023 and 30 September 2022 Cash flows from operating activities Profit / (loss) for the period Finance income Finance expense Taxation Depreciation of fixed assets Amortisation of intangibles Research and development expenditure credit Impairment of intangible assets Share option charge Changes in working capital Decrease in trade and other receivables (Decrease) / increase in trade and other payables Cash (used in) / generated from operations Taxation received Taxation paid Net cash (used in) / generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets including staff costs capitalised Finance income Net cash (used in) / generated from investing activities Cash flows from financing activities Issue of shares Repayment of lease liabilities Net cash (used in) / generated from financing activities Movements in cash and cash equivalents in the period Cash and cash equivalents at start of period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of period 30-Sep-23 £000 30-Sep-22 £000 (1,178) (105) 29 (183) 400 225 (355) 14 52 (1,101) 1,290 (327) (138) 456 (16) 302 (100) (1,863) 99 (1,864) 2 (158) (156) (1,718) 5,769 (20) 4,031 1,032 (10) 33 (147) 451 188 (316) 41 79 1,351 280 (696) 935 499 (10) 1,424 (187) (2,058) 6 (2,239) - (114) (114) (929) 6,684 14 5,769 58 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements Notes to the financial statements 1. Presentation of the financial statements a. General information IXICO plc (the ‘Company’) is a public limited company incorporated in England and Wales and is admitted to trading on the AIM market of the London Stock Exchange under the symbol IXI. The address of its registered office is 4th Floor, Griffin Court, 15 Long Lane, London EC1A 9PN. The Company is the parent of the 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. The Company has elected to use Financial Reporting Standard – ‘The Reduced Disclosure Framework’ (FRS101). In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, these financial statements do not include: • A statement of cash flows and related notes; • The requirement to produce a statement of financial position at the beginning of the earliest comparative period; • The requirements of IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered in to between two or more members of the group as they are wholly owned within the group; • The effect of future accounting standards not adopted; • Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based payment’ (details of the number and weighted average exercise prices of share options, and how the fair value of goods or services received was determined); • Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair value measurement of assets and liabilities). • Disclosures in relation to impairment of assets IFRS 7, ‘Financial instruments: Disclosures’. • 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. 59 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 1. Presentation of the financial statements continued 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 conflict in eastern Europe and recent re-commencement of hostilities in the middle east, accompanied by rising inflation, interest rates and a broad degree of macro-economic and political disruption continue to create challenges for the global economy. These have resulted in a lowered risk appetite which has impacted capital markets around the world, reducing capital availability and investment in areas deemed higher risk. The impact of this has been visible in the clinical trials market both through a slow down in the initiation of new clinical trials, increased focus on development pipelines by the biopharmaceutical companies and restructuring and consolidation announcements within both biopharma and CROs. The Group has seen the impact of this and, whilst it remains well capitalised and debt-free, it has seen an elongation of the timeframes to sign new clinical trials and therefore has lowered its expectations for revenues in 2024 ahead of a return to growth in 2025. Irrespective, the Group has a strong balance sheet for its size with financial year end net assets of £11.4 million, a £4.0 million cash balance and has secured £8.0 million of new contracts in the year providing it with good visibility of future revenues across a diversified portfolio of clients and projects. In assessing going concern, management has prepared detailed sensitised forecasts which consider different scenarios through to December 2024. These include the risk to current projects and expected future sales pipelines. 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, as well as the review completed by the Audit Committee (including a review of a reverse stress test) 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 2023 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. 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: • Classification of liabilities as current or non-current (Amendments to IAS 1) • Deferred Tax related to Assets and Liabilities arising from a Single Transaction • Definition of Accounting Estimates • Disclosure of Accounting Policies 60 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 2. New and amended accounting standards and interpretations continued 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. Revenue comprises the transaction price, being the amount of consideration the Group expects to be entitled to in exchange for transferring promised goods or services to a customer in the ordinary course of business net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. In determining whether to recognise revenue, the Group follows a 5-step process: Identifying the contract with a client; Identifying the performance obligations; 1. 2. 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, wherein the transaction price is determined and agreed for each performance obligation in the schedule of work. The transaction price agreed at the outset is not variable or subject to any refunds or warranties, and this is consistent across all revenue streams. 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. Deferred income and advanced payments are recognised where consideration is received before all performance considerations have been completed. They are then released in line with contractual terms which dictate which performance obligations they relate to. In some instances the Group invoices in advance of work being completed, a corresponding contract liability is therefore created to account for this. The Group also invoices on completion of contractual milestone. In these instances accrued income is recognised until the invoices are issued to reflect the Group’s right to compensation for these completed but not invoiced performance obligations. 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. 61 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 3.1 Revenue continued The Group’s most significant streams of service revenue are outlined below and have the respective recognition criteria: Service type Project & site set up Training materials and delivery Scientific reports Performance obligations 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. Revenue recognition policy Revenue for this service is recognised at a point in time once the Group has delivered the relevant material on behalf of the client. Project management Site management TrialTracker configuration and access 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. For training materials and delivery, revenue is recognised at the point in time when a site has completed its training. 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 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 access granted to client trial sites for upload of clinical information. Due to the lack of interrelationship between the two distinct services provided, each are recognised independently. The performance obligations for each are: • The performance obligation for deployment is met over a period of time during the configuration and development of TrialTracker. • 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 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. The deployment of TrialTracker is recognised over time as the platform is configured for the customer. This is because an asset is being created that has no alternative use for the Group and there is an enforceable entitlement to receive payment for the work completed to date. 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. In respect of data quality control, revenue will be recognised at the point in time when data is quality checked. The data will go through a series of quality control reviews prior to being used in the Group’s performance of reading The services provided for data management represents a provision of ongoing services. 62 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 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. 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. 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. 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. Data reading and analysis Licence revenue 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, or reduction, 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. In line with note 5, the Group has determined that it acted as an agent in one material contract in the year. The Group charges a management fee and recognises this as revenue. This contract delivered £13,000 (£192,000) of revenues in the year. 3.2 Other income Government grants and assistance 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% of qualifying research and development expenditure, with the rate increasing to 20% for expenses incurred from 1 April 2023. 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. 63 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 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: Intention to complete the asset; - Demonstrating technical feasibility of completing the intangible 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 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 payment is expensed on a straight-line basis over the performance 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 any non-market-based performance 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 21 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 pension plan. The assets of the Group pension scheme are held separately from those of the Group in independently administered pension 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 accrued, 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. Please see note 18 for more information. 64 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 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 Leasehold improvements Fixtures and fittings Equipment over expected lease term shorter of 5 years or the lease term 3 years 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 arise 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 - Computer software - Data acquisition 5 years 3 years 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. 65 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 3.8 Intangible assets continued 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, with the charges recognised in accordance with how the Group receives the benefit from the technology. The assets useful economic life is as follows: Internally generated technology Proprietary clinical trial platform 3 - 5 years 15 years Impairment of non-current assets 3.9 Each category of non-current assets is reviewed for impairment annually when under construction or 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. The Group recognises commission payments as incremental costs from obtaining a contract. Those that are paid immediately are capitalised under IFRS 15 and amortised over 3 years (2022: 3 years), being the average length of contracts entered into by the Group, as opposed to using a tailored time period for each project. Management reviews this assessment annually to determine that there are no material variances. Those not paid immediately are accrued over a period of time as this element of the commission payment requires the respective employee to remain in service for a specific period. Commission assets. 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 3.2. 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 – 66 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 3.12 Taxation continued 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. Deferred tax assets are recognised to the extent it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Group’s forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit. As such, the Group does not recognise any deferred tax assets, see note 19. 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, unless significantly overdue, 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. 67 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 3.18 Financial instruments continued The Group holds one type of derivative financial instrument – forward contracts used for the purposes of hedging. These are designated as cash flow hedges and held at fair value with changes held in the cash flow hedge reserve. On crystallisation the gain or loss is recycled to revenue to reflect the risks being hedged. The ineffective portion of the hedging instrument is recognised in the profit or loss account immediately. Further information relating to financial instruments and the policies adopted by the Group to manage risk is found in note 22. 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 a client project or its 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 had 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 an immaterial increase in revenue and cost of sales recognised in the year and a decrease in profit margins achieved. In the prior year the effect would have been material. 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 2023, research and development expenses totalled £2,152,000 (2022: £2,129,000). Of this amount, £1,211,000 (2022: £912,000) was capitalised as an intangible asset relating to employee costs. The balance of expenditure being £925,000 (2022: £1,217,000) 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 19 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 68 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 4. Significant management judgement in applying accounting policies and estimation uncertainty continued 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 Group 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. In line with IAS 2, management assess whether non-market conditions will be achieved and adjusts appropriately. 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: Service revenue 2023 £000 6,665 2022 £000 8,643 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 2023, revenue includes £214,000 (2022: £499,000) held in contract liabilities within trade and other payables at the beginning of the period. This amount also includes performance obligations relating to advance payments that were not yet complete 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. At 30 September 2023, £343,000 (2022: £575,000) of advanced payments were recognised on the balance sheet. 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 from other team members. Performance information is reported as a single business unit to the management team. 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. 69 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 6. Segmental information continued During the year ended 30 September 2023, the Group had five clients (2022: three clients) that exceeded 10% of total revenue. In 2023 the individual percentage revenue associated with these clients was 14% (£966,000), 14% (£949,000), 13% (£862,000), 12% (£792,000) and 10% (£699,000). In 2022, the individual percentage revenue associated with the three largest clients was 38% (£3,320,000), 14% (£1,175,000) and 11% (£976,000). Geographical information The Group’s revenue can be categorised by country, based on the location of the contracting client. Sometimes clients of the Group, which include global biopharmaceutical 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 or partners of the client based elsewhere in the world. United States of America United Kingdom Netherlands Switzerland Ireland Other - Europe Revenue 2023 £000 3,053 952 862 816 689 293 6,665 2022 £000 2,711 2,057 436 2,077 724 638 8,643 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. 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. Grant income RDEC Other income 2023 £000 38 355 393 2022 £000 373 316 689 70 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 8. Auditor’s remuneration Audit services - Group and Parent Company - subsidiary companies Total audit fees Audit-related assurance services Total auditor’s remuneration 9. Employees and Directors 2023 £000 2022 £000 56 37 93 8 101 38 26 64 7 71 The average monthly number of persons (including Executive and Non-Executive Directors) employed by the Group was: Administration Operations, research and development Average total persons employed The aggregate remuneration of employees in the Group was: Wages and salaries Social security costs Other pension costs Share-based payments charge Total remuneration for employees Employee costs capitalised Net employee costs 2023 2022 Number 14 75 89 Number 15 75 90 2023 2022 £000 5,944 702 303 52 7,001 (1,211) 5,790 £000 5,851 610 286 79 6,826 (912) 5,914 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 2023 in respect of pension costs were £46,000 (2022: £46,000). The remuneration of the Group’s Directors is set out in the Directors’ Remuneration Report on pages 39 and 40, as well as in note 23 under related party transactions. The Company did not directly employ any staff and therefore there is no cost recognised in respect of staff costs. 71 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 10. Operating loss / profit The Group’s operating loss (2022: profit) has been achieved after charging: Research and development expenses Research and development related impairment Research and development related amortisation Sales and marketing expenses Amortisation of commission assets Operating lease charges: land, buildings and printers Depreciation of tangible assets Amortisation of intangible assets Foreign exchange (gain) / loss Administrative expenses Total operating expenses 2023 £000 903 14 8 1,262 59 1 400 24 85 2,344 5,100 2022 £000 1,176 41 - 1,173 53 1 451 23 (149) 2,255 5,024 There is a further amortisation charge of £193,000 (2022: £165,000) recognised in cost of sales for those items directly related to project activities. The total amortisation charge for the year is £225,000 (2022: £188,000). 11. Taxation The tax charge for each period can be reconciled to the result per the Consolidated Statement of Comprehensive Income as follows: (Loss) / profit on ordinary activities before taxation (Loss) / profit before tax at the effective rate of corporation tax in the United Kingdom of 22% (2022: 19%) Effects of: Expenses not deductible for tax purposes Origination and reversal of temporary differences Research and development uplifts net of losses surrendered for tax credits Overseas taxation Prior period adjustment Tax credit for the period The tax credit for each period can be reconciled as follows: Small or medium enterprise research and development credit Deduction for corporation tax on RDEC Overseas taxation Prior period adjustment Tax credit for the period 72 2023 £000 (1,361) 2022 £000 885 (299) 168 (17) (291) 406 16 2 (183) 2023 £000 (276) 75 16 2 (183) 4 (332) 17 - (4) (147) 2022 £000 (200) 57 - (4) (147) IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 11. Taxation continued 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: Current tax receivable at start of period Current period credit Corporation tax repayment Current tax receivable at end of period 2023 £000 453 552 (456) 549 2022 £000 480 472 (499) 453 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: Tax credit for the year RDEC gross of corporation tax deduction Overseas taxation Tax recoverable Current period credit 2023 £000 183 355 15 (1) 552 2022 £000 147 316 - 9 472 73 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 12. Earnings per share The calculation of basic and diluted earnings per share (‘EPS’) of the Group is based on the following data: Earnings Earnings for the purposes of basic and diluted EPS, being net profit attributable to the owners of the Company (£000) Number of shares Weighted average number of shares for the purposes of basic EPS Effect of potentially dilutive ordinary shares: - Weighted average number of share options 2023 2022 (1,178) 1,032 48,309,181 48,151,373 - 2,606,350 Weighted average number of shares for the purposes of diluted EPS 48,309,181 50,757,723 Basic earnings per share is calculated by dividing earnings attributable to the owners of the Company by the weighted average number of shares in issue during the 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. For the year ended to 30 September 2023, there was no dilutive effect as the share options in issue would have decreased the loss per share. The basic and diluted earnings per share for the Group and Company is: Basic earnings per share Diluted earnings per share 2023 (2.44p) (2.44p) 2022 2.14p 2.03p 74 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 13. Property, plant and equipment Group Cost At 30 September 2021 Additions Disposals At 30 September 2022 Additions Disposals At 30 September 2023 Accumulated depreciation At 30 September 2021 Charge for the period Disposals At 30 September 2022 Charge for the period Disposals At 30 September 2023 Net book value At 30 September 2022 At 30 September 2023 Office building £000 777 - - 777 - - 777 Leasehold Fixtures and fittings £000 5 - - 5 - - 5 improvement £000 185 - - 185 7 - 192 Equipment £000 955 187 (25) 1,117 94 (20) 1,191 277 102 - 379 102 - 481 398 296 98 59 - 157 19 - 176 28 16 5 - - 5 - - 5 - - 461 290 (25) 726 279 (20) 985 391 206 Total £000 1,922 187 (25) 2,084 101 (20) 2,165 841 451 (25) 1,267 400 (20) 1,647 817 518 The only right-of-use asset is held within the office building category. At 30 September 2023, the carrying amount of the right-of-use asset was £296,000 (2022: £398,000). Company At 30 September 2023 and 30 September 2022, the Company had no property, plant and equipment. 75 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 14. Intangible assets Group Cost At 30 September 2021 Additions Impairment Disposals At 30 September 2022 Additions Impairment At 30 September 2023 Accumulated amortisation At 30 September 2021 Amortisation Disposals At 30 September 2022 Amortisation At 30 September 2023 Net book value At 30 September 2022 At 30 September 2023 Other acquired intangibles £000 Other Internally developed technology £000 Next generation TrialTracker platform £000 Total £000 2,985 2,106 (41) (8) 5,042 1,799 (14) 6,827 275 188 (8) 455 225 680 2,137 1,974 - - 4,111 1,589 - 5,700 - - - - - - 210 11 - - 221 121 - 342 104 37 - 141 47 188 80 154 638 121 (41) (8) 710 89 (14) 785 171 151 (8) 314 178 492 396 293 4,111 5,700 4,587 6,147 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, research and development for those items directly related to the research activities of the company or otherwise within general and administrative expenses. Internally developed technology The Group has capitalised research and development costs during the year in relation to the development of its proprietary TrialTracker software. Development includes TrialTracker platform upgrades as well as additional algorithm development. The costs capitalised include time and expenses in relation to staff costs. In recognising these assets, the Group has applied the recognition criteria of IAS 38 relating to internally generated intangible assets, where costs in relation to the development phase must be capitalised under certain circumstances. More information in relation to this is included in the accounting policies of the Group in notes 4 and 5. Assets under construction Assets that are still under construction undergo an annual impairment test which is carried out at the end of the reporting period. This impairment test considers the carrying amount of the asset and compares it with its recoverable amount, with an impairment being recognised if the recoverable amount is lower than the carrying amount. Management have determined the recoverable amount as being the value-in-use, which is calculated using management expectations of future revenues, discounted at an applicable rate. Whilst the asset remains under construction, amortisation is not charged. Company At 30 September 2023 and 30 September 2022, the Company had no intangible assets. 76 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 15. Investments The consolidated financial statements of the Group as at 30 September 2023 and at 30 September 2022 include: Name of subsidiary Class of share Country of incorporation Principal activities Directly held: IXICO Technologies Limited Indirectly held: IXICO Technologies Inc. Ordinary United Kingdom Data collection and analysis of neurological diseases Ordinary United States Sales and marketing The Company and Group has no investments other than the holdings in the above subsidiaries that are all 100% owned. The carrying amounts of the investments in subsidiaries for the Company are: Investments in subsidiary undertakings At beginning of the period Capital contribution Total investments at end of the period 2023 £000 5,805 52 5,857 2022 £000 5,748 57 5,805 The capital contribution represents the charge in the year for share-based awards issued by the Company to employees of IXICO Technologies Limited and IXICO Technologies Inc. 16. Trade and other receivables Current receivables Trade receivables Less provision for bad and doubtful debts Net carrying amount of trade receivables Other taxation and social security Prepayments and accrued income Commission assets Other receivables Amounts due from subsidiary undertakings Current receivables Non-current receivables Commission assets Total trade and other receivables Group Company 2023 £000 945 - 945 40 684 27 10 - 1,706 2022 £000 2,247 - 2,247 30 652 96 4 - 3,029 2023 £000 - - - 6 20 - 5 2,450 2,481 2022 £000 - - - 2 28 - 1 3,057 3,088 39 1,745 - 3,029 - 2,481 - 3,088 All amounts are classified as short-term and are expected to be received within one year. The average credit period granted to clients ranges from 30 to 90 days (2022: 30 to 90 days). 77 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 16. Trade and other receivables continued A provision for expected credit losses is made when there is uncertainty over the ability to collect the amounts outstanding from clients. This is determined based on specific circumstances relating to each individual client. The Directors consider that there are immaterial credit losses (2022: immaterial credit losses) due to the calibre of customers the Group has and so the carrying amount of trade and other receivables approximates their fair value. Within the Company, there are expected to be immaterial credit losses (2022: immaterial credit losses) from subsidiary companies due to the level of cash available in the subsidiaries which would allow the repayment of these receivables immediately. As at the year-end, the ageing of trade receivables which are past due but not impaired is as follows: Amounts not past due Past due: Less than 30 days Total trade receivables Group Company 2023 £000 864 81 945 2022 £000 2,189 58 2,247 2023 £000 - - - 2022 £000 - - - The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 22. 17. Trade and other payables Current liabilities Trade payables Other taxation and social security Contract liabilities Accrued expenses Other payables Non-current liabilities Accrued expenses Group 2023 £000 86 58 529 464 5 1,142 2 2022 £000 254 56 673 508 11 1,502 33 Total trade and other payables 1,144 1,535 Company 2023 £000 2022 £000 - - - 60 - 60 - 60 - - - 83 - 83 - 83 Trade payables and accrued expenses principally comprise amounts outstanding for trade purchases and ongoing costs. No interest is charged on the trade payables. The Group’s policy is to ensure that payables are paid within the pre-agreed credit terms and to avoid incurring penalties and/or interest on late payments. The fair value of trade and other payables approximates their current book values. 78 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 17. Trade and other payables continued Reconciliation of liabilities arising from financing activities The only liabilities affecting financing activities arise solely from the recognition of the lease liability: Lease liability as at 1 October 2021 Cash-flow: Repayment of lease Non-cash: Interest charge Lease liability as at 1 October 2022 Lease liability as at 1 October 2022 Cash-flow: Repayment of lease Non-cash: Interest charge Lease liability as at 30 September 2023 18. Leases All lease liabilities are presented in the statement of financial position as follows: Current Non-current £000 597 (114) 33 516 516 (158) 29 387 2022 £000 122 394 516 2023 £000 112 275 387 The Group uses leases throughout the business for office space and IT equipment. With the exception of short-term leases and leases of low value, each lease is reflected on the balance sheet as a right-of-use asset in property, plant and equipment and a lease liability. Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. For leases over office buildings, the Group must keep those properties in a good state of repair. The Group has identified one lease relating to the office building that meets the definition of a right-of-use asset. There is no option to purchase and payments are not linked to an index. The remaining lease term is 36 months (2022: 48 months). The lease has the ability to be extended at the end of this term and can be terminated on the break date being after 3.5 years from the date the lease was renegotiated. The Group has elected to not recognise a lease liability for short-term leases, being 12 months or less, or for leases of low value. Payments for these are expensed on a straight-line basis. Right-of-use asset and lease liability Additional information on the right-of-use asset is as follows: Office building Asset Depreciation £000 398 £000 (102) Carrying amount £000 296 79 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 18. Leases continued The various elements recognised in the financial statements are as follows: Statement of Comprehensive Income Depreciation charge in the year Interest expense on lease liability Low value leases expensed in the year Statement of Cash Flows Capital repayments on lease agreements 2023 £000 102 29 1 2022 £000 102 33 1 158 114 The undiscounted maturity analysis of lease liabilities for the office building is as follows: Within 1 year 1 - 2 years 2 - 3 years 3 - 4 years Total 30 September 2023 Lease payments Finance charges Net present values 30 September 2022 Lease payments Finance charges Net present values 132 (20) 112 151 (29) 122 166 (14) 152 132 (20) 112 127 (4) 123 166 (14) 152 - - - 134 (4) 130 425 (38) 387 583 (67) 516 At 30 September 2023, the Group’s commitment to short-term and low-value leases was £nil (2022: £nil). 19. Deferred tax Deferred tax asset (unrecognised) Tax effect of temporary differences: Tax allowances in excess of depreciation Accumulated losses Losses on financial instruments debited to equity Accelerated commission charge Deductible temporary differences Deferred tax asset (unrecognised) Group 2023 £000 1,581 (17,618) 5 14 (13) (16,031) 2022 £000 1,316 (17,310) 28 - (14) (15,980) Company 2023 £000 (1) (3,331) - - - (3,332) 2022 £000 (1) (3,217) - - (5) (3,223) The unrecognised deferred tax asset predominantly arises due to unused tax losses carried forward that have originated but not reversed at the Consolidated Statement of Financial Position date and from transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future. The unrecognised deferred tax asset is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which temporary differences will reverse. Based on tax rates and laws enacted or substantively enacted at the latest balance sheet date, the rate when the above temporary differences are expected to reverse is currently 25% (2022: 25%). 80 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 20. Issued capital and reserves Ordinary shares and share premium The Company has one class of ordinary shares. The share capital issued has a nominal value of £0.01 and each share carries the right to one vote at shareholders’ meetings and all shares are eligible to receive dividends. Share premium is recognised when the amount paid for a share is in excess of the nominal value. The Group and Company’s opening and closing share capital and share premium reserves are: Authorised, issued and fully paid At 30 September 2022 Share issue in the year At 30 September 2023 Exercise of share options Group and Company Ordinary shares Share capital Share premium Number £000 £000 48,151,373 200,000 48,351,373 482 2 484 84,802 - 84,802 During the year, the following share options were exercised: Date of exercise 16/12/2022 Key management personnel shares Other employee shares Total shares 200,000 200,000 - - 200,000 200,000 Exercise price Pence 1.0 Value £000 2 2 Other reserves Accumulated losses This reserve relates to the cumulative results made by the Group and Company in the current and prior periods. Merger relief reserve In accordance with Section 612 ‘Merger Relief’ of the Companies Act 2006, the Company issuing shares as consideration for a business combination, accounted at fair value, is obliged, once the necessary conditions are satisfied, to record the share premium to the merger relief reserve. Reverse acquisition reserve Reverse accounting under IFRS 3 ‘Business Combinations’ requires that the difference between the equity of the legal parent and the issued equity instruments of the legal subsidiary, pre-combination, is recognised as a separate component of equity. Capital redemption reserve This reserve holds shares that were repurchased and cancelled by the Company. Foreign exchange translation reserve This reserve represents the impact of retranslation of overseas subsidiaries on consolidation. Cash flow hedge reserve This reserve represents the movement in designated hedging instruments in the year that have not yet crystallised. 81 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 21. Share-based payments Certain Directors and employees of the Group hold options to subscribe for shares in the Company under share option schemes. All share options relate to a single scheme outlined in the EMI Share Option Plan 2014. The scheme is open, by invitation, to both Executive Directors and employees. Participants are granted share options in the Company which contain vesting conditions. These are subject to the achievement of individual employee and Group performance criteria as determined by the Board. The vesting period varies by award and the conditions approved by the Board. Options are usually forfeited if the employee leaves the Group before the options vest. Total share options outstanding have a range of exercise prices from £0.01 to £0.70 per option and the weighted average contractual life is 6.7 years (2022: 7.2 years). The total charge for each period relating to employee share- based payment plans for continuing operations is disclosed in note 10 of the consolidated financial statements. Details of the share options under the scheme outstanding during the period are as follows: Outstanding at start of the period Granted Exercised Lapsed Outstanding at end of the period Exercisable at end of the period 22. Financial risk management 2023 2022 Number 4,490,931 - (200,000) (761,250) 3,529,681 1,949,680 Weighted average exercise price £0.18 - £0.01 £0.29 £0.15 £0.08 Number 3,815,931 900,000 - (225,000) 4,490,931 1,719,680 Weighted average exercise price £0.18 £0.20 - £0.35 £0.18 £0.07 In common with all other areas of the business, the Group is exposed to risks that arise from the use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. The main risks arising from the Group’s financial instruments are liquidity, interest rate, foreign currency and credit risk. The Group’s financial instruments comprise cash and various items such as trade receivables and trade payables, which arise directly from its operations. Categories of financial instruments Financial assets held at amortised cost Trade and other receivables excluding prepayments Cash and cash equivalents Financial liabilities held at amortised cost Trade and other payables excluding statutory liabilities Lease liabilities Financial liabilities held at fair value Forward contracts held at fair value (Level 2) 82 2023 £000 1,795 4,031 5,826 1,144 387 1,531 27 27 2022 £000 2,943 5,769 8,712 1,535 516 2,051 111 111 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 22. Financial risk management continued Fair value of financial assets and liabilities There is no material difference between the fair values and the carrying values of the financial instruments held at amortised cost because of the short maturity period of these financial instruments or their intrinsic size and risk. Liquidity risk management Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due through having insufficient resources. The Group monitors its levels of working capital to ensure that it can meet its liabilities as they fall due. Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate framework for the management of the Group’s short-, medium- and long-term funding and liquidity requirements. The principal current asset of the business is cash and cash equivalents and is therefore the principal financial instrument employed by the Group to meet its liquidity requirements. The Board ensures that the business maintains surplus cash reserves to minimise any liquidity risk. The financial liabilities of the Group and Company are all mostly due within 3 months (2022: 3 months) of the Consolidated Statement of Financial Position date, with the exception of the lease liability. Further analysis of the lease liability is provided in note 18. All other non-current liabilities are due between 1 to 3 years after the period end. The Group does not have any borrowings or payables on demand which would increase the risk of the Group not holding sufficient reserves for repayment. Market risk Interest rate risk management Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Group operates an interest rate policy designed to minimise interest costs and reduce volatility in reported earnings. The Group holds all cash and cash equivalents with institutions with a recognised high credit rating. Interest rates on current accounts are floating. Changes in interest rates may increase or decrease the Group’s finance income. The Group does not have any committed interest-bearing borrowing facilities and consequently there is no material exposure to interest rate risk in respect of financial liabilities. Foreign currency risk management Foreign currency risk is the risk that the fair value of future cash flows of a foreign currency exposure will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates to the Group’s overseas operating activities, primarily denominated in US Dollars, Euros and Swiss Francs. There is also an investment by the Company in a foreign subsidiary. The Group’s exposure to foreign currency changes for all other currencies is not material. The Group seeks to minimise the exposure to foreign currency risk by matching local currency income with local currency costs where possible. The Group utilises US Dollar forward contracts to mitigate the risk of US Dollar fluctuations on client contracts. It agrees forward contracts based on forecasts of its US Dollar inflows and applies hedge accounting to minimise currency risk. The Group enters into forward contracts to sell US Dollars at quarterly intervals and applies hedge accounting to these contracts. Under hedge accounting, unrealised gains or losses are recognised in other comprehensive income and the cash flow hedge reserve, with the ineffective portion being recognised in the profit and loss as soon as they occur. The gains or losses arising on these are allocated to revenue on settlement. The item hedged was a portion of highly probable forecast US Dollar inflows. The hedged item is the receipt of US Dollars, and the hedging instrument is the sale of a portion of these. The Group has determined that a 1:1 ratio exists between the instrument and items as the underlying risks of both are the same – the exchange rate of USD:GBP. The Group uses the dollar offset method to monitor effectiveness, which compares the change in fair value of the underlying derivative and the change in fair value of future cash flows. Ineffectiveness can arise due to the counterparties credit risk and inaccurate forecasting, which 83 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 22. Financial risk management continued could leave the Group over hedged. In the year some ineffectiveness arose where the Group’s actual inflows were below that of the hedging instrument. This ineffective portion was recognised in general and administrative expenses. At year end the Group had contracts to sell $750,000, these hedges are designated as effective under IFRS 9 and hence the fair value of these is recognised in other comprehensive income. These balances are removed from the Group’s US Dollar exposure as there is deemed to be no foreign exchange exposure. At 30 September 2023, $750,000 is hedged to period of March 2024, at an average rate of 1.2785. The contracts are valued based on observable market exchange rates. The hedging transactions in the year had the following effect on the Group’s results: Statement of Comprehensive Income Revenue Gross profit General and administrative expenses Profit for the year Total other comprehensive expense Total comprehensive income attributable to equity holders for the period Statement of financial position Derivative financial liabilities Cash flow hedge reserve Accumulated losses Statement of Comprehensive Income Revenue Gross profit General and administrative expenses Profit for the year Total other comprehensive expense Total comprehensive income attributable to equity holders for the period Statement of financial position Derivative financial liabilities Cash flow hedge reserve Accumulated losses Without hedge accounting £000 Hedging movements £000 6,638 3,243 (2,743) (1,094) (21) (1,115) 27 - (7,387) 27 27 (111) (84) 84 - - (27) 27 Without hedge accounting £000 Hedging movements £000 8,746 5,346 (2,795) 921 14 935 111 - (6,345) (103) (103) 214 111 (111) - - (111) 111 2023 £000 6,665 3,270 (2,854) (1,178) 63 (1,115) 27 (27) (7,360) 2022 £000 8,643 5,243 (2,581) 1,032 (97) 935 111 (111) (6,234) The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities as at 30 September are as follows: US Dollar exposure Balance at end of period Monetary assets Monetary liabilities Total exposure 84 2023 USD’000 2022 USD’000 14 (27) (13) 704 (135) 569 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 22. Financial risk management continued Euro exposure Balance at end of period Monetary assets Monetary liabilities Total exposure Swiss Franc exposure Balance at end of period Monetary assets Monetary liabilities Total exposure 2023 EUR’000 2022 EUR’000 156 (13) 143 480 (15) 465 2023 CHF’000 2022 CHF’000 33 - 33 113 - 113 The Company had no foreign currency exposure at the year end (2022: nil). Foreign currency sensitivity analysis As at 30 September 2023, the sensitivity analysis assumes a +/-10% change of the USD/GBP, EUR/GBP and CHF/GBP exchange rates, which represents management’s assessment of a reasonably possible change in foreign exchange rates (2022: 10%). The sensitivity analysis was applied on the fair value of financial assets and liabilities. US Dollar Euro Swiss Franc 2023 2022 10% weaker1 10% stronger 10% weaker 10% stronger 1 (12) (3) (14) (1) 12 3 14 £000 (51) (41) (10) (102) £000 51 41 10 102 1 10% weaker relates to the Great British Pound strengthening against the currency and therefore the Group would be in a weaker monetary position. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group’s financial assets are cash and cash equivalents and trade and other receivables. The carrying value of these assets represents the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the Consolidated Statement of Financial Position are net of allowances for any expected credit losses, estimated by the Group’s management based on prior experience and their assessment of the current economic environment, and any specific criteria identified in respect of individual trade receivables. An allowance for expected credit losses is made where there is an identified loss event, which, based on previous experience, is evidence of a reduction in the recoverability of future cash flows. There are no outstanding expected credit losses identified at 30 September 2023 (2022: nil). Prior to entering into an agreement to provide services, the Group makes appropriate enquiries of the counterparty and independent third parties to determine creditworthiness. The Group has not identified any significant credit risk exposure to any single counterparty or Group of counterparties as at the period end. 85 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 22. Financial risk management continued The Group and Company continually reviews client credit limits based on market conditions and historical experience. Any provision for impairment, as well as the ageing analysis of overdue trade receivables, is set out in note 16. The Group and Company’s policy is to minimise the risks associated with cash and cash equivalents by placing these deposits with institutions with a recognised high credit rating. Capital risk management The Group considers capital to be shareholders’ equity as shown in the Consolidated Statement of Financial Position, as the Group is primarily funded by equity finance and is not yet in a position to pay a dividend. The Group had no borrowings at 30 September 2023 (2022: £nil). The objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and for other stakeholders. In order to maintain or adjust the capital structure the Group may return capital to shareholders or issue new shares. 23. Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Remuneration and transactions of Directors and key management personnel Key management remuneration: Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments Total remuneration 2023 £000 1,113 29 (44) 19 1,117 2022 £000 1,269 33 (115) 77 1,264 Key management includes Executive Directors, Non-Executive Directors and senior management who have the responsibility for managing, directly or indirectly, the activities of the Group. The aggregate Directors’ remuneration, including employers’ National Insurance and share-based payments’ expense, was £687,000 (2022: £658,000) and aggregate pension of £16,000 (2022: £15,000). Further detail of Directors’ remuneration is disclosed in the Directors’ Remuneration Report on page 39 and 40. Transactions with group companies The Company is responsible for financing and setting Group strategy. The Company’s subsidiaries carry out the Group’s research and development strategy, employ all employees, including the Executive Directors, and manage the Group’s intellectual property. As a result, a management charge is made between the subsidiaries and the Company for the services provided by the subsidiaries on behalf of the Company. Similarly, as share options are issued in the Company for employees of the subsidiaries, a charge is made between the Company and its subsidiaries. 86 IXICO plc Financial Statements for the year ended 30 September 2023 Notes to the financial statements 23. Related party transactions continued Intercompany balances are unsecured and are interest bearing at 6%, with no fixed date of repayment but are repayable on demand. The intercompany balance also includes specific funding provided by the Company, which attracts a 0% interest rate. Outstanding balances related to subsidiary undertakings are disclosed in note 17. During the year, the following transactions occurred with related parties: Charges from subsidiaries: Management recharge from subsidiaries Net interest charged Charges to subsidiaries: Share option charge 2023 £000 530 (100) 2022 £000 416 (68) 52 57 87 

Continue reading text version or see original annual report in PDF format above