The Group’s financial instruments comprise primarily cash and other financial assets and various items such as receivables and trade payables which arise directly from its operations. The main purpose of these financial instruments is to provide working capital for the Group’s operations. The Group assesses counterparty risk on a regular basis. Board approval is required for adoption of any new financial instrument or counterparty. The primary focus of the treasury function is preservation of capital.

The Directors consider that the carrying amount of these financial instruments approximates to their fair value.

The categories of financial assets included in the balance sheet and the heading in which they are included are as follows. The measurement of financial assets is at amortised cost unless otherwise stated:

	December 31,
	2021		2020
	£000s		£000s
Trade receivables		331		29,306
Cash and cash equivalents		73,537		27,449
Term deposits		-		10,000
Derivative financial instruments held at fair value		-		1,492
Non-current financial assets at amortized cost		301		303
		74,169		68,550

	December 31,
	2021		2020
	£000s		£000s
Trade and other payables		10,464		7,085
Lease liability		137		341
		10,601		7,426

The maximum exposure to credit risk at the reporting date by class of financial asset was:

	December 31,
	2021		2020
	£000s		£000s
Trade receivables		331		29,306
Financial assets at amortized cost – non-current		301		303
		632		29,609

Cash and cash equivalents and term deposits are not considered to be exposed to credit risk due to the fact they are held in a financial institution with an “A” rating. The Group considers the possibility of significant loss in the event of non-performance by a financial counterparty to be unlikely.

The Group continually monitors the creditworthiness its customers and at the reporting date, no financial assets are credit impaired.

The Group considers its capital to be equal to the sum of its total equity. The Group monitors its capital using a number of measures including cash flow projections, working capital ratios, the cost to achieve pre-clinical and clinical milestones and potential revenue from existing partnerships and ongoing licensing activities. The Group’s objective when managing its capital is to ensure it obtains sufficient funding for continuing as a going concern. The Group funds its capital requirements through the issue of new shares to investors, milestone and research support payments received from existing licensing partners and potential new licensees.

The nature of the Group’s activities and the basis of funding are such that the Group has significant liquid resources. The Group uses these resources to meet the cost of future research and development activities. Consequently, it seeks to minimize risk in the holding of its bank deposits while maintaining a reasonable rate of interest. The Group is not financially dependent on the income earned on these resources and therefore the risk of interest rate fluctuations is not significant to the business. Nonetheless, the Directors take steps to secure rates of interest which generate a return for the Group.

Credit risk is managed on a Group basis. Funds are deposited with financial institutions with a credit rating equivalent to, or above, the main U.K. clearing banks. The Group’s liquid resources are invested having regard to the timing of payments to be made in the ordinary course of the Group’s activities. All financial liabilities are payable in the short term (between zero and three months) and the Group maintains adequate bank balances in either instant access or short-term deposits to meet those liabilities as they fall due.

The Group only enters into collaboration agreements with large, reputable companies and the creditworthiness of customers is monitored on an ongoing basis.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. Expected loss rates are based on payment profiles of past receivables and the aging profiles of outstanding balances at the reporting period end date. At the year-end there were no debts that were past due. It was therefore concluded on this basis that there were no expected credit losses for the trade receivable.

Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery includes, but is not limited to, a failure to engage in a repayment plan with the Group.

The Group operates in a global market with revenue possibly arising in a number of different currencies, principally in US dollars, sterling or euros. The majority of the operating costs are incurred in euros with the rest predominantly in sterling. Additionally, to a lesser extent, a number of operating costs are incurred in US dollars. The Group makes use of forward contracts to reduce its exposure to foreign currency risk where the existence, timing and quantum of future cash inflows can be accurately predicted.

Financial assets and liabilities denominated in euros and translated into sterling at the closing rate were:

	December 31,
	2021			2020
	£000s			£000s
Financial assets		1,918			467
Financial liabilities		(3,278	)		(1,190	)
Net financial liabilities		(1,360	)		(723	)

Financial assets and liabilities denominated in US dollars and translated into sterling at the closing rate were:

	December 31,
	2021			2020
	£000s			£000s
Financial assets		11,248			29,427
Financial liabilities		(876	)		(2,123	)
Net financial assets		10,372			27,304

The following table illustrates the sensitivity of the net result for the year and the reported financial assets of the Group in regard to the exchange rate for sterling against the euro.

During the year sterling rose by 4% (2020: 6%) against the euro. The table shows the impact of an additional weakening or strengthening of sterling against the euro by 20%.

				If sterling			If sterling
	As reported			rose 20%			fell 20%
	£000s			£000s			£000s
2021
Group result for the year		(39,410	)		(35,618	)		(45,099	)
Euro denominated net financial liabilities		(1,360	)		(1,133	)		(1,700	)
Total equity at December 31, 2021		8,526			8,753			8,186

2020
Group result for the year		(32,547	)		(29,056	)		(37,784	)
Euro denominated net financial liabilities		(723	)		(603	)		(904	)
Total equity at December 31, 2020		9,059			9,180			8,878

2019
Group result for the year		(19,582	)		(18,645	)		(21,257	)
Euro denominated net financial liabilities		(640	)		(533	)		(800	)
Total equity at December 31, 2019		20,909			18,879			23,995

The following table illustrates the sensitivity of the net result for the year and the reported financial assets of the Group in regards to the exchange rate for sterling against the US dollar.

During the year sterling rose by 7% (2020: 4%) against the US dollar. The table shows the impact of an additional weakening or strengthening of sterling against the US dollar by 20%.

				If sterling			If sterling
	As reported			rose 20%			fell 20%
	£000s			£000s			£000s
2021
Group result for the year		(39,410	)		(37,225	)		(42,688	)
U.S. dollar denominated net financial assets		10,372			8,643			12,965
Total equity at December 31, 2021		8,526			6,797			11,119

2020
Group result for the year		(32,547	)		(31,283	)		(34,442	)
U.S. dollar denominated net financial assets		27,304			22,753			34,130
Total equity at December 31, 2020		9,059			4,508			15,885

2019
Group result for the year		(19,582	)		(19,337	)		(19,950	)
U.S. dollar denominated net financial assets		1,597			1,330			1,996
Total equity at December 31, 2019		20,909			20,643			21,308