Financial Instruments

6 Months Ended

Jun. 30, 2023

Financial Instruments [Abstract]

Financial instruments

12. Financial instruments  

12.1 Financial assets

Set out below is an overview of financial assets, other than cash and short-term deposits, held by the Group as at June 30, 2023 and December 31, 2022:

	At June 30 2023 £’000		At December 31 2022 £’000
Financial assets at amortized cost
Trade receivables		18,888		24,475
Contract assets		263		248
Lease deposits		4,356		5,664
		23,507		30,387
Current		19,151		24,723
Non-current		4,356		5,664

12.2 Financial liabilities

Set out below is an overview of financial liabilities held by the Group as at June 30, 2023 and December 31, 2022:

Financial liabilities: Interest-bearing loans and borrowings

			At June 30 2023		At December 31 2022
	Interest rate %	Maturity	£’000		£’000
Current
Convertible Notes	2%	Within one year		1,248		1,301
Stocking loans	Base rate + 0.5% – 2%	On earlier of sale or 180 days		82,350		161,592
Subscription facilities	Base rate + 1.7%	Within one year		763		14,983
Secured asset financing	3% – 12%	Within one year		1,024		1,479
Bank loans		Within one year		—		30
Lease liabilities	1% – 13%	Within one year		17,972		28,596
				103,357		207,981
Non-current
Convertible Notes	2%	2027		275,169		265,631
Secured asset financing	3% – 12%	2026 – 2027		2,338		4,113
Lease liabilities	1% – 13%	2024 – 2042		76,056		88,864
				353,563		358,608

Other financial liabilities

	At June 30 2023		At December 31 2022
	£’000		£’000
Financial liabilities at fair value through profit or loss
Warrants		16		515
Embedded derivative		78,978		82,108
		78,994		82,623
Current		—		—
Non-current		78,994		82,623

12.3 Fair value

Management assessed that the fair value of trade receivables, other receivables, stocking loans, subscription facilities, secured asset financing and trade and other payables approximate their carrying value due to the short-term maturities of these instruments.

The fair value of trade receivables, other receivables, stocking loans, subscription facilities, secured asset financing and trade and other payables has been measured using Level 3 valuation inputs.

Warrants are classified as Level 3 due to the use of unobservable inputs. The fair value is determined using a Black-Scholes model.

The public warrants are classified as Level 3 due to the use of unobservable inputs. The fair value is determined using a Binomial Lattice model. The public warrants were previously classified as Level 1 as at December 31, 2022 with a fair value of £0.2 million. However, they were transferred into Level 3 during the six months ended June 30, 2023 following the suspension in trading of the public warrants by the NYSE on January 3, 2023.

The embedded derivative of the Convertible Notes is classified as Level 3 due to the use of unobservable inputs. The fair value is determined using a Monte-Carlo simulation to model the conversion, redemption and repayment premium features.

The following table provides the fair value measurement hierarchy of the Group’s financial assets and financial liabilities as at June 30, 2023:

	Level 1		Level 2		Level 3		Total
At June 30, 2023	£’000		£’000		£’000		£’000
Warrants		—		—		16		16
Embedded derivative		—		—		78,978		78,978
		—		—		78,994		78,994

The following information is relevant in the determination of fair value of the warrants and the embedded derivative at June 30, 2023:

	Warrants			Embedded derivative
Expected term (years)		7			4
Expected volatility		81.1	%		79.6	%
Dividend yield		Nil			Nil
Risk free interest rate		4.08	%		4.38	%

Reconciliation of fair values

The fair value movements are set out as follows:

	Warrants			Embedded derivative			Total
	£’000			£’000			£’000
At January 1, 2023		515			82,108			82,623
Fair value movement		(478	)		226			(252	)
Foreign exchange movements		(21	)		(3,356	)		(3,377	)
At June 30, 2023		16			78,978			78,994

The fair value decrease and foreign exchange movements is recognized in the statement of profit or loss within other income and expenses.

Sensitivity analysis

For the warrants, a 100 basis point increase in the expected volatility rate would increase the fair value by £0.0 million.

For the embedded derivative, a 100 basis point increase in the credit spread would decrease the fair value by £76.6 million.