Financial Instruments

6 Months Ended

Jun. 30, 2022

11. Financial instruments

11.1 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, 2022 and December 31, 2021:

	At June 30 2022 £’000		At December 31 2021 £’000
Financial assets at amortized cost
Trade receivables		19,467		14,796
Contract assets		1,385		3,451
Lease deposits		8,545		5,124
		29,397		23,371

Current		20,852		18,247
Non-current		8,545		5,124

11.2 Financial liabilities

Set out below is an overview of financial liabilities held by the Group as at June 30, 2022 and December 31, 2021:

Financial liabilities: Interest-bearing loans and borrowings

	Interest rate		At June 30 2022		At December 31 2021
	%	Maturity	£’000		£’000
Current
Lease liabilities	1 – 11%	Within one year		22,437		18,826
Convertible notes	2.00%	Within one year		1,299		—
Bank loans	2.00%	Within one year		165		635
Stocking loans	Base rate + 0.5% – 13.9%	On earlier of sale or 180 – 330 days / Within one year		196,101		169,170
Subscription facilities	Base rate +1.7% – 3.7% 3.15% – 6.0%	Within one year		25,479		10,188
Mortgages				—		547
				245,481		199,366

Non-current
Lease liabilities	1 – 11%	2023 – 2042		98,522		71,574
Convertible notes	2.00%	2027		358,361		—
Bank loans				—		815
Stocking loans	Base rate + 3.0% – 13.9%	2024		13,319		8,809
Subscription facilities	Base rate + 1.7% – 3.7% 3.15% – 12.0%	2023 – 2026		49,495		56,987
Mortgages				—		1,502
				519,697		139,687

Other financial liabilities

	At June 30 2022		At December 31 2021
	£’000		£’000
Financial liabilities at fair value through profit or loss
Warrants		5,675		42,692
Embedded derivative		112,562		—
		118,237		42,692

Current		—		—
Non-current		118,237		42,692

11.3 Fair value

Management assessed that the fair value of trade receivables, other receivables, stocking loans, subscription facilities 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 and trade and other payables has been measured using Level 3 valuation inputs.

Public warrants are classified as Level 1 due to the use of an observable market quote in an active market. Private warrants are classified as Level 3 due to the use of unobservable inputs. The fair value is determined using a Black-Scholes model for the private warrants.

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, 2022:

	Level 1		Level 2		Level 3		Total
At June 30, 2022	£’000		£’000		£’000		£’000
Warrants		1,493		—		4,182		5,675
Embedded derivative		—		—		112,562		112,562
		1,493		—		116,744		118,237

The following information is relevant in the determination of fair value of the private warrants and the embedded derivative at June 30, 2022:

	Private warrants			Embedded derivative

Expected term (years)		7			5
Expected volatility		89.7	%		58.3	%
Dividend yield		Nil			Nil
Risk free interest rate		3.0	%		3.0	%

Reconciliation of fair values

The fair value movements are set out as follows:

	Public warrants			Private warrants			Embedded derivative			Total
	£’000			£’000			£’000			£’000
At January 1, 2022		13,418			29,274			—			42,692

Issuances		—			—			251,288			251,288
Fair value movement		(13,441	)		(28,399	)		(168,085	)		(209,925	)
Foreign exchange movements		1,516			3,307			29,359			34,182
At June 30, 2022		1,493			4,182			112,562			118,237

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 private warrants, a 100 basis point increase in the expected volatility rate would increase the fair value by £0.1 million.

For the embedded derivative, a 100 basis point increase in the expected volatility rate would increase the fair value by £0.4 million.