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CER - Cerillion News Story

415p 1.0  0.2%

Last Trade - 05/03/21

Small Cap
Market Cap £121.7m
Enterprise Value £119.5m
Revenue £20.8m
Position in Universe 958th / 1807

Cerillion PLC - Final Results - Part 3

Mon 28th November, 2016 7:00am
- Part 3: For the preceding part double click  ID:nRSb2323Qb 

Weighted average number of Ordinary Shares in issue (number)       23,425,877                   11,872,791                                     
 Basic and diluted earnings/(loss) per share (pence per share)      1.3                          (4.9)                                          
There were no potentially dilutive equity instruments in issue during the
12     Intangible assets 
 Group                                   Goodwill     Purchased customer contracts    Intellectual property rights    Software development costs    Total      
                                         £            £                               £                               £                             £          
 At incorporation                        -            -                               -                               -                             -          
 Additions                               -            -                               -                               -                             -          
 At 30 September 2015                    -            -                               -                               -                             -          
 Acquired                                80,000       4,382,654                       2,567,160                       -                             7,029,814  
 Arising on acquisition                  1,973,141    -                               -                               -                             1,973,141  
 Additions                               -            -                               -                               601,111                       601,111    
 At 30 September 2016                    2,053,141    4,382,654                       2,567,160                       601,111                       9,604,066  
 At incorporation                        -            -                               -                               -                             -          
 Provided in the year                    -            -                               -                               -                             -          
 At 30 September 2015                    -            -                               -                               -                             -          
 Provided in the year                    -            313,047                         183,369                         75,139                        571,555    
 At 30 September 2016                    -            313,047                         183,369                         75,139                        571,555    
 Net book amount at 30 September 2016    2,053,141    4,069,607                       2,383,791                       525,972                       9,032,511  
 Net book amount at                      -            -                               -                               -                             -          
 30 September 2015                                                                                                                                             
Amortisation has been included in administrative expenses in the statement of
comprehensive income. 
The carrying value of goodwill included within the Cerillion plc balance sheet
is £2,053,141, which is allocated to the cash-generating unit ("CGU") of
Cerillion Technologies Limited Group. The CGU's recoverable amount has been
determined based on its fair value less costs to sell. As Cerillion plc was
established to purchase the CTL Group the fair value less costs to sell has
been calculated based on the market capitalisation of Cerillion plc less the
estimated costs to sell the CTL Group. 
Using an average market share price of Cerillion plc for the period from
Listing to 30 September 2016, less an estimate of costs to sell, there is
significant headroom above the carrying value of the cash-generating unit and
therefore no impairment exists. 
The calculations show that a reasonably possible change, as assessed by the
directors, would not cause the carrying amount of the CGU to exceed its
recoverable amount. 
13     Property plant and equipment 
 Group                                    Leasehold  improvements    Computer  equipment    Furniture  and fittings    Total        
                                          £                          £                      £                          £            
 At incorporation                         -                          -                      -                          -            
 Additions                                -                          -                      -                          -            
 Exchange difference                      -                          -                      -                          -            
 At 30 September 2015                     -                          -                      -                          -            
 Acquisition                              588,807                    3,221,908              759,094                    4,569,809    
 Additions                                -                          126,448                10,545                     136,993      
 Exchange difference                      16,406                     12,910                 9,524                      38,840       
 At 30 September 2016                     605,213                    3,361,266              779,163                    4,745,642    
 At incorporation                         -                          -                      -                          -            
 Provided in the year                     -                          -                      -                          -            
 Exchange difference                      -                          -                      -                          -            
 At 30 September 2015                     -                          -                      -                          -            
 Acquisition                              573,895                    2,848,847              746,268                    4,169,010    
 Provided in the year                     8,916                      125,472                8,307                      142,695      
 Exchange difference                      11,582                     5,064                  5,786                      22,432       
 At 30 September 2016                     594,393                    2,979,383              760,361                    4,334,137    
 Net book amount at 30 September 2016     10,820                     381,883                18,802                     411,505      
 Net book amount at  30 September 2015    -                          -                      -                          -            
All depreciation charges are included within admin expenses and no impairment
has been charged. 
As referred to in note 19 the Group's loan is secured over all the assets of
the Group (2015: £nil). 
There were no property, plant and equipment assets owned by the parent
14     Investments in subsidiaries 
The group 
At 30 September 2016 the company's subsidiary undertakings, all of which have
been included in the group financial statements, were: 
 Name                                            Country ofincorporation  Percentage of shares held  Year end      Nature of Business  
 Cerillion Technologies Limited*                 UK                       100%                       30 September  Software services   
 Cerillion Inc                                   USA                      100%                       30 September  Software services   
 Cerillion Technologies (India) Private Limited  India                    **100%                     31 March***   Software services   
* Cerillion Technologies Limited is the only subsidiary owned directly by
Cerillion plc. Cerillion Technology Limited is the parent for the other two
** includes holdings held indirectly through Cerillion Inc 
*** For the purpose of the group financial statements for the year ended 30
September 2016, management accounts have been drawn up to 30 September 2016. 
 The company                 Investments in subsidiary undertakings  
 Cost and net book value:                                            
 As at incorporation         -                                       
 Additions                   -                                       
 As at 30 September 2015     -                                       
 Additions                   14,651,571                              
 As at 30 September 2016     14,651,571                              
15     Deferred tax 
Deferred tax asset 
 Group                                                    Accelerated capital allowances  Other temporary differences  Total     
                                                          £                               £                            £         
 1 October 2015                                           -                               -                            -         
 Deferred tax asset acquired                              169,888                         184,166                      354,054   
 Foreign exchange movement on opening deferred tax asset  -                               12,584                       12,584    
 (Charged)/credited to profit or loss                     (56,242)                        10,150                       (46,092)  
 30 September 2016                                        113,646                         206,900                      320,546   
Deferred tax liability 
The deferred tax liability arose in respect of the fair value uplift of
intangible assets, with £1,320,465 arising on the acquisition of Cerillion
Technologies Limited in March 2016 and £70,660 relating to the acquisition of
"Net Solutions Services" by Cerillion Technologies Limited in 2015. 
                                                                        Fair value uplift on acquisitions  
 At 1 October 2015                                                      -                                  
 Deferred tax liability acquired                                        70,660                             
 Deferred tax arising on acquisition of Cerillion Technologies Limited  1,320,465                          
 (Credited)/charged to profit or loss                                   (110,320)                          
 As at 30 September 2016                                                1,280,805                          
There are no deferred tax assets or deferred tax liabilities recognised within
the Parent Company as at 30 September 2016 (2015: £nil). 
16     Trade and other receivables 
                                     The group  The company  
                                     2016       2015         2016    2015    
                                     £          £            £       £       
 Trade receivables                   2,894,015  -            -       -       
 Accrued income                      5,565,952  -            -       -       
 Unpaid share capital (note 24)      -          44,523       -       44,523  
 Amounts owed by group undertakings  -          -            54,238  -       
 Other receivables                   464,500    -            -       -       
 Prepayments                         240,405    -            3,252   -       
                                     9,164,872  44,523       57,490  44,523  
For the period ended 30 September 2015, as shown in note 24, the unpaid share
capital is due from the Directors. The amount shown was expected to be repaid
within 12 months from 30 September 2015 and was repaid as part of the
Admission to AIM, as disclosed in note 22. 
Credit quality of receivables 
A detailed review of the credit quality of each client is completed before an
engagement commences and the concentration of credit risk is limited as
exposure is spread over a large number of clients. 
The credit risk relating to trade receivables is analysed as follows: 
                     2016         2015  
                     £            £     
 Trade receivables   3,598,795    -     
 Bad debt provision  (704,780)    -     
                     2,894,015    -     
The parent company had no trade receivables in either period. The bad debt
provision in the CTL Group on acquisition totalled £209,131, which has
increased by £495,649 during the period post acquisition to give a year end
provision of £704,780. 
The other classes of assets within trade and other receivables do not contain
impaired assets. 
The net carrying value is judged to be a reasonable approximation of fair
The following is an ageing analysis of those trade receivables that were not
past due and those that were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history of
                      2016         2015  
                      £            £     
 Not past due         983,403      -     
 Up to 3 months       973,520      -     
 3 to 6 months        291,492      -     
 Older than 6 months  645,600      -     
                      2,894,015    -     
Of the trade debt older than 6 months as at 30 September 2016, being £645,600,
cash of £514,267 has been received since the year end. 
The following is an ageing analysis of those trade receivables that were
individually considered to be impaired: 
                      2016       2015  
                      £          £     
 Not past due         108,206    -     
 Up to 3 months       322,086    -     
 3 to 6 months        133,913    -     
 Older than 6 months  140,575    -     
                      704,780    -     
17     Trade and other payables 
                                     The group  The company  
                                     2016       2015         2016       2015     
                                     £          £            £          £        
 Trade payables                      336,684    -            16,564     -        
 Taxation                            99,714     -            -          -        
 Other taxation and social security  255,876    -            41,312     -        
 Pension contributions               38,653     -            -          -        
 Other payables                      453,212    -            -          -        
 Derivative financial instrument     121,410    -            -          -        
 Accruals                            1,729,473  580,500      14,270     580,500  
 Deferred income                     1,972,192  -            -          -        
 Redeemable A Ordinary Shares        -          43,704       -          43,704   
 Loans (note 19)                     1,000,000  -            1,000,000  -        
                                     6,007,214  624,204      1,072,146  624,204  
The directors consider that the carrying amount of trade and other payables
approximates to their fair values. 
In respect of the period ended 30 September 2015: 
The accruals were for the non-contingent element of professional fees incurred
up to the balance sheet date in connection with the admission of the Company's
shares to trading on AIM and the acquisition of the issued share capital of
Cerillion Technologies Limited. 
The A Ordinary Shares have attached to them full voting, dividend and capital
distribution rights. The holders of a majority of A Ordinary Shares may redeem
all or any of the A Ordinary Shares at any time. Upon redemption the Company
shall pay each holder of A Ordinary Shares a price per share equal to the
amounts subscribed or deemed to be subscribed. These were redeemed as part of
the IPO. 
18     Non-current other payables 
                 The group  The company  
                 2016       2015         2016  2015  
                 £          £            £     £     
 Other payables  120,000    -            -     -     
                 120,000    -            -     -     
Other payables comprise the amount outstanding on the purchase of the "Net
Solutions Services" business by Cerillion Technologies Limited during its year
ended 30 September 2015. The total balance outstanding at 30 September 2016 is
£240,000 and is payable by two further equal instalments of £120,000 each on 2
March 2017 (shown in current liabilities) and 2018. The amount is unsecured
and interest free. The directors consider the fair value of deferred
consideration to be approximately equal to the carrying amount. 
19     Borrowings and financial liabilities 
                           The group  The company  
                           2016       2015         2016       2015  
                           £          £            £          £     
 Current liabilities:                                               
 Secured loans             1,000,000  -            1,000,000  -     
 Non-current liabilities:                                           
 Secured loans             3,572,602  -            3,572,602  -     
                           4,572,602  -            4,572,602  -     
19a Terms and repayment schedule 
The Facility Agreement between the Company and HSBC Bank plc made available a
loan of up to £5 million (the "Loan") for the purpose of assisting with the
payment of the cash element of the Acquisition. 
The Loan is secured over the assets of the Group and was drawn down in full in
March 2016. The terms and conditions of outstanding loans are as follows: 
(a) it bears interest at the rate of 2.5 per cent. per annum over the Bank of
England Base Rate as published from time to time; 
(b) is repayable by the Company by quarterly repayments in the amount of
£250,000 inclusive of interest, for the first three years of the term, and
thereafter in an amount of £300,000 inclusive of interest, in accordance with
an agreed repayment schedule; 
(c) is terminable on a change of control of the Company and repayable
following an event of default; and 
(d) is for a term of five years from the date of first drawdown. 
20     Financial instruments and risk management 
   Financial instruments by category           2016£         2015£   
   Financial assets - loans and receivables                          
   Trade and other receivables                 3,358,515     -       
   Accrued income                              5,565,952     -       
   Unpaid share capital                        -             44,523  
   Cash and cash equivalents                   5,006,185     14,841  
                                               13,930,652    59,364  
Prepayments are excluded, as this analysis is required only for financial
 Financial liabilities - held at amortised cost    2016£        2015£    
 Borrowings                                        3,572,602    -          
 Other payables                                    120,000      -          
                                                   3,692,602    -          
 Current borrowings                                1,000,000    -          
 Trade and other payables                          1,045,772    -          
 Pension costs                                     38,653       -          
 Accruals                                          1,729,473    580,500    
                                                   3,813,898    580,500    
Statutory liabilities and deferred income are excluded from the trade payables
balance, as this analysis is required only for financial instruments. 
 Financial liabilities - at fair value through profit and loss                  
 Derivative financial instruments                                 121,410    -    
                                                                  121,410    -    
There is no material difference between the book value and the fair value of
the financial assets and financial liabilities disclosed above. 
The Group's multinational operations expose it to financial risks that include
market risk, credit risk, foreign curreny risk and liquidity risk. The
Directors review and agree policies for managing each of these risks and they
are summarised below. These policies have remained unchanged from previous
years, with the exception of currency risk where forward currency contracts
have been entered into during the year. 
Credit quality of financial assets 
The credit quality of financial assets that are neither past due nor impaired
can be assessed by reference to external credit ratings (S&P) (if available)
or to historical information about counterparty default rates: 
                    2016         2015  
                    £            £     
 Trade receivables                     
 Group 1            131,788      -     
 Group 2            2,677,325    -     
 Group 3            84,902       -     
                    2,894,015    -     
Group 1 - new customers (less than 6 months). 
Group 2 - existing customers (more than 6 months) with no defaults in the
Group 3 - existing customers (more than 6 months) with some defaults in the
                                       2016         2015    
                                       £            £       
 Cash at bank and short-term deposits                       
 A1                                    5,003,700    14,841  
 Not rated                             2,485        -       
                                       5,006,185    14,841  
A1 rating means that the risk of default for the investors and the policy
holder is deemed to be very low. 
Not rated balances relate to petty cash amounts. 
Market risk - foreign exchange risk 
Exposures to currency exchange rates arise from the Group's overseas sales and
purchases, which are primarily denominated in US dollars (USD), Australian
dollars (AUD) and Euros (EUR). There is no foreign exchange exposure within
the parent company and there were no foreign currency balances in the period
ended 30 September 2015. 
To mitigate the Group's exposure to foreign currency risk, non-GBP cash flows
are monitored and forward exchange contracts are entered into in accordance
with the Group's risk management policies. Generally, the Group's risk
management procedures distinguish short-term foreign currency cash flows (due
within 6 months) from longer-term cash flows (due after 6 months). Where the
amounts to be paid and received in a specific currency are expected to largely
offset one another, no further hedging activity is undertaken. Forward
exchange contracts are mainly entered into for significant long-term foreign
currency exposures that are not expected to be offset by other same-currency
As at 30 September 2016 the group had forward foreign exchange contracts in
place to mitigate exchange rate exposure arising from forecast income in US
dollars, Australian Dollars and Euros. The contracts are considered by
management to be part of economic hedge arrangements but have not been
formally designated as hedging instruments, so are treated as held for trading
in accordance with IAS 39. The above contract is short term in nature and is
due to be settled within 12 months of the year end. 
Foreign currency denominated financial assets and liabilities which expose the
Group to currency risk are disclosed below. The amounts shown are those
reported to key management translated into GBP at the closing rate: 
                          AUD          USD            EUR          INR        
 30 September 2016                                                            
 Financial assets         162,863      4,462,267      1,424,000    366,804    
 Financial liabilities    (117,806)    (1,259,697)    (615,115)    (329,079)  
 Total exposure           45,507       3,202,570      808,885      37,725     
The following table illustrates the sensitivity of profit and equity in
regards to the Group's financial assets and financial liabilities and the US
dollar, Australian Dollar, Euro and Indian Rupee to GBP exchange rate 'all
other things being equal'. It assumes a +/- 10% change to each of the foreign
currency to GBP exchange rates. These percentages have been determined based
on the average market volatility in exchange rates in the previous 12 months.
The sensitivity analysis is based on the Group's foreign currency financial
instruments held at each reporting date and also takes into account forward
exchange contracts that offset effects from changes in currency exchange
If the GBP had strengthened against the foreign currencies by 10% then this
would have had the following impact: 
 30 September 2016    AUD        USD          EUR         INR      
 Loss for the year    (4,096)    (291,143)    (73,535)    (3,430)  
 Equity total         (4,096)    (291,143)    (73,535)    (3,430)  
If the GBP had weakened against the foreign currencies by 10% then this would
have had the following impact: 
 30 September 2016      AUD      USD        EUR       INR    
 Profit for the year    5,006    355,841    89,876    4,192  
 Equity total           5,006    355,841    89,876    4,192  
Exposures to foreign exchange rates vary during the year depending on the
volume of overseas transactions. Nonetheless, the analysis above is considered
to be representative of the Group's exposure to currency risk. 
Market Risk - cash flow interest rate risk 
Cerillion had outstanding borrowing within the group and company, as disclosed
in note 19. 
These were loans taken out with HSBC to facilitate the purchase of shares
prior to the Admission on AIM. 
The Group's policy is to minimise interest rate cash flow risk exposures on
long-term financing. Longer-term borrowings are therefore usually at fixed
rates. At 30 September 2016, the Group is exposed to changes in market
interest rates through bank borrowings at variable interest rates. Other
borrowings are at fixed interest rates. The exposure to interest rates for the
Group's cash at bank and short-term deposits is considered immaterial. 
The following table illustrates the sensitivity of profit and equity to a
reasonably possible change in interest rates of +/- 1%. These changes are
considered to be reasonably possible based on observation of current market
conditions. The calculations are based on a change in the average market
interest rate for each period, and the financial instruments held at each
reporting date that are sensitive to changes in interest rates. All other
variables are held constant. 
                      Profit for the year    Equity  
                      +1%                    -1%       +1%         -1%     
 30 September 2016    (30,564)               30,499    (30,564)    30,499  
 30 September 2015    -                      -         -           -       
Liquidity risk 
Cerillion actively maintains cash that is designed to ensure Cerillion has
sufficient available funds for operations and planned expansions. The table
below analyses Cerillion's financial liabilities into relevant maturity
groupings based on the remaining period at the balance sheet date to the
contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows. 
                             Less than 1 year    Between 1 and 2 years    Between 2 and 5 years    Over 5 years  
 30 September 2016                                                                                               
 Borrowings                  1,000,000           1,000,000                2,572,602                -             
 Trade and other payables    5,007,214           120,000                  -                        -             
 30 September 2015                                                                                               
 Trade and other payables    624,204             -                        -                        -             
Capital risk management 
The Group manages its capital to ensure it will be able to continue as a going
concern while maximising the return to shareholders through optimising the
debt and equity balance. 
The Group monitors cash balances and prepare regular forecasts, which are
reviewed by the board. Since the year end the Directors have proposed the
payment of a dividend. In order to maintain or adjust the capital structure,
the Group may, in the future, adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt. 
21     Fair value measurement of financial instruments 
Financial assets and financial liabilities measured at fair value are required
to be grouped into three Levels of a fair value hierarchy. The three Levels
are defined based on the observability of significant inputs to the
measurement, as follows: 
- Level 1: quoted prices (unadjusted) in active markets for identical assets
and liabilities; 
- Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and 
- Level 3: unobservable inputs for the asset or liability. 
The following table shows the Levels within the hierarchy of financial assets
and liabilities measured at fair value on a recurring basis at 30 September
2016, there were no financial asset or liabilities measured at fair value as
at 30 September 2015: 
 Classes of financial liabilities measured at fair value - carrying amounts  Level 1        Level 2        Level 3        Total      
 2016                                                                                 2016           2016           2016           
 £                                                                                    £              £              £              
 Derivative financial instruments                                            -              121,410        -              121,410    
There were no transfers between Level 1 and Level 2 in 2016 or 2015 and no
derivative financial instruments within the Parent Company. 
Measurement of fair value of financial instruments 
The Group's finance team performs valuations of financial items for financial
reporting purposes, with valuation techniques selected based on the
characteristics of each instrument, with the overall objective of maximising
the use of market-based information. The Group's foreign currency forward
contracts (Level 2) are not traded in active markets, so have been fair valued
using observable forward exchange rates corresponding to the maturity of the
contract. The effects of non-observable inputs are not significant for foreign
currency forward contracts. 
22     Share capital 
                                                                         2016       2015    
                                                                         £          £       
 Issued, allotted, called up and fully paid (2015: one quarter paid):                       
 29,513,486 (2015: 3,131,969) Ordinary shares of 0.5 pence               147,567    15,660  
 Nil (2015: 8,740,822 A Ordinary shares of 0.5 pence)                    -          43,704  
The Ordinary Shares have been classified as Equity. The Ordinary Shares have
attached to them full voting and capital distribution rights. 
The A Ordinary Shares in existence as at 30 September 2015 have been
classified as a liability as disclosed in note 17. 
The Company does not have an authorised share capital. 
On 30 September 2015 the issued share capital of the Company was £59,363.955
divided into 8,740,822 A ordinary shares of £0.005 each with an amount paid up
of £0.00125 per share and 3,131,969 ordinary shares of £0.005 each with an
amount paid up of £0.00125 per share. 
On 3 November 2015 the amounts outstanding were fully paid up by way of
irrevocable undertakings to pay from the shareholders. 
Pursuant to a resolution of the Directors on 9 November 2015 and a general
meeting of the Shareholders on 9 November 2015, the 8,740,822 A ordinary
shares of £0.005 each in the capital of the Company were redesignated as
8,740,822 Ordinary Shares. 
Pursuant to a resolution of the Directors and a general meeting of the Company
on 9 November 2015, and a subscription agreement on the same date,
Livingbridge VC LLP, on behalf of funds managed by it, subscribed for
5,263,158 Ordinary Shares for an aggregate subscription price of £4 million. 
By shareholder resolutions passed at the annual general meeting of the Company
held on 11 March 2016: 
(a) the directors were generally and unconditionally authorised in accordance
with section 551 of the Act to exercise all of the powers of the Company to
allot Ordinary Shares up to an aggregate nominal amount of £61,887.69 as
(i) 4,482,800 Ordinary Shares pursuant to the Acquisition; and 
(ii) 7,894,737 Ordinary Shares pursuant to the Placing. 
23     Retirement benefits 
The group operates a group personal contribution pension scheme for the
benefit of the employees. The pension cost charge for the year represents
contributions payable by the group to the fund and amounted to £170,521 (2015:
24     Related party transactions 
(i) Remuneration of Key Management Personnel 
The Group and Company consider that the Directors are their key management
personnel and further detail of their remuneration is disclosed in the
Remuneration report for 2016. 
No key personnel other than the directors have been identified in relation to
the period ended 30 September 2015 and no director remuneration took place
that period. 
(ii) Related party transactions 
As at the year ended 30 September 2015 the directors owed the following
amounts in respect of unpaid share capital: 
O Gilchrist                    £2,687 
L Hall                           £32,778 
G J O'Connor               £9,058 
The amounts were fully paid up on 3 November 2015 by way of an irrevocable
undertaking to pay, which took place prior to IPO. 
No further related party transactions took place during the period. 
The Directors were remunerated by Cerillion Technologies Limited, an
associated company, during the period ended 30 September 2015. 
25     Future lease payments 
The Group had commitments under non-cancellable operating leases in respect of
land and buildings and plant and machinery. The Group's future minimum
operating lease payments are as follows: 
                             Year to 30 September 2016    Period from 5 March 2015 to 30 September 2015  
 Group                       £                            £                                              
 Within one year             541,268                      -                                              
 Between one and five years  350,489                      -                                              
                             891,757                      -                                              
There are no lease commitments within the parent company. 
26     Charge over assets 
In providing the group with banking, credit card and forward currency
facilities, the group's bankers HSBC plc hold: 
·      a fixed charge over all present freehold and leasehold property; 
·      a first charge over book and other debts, chattels, goodwill and
uncalled capital, both present and future; and 
·      a first floating charge over all assets, both present and future. 
27     Subsequent events 
Since the balance sheet date of 30 September 2016, there have been no
subsequent events requiring disclosure. 
28     Ultimate controlling party 
In the opinion of the Directors, there was no ultimate controlling party at 30
September 2016. Louis Tancred Hall was the ultimate controlling party of the
Company as at 30 September 2015. 
This information is provided by RNS
The company news service from the London Stock Exchange
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