REG - Cerillion PLC - Final Results <Origin Href="QuoteRef">CER.L</Origin> - Part 3
28/11/2016 07:06
- 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
year/period.
12 Intangible assets
Group Goodwill Purchased customer contracts Intellectual property rights Software development costs Total
£ £ £ £ £
Cost
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
Amortisation
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
£ £ £ £
Cost
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
Depreciation
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
company.
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
subsidiaries
** 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
320,546
Deferred tax liability
Group
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
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
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
£ £
Group
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
value.
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
default.
2016 2015
£ £
Group
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
£ £
Group
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
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 -
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
Group
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
instruments.
Financial liabilities - held at amortised cost 2016£ 2015£
Non-current
Borrowings 3,572,602 -
Other payables 120,000 -
3,692,602 -
Current
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
past.
Group 3 - existing customers (more than 6 months) with some defaults in the
past.
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
transactions.
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
rates.
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
follows:
(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:
£nil).
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
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