REG - Cerillion PLC - Final Results <Origin Href="QuoteRef">CER.L</Origin> - Part 3
27/11/2017 07:05
- Part 3: For the preceding part double click ID:nRSa5090Xb
date of first drawdown.
19 Financial instruments and risk management
Group
Financial instruments by category 2017£ 2016£
Financial assets - loans and receivables
Trade and other receivables 2,449,598 3,358,515
Accrued income 5,866,024 5,565,952
Unpaid share capital - -
Cash and cash equivalents 5,338,935 5,006,185
13,654,557 13,930,652
Prepayments are excluded, as this analysis is required only for financial
instruments.
Financial liabilities - held at amortised cost 2017£ 2016 £
Non-current
Borrowings 2,693,139 3,572,602
Other payables - 120,000
2,693,139 3,692,602
Current
Current borrowings 1,000,000 1,000,000
Trade and other payables 1,330,979 1,045,772
Pension costs 40,413 38,653
Accruals 1,221,442 1,729,473
3,592,834 3,813,898
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 2017£ 2016 £
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 currency 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:
2017 2016
£ £
Trade receivables
Group 1 1,900 131,788
Group 2 1,939,473 2,677,325
Group 3 15,563 84,902
1,956,936 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.
2017 2016
£ £
Cash at bank and short-term deposits
A1 5,336,036 5,003,700
Not rated 2,899 2,485
5,338,935 5,006,185
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
Exposure 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.
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 was settled during the year
ended 30 September 2017 and no other contracts were entered into.
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 2017
Financial assets 269,699 7,662,036 1,376,700 365,994
Financial liabilities - (141,917) (15,395) (378,943)
Total exposure 269,699 7,520,119 1,361,305 (12,949)
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 2017 AUD USD EUR INR
Loss for the year (24,518) (683,647) (123,755) 1,177
Equity total (24,518) (683,647) (123,755) 1,177
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 2017 AUD USD EUR INR
Profit for the year 29,967 835,569 151,256 (1,439)
Equity total 29,967 835,569 151,256 (1,439)
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 18.
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 2017, 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 2017 (38,643) 38,354 (38,643) 38,354
30 September 2016 (30,564) 30,499 (30,564) 30,499
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 2017
Borrowings 1,000,000 1,000,000 1,693,139 -
Trade and other payables 4,573,705 - - -
30 September 2016
Borrowings 1,000,000 1,000,000 2,572,602 -
Trade and other payables 5,007,214 120,000 - -
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 prepares 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.
20 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
2017:
Classes of financial liabilities measured at fair value - carrying amounts Level 1 Level 2 Level 3 Total
2017 2017 2017 2017
£ £ £ £
Derivative financial instruments - - - -
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 2017 or 2016 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.
21 Share capital
2017 2016
£ £
Issued, allotted, called up and fully paid:
29,513,486 (2016: 29,513,486) Ordinary shares of 0.5 pence 147,567 147,567
The Ordinary Shares have been classified as Equity. The Ordinary Shares have
attached to them full voting and capital distribution rights.
The Company does not have an authorised share capital.
On 1 October 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.
22 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 £336,465 (2016:
£170,521).
23 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 2017.
No key personnel other than the directors have been identified in relation to
the period ended 30 September 2016.
(ii) Related party transactions
As at 1 October 2015 the directors owed the following amounts in respect of
unpaid share capital:
O C R Gilchrist £2,687
L T 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.
24 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:
2017 2016
Group £ £
Within one year 251,440 541,268
Between one and five years 41,902 350,489
293,342 891,757
There are no lease commitments within the parent company.
On 16 October 2017 the group entered into a 10 year lease for a new London
Office, through to 31 December 2027. The lease is rent free for the first
year, at £365,500 for years two and three and £731,000 per annum for the
remaining years.
25 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.
26 Contingent asset
The group have a contingent asset in relation to a legal claim regarding
receivables outstanding from a customer. Management believe that it is likely
that a material amount will be collected. The group has recognised an
immaterial amount within revenue based on it being virtually certain.
27 Subsequent events
There have been no subsequent events requiring adjustment or disclosure within
the financial statements.
28 Ultimate controlling party
In the opinion of the Directors, there was no ultimate controlling party at 30
September 2017 or 30 September 2016.
This information is provided by RNS
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