REG - Cerillion PLC - Final Results
22/11/2021 07:05
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RNS Number : 0239T Cerillion PLC 22 November 2021
22 November 2021
AIM:
CER
Cerillion plc
("Cerillion" or "Company" or "Group")
Final results for the year ended 30 September 2021
Cerillion plc, the billing, charging and customer relationship management
software solutions provider, presents its annual results for the 12 months
ended 30 September 2021.
Highlights
Financial:
· All key financial performance measures reached record highs
· Revenue(1) rose by 25% to £26.1m (2020: £20.8m)
- recurring revenue(2) contributed £8.6m (2020: £6.0m), 33% of total revenue
- at the year end, on an annualised basis, recurring revenue was up 25%
year-on-year to £9.9m (2020: £7.9m)
· New orders rose by 43% to £33.3m (2020: £23.3m)
· Back-order book(3) increased by 36% to £42.1m at the year-end (2020:
£31.0m)
· Adjusted EBITDA(4) increased by 81% to £10.5m (2020: £5.8m)
- adjusted EBITDA margin rose to 40.3% (2020: 27.9%)
· Adjusted profit before tax(5) up by 131% to £8.5m (2020: £3.7m)
· Adjusted earnings per share(6) increased by 105% to 25.5p (2020: 12.4p)
· Reported profit before tax up by 181% to £7.4m (2020: £2.6m)
· Reported earnings per share up 147% to 21.8p (2020: 8.8p)
· Net cash increased by 71% to £13.2m (2020: £7.7m)
· Final dividend of 5.00p per share proposed (2020: 3.75p), bringing the
total dividend for the year to 7.1p per share (2020: 5.5p), an increase of 29%
Operational:
· Staff continued to work remotely in light of the ongoing coronavirus
pandemic, but there was little adverse impact to operations and
implementations
· Largest ever contract won in March 2021 ($18.4m), with Telesur, a
full-service Latin American network operator, continuing the trend of winning
bigger contracts with larger customers
· Strong pipeline of new business opportunities
· The Board believes that Cerillion is well-positioned for further
progress over the new financial year
Louis Hall, CEO of Cerillion, commented:
"We have more than doubled our top-line growth rate to 25%, building on the
increasing momentum in new business wins over the last three to four years. I
am also pleased to highlight strong margin growth and a rising base of
recurring income. Cerillion has made huge strides in increasing market
awareness of its flagship product, and the signing of its largest ever
contract win in the first half of the financial year continued the trend of
securing bigger contracts with larger customers.
"Prospects for ongoing growth remain very strong. With a record back-order
book and strong new business pipeline, we remain confident of continued
momentum over the new financial year. The market backdrop remains extremely
favourable. The roll-out of 5G and digitisation continue to drive investment
by telecom companies in enterprise software. These tailwinds should help to
support Cerillion's continued expansion over the short-term and longer term."
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of
MAR.
For further information please contact:
Cerillion plc c/o KTZ Communications
Louis Hall, CEO, Oliver Gilchrist, CFO T: 020 3178 6378
Liberum (Nomad and Broker) T: 020 3100 2000
Bidhi Bhoma, Cameron Duncan, William Hall
KTZ Communications T: 020 3178 6378
Katie Tzouliadis, Dan Mahoney
About Cerillion
Cerillion has a 22-year track record in providing mission-critical software
for billing, charging and customer relationship management ("CRM"), mainly to
the telecommunications sector but also to other markets, including utilities
and financial services. The Company has c. 80 customer installations across c.
45 countries.
Headquartered in London, Cerillion has operations in Pune, India, where its
Global Solutions Centre is located, as well as operations in Bulgaria, USA and
Australia.
The business was originally part of Logica plc before its management buyout,
led by CEO, Louis Hall, in 1999. The Company joined AIM in March 2016.
Notes
Note 1 Revenue derived from software licence, support and maintenance,
Software-as-a-Service ("SaaS") and third-party sales.
Note 2 Recurring revenue includes annualised support and maintenance,
managed service and Skyline revenue.
Note 3 Back order book consists of £34.9m of sales contracted but not
yet recognised at the end of the reporting period plus £7.2m of annualised
support and maintenance revenue. It is anticipated that 75% of the £34.9m
of sales contracted but not yet recognised as at the end of the reporting
period will be recognised within the next 12 to 18 months.
Note 4 Adjusted earnings before interest, tax, depreciation and
amortisation ("EBITDA") is calculated by taking operating profit and adding
back depreciation & amortisation, share-based payment charge and
exceptional items.
Note 5 Adjusted profit before tax is calculated after adding back
amortisation of acquired intangible assets, share-based payment charge and
exceptional items.
Note 6 Adjusted earnings per share is calculated by taking profit
after tax and adding back amortisation of acquired intangible assets,
share-based payment charge and exceptional items and is divided by the
weighted average number of shares in issue during the period. There is no tax
impact relating to these items.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Cerillion performed very strongly over the financial year, with revenue,
profit before tax and the back-order book setting new record highs. Revenue
increased by 25% year-on-year to £26.1m (2020: £20.8m), more than doubling
the growth rate achieved in the previous four financial years post-IPO.
Adjusted profit before tax rose by 131% to £8.5m (2020: £3.7m),
significantly better than market expectations as previously reported in our
trading update in October. In addition, the back-order book was up by 36% to
£42.1m (2020: £31.0m).
New orders over the year were up by 43% to £33.3m (2020: £23.3m), and
included the largest initial contract the Company has signed in its history at
$18.4m. The contract, with Telesur, a full-service Latin American network
operator, followed a £11.2m contract win in the prior financial year, which
at the time was Cerillion's largest ever contract win. The trend in recent
years towards bigger deal sizes with larger customers has multiple benefits.
It evidences the quality of our product offering, adds customers that are
typically more active and generate higher income over the long-term, and since
larger deals frequently have a higher software licence element, they tend to
be margin enhancing.
The Company's performance was also supported by strong demand from existing
customers, with orders from existing accounts up by 105% to £19.2m (2020:
£9.4m), which exceeded the 88% increase in the prior year. This significant
uplift in sales mainly reflected the increased presence in the base of larger
customers with commensurately broader and deeper requirements as well as
larger budgets.
The global coronavirus pandemic did not significantly impede the Company's
operations over the financial year. Staff continued to work remotely, and a
hybrid model is now operating in the London office, with staff working two
core days a week in the office and three days a week from home. It is
anticipated that staff will begin to return to the Pune office in some form
from January 2022.
In order to support the significant acceleration of the Company's growth rate,
we increased our resource in the main London and Pune operations. In early
September, we also launched a new delivery and development centre in Sophia,
Bulgaria, which has a reputation for its strong technology skill base. We
expect the new centre to become another major strategic base for the Group.
Looking to the future, demand for billing, charging, customer relationship
management ("CRM") and digital customer experience solutions in the Company's
core telecommunications market is set to continue to rise as telecoms
businesses continue to invest in 5G rollouts and the ancillary systems that
are essential to supporting and monetizing those investments. Cerillion
remains well-placed to benefit from this, and to grow both in Europe and its
other international markets.
The pipeline of potential new business opportunities remains very strong, at
£146.4m (2020: £121.9m) and major implementations for new customers are
progressing well. We therefore expect the Company to make further strong
progress in the new financial year.
Financial Overview
Total revenue for the year to 30 September 2021 rose by 25% to £26.1m (2020:
£20.8m). As is typical, existing customers (classified as those acquired
before the beginning of the reporting period) accounted for a high proportion
of total revenue, generating 96% of the overall result (2020: 97%).
Recurring revenue, which is derived from support and maintenance and managed
service contracts, contributed £8.6m to total revenue, approximately 33% of
overall Group revenue (2020: £6.0m, 29%). At 30 September 2021, recurring
revenue on an annualised basis was 25% higher year-on-year at £9.9m (30
September 2020: £7.9m), boosted by a 36% increase in annualised managed
service contract revenue (2020: 205%) as more customers contracted for these
services.
The Group's revenue streams are categorised in three segments: software
revenue (including Software-as-a-Service); services revenue; and revenue from
other activities. Software revenue principally comprises software licences
and related support and maintenance sales, while services revenue is generated
by software implementations and ongoing account development work. Revenue
from other activities is mainly from the reselling of third-party products.
• Software (including Software-as-a-Service) revenue increased by 75% to £13.4m
(2020: £7.6m). This was mainly due to an increase in licence revenue
recognition deriving from recent larger wins with larger customers. Software
revenues accounted for 51% of total revenues (2020: 37%).
• Services revenue increased by 5% to £11.9m (2020: £11.3m) and comprised 46%
of total revenue (2020: 54%).
• Third-party income totalled £0.8m (2020: £1.8m) and comprised 3% of total
revenue (2020: 9%), the reduction being mainly due to a reduction in lower
margin hardware sales to new and existing customers.
Gross margin increased to 78% (2020: 74%), which was in line with management
expectations.
Reflecting growth, operating expenses increased by 3% to £12.9m (2020:
£12.5m). Personnel costs were steady at £5.8m (2020: £5.8m), and
accounted for 45% (2020: 47%) of operating expenses.
Adjusted EBITDA for the year increased by 81% to £10.5m (2020: £5.8m),
mainly driven by higher revenues. The Board considers adjusted EBITDA to be
a key performance indicator for Cerillion as it adds back exceptional items
and key non-cash transactions, being share-based payments, depreciation and
amortisation.
We continued to invest in our product set, and the charge for amortisation of
intangibles was £1.9m (2020: £1.9m). Expenditure on tangible fixed assets
was £0.3m (2020: £0.3m). Operating profit increased by 168% to £7.5m (2020:
£2.8m) due to the increase in revenue, which included a higher proportion of
software licence revenue and a lower proportion of lower margin 3(rd) party
revenue, as well as operational leverage.
Adjusted profit before tax rose by 131% to £8.5m (2020: £3.7m) and adjusted
earnings per share increased by 105% to 25.5p (2020: 12.4p). On a statutory
basis, profit before tax increased by 181% to £7.4m (2020: £2.6m) and
earnings per share increased by 147% to 21.8p (2020: 8.8p).
Cash Flow and Banking
The Group continued to generate strong cash flows, and closed the financial
year with net cash of £13.2m, up by 71% against the same point last year (30
September 2020: £7.7m). This net position is after £0.6m of debt repayments
(2020: £1.2m) and £1.7m of dividend payments (2020: £1.5m). Total Group
cash at the year-end increased to £13.2m (2020: £8.3m), up by 59%
year-on-year, and total debt stood at £nil (2020: £0.6m).
Dividend
The Board is pleased to propose a 33% increase in the final dividend to 5.00p
per share (2020: 3.75p). Together with the interim dividend of 2.1p per share
(2020: 1.75p), this brings the total dividend for the year to 7.1p per share
(2020: 5.5p), an increase of 29%.
The dividend, which is subject to shareholder approval at the Company's Annual
General Meeting to be held on 4 February 2022, will become payable on 8
February 2022 to those shareholders on the Company's register as at the close
of business on the record date of 31 December 2021. The ex-dividend date is
30 December 2021.
Operational Overview
Whilst the coronavirus pandemic presented fewer challenges this financial year
compared to the prior year, with the Group having already adapted well to the
change in circumstances, we remained vigilant. Staff continued to work
remotely, and we were able to continue to complete new implementations and new
projects for existing customers remotely.
The global experience of enforced remote working - still in place in many
economies - has continued to emphasise the dependence of the world economy on
state-of-the-art telecoms infrastructure. We are seeing high levels of
investment in the sector in general, and an acceleration of investment in 5G
rollouts, with spending trickling down from core network improvements to
ancillary system upgrades and replacements. We therefore fully expect demand
for billing, charging, CRM and digital customer experience software in our
core telecoms market to continue to grow.
Beyond these broad sector trends, a number of other factors will continue to
drive demand for our specific offerings. These include:
- the acceleration of digital investments, initially driven by the
pandemic as a necessity to ensure continuity of services, but increasingly as
a requirement to improve the customer experience. This means Communication
Service Providers ("CSPs") are now going beyond their digital front-ends and
investing in wider digitalisation and in the transformation of their BSS/OSS
systems - to automate and optimise customer engagement and deliver a seamless
experience across all touchpoints;
- the rollout of 5G and the evolution to 5G "Standalone" networks,
which is driving further investment in convergent charging systems and product
catalogue solutions, as CSPs aim to maximise their opportunities in the B2B
sector;
- the requirement for agility; with CSPs facing the on-going threat
from digital services providers and the hyperscalers, agility is more
important than ever. This is driving further investment in BSS/OSS platforms
that will allow CSPs to pivot quickly, changing business processes to address
new market opportunities, from the complexities of B2B/enterprise use cases to
the simplest of digital subscription services; and
- the trend to 'low-code' / 'no-code', with many CSPs now preferring
to invest in products with standardised interfaces (Open Application
Programming Interfaces ("API") for interoperability with other systems, and
moving away from 'customisation' towards 'configuration'.
Cerillion's ability to address the market through a range of flexible
solutions remains a key strength. In addition to our proven ability to support
end-to-end transformation projects, the Company can provide individual product
modules, or subsets of modules, to implement point solutions that address more
specific requirements. The Company's solutions are also able to support a
broad range of CSPs, from traditional network operators and virtual network
operators ("VNOs") to enterprise connectivity solutions providers.
The major new contract win announced in March 2021 with Telesur, the main
telecoms provider in Suriname, was another important milestone for Cerillion,
representing the Company's largest ever initial contract value, and enhancing
the Cerillion brand in the marketplace. We expect the general trend towards
signing bigger deals with larger new customers to continue. As mentioned
previously, these engagements typically involve higher recurring revenues as
well as much greater upsell opportunity, and therefore will contribute
significantly to the ongoing growth of the business.
The new customer wins, ongoing implementation work with existing customers,
and major new deals signed with existing customers, create a strong platform
for further growth in the new financial year. The back-order book at 30
September 2021 was up by 36% to an all-time record of £42.1m (2020: £31.0m),
providing far greater visibility of revenues than at the beginning of any
previous financial year.
As we grow across the globe, and global labour markets evolve, we will
continue to expand our operating locations, both to have access to the best
talent most cost-effectively, and to be able to support our expanding customer
base at closer proximity.
We continued to invest in R&D over the year to further improve our product
set, maintaining our commitment to provide two major new releases of the
product set in each calendar year. The most recent of these upgrades was
Cerillion 21.2, which went on general release in early November 2021.
Outlook
The Company delivered a record set of results, and our products are gaining
greater visibility in the marketplace. In addition, Cerillion's financial
position is very strong, supported by a growing base of recurring income,
increased cash flows, and no debt.
We believe that Cerillion remains well-positioned to deliver another strong
performance over the new financial year. The back-order book stands at a
record level, providing strong visibility of revenues, and the pipeline of new
business is strong. In addition to these strong organic growth prospects, we
also continue to assess a range of inorganic growth opportunities as they
arise.
The market backdrop is favourable, with increasing investment by telecom
companies in their networks and in digital transformation, and this long-term
trend should continue to benefit Cerillion's growth prospects.
A M Howarth L T Hall
Non-executive Chairman Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2021
Year to Year to
30 September 2021
30 September 2020
Notes £ £
Revenue 2 26,070,815 20,813,925
Cost of sales (5,662,228) (5,465,710)
Gross profit 20,408,587 15,348,215
Operating expenses (12,884,572) (12,545,475)
Adjusted EBITDA* 10,515,283 5,805,645
Depreciation and amortisation (2,880,927) (2,934,178)
Share-based payment charge 18 (110,341) (68,727)
Operating profit 3 7,524,015 2,802,740
Finance income 4 66,810 49,990
Finance costs 5 (163,982) (214,142)
Profit before taxation 7,426,843 2,638,588
Taxation 6 (999,748) (28,783)
Profit for the year 6,427,095 2,609,805
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign (120,093) (165,075)
operations
Total comprehensive income for the year
6,307,002 2,444,730
Earnings per share
Basic earnings per share - continuing and total operations 8 21.8 pence 8.8 pence
Diluted earnings per share - continuing and total operations
21.7 pence 8.8 pence
The Group has no other recognised gains or losses for the current year.
* Adjusted earnings before interest, tax, depreciation and amortisation
("EBITDA") is calculated by taking operating profit and adding back
depreciation & amortisation, share-based payment charge and exceptional
items.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2021
2021 2020
Notes £ £
ASSETS
Non-current assets
Goodwill 9 2,053,141 2,053,141
Other intangible assets 9 3,571,787 4,475,236
Property, plant and equipment 10 758,670 787,885
Right-of-use assets 11 3,705,723 4,389,175
Trade and other receivables 13 2,015,422 2,439,119
Deferred tax assets 12 209,211 145,060
12,313,954 14,289,616
Current assets
Trade and other receivables 13 10,178,628 9,516,568
Cash and cash equivalents 16 13,174,471 8,311,867
23,353,099 17,828,435
TOTAL ASSETS 35,667,053 32,118,051
LIABILITIES
Non-current liabilities
Trade and other payables 14 (394,850) -
Lease liabilities 11 (3,866,352) (4,655,772)
Deferred tax liabilities 12 (861,765) (883,823)
(5,122,967) (5,539,595)
Current liabilities
Trade and other payables 14 (9,390,933) (9,020,502)
Lease liabilities 11 (947,710) (922,706)
Borrowings 15 - (609,359)
(10,338,643) (10,552,567)
TOTAL LIABILITIES (15,461,610) (16,092,162)
NET ASSETS 20,205,443 16,025,889
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Share capital 17 147,567 147,567
Share premium account 13,318,725 13,318,725
Treasury stock 17 (25) (375,025)
Share option reserve 128,130 151,619
Foreign exchange reserve (167,074) (46,981)
Retained earnings 6,778,120 2,829,984
TOTAL EQUITY 20,205,443 16,025,889
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2021
2021 2020
£ £
Cash flows from operating activities
Profit for the year 6,427,095 2,609,805
Adjustments for:
Taxation 999,748 28,783
Finance income (66,810) (49,990)
Finance costs 163,982 214,142
Share option charge 110,341 68,727
Depreciation 1,007,265 1,058,169
Amortisation 1,873,661 1,876,009
10,515,282 5,805,645
Increase in trade and other receivables (238,364) (1,412,938)
(Decrease)/increase in trade and other payables (84,435) 2,501,200
Cash generated from operations 10,192,483 6,893,907
Finance costs (163,982) (214,142)
Finance income 66,810 49,990
Tax paid (293,076) (123,171)
NET CASH GENERATED FROM OPERATING ACTIVITIES 9,802,235 6,606,584
Cash flows from investing activities
Capitalisation of intangible assets (970,212) (1,108,473)
Purchase of property, plant and equipment (301,686) (330,098)
NET CASH USED IN INVESTING ACTIVITIES (1,271,898) (1,438,571)
Cash flows from financing activities
Borrowings repaid (609,359) (1,161,587)
Purchase of treasury stock (512,500) (737,506)
Receipts from exercise of share options 1,249 195,395
Principal elements of finance leases (764,416) (411,653)
Dividends paid (1,726,538) (1,490,431)
NET CASH USED IN FINANCING ACTIVITIES (3,611,564) (3,605,782)
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,918,773 1,562,231
Translation differences (56,169) (21,770)
Cash and cash equivalents at beginning of year 8,311,867 6,771,406
CASH AND CASH EQUIVALENTS AT END OF YEAR
13,174,471 8,311,867
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2021
Ordinary share capital Share premium Treasury stock Share option reserve Foreign exchange reserve Retained earnings Total
£ £ £ £ £ £ £
Balance at 1 October 2019 147,567 13,318,725 - 158,515 118,094 1,802,073 15,544,974
Profit for the year - - - - - 2,609,805 2,609,805
Other comprehensive income:
Exchange differences on translating foreign operations - - - - (165,075) - (165,075)
Total comprehensive income - - - - (165,075) 2,609,805 2,444,730
Transactions with owners:
Share option charge - - - 68,727 - - 68,727
Purchase of treasury stock - - (737,506) - - - (737,506)
Exercise of share options - - 362,481 (75,623) - (91,463) 195,395
Dividends - - - - - (1,490,431) (1,490,431)
Total transactions with owners - - (375,025) (6,896) - (1,581,894) (1,963,815)
Balance as at 30 September 2020 147,567 13,318,725 2,829,984 16,025,889
(375,025) 151,619 (46,981)
Ordinary share capital Share premium Treasury stock Share option reserve Foreign exchange reserve Retained earnings Total
£ £ £ £ £ £ £
Balance at 1 October 2020 147,567 13,318,725 (375,025) 151,619 (46,981) 2,829,984 16,025,889
Profit for the year - - - - - 6,427,095 6,427,095
Other comprehensive income:
Exchange differences on translating foreign operations - - - - (120,093) - (120,093)
Total comprehensive income - - - - (120,093) 6,427,095 6,307,002
Transactions with owners:
Share option charge - - - 110,341 - - 110,341
Purchase of treasury stock - - (512,500) - - - (512,500)
Exercise of share options - - 887,500 (133,830) - (752,421) 1,249
Dividends - - - - - (1,726,538) (1,726,538)
Total transactions with owners - - 375,000 (23,489) - (2,478,959) (2,127,448)
Balance as at 30 September 2021 147,567 13,318,725 6,778,120 20,205,443
(25) 128,130 (167,074)
NOTES TO THE ACCOUNTS
1 Critical accounting estimates and judgements and other sources
of estimation uncertainty
1 (a) Critical accounting estimates and judgements
The preparation of Financial Statements under IFRS requires the use of certain
critical accounting assumptions, and requires management to exercise its
judgement and to make estimates in the process of applying Cerillion's
accounting policies.
Judgements
(i) Capitalisation of development costs
Development costs are capitalised only after the technical and commercial
feasibility of the asset for sale or use have been established. This is
determined by our intention to complete and/or use the intangible asset. The
future economic benefits of the asset are reviewed using detailed cash flow
projections. The key judgement is whether there will be a market for the
products once they are available for sale.
(ii) Revenue recognition
The Group assesses the products and services promised in its contracts with
customers and identifies a performance obligation for each promise to transfer
to the customer a product or service (or bundle of products and services) that
is distinct. This assessment is performed on a contract by contract basis and
involves significant judgement. The determination of whether performance
obligations are distinct or not affects the timing and quantum of revenue and
profit recognised in each period.
Estimates
(i) Revenue recognition
For contracts where goods or services are transferred over time, revenue is
recognised in line with the percentage completed in terms of effort to date as
a percentage of total forecast effort. Total forecast is prepared by project
managers on a monthly basis and reviewed by the project office and senior
management team on a monthly basis. The forecast requires management to be
able to accurately estimate the effort required to complete the project and
affects the timing and quantum of revenue and profit recognised on these
contracts in each period.
(ii) Impairment of non-financial assets
All non-current assets are tested for impairment whenever events or
circumstances indicate that their carrying value may be impaired.
Additionally, goodwill is subject to an annual impairment test. An impairment
loss is recognised in the Group statement of comprehensive income to the
extent that an asset's carrying value exceeds its recoverable amount, which
represents the higher of the asset's net realisable value and its value in
use.
(iii) Depreciation and amortisation
Depreciation and amortisation rates are based on estimates of the useful
economic lives and residual values of the assets involved. The assessment of
these useful economic lives is made by projecting the economic lifecycle of
the asset. The key judgement is estimating the useful economic life of the
development costs capitalised, a review is conducted annually by project.
Depreciation and amortisation rates are changed where economic lives are
re-assessed and technically obsolete items written off where necessary.
(iv) Calculation of future minimum lease payments
The calculation of lease liabilities requires the Group to determine an
incremental borrowing rate ("IBR") to discount future minimum lease payments.
The IBR is the rate of interest that the Group would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to
obtain an asset of a similar value to the right-of-use asset in a similar
economic environment. The IBR therefore reflects what the Group 'would have to
pay', which requires estimation when no observable rates are available or when
they need to be adjusted to reflect the terms and conditions of the lease.
Management has considered the above areas of estimation and concluded that
there are no deemed material changes arising from changes in underlying
assumptions.
1 (b) Other sources of estimation uncertainty
(i) Recoverability of trade debtors and accrued income
Management use their judgement when determining whether trade debtors and
accrued income are considered recoverable or where a provision for impairment
is considered necessary. The assessment of recoverability will include
consideration of whether the balance is with a long-standing client, whether
the customer is experiencing financial difficulties, the fact that balances
are recognised under contract and that the products sold are mission -critical
to the customer's business.
2 Segment information
The Group continues to be organised into four main business segments for
revenue purposes.
Under IFRS 8 there is a requirement to show the profit or loss for each
reportable segment and the total assets and total liabilities for each
reportable segment if such amounts are regularly provided to the chief
operating decision-maker. There are no other material items that are
separately presented to the chief operating decision-maker.
In respect of the profit or loss for each reportable segment the expenses are
not reported by segment and cannot be allocated on a reasonable basis and, as
a result, the analysis is limited to the Group revenue.
Assets and liabilities are used or incurred across all segments and therefore
are not split between segments.
2021 2020
£ £
Revenue
Services 11,863,628 11,326,196
Software 11,340,625 6,657,289
Software-as-a-Service 2,057,655 984,518
Third-party 808,907 1,845,922
Total revenue 26,070,815 20,813,925
The following table provides a reconciliation of the revenue by segment to the
revenue recognition accounting policy. Revenue recognised on performance
obligations partially satisfied in previous periods was £12,703,901 (2020:
£12,994,913).
Accounting policies
Year ended 30 September 2021 (i) (ii) (iii) (iv) Total
£ £ £ £ £ £
Services 11,863,628
implementation fees 5,386,613 - - - 5,386,613
ongoing account development work - - 6,477,015 - 6,477,015
Software 11,340,625
initial licence fees 3,839,508 - - - 3,839,508
sale of additional licences - 910,787 - - 910,787
ongoing maintenance and support fees 6,590,330 - - - 6,590,330
Software-as-a-Service 2,057,655 2,057,655 - - - 2,057,655
Third-Party 808,907 - - - 808,907 808,907
Total 26,070,815 17,874,106 910,787 6,477,015 808,907 26,070,815
Accounting policies
Year ended 30 September 2020 (i) (ii) (iii) (iv) Total
£ £ £ £ £ £
Services 11,326,196
implementation fees 7,528,326 - - - 7,528,326
ongoing account development work - - 3,797,870 - 3,797,870
Software 6,657,289
initial licence fees 1,449,647 - - - 1,449,647
sale of additional licences - 151,752 - - 151,752
ongoing maintenance and support fees 5,055,890 - - - 5,055,890
Software-as-a-Service 984,518 984,518 - - - 984,518
Third-Party 1,845,922 - - - 1,845,922 1,845,922
Total 20,813,925 15,018,381 151,752 3,797,870 1,845,922 20,813,925
(a) Geographical information
As noted above, the internal reporting of the Group's performance does not
require that the statement of financial position information is gathered on
the basis of the business streams. However, the Group operates within discrete
geographical markets such that capital expenditure, total assets and net
assets of the Group are split between these locations as follows:
Europe MEA Americas Asia Pacific
£ £ £ £
Year ended 30 September 2021
Revenue - by customer location 18,729,415 2,052,625 3,478,079 1,810,696
Capital expenditure 1,218,040 - - 53,858
Non-current assets 11,371,807 - - 942,147
Total assets 34,104,087 - - 1,562,966
Net assets 20,250,312 - - (44,869)
Europe MEA Americas Asia Pacific
£ £ £ £
Year ended 30 September 2020
Revenue - by customer location 13,478,228 508,667 3,283,377 3,543,653
Capital expenditure 1,417,080 - - 21,491
Non-current assets 13,301,609 - - 988,007
Total assets 30,552,219 - - 1,565,832
Net assets 15,789,432 - - 236,457
All revenue is contracted within the UK subsidiary Cerillion Technologies
Limited and therefore all revenue is domiciled in the Europe segment.
Cerillion receives greater than 10% of revenue from individual customers in
the following geographical regions:
Operating 2021 2020
segment £ £
Customer
No. 1 Europe 5,195,842 104,432
No. 2 Europe 2,708,264 4,483,638
No. 3 Asia Pacific 1,133,089 2,822,605
3 Operating profit
2021 2020
£ £
Operating profit is stated after (crediting)/charging:
Employee benefits expenses 12,602,628 11,923,335
Depreciation 1,007,265 1,058,169
Amortisation of intangibles 1,873,662 1,876,009
Research and development costs 395,731 341,834
Bad debt expense 226,852 178,983
Foreign exchange losses 494,903 323,083
Operating leases 125,834 126,265
Fees payable to Cerillion's principal auditor:
- Audit of Cerillion plc's annual financial statements 13,000 8,400
- Audit of subsidiaries 73,000 62,600
- Non-audit services - tax services 38,430 20,000
Fees payable to associates of principal auditor:
- Audit of subsidiaries 7,500 7,500
Other costs 1,687,995 2,085,007
Total cost of sales and operating expenses 18,546,800 18,011,185
4 Finance income
2021 2020
£ £
Finance income:
Bank interest receivable 1,855 5,949
Unwinding discount of contracts with significant financing component 64,955 44,041
66,810 49,990
5 Finance costs
2021 2020
£ £
Finance costs:
Interest payable in respect of loans (5,347) (38,414)
Interest and finance charges for lease liabilities (158,341) (174,476)
Other interest payable (294) (1,252)
(163,982) (214,142)
6 Taxation
(a) Analysis of tax charge for the year
The tax charge for the Group is based on the profit for the year and
represents:
2021 2020
£ £
Current tax expense - UK 799,160 -
Current tax expense - overseas 293,076 123,170
Current tax expense - total 1,092,236 123,170
Deferred tax credit (92,336) (56,323)
Deferred tax - adjustment in respect of prior year (152) (38,064)
Deferred tax credit - total (92,488) (94,387)
Total tax charge 999,748 28,783
(b) Factors affecting total tax for the year
The tax assessed for the year is lower (2020: lower) than the standard rate of
corporation tax in the United Kingdom 19.0% (2020: 19.0%). The differences are
explained as follows:
Profit on ordinary activities before tax 7,426,843 2,638,588
Profit on ordinary activities multiplied by standard rate of corporation tax 1,411,100 501,333
in the United Kingdom of 19.0% (2019: 19.0%)
Effect of:
Expenses not deductible for tax purposes 219,344 353,342
Non-taxable income for tax purposes (180,158) (386,800)
Difference in tax rates 64,625 107,942
Other temporary differences 28,310 -
Foreign tax - other 78,760 -
Prior year tax adjustment (152) (38,064)
Other permanent differences - relating to share options (168,464) (97,054)
Enhanced relief for research and development (453,617) (411,916)
Total tax charge 999,748 28,783
There are currently no recognised or unrecognised deferred tax assets or
liabilities within the Parent Company financial statements. There has been a
change in the future tax rates to 25%, which has been used to calculate the
deferred tax balances.
7 Dividends
(a) Dividends paid during the reporting period
The Board paid the final dividend in respect of 2020 of 3.75p per share, on 9
February 2021, and declared and paid an interim 2021 dividend of 2.1p (2020:
1.75p) per share on 18 June 2021. Total dividends paid during the reporting
period were £1,726,538 (2020: £1,490,431).
(b) Dividends not recognised at the end of the reporting period
Since the year end the Directors have proposed the payment of a dividend in
respect of the full financial year of 5.00p per fully paid Ordinary Share
(2020: 3.75p). The aggregate amount of the proposed dividend expected to be
paid out of retained earnings at 30 September 2021, but not recognised as a
liability at the year end is £1,475,674 (2020: £1,106,756). Since the year
end the Directors of Cerillion Technologies Limited have approved a £3.0
million dividend to Cerillion plc
8 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of Ordinary
Shares in issue during the year.
2021 2020
Profit attributable to equity holders of the Company (£) 6,427,095 2,609,805
Weighted average number of Ordinary Shares in issue (number) 29,513,486 29,513,486
Less weighted average number of shares held in Treasury (30,149) (9,911)
Weighted average number of Ordinary Shares in issue (number) 29,483,337 29,503,575
Effect of share options in issue 105,886 309,223
Weighted average shares for diluted earnings per share 29,589,223 29,812,798
Basic earnings per share (pence per share) 21.8 8.8
Diluted earnings per share (pence per share) 21.7 8.8
9 Intangible assets
Group Goodwill Purchased customer contracts Intellectual property rights Software development costs External Total
software licences
£ £ £ £ £ £
Cost
At 1 October 2019 2,053,141 4,382,654 2,567,160 3,217,427 - 12,220,382
Additions - - - 1,088,365 20,108 1,108,473
Reclassification* - - - - 210,345 210,345
At 30 September 2020 2,053,141 4,382,654 2,567,160 4,305,792 230,453 13,539,200
Additions - - - 948,198 22,014 970,212
At 30 September 2021 2,053,141 4,382,654 2,567,160 5,253,990 252,467 14,509,412
Amortisation
At 1 October 2019 - 2,191,326 1,283,580 1,481,569 - 4,956,475
Provided in the year - 626,093 366,737 864,960 18,219 1,876,009
Reclassification* - - - - 178,339 178,339
At 30 September 2020 - 2,817,419 1,650,317 2,346,529 196,558 7,010,823
Provided in the year - 626,093 366,737 856,530 24,301 1,873,661
At 30 September 2021 - 3,443,512 2,017,054 3,203,059 220,859 8,884,484
Net book amount at 30 September 2021 2,053,141 939,142 550,106 2,050,931 31,608 5,624,928
Net book amount at 2,053,141 1,565,235 916,843 1,959,263 33,895 6,528,377
30 September 2020
Amortisation has been included in operating expenses in the consolidated
statement of comprehensive income.
The carrying value of goodwill included within the Cerillion plc consolidated
statement of financial position 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 year ended 30
September 2021, 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.
*The Company's external software licences were previously presented as
tangible assets in the balance sheet. However, management has assessed that
these assets are not closely linked to underlying hardware and can be used
independently, the cost and accumulated amortisation of those was reclassified
to intangible assets.
10 Property plant and equipment
Group Leasehold improvements Computer equipment Fixtures and fittings Total
£ £ £ £
Cost
At 1 October 2019 738,863 1,446,318 304,332 2,489,513
Additions - 326,954 3,144 330,098
Disposals - (91,053) (3,141) (94,194)
Reclassification* - (210,345) - (210,345)
Exchange difference (26,115) (15,496) (9,684) (51,295)
At 30 September 2020 712,748 1,456,378 294,651 2,463,777
Additions 33,040 263,611 5,035 301,686
Disposals - (105,325) - (105,325)
Exchange difference (14,932) (9,944) (5,558) (30,434)
At 30 September 2021 730,856 1,604,720 294,128 2,629,704
Depreciation
At 1 October 2019 267,045 1,146,984 222,278 1,636,307
Provided in the year 67,509 224,572 57,977 350,058
Disposals - (91,053) (3,140) (94,193)
Reclassification* - (178,339) - (178,339)
Exchange difference (16,011) (12,907) (9,023) (37,941)
At 30 September 2020 318,543 1,089,257 268,092 1,675,892
Provided in the year 67,344 232,232 24,237 323,813
Disposals - (105,325) - (105,325)
Exchange difference (10,058) (7,999) (5,289) (23,346)
At 30 September 2021 375,829 1,208,165 287,040 1,871,034
Net book amount at 30 September 2021 355,027 396,555 7,088 758,670
Net book amount at 394,205 367,121 26,559 787,885
30 September 2020
All depreciation charges are included within operating expenses and no
impairment has been charged.
As referred to in note 15 the Group's loan was secured over all the assets of
the Group.
There were no property, plant and equipment assets owned by the Parent
Company.
*The reclassification is explained in note 9.
11 Leases
Group
This note provides information for leases where the Group is a lessee. The
Group leases offices in London and India, along with some IT equipment.
(i). amounts recognised in the consolidated and company statements of
financial position
The consolidated and company statements of financial position shows the
following amounts relating to leases:
Group Company
30 September 2021 30 September 2020 30 September 2021 30 September 2020
Right-of-use assets £ £ £ £
Properties 3,705,723 4,383,327 3,162,079 3,668,011
IT Equipment - 5,848 - -
3,705,723 4,389,175 3,162,079 3,668,011
Group Company
30 September 2021 30 September 2020 30 September 2021 30 September 2020
Lease liabilities £ £ £ £
Current 947,710 922,706 731,000 731,000
Non-current 3,866,352 4,655,772 3,416,663 4,012,028
4,814,062 5,578,478 4,147,663 4,743,028
Additions to the right-of-use assets during the 2021 financial year were £nil
(2020:£nil).
(ii). amounts recognised in the consolidated statement of comprehensive income
The consolidated statement of comprehensive income shows the following amounts
relating to leases:
30 September 2021 30 September 2020
Depreciation charge of right-of-use assets £ £
Properties 677,604 677,606
IT Equipment 5,848 30,505
683,452 708,111
Interest expense (included in finance cost) 158,341 174,476
Expense relating to short-term leases (included in operating expenses) 120,674 120,797
Expenses relating to low value assets that are not shown above as short-term 5,160 5,468
leases (included in operating expenses)
The total cash outflow for leases in 2021 was £922,757 (2020: £586,132).
The property within the Company had a depreciation charge for the year of
£505,932 (2020: £505,932).
12 Deferred tax
Deferred tax asset
Group Accelerated capital allowances Other temporary differences Total
£ £ £
1 October 2019 21,053 112,525 133,578
Foreign exchange movement on opening deferred tax asset (3,273) (7,887) (11,160)
Credited to statement of comprehensive income 622 22,020 22,642
30 September 2020 18,402 126,658 145,060
Group Accelerated capital allowances Other temporary differences Total
£ £ £
1 October 2020 18,402 126,658 145,060
Foreign exchange movement on opening deferred tax asset 833 (7,112) (6,279)
Credited to statement of comprehensive income 1,755 68,675 70,430
30 September 2021 20,990 188,221 209,211
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.
2021 2020
£ £
At 1 October 883,823 955,569
Debited to statement of comprehensive income in respect of net ACAs & 166,580 47,394
other temporary differences
Credited to statement of comprehensive income in respect of acquisitions (188,638) (119,140)
As at 30 September 861,765 883,823
There are no deferred tax assets or deferred tax liabilities recognised within
the Parent Company as at 30 September 2021 (2020: £nil).
13 Trade and other receivables and other contract balances
Contract balances
The following table provides information about receivables, contract assets
and contract liabilities from contracts with customers.
Group
2021 2020
£ £
Trade receivables 1,697,958 2,687,472
Contract assets 9,709,419 8,494,767
Contract liabilities 4,775,174 5,084,999
Contract assets, which are included in 'Accrued income' within trade and other
receivables and are composed of the current and non-current balances. Contract
liabilities, which are included in 'Deferred income' within trade and other
payables.
Payment terms and conditions in customer contracts may vary. In some cases,
customers pay in advance of the delivery of solutions or services; in other
cases, payment is due as services are performed or in arrears following the
delivery of the solutions or services. Differences in timing between revenue
recognition and invoicing result in trade receivables, contract assets or
contract liabilities in the statement of financial position.
Contract assets refer to accrued income and arise when revenue is recognised,
but invoicing is contingent on performance of other performance obligations or
on completion of contractual milestones. Contract assets are transferred to
receivables when the rights become unconditional, typically upon invoicing of
the related performance obligations in the contract or upon achieving the
requisite project milestone.
Contract liabilities refer to deferred income and result from customer
payments in advance of the satisfaction of the associated performance
obligations and relate primarily to prepaid support or other recurring
services. Deferred income is released as revenue is recognised.
Significant changes in the contract assets and contract liabilities balances
during the period are driven by the timing of income recognition and when
associated invoices are raised. Specifically, revenue recognised in the year
in relation to deferred income brought forward from prior year of £4,700,894
(2020: £3,003,462).
When certain costs to acquire a contract meet defined criteria, those costs
are deferred as contract assets. The total amount of deferred contract assets
(commission fees recognised in prepaid assets) are £209,762 (2020: £86,599).
The total amount of accrued costs to acquire a contract are £242,916 (2020:
£203,629).
The total amount of revenue allocated to unsatisfied performance obligations
is £34,853,478 (2020: £25,102,075). It is estimated that 75% will be
recognised over the next 18 months, the remainder over the following year
thereafter.
There are no contract balances within the Parent Company (2020: £nil).
Current receivables Group Company
2021 2020 2021 2020
£ £ £ £
Trade receivables 1,697,958 2,687,472 - -
Accrued income 7,763,748 6,055,648 - -
Amounts owed by Group undertakings - - 2,079,936 1,908,131
Other receivables 235,981 366,875 - 32,029
Prepayments 480,941 406,573 7,811 8,066
10,178,628 9,516,568 2,087,747 1,948,226
Non-current receivables Group Company
2021 2020 2021 2020
£ £ £ £
Accrued income 1,945,671 2,439,119 - -
Other receivables 69,751 - - -
2,015,422 2,439,119 - -
The amounts owed by Group undertakings are unsecured, interest free and
repayable on demand.
Credit quality of receivables
A detailed review of the credit quality of each client is completed before an
engagement commences.
The credit risk relating to trade receivables is analysed as follows:
2021 2020
£ £
Group
Trade receivables 2,121,287 3,015,131
ECL reserve (423,329) (327,659)
1,697,958 2,687,472
The Parent Company had no trade receivables in either period.
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.
2021 2020
£ £
Group
Not past due 1,104,013 2,065,185
Up to 3 months 463,995 395,178
3 to 6 months 102,174 51,771
Older than 6 months 27,776 175,338
1,697,958 2,687,472
Of the trade debt older than 6 months as at 30 September 2021, being £27,776
(2020: £175,338), cash of £nil (2020: £122,471) has been received since the
year end.
The following is an ageing analysis of those trade receivables that were
individually considered to be impaired:
2021 2020
£ £
Group
Not past due 141,696 -
Up to 3 months 219,203 98,324
3 to 6 months 29,574 39,682
Older than 6 months 32,856 189,653
423,329 327,659
14 Trade and other payables
Current trade and other payables Group Company
2021 2020 2021 2020
£ £ £ £
Trade payables 490,055 736,157 59,081 53,539
Taxation 799,160 - 446 -
Other taxation and social security 421,847 551,990 74,227 -
Pension contributions 46,383 42,232 - -
Other payables 519,171 481,391 - 250
Accruals 2,339,143 2,123,733 65,951 66,830
Deferred income 4,775,174 5,084,999 - -
9,390,933 9,020,502 199,705 120,619
Non-current trade and other payables Group Company
2021 2020 2021 2020
£ £ £ £
Other payables 394,850 - - -
The Directors consider that the carrying amount of trade and other payables
approximates to their fair values.
The non-current other payable above relates to provisions for gratuity and
long-term bonuses within the Indian subsidiary.
Gratuity - The Indian subsidiary, Cerillion Technologies India Private
Limited, provides for gratuity, a defined benefit plan (the "Gratuity Plan")
covering eligible employees in accordance with the Payment of Gratuity Act,
1972 . The unfunded plan provides a lump sum payment to vested employees at
retirement, death, incapacitation or termination of employment, of an amount
based on the respective employee's salary and the tenure of employment. There
is a vesting condition of five years of service for benefit payment.
Long-term bonus - The employees (Band II, III and IV only) are eligible for a
loyalty bonus at 20% of annual total fixed pay as at the end of the third
year, 10% of annual total fixed pay as at the end of four and half years and
10% of annual total fixed pay as at the end of the sixth year provided they
are employed with the Indian subsidiary, Cerillion Technologies India Private
Limited, for at least three years/four and half years/six years, as the case
maybe, after completion of probationary period. The Group's liability is
actuarially determined at the end of each year. Actuarial losses/gains are
recognised in the Statement of Comprehensive Income in the year in which they
arise.
The actuarial assumptions relating to the above provisions are outlined below:
Gratuity Long-term bonus
2021 2020 2021 2020
Discount rate 6.20% 6.10% 5.10% 5.10%
Salary increment rate 15.00% 7.50% 15.00% 7.50%
Withdrawal rate 15.00% 15.00% 15.00% 15.00%
The mortality rates assumed in the calculation for the Gratuity and Long-term
bonus are based on the Indian Assured Lives Mortality (2012-14) ultimate
("IALM ult).
Management have considered sensitivities to changes in the key assumptions
above and concluded that there are unlikely to be any material impacts arising
from reasonable changes in these assumptions.
15 Borrowings and financial liabilities
Group Company
2021 2020 2021 2020
£ £ £ £
Current liabilities:
Secured loans - 609,359 - 609,359
Lease liabilities 947,710 922,706 731,000 731,000
Non-current liabilities:
Lease liabilities 3,866,352 4,655,772 3,416,663 4,012,028
4,814,062 6,187,837 4,147,663 5,352,387
15a 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 of Cerillion Technologies
Limited. The loan was fully repaid during the current year.
The Loan was secured over the assets of the Group and was drawn down in full
in March 2016. The terms and conditions of the outstanding loans in the prior
year and at the start of the current period were 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.
Group and Company Non-current Borrowings Current Borrowings
Total
£ £ £
1 October 2020 - 609,359 609,359
Cash-flows:
Repayment - (609,359) (609,359)
30 September 2021 - - -
Non-current Borrowings Current Borrowings
Total
Group and Company £ £ £
1 October 2019 570,946 1,200,000 1,770,946
Cash-flows:
Repayment - (1,161,587) (1,161,587)
Non-cash:
Reclassification (570,946) 570,946 -
30 September 2020 - 609,359 609,359
Group Non-current Lease liabilities Current Lease liabilities
Total
£ £ £
1 October 2020 4,655,772 922,706 5,578,478
Cash-flows:
Repayment - (922,757) (922,757)
Accrued interest - 158,341 158,341
Non-cash:
Reclassification (789,420) 789,420 -
30 September 2021 3,866,352 947,710 4,814,062
1 October 2019 - - -
Recognised on adoption of IFRS 16 5,408,004 582,127 5,990,131
1 October 2019 post adoption of IFRS 16 5,408,004 582,127 5,990,131
Cash-flows:
Repayment - (586,132) (586,132)
Accrued interest - 174,479 174,479
Non-cash:
Reclassification (752,232) 752,232 -
30 September 2020 4,655,772 922,706 5,578,478
Company Non-current Lease liabilities Current Lease liabilities
Total
£ £ £
1 October 2020 4,012,028 731,000 4,743,028
Cash-flows:
Repayment - (731,004) (731,004)
Accrued interest - 135,639 135,639
Non-cash:
Reclassification (595,365) 595,365 -
30 September 2021 3,416,663 731,000 4,147,663
1 October 2019 - - -
Recognised on adoption of IFRS 16 4,600,500 365,500 4,966,000
1 October 2019 post adoption of IFRS 16 4,600,500 365,500 4,966,000
Cash-flows:
Repayment - (369,504) (369,504)
Accrued interest - 146,532 146,532
Non-cash:
Reclassification (588,472) 588,472 -
30 September 2020 4,012,028 731,000 4,743,028
16 Financial instruments and risk management
Group - Financial instruments by category 2021 2020
£ £
Financial assets - measured at amortised cost
Non-current
Accrued income 1,945,671 2,439,119
Other receivables 69,751 -
2,015,422 2,439,119
Current
Trade and other receivables 1,933,939 3,054,347
Accrued income 7,763,748 6,055,648
Cash and cash equivalents 13,174,471 8,311,867
22,872,158 17,421,862
Prepayments are excluded, as this analysis is required only for financial
instruments.
Financial liabilities - held at amortised cost 2021 2020
£ £
Non-current
Trade and other payables 394,850 -
Lease liabilities 3,866,352 4,655,772
4,261,202 4,655,772
Current
Current borrowings - 609,359
Lease liabilities 947,710 922,706
Trade and other payables 1,009,226 1,217,548
Pension costs 46,383 42,232
Accruals 2,339,143 2,123,733
4,342,462 4,915,578
Statutory liabilities and deferred income are excluded from the trade payables
balance, as this analysis is required only for financial instruments.
Company
Financial instruments by category 2021 2020
£ £
Financial assets - measured at amortised cost
Current
Amounts owed by Group undertakings & other receivables 2,079,936 1,940,160
Cash and cash equivalents 227,008 114,129
2,306,944 2,054,289
Financial liabilities - held at amortised cost 2021 2020
£ £
Non-current
Lease liabilities 3,416,663 4,012,028
3,416,663 4,012,028
Current
Current borrowings - 609,359
Lease liabilities 731,000 731,000
Trade and other payables 59,081 53,789
Accruals 65,951 66,830
856,032 1,460,978
There is no material difference between the book value and the fair value of
the financial assets and financial liabilities disclosed above for either the
Group or Parent Company.
There were no derivative financial instruments in existence as at 30 September
2021 (2020: £nil).
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.
Credit quality of financial assets
The credit quality of financial assets can be assessed by reference to
external credit ratings (S&P) (if available) or to historical information
about counterparty default rates:
2021 2020
£ £
Trade receivables
Group 1 838 295,153
Group 2 1,628,518 2,274,277
Group 3 68,602 118,042
1,697,958 2,687,472
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.
At the year end there are 5 customers (2020: 6 customers) with trade
receivable balances each representing in excess of 5% of the total trade
receivables of £1,697,958 (2020: £2,687,472). Of these customers, none are
categorised within Group 1 (2020: 1), 5 are within Group 2 representing 78% of
total trade receivables (2020: 5 customers), with none in Group 3 (2020:
none).
There are no trade receivables within the Parent Company.
2021 2020
£ £
Cash at bank and short-term deposits
A1 13,172,172 8,309,074
Not rated 2,299 2,793
13,174,471 8,311,867
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. All cash within the Parent
Company is within the A1 category.
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 2021 the Group had no forward foreign exchange contracts in
place (2020: none) to mitigate exchange rate exposure arising from forecast
income in US Dollars, Australian Dollars and Euros.
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 DKK BND
30 September 2021
Financial assets 361,918 2,395,709 1,355,140 898,789 2,151,192 413,787
Financial liabilities - (87,411) (5,389) (546,586) - -
Total exposure 361,918 2,308,298 1,349,751 352,203 2,151,192 413,787
AUD USD EUR INR DKK BND
30 September 2020
Financial assets 374,834 3,117,456 2,202,588 722,885 2,845,424 729,482
Financial liabilities - (101,187) (40,063) (509,071) - -
Total exposure 374,834 3,016,269 2,162,525 213,814 2,845,424 729,482
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, Indian Rupee, Danish Krone and Brunei Dollar
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 2021 AUD USD EUR INR DKK BND
Loss for the year (32,902) (209,845) (122,705) (32,018) (195,563) (37,617)
Equity total (32,902) (209,845) (122,705) (32,018) (195,563) (37,617)
30 September 2020 AUD USD EUR INR DKK BND
Loss for the year (34,076) (274,206) (196,593) (19,438) (258,675) (66,317)
Equity total (34,076) (274,206) (196,593) (19,438) (258,675) (66,317)
If the GBP had weakened against the foreign currencies by 10% then this would
have had the following impact:
30 September 2021 AUD USD EUR INR DKK BND
Gain for the year 40,213 256,478 149,972 39,134 239,021 45,976
Equity total 40,213 256,478 149,972 39,134 239,021 45,976
30 September 2020 AUD USD EUR INR DKK BND
Gain for the year 41,648 335,141 240,281 23,757 316,158 81,054
Equity total 41,648 335,141 240,281 23,757 316,158 81,054
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 and have now been repaid.
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. 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, £nil for 30
September 2021 as the bank loans have been repaid. All other variables are
held constant.
Profit for the year Equity
+1% -1% +1% -1%
30 September 2021 nil nil nil nil
30 September 2020 (11,621) 13,101 (11,621) 13,101
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 2021
Lease liabilities 926,303 931,919 2,427,264 913,750
Trade and other payables 4,615,759 394,850 - -
30 September 2020
Borrowings 614,793 - - -
Lease liabilities 913,473 936,879 2,651,816 1,644,750
Trade and other payables 3,935,503 - - -
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. In the short-term this means generating sufficient
cash to maintain the dividend policy and investment in research and
development.
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.
The Parent Company has the same approach to capital risk management, with the
additional focus of monitoring dividends up from Group companies to ensure
that sufficient reserves are in place to maintain the dividend policy.
The capital structure consists of the Group's debt facility and equity
attributable to equity holders of the parent, comprising issued capital,
reserves and retained earnings. As of the year ended 30 September 2021 the
Group's total managed capital amounted to £20,205,443 (2020: £16,635,248);
Company's capital as of 30 September 2021 was £15,781,037 (2020:
£15,518,290).
17 Share capital
2021 2020
£ £
Issued, allotted, called up and fully paid:
29,513,486 (2020: 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.
At the beginning of the year the Group held 125,012 shares in Treasury Stock.
In October 2020 125,000 of these shares were issued on the exercise of share
options. In March 2021, the Company acquired 125,000 of its own shares in the
market, at £4.10 per share, to be held as Treasury Stock to be used to
satisfy the exercise of share options. In May 2021 125,000 of these shares
were issued on the exercise of share options. At the year end there were 12
shares (2020: 125,012 shares remaining in Treasury Stock) at an average cost
of £2.10 per share (2020: £3.00).
18 Share-based payments
The Group introduced a Save as You Earn ("SAYE") share option scheme and a
Long-Term Incentive Plan ("LTIP") in 2017. The Group is required to reflect
the effects of share-based payment transactions in its statement of
comprehensive income and statement of financial position. For the purposes of
calculating the fair value of share options granted, the Black Scholes Pricing
Model has been used by the Group in respect of the SAYE schemes, the LTIP has
been fair valued using a Monte-Carlo Simulation Model. Fair values have been
calculated on the date of grant.
A new Save as You Earn ("SAYE") share option scheme and a new Long-Term
Incentive Plan ("LTIP") were introduced in 2021. A charge of £110,341 (2020:
£68,727) has been reflected in the consolidated statement of comprehensive
income, with the corresponding entry recognised within the share option
reserve.
The fair value of options granted in the current year and the assumptions used
in the calculation are shown below:
Year of grant 2021 2021 2019
Scheme SAYE LTIP SAYE
Exercise price (£) 5.92 0.005 1.092
Number of options granted 71,000 75,000 132,917
Vesting period (years) 3 years 3 to 6 years 3 years
Option life (years) 3.5 years 3 to 6 years 3.5 years
Risk free rate 0.16% 1.00% 0.50%
Volatility 35% 83% 41%
Dividend yield 3.00% 1.5% to 3% 3.00%
Fair value (£) 2.03 15.20 0.43
The share option schemes are issued by the Parent Company, therefore the
disclosures within this note cover the Group and Parent Company, the
share-based payment expense is recharged to Cerillion Technologies Limited as
this is where the option holders are employed.
In October 2020 half of the LTIP share options brought forward, being options
over 125,000 shares, were exercised, with the second half of the LTIP share
options, also being options over 125,000 shares, exercised in May 2021 with
Treasury Shares being used to settle all of the options exercised. In the
prior year Share options relating to the SAYE 2017 were exercised, with
Treasury Shares being used to settle the options exercised.
During the year options were granted as summarised in the table below:
2021 2021 2020 2020
Weighted Weighted
average average
Number of exercise Number of exercise
Options price Options price
£ £
Outstanding at start of year 382,912 0.38 555,522 0.62
Granted 146,000 2.88 - -
Expired - - - -
Exercised (250,000) (0.005) (172,610) (1.13)
Outstanding at 30 September 278,912 2.03 382,912 0.38
Exercisable at 30 September - - - -
19 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 £320,358
(2020: £313,181). At the year end the contributions payable to the scheme
were £46,383 (2020: £42,232).
20 Annual General Meeting
The Annual General Meeting is to be held on 4 February 2022. Notice of the
AGM will be despatched to shareholders with Cerillion's report and accounts.
21 Preliminary Announcement
The financial information set out in the announcement does not constitute the
Company's full statutory accounts for the years ended 30 September 2021 or
2020, which have been delivered to the Registrar of Companies. The auditors
reported on those accounts; their report was unqualified, it did not draw
attention to any matters by way of emphasis without qualifying their report
and it did not contain a statement under s498(2) or (3) Companies Act 2006.
The audit of the statutory accounts for the year ended 30 September 2021 has
been completed and the accounts will be delivered to the Registrar of
Companies before the Company's Annual General Meeting and will be available on
the Company's website at www.cerillion.com. This announcement is derived
from the statutory accounts for that year.
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