REG - Cerillion PLC - Final Results
28/11/2022 07:00
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RNS Number : 6807H Cerillion PLC 28 November 2022
28 November 2022
AIM:
CER
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.
Cerillion plc
("Cerillion" or "Company" or "Group")
Final results for the year ended 30 September 2022
Record financial performance
Group is well-placed for continued growth
Cerillion plc, the billing, charging and customer relationship management
software solutions provider, presents its annual results for the 12 months
ended 30 September 2022.
Highlights
Year ended 30 September 2022 2021 Change
Revenue £32.7m £26.1m +26%
Annualised recurring revenue(2) £12.4m £9.9m +25%
Adjusted EBITDA(4) £13.8m £10.5m +31%
Adjusted EBITDA margin 42.0% 40.3% +170bps
Adjusted profit before tax(5) £11.9m £8.5m +40%
Statutory profit before tax £10.9m £7.4m +47%
Adjusted basic earnings per share(6) 35.2p 25.5p +38%
Statutory basic earnings per share 31.7p 21.8p +45%
Total dividend per share 9.1p 7.1p +28%
Net cash £20.2m £13.2m +54%
Financial:
· Key financial performance measures reached new highs
· Revenue up 26% to a record £32.7m (2021: £26.1m), driven by major new
customer implementations and strong demand from existing customers
· Back-order book(3) reached a new high of £45.4m at the year-end (30
September 2021: £42.1m)
· Strong balance sheet with net cash up 54% to £20.2m (2021: £13.2m)
· Final dividend of 6.5p per share proposed (2021: 5.0p), bringing the
total dividend for the year to 9.1p per share (2021: 7.1p), an increase of 28%
· New customer sales pipeline up 43% to a record £209m (30 September
2021: £146m)
Operational:
· Continued expansion of new resource centres in Bulgaria and India
· Largest ever contract won in July 2022 (£15m), with Cable &
Wireless Seychelles (CWS), a full-service network operator - continued the
trend of winning bigger contracts and/or larger customers
· Gained Gold-level status for flagship BSS/OSS suite in the TM Forum's
Open API Conformance Certification program in early November 2022
· Strong pipeline of new business opportunities
· Cerillion well-positioned for further growth over the new financial
year and beyond
Louis Hall, CEO of Cerillion, commented:
"It has been another year of very strong growth and development. Reported
revenue, pre-tax profit and back-order book all reached new highs. We have
maintained our top-line growth rate of c.25% for the second year running,
building on the momentum of the last three to four years. We also secured
another record-breaking contract win, and continued to expand the business,
enlarging our resources, especially in India and Bulgaria, and enhancing our
technology.
"We start the new financial year with a very high degree of visibility over
our earnings, based on our very strong back-order book and higher level of
recurring income. The new business pipeline is very strong and includes a
number of large potential deals.
"The market backdrop remains extremely favourable. The roll-out of 5G and
digitisation, and the need to be able to react rapidly to changing market
conditions, means that telecom companies continue to drive investment in
enterprise software. These tailwinds should help to support Cerillion's
continued expansion over the longer term."
For further information please contact:
Cerillion plc c/o KTZ Communications
Louis Hall, CEO, Andrew Dickson, CFO T: 020 3178 6378
Liberum (Nomad and Broker) T: 020 3100 2000
Bidhi Bhoma, Cameron Duncan, William Hall
Singer Capital Markets (Joint Broker) T: 020 7496 3000
Rick Thompson, George Tzimas, James Fischer
KTZ Communications T: 020 3178 6378
Katie Tzouliadis, Dan Mahoney
About Cerillion
Cerillion has a 23-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,
Belgium, Singapore 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 support and maintenance, managed
service and Skyline revenue.
Note 3 Back order book consists of £37.4m of sales contracted but not
yet recognised at the end of the reporting period plus £8.0m of annualised
support and maintenance revenue. It is anticipated that 75% of the £37.4m
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 and share-based payment charge.
Note 5 Adjusted profit before tax is calculated by taking reported
profit before tax and adding back amortisation of acquired intangible assets
and share-based payment charge.
Note 6 Adjusted earnings per share is calculated by taking profit
after tax and adding back amortisation of acquired intangible assets and
share-based payment charge and is divided by the weighted average number of
shares in issue during the period.
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 26% to £32.7m year-on-year (2021: £26.1m), slightly ahead of
the 25% growth rate achieved in the last financial year. Adjusted profit
before tax rose by 40% to £11.9m (2021: £8.5m), which was significantly
better than consensus market expectations, as we reported in our trading
update in October. In addition, the back-order book increased by 8% to £45.4m
(2021: £42.1m).
New orders over the year stood at £29.4m (2021: £33.3m). While this is a
small year-on-year decrease, the total value of the new customer sales
pipeline has increased by 43% to £209.0m (2021: £146.4m) reflecting strong
on-going demand for the Company's solutions. For a second year in a row, we
signed the largest initial contract order in the Company's history, securing a
major contract worth £15.0m with Cable & Wireless Seychelles.
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 continuing strong demand from
existing customers, with orders from existing accounts at £16.7m. This
compared to £19.2m last year, which was a 105% increase on the prior year.
The continuing strong performance mainly reflected the increased presence of
larger customers in the customer base, with commensurately broader and deeper
requirements as well as larger budgets.
In order to support the significant acceleration of the Company's growth rate,
we increased our resource in our main London and Pune operations and expanded
our new base in Sofia, Bulgaria, opened in September 2021. We also
established new teams in India at Indore and Ahmedabad.
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 rise further as telecoms businesses
continue to invest in 5G and fibre rollouts and in ancillary systems, which
are essential to supporting and monetising those investments and to enabling
telecoms businesses to adapt to rapidly changing market conditions. Cerillion
remains well-placed to benefit from this, and to grow both in Europe and its
other international markets. We also expect our growth to benefit from
increasing market acceptance of SaaS-based product solutions, which lower
total cost of ownership and provide significant commercial and operational
benefits.
With the pipeline of potential new business opportunities remaining very
strong, we expect the Company to make further strong progress in the new
financial year.
Financial Overview
Total revenue for the year to 30 September 2022 rose by 26% to £32.7m (2021:
£26.1m). As is typical, existing customers (classified as those acquired
before the beginning of the reporting period) accounted for a very high
proportion of total revenue, generating 98% of the overall result (2021: 96%).
Recurring revenue, which is derived from support and maintenance and managed
service contracts, increased by 21% to £10.5m and comprised approximately 32%
of total revenue (2021: £8.6m, 33%). At 30 September 2022, recurring revenue
on an annualised basis was 25% higher year-on-year at £12.4m (30 September
2021: £9.9m), boosted by a 67% increase in annualised managed service
contract revenue (2021: 36%) 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, managed services 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 decreased by 4% to £12.9m
(2021: £13.4m). This was mainly due to the timing of licence recognition
for recent, large new customer wins where recognition will not occur until FY
2023. Software revenues accounted for 39% of total revenues (2021: 51%).
• Services revenue increased by 54% to £18.3m (2021: £11.9m). This increase
largely reflected concurrent implementation work on new customer projects won
in the prior year, as well as a strong flow of services work from live
customers. Services revenue comprised 56% of total revenue (2021: 46%).
• Third-party income doubled to £1.6m (2021: £0.8m) and comprised 5% of total
revenue (2021: 3%).
Gross margin was in line with the prior year at 77.9% (2021: 78.3%).
Operating expenses increased by 2.9% to £13.0m (2021: £12.7m). This included
a favourable year-on-year foreign exchange impact of £0.9m due to
retranslation of balance sheet items at year end. Excluding this, operating
expenses increased by 9.9%, reflecting strong focus on cost control.
Personnel costs were flat at £7.4m (2021: £7.1m), and accounted for 57%
(2021: 56%) of operating expenses.
Adjusted EBITDA for the year increased by 31% to £13.8m (2021: £10.5m),
driven mainly by higher revenues, and supported by favourable foreign exchange
rates and higher resource utilisation. 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 (2021: £1.9m). Expenditure on tangible fixed assets
was £0.6m (2021: £0.3m). Operating profit increased by 42% to £10.7m (2021:
£7.5m) due to the increase in revenue, as well as operational leverage.
Adjusted profit before tax rose by 40% to £11.9m (2021: £8.5m) and adjusted
earnings per share increased by 38% to 35.2p (2021: 25.5p). On a statutory
basis, profit before tax increased by 47% to £10.9m (2021: £7.4m) and
earnings per share increased by 45% to 31.7p (2021: 21.8p).
Cash Flow and Banking
The Group continued to generate strong cash flows, and closed the financial
year with net cash up by 54% against the same point last year to £20.2m (30
September 2021: £13.2m). This was after £2.2m of dividend payments (2021:
£1.7m). Total debt at the year-end remained £nil (2021: £nil).
Dividend
The Board is pleased to propose a 30% increase in the final dividend to 6.5p
per share (2021: 5.0p). Together with the interim dividend of 2.6p per share
(2021: 2.1p), this brings the total dividend for the year to 9.1p per share
(2021: 7.1p), an increase of 28%.
The dividend, which is subject to shareholder approval at the Company's Annual
General Meeting to be held on 2 February 2023, will become payable on 8
February 2023 to those shareholders on the Company's register as at the close
of business on the record date of 30 December 2022. The ex-dividend date is
29 December 2022.
Operational and Market Overview
Whilst the coronavirus pandemic is no longer directly affecting business
operations, the global experience of 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. Over the year, we continued to see
high levels of investment in the sector in general, and an acceleration of
investment in 5G and fibre rollouts, with spending trickling down from core
network improvements to ancillary system upgrades and replacements. We
expect to see these trends continue.
In addition, as the global cost of living crisis begins to bite, we anticipate
increasing pressure on telcos to find efficiencies in their digital
real-estate. This is likely to encourage further market take-up of
product-based SaaS solutions, which Cerillion offers, rather than the more
bespoke solutions available from more traditional vendors. 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 offerings. These include:
- the acceleration of digital investments, initially driven by the
pandemic as a necessity to ensure continuity of services, but now increasingly
a requirement to improve the customer experience. This means that
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 in order 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 and change business processes to address
new market opportunities, from the complexities of B2B/enterprise use cases to
the simplest of digital subscription services;
- the need for CSPs to be able to respond rapidly to changing
conditions in their markets, which fully integrated BSS/OSS product solutions
enable, heightened by current inflationary pressures and other macro-economic
drivers; 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. As well as 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.
In July 2022, the Company announced a major new contract win with Cable &
Wireless Seychelles ("CWS"), the main telecoms provider in the Seychelles.
This latest win is the Company's largest initial contract agreement to date,
and further enhances the Cerillion brand in the marketplace. We expect the
general trend towards signing bigger deals with larger new customers to
continue. These contracts normally involve higher recurring revenues and there
is a much greater upsell opportunity as well. Therefore they contribute
significantly to the ongoing growth of the business. As mentioned previously,
these larger contracts typically have a longer sales cycle than smaller ones.
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 2022 was up by 8% to an all-time record of £45.4m (2021: £42.1m).
This means that the Company has started the new financial year with far
greater visibility of revenues than any previous year.
As we grow across the globe, and global labour markets evolve, we will
continue to expand our operating locations, recruiting the best talent
cost-effectively and supporting our expanding global customer base. We
continued to build our teams at our new locations in Sofia, Bulgaria and at
Ahmedabad and Indore in India and maintain a mix of remote and office-based
working. The competition for technology professionals remained strong during
most of the financial year, however, we believe that we have seen a peak in
demand at our main operating locations and consequently expect those pressures
to ease a little during the new financial year. Nevertheless, we remain
focused on potential inflation in people costs and intend to continue to
manage carefully the mix and location of resource.
We continued to invest in R&D over the year, enhancing our technology and
providing two major new releases of our product set as scheduled. The most
recent of these releases was Cerillion 22.2, which went live in early November
2022. The focus of this release was a major upgrade of the 'Wholesale
Gateway' module. This module supports the automation of the wholesale
operations of network operators ("NetCos"), and the upgraded version speeds up
the on-boarding process of new service provider partners ("ServCos"). It also
simplifies the integration of business support systems between NetCos and
ServCos, whilst providing a high level of security for NetCos through a
dedicated authorisation layer and comprehensive API (application programming
interfaces) management policies.
In early November 2022, we were delighted to gain Gold-level status for the
Company's BSS/OSS suite in the TM Forum's Open API Conformance Certification
program. Achieving this level underlines Cerillion's commitment to delivering
open and standards-based products in accordance with the TM Forum's Open API
& Open Digital Architecture Manifesto, and puts Cerillion at the forefront
of adoption.
Outlook
The Company continues to grow strongly, and the Cerillion brand is gaining
visibility in what is a huge marketplace.
Looking ahead, we are well-placed to deliver another strong performance in the
new financial year, supported by a record order book. The new customer sales
pipeline is also at a record high and contains large deal opportunities.
Cerillion's financial position is very robust. The Company continues to
generate strong cash flows, maintains significant net cash, and recurring
income is rising. We are therefore well-placed to support ongoing growth,
including taking advantage of any suitable acquisitions opportunities as they
arise.
The long-term trend of telecoms companies increasing investment in their
networks and in digital transformation remains entrenched. This should
continue to benefit Cerillion's own long-term 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 2022
Year to Year to
30 September 2022
30 September 2021
Notes £ £
Revenue 2 32,726,049 26,070,815
Cost of sales (7,221,383) (5,662,228)
Gross profit 25,504,666 20,408,587
Operating expenses (13,030,714) (12,657,720)
Impairment losses on financial assets 3 (1,770,011) (226,852)
Adjusted EBITDA* 13,750,055 10,515,283
Depreciation and amortisation (2,985,649) (2,880,927)
Share-based payment charge 18 (60,465) (110,341)
Operating profit 3 10,703,941 7,524,015
Finance income 4 336,986 66,810
Finance costs 5 (145,623) (163,982)
Profit before taxation 10,895,304 7,426,843
Taxation 6 (1,551,125) (999,748)
Profit for the year 9,344,179 6,427,095
Other comprehensive income/(expense)
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign 70,238 (120,093)
operations
Total comprehensive income for the year
9,414,417 6,307,002
Earnings per share
Basic earnings per share - continuing and total operations 8 31.7 pence 21.8 pence
Diluted earnings per share - continuing and total operations
31.6 pence 21.7 pence
All transactions are attributable to the owners of the parent.
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 and share-based payment charge.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2022
2022 2021
Notes £ £
ASSETS
Non-current assets
Goodwill 9 2,053,141 2,053,141
Other intangible assets 9 2,653,225 3,571,787
Property, plant and equipment 10 979,880 758,670
Right-of-use assets 11 3,056,997 3,705,723
Trade and other receivables 13 2,171,377 2,015,422
Deferred tax assets 12 259,625 209,211
11,174,245 12,313,954
Current assets
Trade and other receivables 13 11,204,221 10,178,628
Cash and cash equivalents 16 20,249,100 13,174,471
31,453,321 23,353,099
TOTAL ASSETS 42,627,566 35,667,053
LIABILITIES
Non-current liabilities
Trade and other payables 14 (934,439) (394,850)
Lease liabilities 11 (3,049,538) (3,866,352)
Deferred tax liabilities 12 (718,671) (861,765)
(4,702,648) (5,122,967)
Current liabilities
Trade and other payables 14 (10,216,453) (9,390,933)
Lease liabilities 11 (976,486) (947,710)
(11,192,939) (10,338,643)
TOTAL LIABILITIES (15,895,587) (15,461,610)
NET ASSETS 26,731,979 20,205,443
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Ordinary share capital 17 147,567 147,567
Share premium account 13,318,725 13,318,725
Treasury stock 17 (25) (25)
Share option reserve 136,958 128,130
Foreign exchange reserve (96,836) (167,074)
Retained earnings 13,225,590 6,778,120
TOTAL EQUITY 26,731,979 20,205,443
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2022
2022 2021
Notes £ £
Cash flows from operating activities
Profit for the year 9,344,179 6,427,095
Adjustments for:
Taxation 6 1,551,125 999,748
Finance income 4 (336,986) (66,810)
Finance costs 5 145,623 163,982
Share option charge 18 60,465 110,341
Depreciation 10,11 1,084,581 1,007,265
Amortisation 9 1,901,068 1,873,661
13,750,055 10,515,282
Increase in trade and other receivables (1,181,548) (238,364)
Increase/(decrease) in trade and other payables 1,323,530 (84,435)
Cash generated from operations 13,892,037 10,192,483
Finance costs 5 (145,623) (163,982)
Finance income 4 336,986 66,810
Tax paid (1,745,872) (293,076)
NET CASH GENERATED FROM OPERATING ACTIVITIES 12,337,528 9,802,235
Cash flows from investing activities
Capitalisation of intangible assets 9 (982,506) (970,212)
Purchase of property, plant and equipment 10 (626,206) (301,686)
NET CASH USED IN INVESTING ACTIVITIES (1,608,712) (1,271,898)
Cash flows from financing activities
Borrowings repaid - (609,359)
Purchase of treasury stock (827,424) (512,500)
Receipts from exercise of share options 122,102 1,249
Principal elements of finance leases 11 (806,706) (764,416)
Dividends paid 7 (2,243,024) (1,726,538)
NET CASH USED IN FINANCING ACTIVITIES (3,755,052) (3,611,564)
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,973,764 4,918,773
Translation differences 100,865 (56,169)
Cash and cash equivalents at beginning of year 13,174,471 8,311,867
CASH AND CASH EQUIVALENTS AT END OF YEAR
20,249,100 13,174,471
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2022
Ordinary share capital Share premium account 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)
Ordinary share capital Share premium account Treasury stock Share option reserve Foreign exchange reserve Retained earnings Total
£ £ £ £ £ £ £
Balance at 1 October 2021 147,567 13,318,725 (25) 128,130 (167,074) 6,778,120 20,205,443
Profit for the year - - - - - 9,344,179 9,344,179
Other comprehensive income:
Exchange differences on translating foreign operations - - - - 70,238 - 70,238
Total comprehensive income - - - - 70,238 9,344,179 9,414,417
Transactions with owners:
Share option charge - - - 60,465 - - 60,465
Purchase of treasury stock - - (827,424) - - - (827,424)
Exercise of share options - - 827,424 (51,637) - (653,685) 122,102
Dividends - - - - - (2,243,024) (2,243,024)
Total transactions with owners - - - 8,828 - (2,896,709) (2,887,881)
Balance as at 30 September 2022 147,567 13,318,725 13,225,590 26,731,979
(25) 136,958 (96,836)
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 effort 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. Refer to notes 13 and 16.
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.
2022 2021
£ £
Revenue
Services 18,271,756 11,863,628
Software 9,853,954 11,340,625
Software-as-a-Service 3,005,913 2,057,655
Third-party 1,594,426 808,907
Total revenue 32,726,049 26,070,815
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 £19,928,729 (2021:
£12,703,901).
Accounting policies
Year ended 30 September 2022 (i) (ii) (iii) (iv) Total
£ £ £ £ £ £
Services 18,271,756
implementation fees 6,597,495 - - - 6,597,495
ongoing account development work - - 11,674,261 - 11,674,261
Software 9,853,954
initial licence fees 764,858 - - - 764,858
sale of additional licences - 1,611,694 - - 1,611,694
ongoing maintenance and support fees 7,477,402 - - - 7,477,402
Software-as-a-Service 3,005,913 3,005,913 - - - 3,005,913
Third-Party 1,594,426 - - - 1,594,426 1,594,426
Total 32,726,049 17,845,668 1,611,694 11,674,261 1,594,426 32,726,049
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
(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:
UK & Europe MEA Americas Asia Pacific
£ £ £ £
Year ended/As at 30 September 2022
Revenue - by customer location 20,389,431 3,165,818 7,937,599 1,233,201
Capital expenditure 1,548,273 - - 60,439
Non-current assets 10,496,433 - - 677,812
Total assets 41,099,603 - - 1,527,963
Net assets 26,519,367 - - 212,612
UK & Europe MEA Americas Asia Pacific
£ £ £ £
Year ended/As at 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)
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 2022 2021
segment £ £
Customer
No. 1 Europe 4,817,806 2,708,264
No. 2 Americas 3,417,612 555,716
No. 3 UK 3,400,054 5,195,842
3 Operating profit
2022 2021
£ £
Operating profit is stated after (crediting)/charging:
Employee benefits expenses 13,943,441 12,602,628
Depreciation 1,084,581 1,007,265
Amortisation of intangibles 1,901,068 1,873,662
Research and development costs 385,449 395,731
Bad debt expense 1,770,011 226,852
Foreign exchange (gains)/losses (366,693) 494,903
Operating leases 157,089 125,834
Fees payable to Cerillion's principal auditors:
- Audit of Cerillion plc's annual financial statements 14,300 13,000
- Audit of subsidiaries 80,300 73,000
- Non-audit services - tax services 81,474 38,430
- Non-audit services - other services 4,278 -
Fees payable to associates of principal auditors:
- Audit of subsidiaries 9,000 7,500
Other costs 2,957,810 1,687,995
Total cost of sales, operating expenses and impairment losses on financial 22,022,108 18,546,800
assets
The bad debt expense relates to the provisions made against the risk of
non-recovery of receivables. The increase during the year is predominantly due
to an assessment over certain implementation work that may not be fully
recoverable.
4 Finance income
2022 2021
£ £
Finance income:
Bank interest receivable 74,922 1,855
Unwinding discount of contracts with significant financing component 262,064 64,955
336,986 66,810
5 Finance costs
2022 2021
£ £
Finance costs:
Interest payable in respect of loans - (5,347)
Interest and finance charges for lease liabilities (133,944) (158,341)
Other interest payable (11,679) (294)
(145,623) (163,982)
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:
2022 2021
£ £
Current tax expense - UK 1,524,372 799,160
Current tax - adjustment in respect of prior year 1,159 -
Current tax expense - overseas 197,158 293,076
Current tax expense - total 1,722,689 1,092,236
Deferred tax credit (153,541) (92,336)
Deferred tax - adjustment in respect of prior year (18,023) (152)
Deferred tax credit - total (171,564) (92,488)
Total tax charge 1,551,125 999,748
(b) Factors affecting total tax for the year
The tax assessed for the year is lower (2021: lower) than the standard rate of
corporation tax in the United Kingdom 19.0% (2021: 19.0%). The differences are
explained as follows:
Profit on ordinary activities before tax 10,895,304 7,426,843
Profit on ordinary activities multiplied by standard rate of corporation tax 2,070,108 1,411,100
in the United Kingdom of 19.0% (2021: 19.0%)
Effect of:
Expenses not deductible for tax purposes 257,001 219,344
Non-taxable income for tax purposes - (180,158)
Difference in tax rates 15,256 64,625
Other temporary differences (51,606) 28,310
Foreign tax - other (8,434) 78,760
Prior year tax adjustment 1,159 -
Prior year tax adjustment - deferred tax (18,023) (152)
Other permanent differences - relating to share options (134,604) (168,464)
Enhanced relief for research and development (579,732) (453,617)
Total tax charge 1,551,125 999,748
There are currently no recognised or unrecognised deferred tax assets or
liabilities within the Parent Company financial statements. In the Spring
Budget 2021, the Government announced that from 1 April 2023 the main rate of
UK corporation tax rate will increase from 19% to 25%. This new rate was
substantively enacted on 24 May 2021 and therefore its impact has been
reflected in the measurement of deferred taxes in the financial statements.
7 Dividends
(a) Dividends paid during the reporting period
The Board paid the final dividend in respect of 2021 of 5.0p per share, on 8
February 2022, and declared and paid an interim 2022 dividend of 2.6p (2021:
2.1p) per share on 17 June 2022. Total dividends paid during the reporting
period were £2,243,024 (2021: £1,726,538).
(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 6.50p per fully paid Ordinary Share
(2021: 5.00p). The aggregate amount of the proposed dividend expected to be
paid out of retained earnings at 30 September 2022, but not recognised as a
liability at the year end is £1,918,377 (2021: £1,475,674). 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.
2022 2021
Profit attributable to equity holders of the Company (£) 9,344,179 6,427,095
Weighted average number of Ordinary Shares in issue (number) 29,513,486 29,513,486
Less weighted average number of shares held in Treasury (10,627) (30,149)
Weighted average number of Ordinary Shares in issue (number) 29,502,859 29,483,337
Effect of share options in issue 56,858 105,886
Weighted average shares for diluted earnings per share 29,559,717 29,589,223
Basic earnings per share (pence per share) 31.7 21.8
Diluted earnings per share (pence per share) 31.6 21.7
9 Intangible assets
Group Goodwill Purchased customer contracts Intellectual property rights Software development costs External Total
software licences
£ £ £ £ £ £
Cost
At 1 October 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
Additions - - - 965,427 17,079 982,506
At 30 September 2022 2,053,141 4,382,654 2,567,160 6,219,417 269,546 15,491,918
Amortisation
At 1 October 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
Provided in the year - 626,093 366,737 884,620 23,618 1,901,068
At 30 September 2022 - 4,069,605 2,383,791 4,087,679 244,477 10,785,552
Net book amount at 30 September 2022 2,053,141 313,049 183,369 2,131,738 25,069 4,706,366
Net book amount at 2,053,141 939,142 550,106 2,050,931 31,608 5,624,928
30 September 2021
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 (2021: £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 2022, 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.
10 Property plant and equipment
Group Leasehold improvements Computer equipment Fixtures and fittings Total
£ £ £ £
Cost
At 1 October 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
Additions - 623,708 2,498 626,206
Disposals - (58,724) - (58,724)
Exchange difference 27,628 23,795 10,283 61,706
At 30 September 2022 758,484 2,193,499 306,909 3,258,892
Accumulated Depreciation
At 1 October 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
Provided in the year 71,653 335,121 5,003 411,777
Disposals - (58,724) - (58,724)
Exchange difference 23,430 21,252 10,243 54,925
At 30 September 2022 470,912 1,505,814 302,286 2,279,012
Net book amount at 30 September 2022 287,572 687,685 4,623 979,880
Net book amount at 355,027 396,555 7,088 758,670
30 September 2021
All depreciation charges are included within operating expenses and no
impairment has been charged.
There were no property, plant and equipment assets owned by the Parent
Company.
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 2022 30 September 2021 30 September 2022 30 September 2021
Right-of-use assets £ £ £ £
Properties 3,043,937 3,705,723 2,656,147 3,162,079
IT Equipment 13,060 - - -
3,056,997 3,705,723 2,656,147 3,162,079
Group Company
30 September 2022 30 September 2021 30 September 2022 30 September
Lease liabilities £ £ £ 2021
£
Current 976,486 947,710 731,000 731,000
Non-current 3,049,538 3,866,352 2,803,234 3,416,663
4,026,024 4,814,062 3,534,234 4,147,663
Additions to the right-of-use assets during the 2022 financial year were
£130,538 (2021: £nil). There were lease disposals during the year with net
book value totalling £106,460 (2021: £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 2022 30 September 2021
Depreciation charge of right-of-use assets £ £
Properties 672,431 677,604
IT Equipment 373 5,848
672,804 683,452
Interest expense (included in finance cost) 133,944 158,341
Expense relating to short-term leases (included in operating expenses) 156,681 120,674
Expenses relating to low value assets that are not shown above as short-term 408 5,160
leases (included in operating expenses)
The total cash outflow for leases in 2022 was £940,650 (2021: £922,757).
The property within the Company had a depreciation charge for the year of
£505,932 (2021: £505,932).
12 Deferred tax
Deferred tax asset
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
Group Accelerated capital allowances Other temporary differences Total
£ £ £
1 October 2021 20,990 188,221 209,211
Foreign exchange movement on opening deferred tax asset 2,683 19,261 21,944
Credited to statement of comprehensive income 1,742 26,728 28,470
30 September 2022 25,415 234,210 259,625
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.
2022 2021
£ £
At 1 October 861,765 883,823
Debited to statement of comprehensive income in respect of net ACAs & 45,544 166,580
other temporary differences
Credited to statement of comprehensive income in respect of acquisitions (188,638) (188,638)
As at 30 September 718,671 861,765
There are no deferred tax assets or deferred tax liabilities recognised within
the Parent Company as at 30 September 2022 (2021: £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
2022 2021
£ £
Trade receivables 2,502,608 1,697,958
Contract assets 9,853,285 9,709,419
Contract liabilities 4,612,511 4,775,174
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 years of £4,104,520
(2021: £4,700,894).
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 £225,869 (2021:
£209,762). The total amount of accrued costs to acquire a contract are
£304,597 (2021: £242,916).
The total amount of revenue allocated to unsatisfied performance obligations
is £37,420,003 (2021: £34,853,478). It is estimated that 75% will be
recognised over the next 18 months, the remainder over the following years
thereafter.
There are no contract balances within the Parent Company (2021: £nil).
Current receivables Group Company
2022 2021 2022 2021
£ £ £ £
Trade receivables 2,502,608 1,697,958 - -
Accrued income 7,758,649 7,763,748 - -
Amounts owed by Group undertakings - - 2,058,502 2,079,936
Other receivables 311,229 235,981 - -
Prepayments 631,735 480,941 7,726 7,811
11,204,221 10,178,628 2,066,228 2,087,747
Non-current receivables Group Company
2022 2021 2022 2021
£ £ £ £
Accrued income 2,094,636 1,945,671 - -
Other receivables 76,741 69,751 - -
2,171,377 2,015,422 - -
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:
2022 2021
£ £
Group
Trade receivables 2,744,317 2,121,287
Specific provision (193,501) (201,827)
ECL reserve (231,841) (221,502)
2,318,975 1,697,958
The ECL Provision above includes an amount relating to accrued income of
£183,633 (2021: nil).
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.
Movements in the provision for the impairment of trade receivables were as
follows:
Specific Provision ECL provision
£ £
Balance at the beginning of the year 201,827 221,502
Charged/(released) for the year 149,165 48,208
Utilised for the year (157,491) (221,502)
Balance at the end of the year 193,501 48,208
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.
2022 2021
£ £
Group
Not past due 1,713,716 1,104,013
Up to 3 months 734,637 463,995
3 to 6 months 5,994 102,174
Older than 6 months 48,261 27,776
2,502,608 1,697,958
Of the trade debt older than 6 months as at 30 September 2022, being £48,261
(2021: £27,776), cash of £7,689 (2021: £nil) has been received since the
year end.
The following is an ageing analysis of those trade receivables that were
individually considered to be impaired:
2022 2021
£ £
Group
Not past due 33,011 141,696
Up to 3 months 14,152 219,203
3 to 6 months 150,259 29,574
Older than 6 months 44,287 32,856
241,709 423,329
1
14 Trade and other payables
Current trade and other payables Group Company
2022 2021 2022 2021
£ £ £ £
Trade payables 1,154,204 490,055 96,657 59,081
Taxation 775,977 799,160 919 446
Other taxation and social security 494,638 421,847 64,254 74,227
Pension contributions 46,263 46,383 - -
Other payables 381,669 519,171 - -
Accruals 3,118,656 2,339,143 74,340 65,951
Deferred income 4,245,046 4,775,174 - -
10,216,453 9,390,933 236,170 199,705
Movements in the provisions, which are included within accruals above, were as
follows:
Dilapidations Provision
£
Balance at the beginning of the year 94,310
Charged/(released) for the year 23,579
Balance at the end of the year 117,889
The dilapidations provision relates to the full expected cost of dilapidations
across the Group's properties.
Non-current trade and other payables Group Company
2022 2021 2022 2021
£ £ £ £
Other payables 566,974 394,850 - -
Deferred income 367,465 - - -
934,439 394,850 - -
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
2022 2021 2022 2021
Discount rate 7.50% 6.20% 7.50% 5.10%
Salary increment rate 15.00% 15.00% 15.00% 15.00%
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
2022 2021 2022 2021
£ £ £ £
Current liabilities:
Secured loans - - - -
Lease liabilities 976,486 947,710 731,000 731,000
Non-current liabilities:
Lease liabilities 3,049,538 3,866,352 2,803,234 3,416,663
4,026,024 4,814,062 3,534,234 4,147,663
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 prior year.
Group and Company Non-current Borrowings Current Borrowings
Total
£ £ £
1 October 2021 - - -
Cash-flows:
Repayment - - -
30 September 2022 - - -
Non-current Borrowings Current Borrowings
Total
Group and Company £ £ £
1 October 2020 - 609,359 609,359
Cash-flows:
Repayment - (609,359) (609,359)
30 September 2021 - - -
Group Non-current Lease liabilities Current Lease liabilities
Total
£ £ £
1 October 2021 3,866,352 947,710 4,814,062
Cash-flows:
Repayment - (940,650) (940,650)
Accrued interest - 133,944 133,944
Non-cash:
Additions - 125,128 125,128
Foreign exchange revaluation - (106,460) (106,460)
Reclassification (816,814) 816,814 -
30 September 2022 3,049,538 976,486 4,026,024
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
Company Non-current Lease liabilities Current Lease liabilities
Total
£ £ £
1 October 2021 3,416,663 731,000 4,147,663
Cash-flows:
Repayment - (731,002) (731,002)
Accrued interest - 117,573 117,573
Non-cash:
Reclassification (613,429) 613,429 -
30 September 2022 2,803,234 731,000 3,534,234
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
16 Financial instruments and risk management
Group - Financial instruments by category 2022 2021
£ £
Financial assets - measured at amortised cost
Non-current
Accrued income 2,094,636 1,945,671
Other receivables 76,741 69,751
2,171,377 2,015,422
Current
Trade and other receivables 2,813,837 1,933,939
Accrued income 7,758,649 7,763,748
Cash and cash equivalents 20,249,100 13,174,471
30,821,586 22,872,158
Prepayments are excluded, as this analysis is required only for financial
instruments.
Financial liabilities - held at amortised cost 2022 2021
£ £
Non-current
Trade and other payables 566,974 394,850
Lease liabilities 3,049,538 3,866,352
3,616,512 4,261,202
Current
Lease liabilities 976,486 947,710
Trade and other payables 1,535,873 1,009,226
Pension costs 46,263 46,383
Accruals 3,118,656 2,339,143
5,677,278 4,342,462
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 2022 2021
£ £
Financial assets - measured at amortised cost
Current
Amounts owed by Group undertakings & other receivables 2,058,502 2,079,936
Cash and cash equivalents 289,141 227,008
2,347,643 2,306,944
Financial liabilities - held at amortised cost 2022 2021
£ £
Non-current
Lease liabilities 2,803,234 3,416,663
2,803,234 3,416,663
Current
Lease liabilities 731,000 731,000
Trade and other payables 96,657 59,081
Accruals 74,340 65,951
901,997 856,032
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
2022 (2021: £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:
2022 2021
£ £
Trade receivables
Group 1 25,838 838
Group 2 2,466,259 1,628,518
Group 3 10,511 68,602
2,502,608 1,697,958
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 4 customers (2021: 5 customers) with trade
receivable balances each representing in excess of 5% of the total trade
receivables of £2,502,608 (2021: £1,697,958). Of these customers, none are
categorised within Group 1 (2021: none), 4 are within Group 2 representing 86%
of total trade receivables (2021: 5 customers), with none in Group 3 (2021:
none).
There are no trade receivables within the Parent Company.
2022 2021
£ £
Cash at bank and short-term deposits
A1 20,245,806 13,172,172
Not rated 3,294 2,299
20,249,100 13,174,471
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), Danish Krone
(DKK) 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 2022 the Group had no forward foreign exchange contracts in
place (2021: none) to mitigate exchange rate exposure.
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 2022
Financial assets 338,844 1,341,281 3,552,826 1,109,776 1,855,143 227,480
Financial liabilities - (154,998) (3,167) (980,546) - -
Total exposure 338,844 1,186,283 3,549,659 129,230 1,855,143 227,480
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
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. The sensitivity
analysis is based on the Group's foreign currency financial instruments held
at each reporting date.
If the GBP had strengthened against the foreign currencies by 10% then this
would have had the following impact:
30 September 2022 AUD USD EUR INR DKK BND
Loss for the year (30,804) (107,844) (322,696) (11,748) (168,649) (20,680)
Equity total (30,804) (107,844) (322,696) (11,748) (168,649) (20,680)
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)
If the GBP had weakened against the foreign currencies by 10% then this would
have had the following impact:
30 September 2022 AUD USD EUR INR DKK BND
Gain for the year 37,649 131,809 394,407 14,359 206,127 25,276
Equity total 37,649 131,809 394,407 14,359 206,127 25,276
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
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
The loans taken out with HSBC to facilitate the purchase of shares prior to
the Admission on AIM and have now been repaid, as disclosed in note 18.
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.
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 2022
Lease liabilities 977,375 958,275 2,223,696 182,750
Trade and other payables 5,971,407 566,974 - -
30 September 2021
Lease liabilities 926,303 931,919 2,427,264 913,750
Trade and other payables 4,615,759 394,850 - -
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 equity attributable to equity
holders of the parent, comprising issued capital, reserves and retained
earnings. As of the year ended 30 September 2022 the Group's total managed
capital amounted to £26,731,979 (2021: £20,205,443); Company's capital as of
30 September 2022 was £15,892,683 (2021: £15,781,037).
17 Share capital
2022 2021
£ £
Issued, allotted, called up and fully paid:
29,513,486 (2021: 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 12 shares in Treasury Stock. In
February 2022, the Company acquired 111,814 of its own shares in the market,
at £7.40 per share, to be held as Treasury Stock to be used to satisfy the
exercise of share options. In March to August 2022 111,814 of these shares
were issued on the exercise of share options. At the year end there were 12
shares (2021: 12 shares remaining in Treasury Stock) at an average cost of
£2.10 per share (2021: £2.10).
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 and additional options were
granted during the year ended 30 September 2022 under the LTIP. A charge of
£60,465 (2021: £110,341) 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 and prior year and the
assumptions used in the calculation are shown below:
Year of grant 2022 2021 2021
Scheme LTIP SAYE LTIP
Exercise price (£) 0.005 5.92 0.005
Number of options granted 15,000 71,000 75,000
Vesting period (years) 3 to 4 years 3 years 3 to 6 years
Option life (years) 3 to 4 years 3.5 years 3 to 6 years
Risk free rate 1.75% 0.16% 1.00%
Volatility 109% 35% 83%
Dividend yield 1% to 2% 3.00% 1.00%
Fair value (£) 9.45 2.03 4.39
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.
The SAYE 2019 scheme matured during the year and 111,814 share options were
exercised, with Treasury Shares being used to settle all of the options
exercised. In the prior year share options relating to the LTIP 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:
2022 2022 2021 2021
Weighted Weighted
average average
Number of exercise Number of exercise
Options price Options price
£ £
Outstanding at start of year 278,912 2.03 382,912 0.38
Granted 15,000 0.005 146,000 2.88
Lapsed (28,090) (2.29) - -
Exercised (111,814) (1.092) (250,000) (0.005)
Outstanding at 30 September 154,008 2.46 278,912 2.03
Exercisable at 30 September - - - -
For the options outstanding at 30 September 2022, the weighted average fair
values and the weighted average remaining contractual lives (being the time
period from 30 September 2022 until the lapse date of each share option) are
set out below:
Weighted average fair value of options outstanding Weighted average remaining contractual life
£ Years
LTIP 2021 4.39 4.49
SAYE 2021 2.03 2.34
LTIP 2022 9.45 5.41
19 Retirement benefits
The Group operates a 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 £329,901 (2021: £320,358).
At the year end the contributions payable to the scheme were £46,263 (2021:
£46,383).
20 Annual General Meeting
The Annual General Meeting is to be held on 2 February 2023. 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 2022 or
2021, 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 2022 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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