REG - Cerillion PLC - Final Results
20/11/2023 07:00
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RNS Number : 8990T Cerillion PLC 20 November 2023
AIM: CER
Cerillion plc
("Cerillion" or "Company" or "Group")
Final results for the year ended 30 September 2023
Record financial performance
Strong platform 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 2023.
Highlights
Year ended 30 September 2023 2022 Change
Revenue £39.2m £32.7m +20%
Annualised recurring revenue(2) £14.8m £12.4m +19%
Adjusted EBITDA(4) £18.1m £13.8m +32%
Adjusted EBITDA margin 46.2% 42.0% +420bps
Adjusted profit before tax(5) £16.8m £11.9m +41%
Statutory profit before tax £16.1m £10.9m +48%
Adjusted basic earnings per share(6) 46.2p 35.2p +31%
Statutory basic earnings per share 43.8p 31.7p +38%
Total dividend per share 11.3p 9.1p +24%
Net cash £24.7m £20.2m +22%
Financial:
· A record year across key financial performance measures
· Revenue up 20% to a record £39.2m (2022: £32.7m), driven by major new
customer implementations, significant licence revenue and strong demand from
existing customers
· Annualised recurring revenue up 19% to £14.8m (2022: £12.4m)
· Back-order book(3) at £45.4m at the financial year-end (30 September
2022: £45.4m); now at a record £52.5m following the recent €12.4m contract
win with a new European Tier-1 customer
· New customer sales pipeline(7) up 16% to a record £243m at 30 September
2023 (30 September 2022: £209m)
· Strong balance sheet with net cash up 22% to £24.7m (30 September 2022:
£20.2m)
· Final dividend of 8.0p per share proposed (2022: 6.5p), bringing the
total dividend for the year to 11.3p per share (2022: 9.1p), an increase of
24%
Operational:
· Major new implementation covering mobile services completed for
Telesur in H2; second phase covering its fixed-line network is now under way
· Record orders of £30.8m to existing customers, up by 85% year-on-year
- reflects the benefits of recent larger customer wins and includes
major new contract worth £15.1m signed in H2
· Continued expansion of newer resource centres in Bulgaria and India,
and sales team presence added in the USA
· AI-based functionality introduced in latest product release, issued in
November 2023
· Pipeline of new business opportunities stands at a record high and
includes larger potential contracts
· Cerillion well-positioned for further growth in FY24 and beyond
Louis Hall, CEO of Cerillion plc, commented:
"It has been another year of strong growth and development. Revenue, pre-tax
profit, and the new customer sales pipeline all reached new highs. Record
orders to existing customers - some 79% of total revenue for the year - shows
the importance of our existing customer base, and the recent closure of a
€12.4m deal with a Tier-1 telco is another demonstration of our widening
market appeal.
"We continued to invest in our product set, introducing AI for the first time,
and also expanded our resource base, particularly at our newer centres in
Ahmedabad, Indore and Sofia.
"The market backdrop remains extremely favourable. Numerous factors continue
to drive telco investment in the enterprise software layer that connects their
network infrastructure to their customers and allows them to enhance
monetisation of their network infrastructure assets. In a slower growth
environment for telcos, the need to extract more revenue from existing assets
and improve operational efficiency are just as important drivers for improving
or replacing the enterprise software layer as investment in new 5G and fibre
infrastructure.
"Cerillion's financial position remains very strong, supported by significant
net cash, increasing levels of recurring income and strong cash generation.
Together with a record back-order book and strong new customer sales pipeline,
this leaves us confident about Cerillion's growth prospects in the new
financial year and beyond."
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, Ben Cryer, Matthew Hogg
Singer Capital Markets (Joint Broker) T: 020 7496 3000
Rick Thompson, James Fischer
KTZ Communications T: 020 3178 6378
Katie Tzouliadis, Robert Morton
About Cerillion
Cerillion has a 24-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 also has operations in India and Bulgaria.
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 £36.7m of sales contracted but not
yet recognised at the end of the reporting period plus £8.7m of annualised
support and maintenance revenue. It is anticipated that c. 45% of the
£36.7m of sales contracted but not yet recognised as at the end of the
reporting period will be recognised within the next 12 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.
Note 7 New Customer Sales Pipeline is the total, unweighted value of all
qualified sales prospects.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Cerillion continues to perform very strongly and financial results for the
year have set new record highs on key measures. Revenue increased by 20%
year-on-year to a record £39.2m (2022: £32.7m), and adjusted profit before
tax rose by 41% to a new high of £16.8m (2022: £11.9m), which was
meaningfully ahead of the prior consensus market forecast, as reported in our
October trading update. At financial year-end, the total value of our new
customer sales pipeline had increased by 16% to a record £243m (2022:
£209m), which reflects the growing demand that we are seeing in the
marketplace.
This excellent performance was achieved against slower economic growth
globally. We believe that this backdrop is likely to stimulate market
interest in our product-based SaaS solutions as telcos seek to maximise
investment returns on critical 5G and fibre infrastructure, as well as on
existing infrastructure assets and comment further on this below.
New orders for the financial year under review increased slightly to £31.6m
(2022: £29.4m), and the new financial year has started strongly with a major
new contract worth approximately €12.4m signed with a new Tier-1 customer.
It is worth noting that key criteria in the selection process were the
commercial, operational and financial advantages of our 'out-of-the-box'
product model, and especially the ease with which our software enables new
products and packages to be created and launched by our customers to their
end-customers. Our highly-configurable, 'out-of-the-box' product solution
enables much lower total cost of ownership and much faster time-to-market than
the traditional best-of-breed or bespoke approaches.
The recent Tier-1 new customer signing continues a trend towards winning
larger customers. As we have previously commented, this has multiple
benefits. In addition to providing further proof points of the quality of our
product offering, larger customers typically generate higher income over the
long-term since they are generally more active, with broader and deeper
requirements and larger budgets. Larger deals also typically have a higher
software licence element and therefore tend to be margin enhancing.
New orders from existing accounts increased by 85% year-on-year to £30.8m
(2022: £16.7m). This substantial uplift mainly reflected the presence of the
larger customers that we have signed in recent years, but it was also driven
by some large deals with a number of smaller customers.
In order to support the significant acceleration of the Company's growth rate,
we have continued to increase resources in our main operations in India and
Bulgaria. We also added new sales presence in the USA, Belgium and Singapore
over the year.
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 driven by a very broad range of factors.
These include the need to: realise greater value from existing
infrastructure assets; improve operational efficiency; adapt rapidly to
changing market conditions; and maximise value from new infrastructure
investments in 5G and fibre rollouts. Cerillion remains well-placed to benefit
from these drivers, and to grow, both in Europe and internationally. We also
expect to gain from increasing market acceptance of SaaS-based product
solutions.
The pipeline of potential new business opportunities is very strong, and the
Company is well-positioned to make further strong progress in the new
financial year.
Financial Overview
Total revenue for the year to 30 September 2023 rose by 20% to £39.2m (2022:
£32.7m). 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 99% of the overall result (2022: 98%).
Recurring revenue, which is derived from support and maintenance, and managed
service contracts, increased by 23% to £12.9m and comprised approximately 33%
of total revenue (2022: £10.5m, 32%). At 30 September 2023, recurring revenue
on an annualised basis was 19% higher year-on-year at £14.8m (30 September
2022: £12.4m), boosted by a 41% increase in annualised managed service
contract revenue (2022: 67% increase) as more customers contracted for these
services.
The Group's revenue streams are categorised into 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, and managed service 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 64% to £21.1m
(2022: £12.9m). This included initial licence recognition for recent, large
new customer wins. Software revenues accounted for 54% of total revenues
(2022: 39%).
• Services revenue decreased by 15% to £15.5m (2022: £18.3m). This reduction
largely reflected a reduction in concurrent implementation work on new
customer projects. Services revenue comprised 40% of total revenue (2022:
56%).
• Third-party income increased by 62% to £2.6m (2022: £1.6m) and comprised 7%
of total revenue (2022: 5%).
Gross margin was slightly ahead of the prior year at 78.6% (2022: 77.9%),
reflecting the higher proportion of licence revenue recognised.
Operating expenses increased by 17.2% to £15.3m (2022: £13.0m). This
included an unfavourable year-on-year foreign exchange impact of £0.6m due to
retranslation of balance sheet items at year end. Excluding this, operating
expenses increased by 12%, reflecting strong focus on cost control.
Personnel costs were £8.7m (2022: £7.4m) and accounted for 57% (2022: 57%)
of operating expenses.
Adjusted EBITDA for the year increased by 32% to £18.1m (2022: £13.8m),
driven mainly by higher revenues, and supported by favourable foreign exchange
rates. The Board considers adjusted EBITDA to be a key performance indicator
for Cerillion as it adds back 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 £1.4m (2022: £1.9m). Expenditure on tangible fixed assets
was £0.3m (2022: £0.6m). Operating profit increased by 43% to £15.3m (2022:
£10.7m) due to the increase in revenue, as well as operational leverage.
Adjusted profit before tax rose by 41% to £16.8m (2022: £11.9m) and adjusted
earnings per share increased by 31% to 46.2p (2022: 35.2p). On a statutory
basis, profit before tax increased by 48% to £16.1m (2022: £10.9m) and
earnings per share increased by 38% to 43.8p (2022: 31.7p).
Cash Flow and Banking
The Group continued to generate strong cash flows, and closed the financial
year with net cash up by 22% against the same point last year to £24.7m (30
September 2022: £20.2m). This was after £2.9m of dividend payments (2022:
£2.2m). Total debt at the year-end remained £nil (2022: £nil).
Dividend
The Board is pleased to propose a 23% increase in the final dividend to 8.0p
per share (2022: 6.5p). Together with the interim dividend of 3.3p per share
(2021: 2.6p), this brings the total dividend for the year to 11.3p per share
(2022: 9.1p), an increase of 24%.
The dividend, which is subject to shareholder approval at the Company's Annual
General Meeting to be held on 1 February 2024, will be payable on 8 February
2024 to those shareholders on the Company's register as at the close of
business on the record date of 29 December 2023. The ex-dividend date is 28
December 2023.
Operational and Market Overview
High points over the year included the completion of some major
implementations. One was for Neos Networks, a leading UK business telecoms
provider, where we replaced three independent systems, and another was for
Telesur, the leading telecommunications provider in Suriname, where we
migrated the telco's mobile services to our platform. Our work for Telesur
continues with the digital transformation of its fixed-line services. In
June 2023, we signed a major new six-year contract with an existing
telecommunications customer, worth a total of £15.1 million, which just tops
our previous largest ever customer win, signed in 2022. The £15.1 million win
followed a £10 million contract signing in the first half of the year with an
existing customer.
Our latest major new contract was agreed in November 2023 and is with a Tier-1
telco, based in Europe. Worth an initial €12.4 million, we expect this
engagement to grow significantly in value over time. It also supports our view
that the trend towards signing larger deals with larger customers will
continue as our product-based approach gains wider acceptance. As previously
emphasised, contracts with larger customers normally involve higher recurring
revenues and have much greater upsell potential, therefore they contribute
significantly to the ongoing growth of the business.
As we grow across the globe, and global labour markets evolve, we continue to
expand our operating locations, recruiting the best talent cost-effectively
and supporting our expanding global customer base. We enlarged our teams at
our newer locations in Sofia, Bulgaria and at Ahmedabad and Indore in India
and have maintained a mix of remote and office-based working. The competition
for technology professionals remained relatively strong during most of the
financial year, but pressures eased significantly from the peaks reached in
the prior year. Nevertheless, we remain focused on potential inflation in
people costs and continue to manage carefully the mix and location of
resource.
Our investment in R&D exceeded last year's levels and we have continued to
advance our technology, launching two major new releases of our product set,
as scheduled. The most recent of these releases was Cerillion 23.2, which went
live in early November 2023. A key feature of this latest release was the
introduction of AI. This will specifically support the ease and agility with
which our customers can create and release new product sets within our
Enterprise Product Catalogue, by enabling non-technical telco staff to use
natural language to define complex product bundles. These are then constructed
automatically, significantly reducing the time and complexity of this key
task.
Significant telco investment in critical 5G and fibre infrastructure continues
and will continue to flow down to the ancillary systems that connect this
infrastructure to customers and revenue. Against this macro backdrop, we
anticipate that the current global economic slowdown will place more pressure
on telcos to find efficiencies in their digital real-estate. We believe that
this is likely to encourage further market take-up of the flexible, highly
configurable, product-based SaaS solutions that Cerillion offers, rather than
the more bespoke solutions, or best-of-breed platforms, available from
traditional vendors. In addition to this, we anticipate that telcos will seek
to improve their digital real-estate in order to save costs, by improving
business efficiency and consolidating multiple customer bases onto a single
platform, as well as driving revenue from existing infrastructure assets, by
providing the market with more innovative products based on those assets.
Cerillion's ability to address the market through a range of flexible
solutions remains compelling. As well as our proven ability to support
end-to-end transformation projects, the Company offers the flexibility to
provide individual product modules, or subsets of modules, to implement point
solutions that address 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.
Outlook
The Company is growing strongly, and its product-based SaaS approach leaves it
well placed to continue to benefit from the broad range of positive market
drivers, as discussed above. We are also encouraged by the increasing
visibility the brand is gaining in what remains a huge marketplace. Our recent
Tier-1 new customer win reflects this and Cerillion's inclusion in two Gartner
Market Guides* (which evaluated suppliers based on product portfolio,
geographic spread and progress in the last year), published earlier in 2023,
also highlights the Company's growing reputation and the breadth and
completeness of its product portfolio.
Looking ahead, the recent new customer win, ongoing implementation work with
existing customers, and the major new deals signed with existing customers all
create a strong platform for further growth. The back-order book, now at a
record £52.5m, underpins revenue visibility, and the new customer sales
pipeline, also at a new high, contains large deal opportunities. This leaves
Cerillion well-placed to deliver another strong performance in the new
financial year and beyond.
Cerillion's financial position remains very strong, supported by significant
net cash, increasing levels of recurring income and strong cash flows. We
therefore view the future with confidence and will continue to invest across
the business to support ongoing growth.
A M Howarth L T Hall
Non-executive Chairman Chief Executive Officer
*Gartner "Market Guide for CSP Customer Management and Experience Solutions"
By Analyst(s): Juha Korhonen, Amresh Nandan, Chris Meering, Susan Welsh de
Grimaldo. Published 10 April 2023, and Gartner "Market Guide for CSP Revenue
Management and Monetization Solutions" By Analyst(s): Amresh Nandan, Chris
Meering, Juha Korhonen. Published 9 November 2022.
Gartner Disclaimer:
Gartner does not endorse any vendor, product or service depicted in our
research publications, and does not advise technology users to select only
those vendors with the highest ratings or other designation. Gartner research
publications consist of the opinions of Gartner's research organization and
should not be construed as statements of fact. Gartner disclaims all
warranties, expressed or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose. GARTNER is
a registered trademark and service mark of Gartner, Inc. and/or its affiliates
in the U.S. and internationally and is used herein with permission. All rights
reserved.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2023
Year to Year to
30 September 2023
30 September 2022
Notes £'000 £'000
Revenue 2 39,170 32,726
Cost of sales (8,364) (7,221)
Gross profit 30,806 25,505
Operating expenses (15,273) (13,031)
Impairment losses on financial assets 3 (256) (1,770)
Adjusted EBITDA* 18,083 13,750
Depreciation and amortisation (2,597) (2,986)
Share-based payment charge 18 (209) (60)
Operating profit 3 15,277 10,704
Finance income 4 956 337
Finance costs 5 (119) (146)
Profit before taxation 16,114 10,895
Taxation 6 (3,183) (1,551)
Profit for the year 12,931 9,344
Other comprehensive (expense) / income
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign (95) 70
operations
Total comprehensive income for the year
12,836 9,414
Earnings per share
Basic earnings per share - continuing and total operations 8 43.8 pence 31.7 pence
Diluted earnings per share - continuing and total operations
43.7 pence 31.6 pence
All transactions are attributable to the owners of the parent.
* 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 2023
2023 2022
Notes £'000 £'000
ASSETS
Non-current assets
Goodwill 9 2,053 2,053
Other intangible assets 9 2,374 2,653
Property, plant and equipment 10 780 980
Right-of-use assets 11 2,352 3,057
Trade and other receivables 13 5,105 2,171
Deferred tax assets 12 268 260
12,932 11,174
Current assets
Trade and other receivables 13 15,115 11,205
Cash and cash equivalents 16 24,738 20,249
39,853 31,454
TOTAL ASSETS 52,785 42,628
LIABILITIES
Non-current liabilities
Trade and other payables 14 (1,200) (934)
Lease liabilities 11 (2,178) (3,050)
Deferred tax liabilities 12 (671) (719)
(4,049) (4,703)
Current liabilities
Trade and other payables 14 (10,871) (10,217)
Lease liabilities 11 (980) (976)
(11,851) (11,193)
TOTAL LIABILITIES (15,900) (15,896)
NET ASSETS 36,885 26,732
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Ordinary share capital 17 147 147
Share premium account 13,319 13,319
Treasury stock 17 - -
Share option reserve 346 137
Foreign exchange reserve (192) (97)
Retained earnings 23,265 13,226
TOTAL EQUITY 36,885 26,732
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2023
2023 2022
Notes £'000 £'000
Cash flows from operating activities
Profit for the year 12,931 9,344
Adjustments for:
Taxation 6 3,183 1,551
Finance income 4 (956) (337)
Finance costs 5 119 146
Share option charge 18 209 60
Depreciation 10,11 1,171 1,085
Amortisation 9 1,426 1,901
18,083 13,750
Increase in trade and other receivables (6,468) (1,182)
Increase in trade and other payables 671 1,324
Cash generated from operations 12,286 13,892
Finance costs 5 (119) (146)
Finance income 4 580 337
Tax paid (2,997) (1,745)
NET CASH GENERATED FROM OPERATING ACTIVITIES 9,750 12,338
Cash flows from investing activities
Capitalisation of intangible assets 9 (1,147) (983)
Purchase of property, plant and equipment 10 (278) (626)
NET CASH USED IN INVESTING ACTIVITIES (1,425) (1,609)
Cash flows from financing activities
Purchase of treasury stock - (827)
Receipts from exercise of share options - 122
Principal elements of finance leases 11 (868) (807)
Dividends paid 7 (2,892) (2,243)
NET CASH USED IN FINANCING ACTIVITIES (3,760) (3,755)
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,565 6,974
Translation differences (76) 101
Cash and cash equivalents at beginning of year 20,249 13,174
CASH AND CASH EQUIVALENTS AT END OF YEAR
24,738 20,249
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2023
Ordinary share capital Share premium account Treasury stock Share option reserve Foreign exchange reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 147 13,319 - 128 (167) 6,778 20,205
Profit for the year - - - - - 9,344 9,344
Other comprehensive income:
Exchange differences on translating foreign operations - - - - 70 - 70
Total comprehensive income - - - - 70 9,344 9,414
Transactions with owners:
Share option charge - - - 60 - - 60
Purchase of treasury stock - - (827) - - - (827)
Exercise of share options - - 827 (51) - (653) 123
Dividends - - - - - (2,243) (2,243)
Total transactions with owners - - - 9 - (2,896) (2,887)
Balance as at 30 September 2022 147 13,319 13,226 26,732
- 137 (97)
Ordinary share capital Share premium account Treasury stock Share option reserve Foreign exchange reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2022 147 13,319 - 137 (97) 13,226 26,732
Profit for the year - - - - - 12,931 12,931
Other comprehensive income:
Exchange differences on translating foreign operations - - - - (95) - (95)
Total comprehensive income - - - - (95) 12,931 12,836
Transactions with owners:
Share option charge - - - 209 - - 209
Dividends - - - - - (2,892) (2,892)
Total transactions with owners - - - 209 - (2,892) (2,683)
Balance as at 30 September 2023 147 13,319 23,265 36,885
- 346 (192)
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) 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.
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.
(ii) 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.
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.
2023 2022
£'000 £'000
Revenue
Services 15,540 18,272
Software 16,653 9,854
Software-as-a-Service 4,401 3,006
Third-party 2,576 1,594
Total revenue 39,170 32,726
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 £29,993,000 (2022:
£19,929,000).
Accounting policies
Year ended 30 September 2023 (i) (ii) (iii) (iv) Total
£'000 £'000 £'000 £'000 £'000 £'000
Services 15,540
implementation fees 7,683 - - - 7,683
ongoing account development work - - 7,857 - 7,857
Software 16,653
initial licence fees 6,055 - - - 6,055
sale of additional licences - 2,091 - - 2,091
ongoing maintenance and support fees* 8,507 - - - 8,507
Software-as-a-Service 4,401 4,401 - - - 4,401
Third-Party 2,576 - - - 2,576 2,576
Total 39,170 26,646 2,091 7,857 2,576 39,170
* Includes maintenance and support performed by third parties.
Accounting policies
Year ended 30 September 2022 (i) (ii) (iii) (iv) Total
£'000 £'000 £'000 £'000 £'000 £'000
Services 18,272
implementation fees 6,598 - - - 6,598
ongoing account development work - - 11,674 - 11,674
Software 9,854
initial licence fees 765 - - - 765
sale of additional licences - 1,612 - - 1,612
ongoing maintenance and support fees* 7,477 - - - 7,477
Software-as-a-Service 3,006 3,006 - - - 3,006
Third-Party 1,594 - - - 1,594 1,594
Total 32,726 17,846 1,612 11,674 1,594 32,726
* Includes maintenance and support performed by third parties.
(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
£'000 £'000 £'000 £'000
Year ended/As at 30 September 2023
Revenue - by customer location 19,452 10,722 7,887 1,109
Capital expenditure 1,402 - - 23
Non-current assets 12,438 - - 494
Total assets 51,633 - - 1,152
Trade receivables - by customer location 2,247 396 21 193
Accrued income - by customer location 5,875 6,896 2,770 2
Net assets 36,938 - - (53)
UK & Europe MEA Americas Asia Pacific
£'000 £'000 £'000 £'000
Year ended/As at 30 September 2022
Revenue - by customer location 20,389 3,166 7,938 1,233
Capital expenditure 1,548 - - 60
Non-current assets 10,496 - - 678
Total assets 41,100 - - 1,528
Trade receivables - by customer location 1,129 1,007 164 203
Accrued income - by customer location 7,607 1,405 813 28
Net assets 26,519 - - 213
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 2023 2022
segment £'000 £'000
Customer
No. 1 MEA 7,719 506
No. 2 Americas 5,693 3,418
No. 3 Europe 5,259 4,818
No. 4 UK 2,382 3,400
3 Operating profit
2023 2022
£'000 £'000
Operating profit is stated after (crediting)/charging:
Employee benefits expenses 15,933 13,943
Depreciation 1,171 1,085
Amortisation of intangibles 1,426 1,901
Research and development costs 572 385
Impairment losses on financial assets 256 1,770
Foreign exchange losses/(gains) 251 (367)
Operating leases 280 157
Fees payable to Cerillion's principal auditors:
- Audit of Cerillion plc's annual financial statements 20 14
- Audit of subsidiaries 110 80
- Non-audit services - tax services 6 81
- Non-audit services - other services 30 4
Fees payable to associates of principal auditors:
- Audit of subsidiaries 9 9
Other costs 3,829 2,960
Total cost of sales, operating expenses and impairment losses on financial 23,893 22,022
assets
The impairment losses on financial assets relates to the provisions made
against the risk of non-recovery of receivables. The write-off during the
prior year was predominantly due to an assessment over certain implementation
work that may not be fully recoverable.
4 Finance income
2023 2022
£'000 £'000
Finance income:
Bank interest 580 75
Unwinding discount of contracts with significant financing component 376 262
956 337
5 Finance costs
2023 2022
£'000 £'000
Finance costs:
Interest and finance charges for lease liabilities (111) (134)
Other interest payable (8) (12)
(119) (146)
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:
2023 2022
£'000 £'000
Current tax expense - UK 3,074 1,525
Current tax - adjustment in respect of prior year (9) 1
Current tax expense - overseas 198 197
Current tax expense - total 3,263 1,723
Deferred tax credit (85) (154)
Deferred tax - adjustment in respect of prior year 5 (18)
Deferred tax credit - total (80) (172)
Total tax charge 3,183 1,551
(b) Factors affecting total tax for the year
The tax assessed for the year is lower (2022: lower) than the standard rate of
corporation tax in the United Kingdom 22.0% (2022: 19.0%). The differences are
explained as follows:
Profit on ordinary activities before tax 16,114 10,895
Profit on ordinary activities multiplied by standard rate of corporation tax 3,542 2,070
in the United Kingdom of 22.0% (2022: 19.0%)
Effect of:
Expenses not deductible for tax purposes 287 258
Difference in tax rates 5 15
Other temporary differences 51 (52)
Foreign tax - other 13 (8)
Prior year tax adjustment (9) 1
Prior year tax adjustment - deferred tax 5 (18)
Other permanent differences - relating to share options - (135)
Enhanced relief for research and development (711) (580)
Total tax charge 3,183 1,551
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 was reflected in
the measurement of deferred taxes in the prior year financial statements. In
the current year ended 30 September 2023, the impact of the increase to 25%
from 1 April 2023 resulted in the standard tax rate of 22.0%.
7 Dividends
(a) Dividends paid during the reporting period
The Board paid the final dividend in respect of 2022 of 6.5p per share, on 7
February 2023, and declared and paid an interim 2023 dividend of 3.3p (2022:
2.6p) per share on 23 June 2023. Total dividends paid during the reporting
period were £2,892,000 (2022: £2,243,000).
(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 8.0p per fully paid Ordinary Share
(2022: 6.5p). The aggregate amount of the proposed dividend expected to be
paid out of retained earnings at 30 September 2023, but not recognised as a
liability at the year end is £2,361,000 (2022: £1,918,000). Since the year
end the Directors of Cerillion Technologies Limited have approved a £5.0
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.
2023 2022
Profit attributable to equity holders of the Company (£'000) 12,931 9,344
Weighted average number of Ordinary Shares in issue (number) 29,513,486 29,513,486
Less weighted average number of shares held in Treasury (12) (10,627)
Weighted average number of Ordinary Shares in issue (number) 29,513,474 29,502,859
Effect of share options in issue 107,894 56,858
Weighted average shares for diluted earnings per share 29,621,368 29,559,717
Basic earnings per share (pence per share) 43.8 31.7
Diluted earnings per share (pence per share) 43.7 31.6
9 Intangible assets
Group Goodwill Purchased customer contracts Intellectual property rights Software development costs External Total
software licences
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 October 2021 2,053 4,383 2,567 5,254 252 14,509
Additions - - - 965 18 983
At 30 September 2022 2,053 4,383 2,567 6,219 270 15,492
Additions - - - 1,146 1 1,147
At 30 September 2023 2,053 4,383 2,567 7,365 271 16,639
Amortisation
At 1 October 2021 - 3,444 2,017 3,203 221 8,885
Provided in the year - 626 367 885 23 1,901
At 30 September 2022 - 4,070 2,384 4,088 244 10,786
Provided in the year - 313 183 915 15 1,426
At 30 September 2023 - 4,383 2,567 5,003 259 12,212
Net book amount at 30 September 2023 2,053 - - 2,362 12 4,427
Net book amount at 2,053 313 183 2,131 26 4,706
30 September 2022
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 £2,053,000 (2022: £2,053,000), 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 2023, 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
£'000 £'000 £'000 £'000
Cost
At 1 October 2021 731 1,605 294 2,630
Additions - 623 3 626
Disposals - (59) - (59)
Exchange difference 28 24 10 62
At 30 September 2022 759 2,193 307 3,259
Additions - 244 34 278
Exchange difference (31) (31) (12) (74)
At 30 September 2023 728 2,406 329 3,463
Accumulated Depreciation
At 1 October 2021 376 1,208 287 1,871
Provided in the year 72 335 5 412
Disposals - (59) - (59)
Exchange difference 23 22 10 55
At 30 September 2022 471 1,506 302 2,279
Provided in the year 71 385 10 466
Exchange difference (26) (24) (12) (62)
At 30 September 2023 516 1,867 300 2,683
Net book amount at 30 September 2023 212 539 29 780
Net book amount at 288 687 5 980
30 September 2022
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 show the
following amounts relating to leases:
Group Company
30 September 2023 30 September 2022 30 September 2023 30 September 2022
Right-of-use assets £'000 £'000 £'000 £'000
Properties 2,343 3,044 2,150 2,656
IT Equipment 9 13 - -
2,352 3,057 2,150 2,656
Group Company
30 September 2023 30 September 2022 30 September 2023 30 September
Lease liabilities £'000 £'000 £'000 2022
£'000
Current 980 976 731 731
Non-current 2,178 3,050 2,171 2,803
3,158 4,026 2,902 3,534
Additions to the right-of-use assets during the 2023 financial year were £nil
(2022: £131,000). There were lease disposals during the year with net book
value totalling £nil (2022: £106,000).
(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 2023 30 September 2022
Depreciation charge of right-of-use assets £'000 £'000
Properties 701 672
IT Equipment 4 1
705 673
Interest expense (included in finance cost) 111 134
Expense relating to short-term leases (included in operating expenses) 261 157
Expenses relating to low value assets that are not shown above as short-term 19 -
leases (included in operating expenses)
The total cash outflow for leases in 2023 was £979,000 (2022: £941,000).
The property within the Company had a depreciation charge for the year of
£506,000 (2022: £506,000).
12 Deferred tax
Deferred tax asset
Group Accelerated capital allowances Other temporary differences Total
£'000 £'000 £'000
1 October 2021 21 188 209
Foreign exchange movement on opening deferred tax asset 3 19 22
Credited to statement of comprehensive income 2 27 29
30 September 2022 26 234 260
Group Accelerated capital allowances Other temporary differences Total
£'000 £'000 £'000
1 October 2022 26 234 260
Foreign exchange movement on opening deferred tax asset (4) (20) (24)
Credited to statement of comprehensive income 4 28 32
30 September 2023 26 242 268
Deferred tax liabilities
Group
Part of the deferred tax liability arose in respect of the fair value uplift
of intangible assets, with £1,320,000 arising on the acquisition of Cerillion
Technologies Limited in March 2016 and £71,000 relating to the acquisition of
"Net Solutions Services" by Cerillion Technologies Limited in 2015, which has
been written down to £nil as at 30 September 2023 (2022: £95,000). The
deferred tax liabilities also include £671,000 (2022: £624,000), which is
driven by expected future amortisation on R&D intangibles in Cerillion
Technologies Limited where full relief has been taken in the year the assets
were capitalised. This amortisation will be treated as non-deductible for
corporation tax purposes and therefore a deferred tax liability arises.
2023 2022
£'000 £'000
At 1 October 719 862
Debited to statement of comprehensive income in respect of net ACAs & 47 46
other temporary differences
Credited to statement of comprehensive income in respect of acquisitions (95) (189)
As at 30 September 671 719
There are no deferred tax assets or deferred tax liabilities recognised within
the Parent Company as at 30 September 2023 (2022: £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
2023 2022
£'000 £'000
Trade receivables 2,857 2,503
Contract assets 15,543 9,853
Contract liabilities 5,039 4,613
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 £4,195,000
(2022: £4,105,000).
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 £132,000 (2022:
£226,000). The total amount of accrued costs to acquire a contract are
£352,000 (2022: £305,000).
The total amount of revenue allocated to unsatisfied performance obligations
is £36,732,000 (2022: £37,420,000). It is estimated that 45% will be
recognised over the next 12 months, the remainder over the following years
thereafter.
There are no contract balances within the Parent Company (2022: £nil).
Current receivables Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade receivables 2,857 2,503 - -
Accrued income 10,507 7,759 - -
Amounts owed by Group undertakings - - 2,320 2,058
Other receivables 536 311 - -
Prepayments 1,215 632 10 8
15,115 11,205 2,330 2,066
Non-current receivables Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Accrued income 5,036 2,094 - -
Other receivables 69 77 - -
5,105 2,171 - -
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:
2023 2022
£'000 £'000
Group
Trade receivables 3,219 2,744
Specific provision (304) (193)
ECL reserve (377) (232)
2,538 2,319
The ECL Provision above includes an amount relating to accrued income of
£319,000 (2022: £184,000).
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 and accrued
income were as follows:
Specific Provision ECL provision
£'000 £'000
Balance at the beginning of the year 193 232
Charged for the year 111 377
Utilised for the year - (232)
Balance at the end of the year 304 377
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.
2023 2022
£'000 £'000
Group
Not past due 1,432 1,714
Up to 3 months 1,318 735
3 to 6 months 57 6
Older than 6 months 50 48
2,857 2,503
Of the trade debt older than 6 months as at 30 September 2023, being £50,000
(2022: £48,000), cash of £nil (2022: £8,000) has been received since the
year end.
The following is an ageing analysis of those trade receivables that were
individually considered to be impaired:
2023 2022
£'000 £'000
Group
Not past due 28 33
Up to 3 months 28 14
3 to 6 months 1 150
Older than 6 months 305 45
362 242
14 Trade and other payables
Current trade and other payables Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade payables 858 1,154 77 97
Taxation 1,052 776 - 1
Other taxation and social security 453 495 59 64
Pension contributions 51 46 - -
Other payables 342 382 - -
Provisions 141 118 - -
Accruals 3,389 3,001 71 74
Deferred income 4,585 4,245 - -
10,871 10,217 207 236
Movements in the provisions were as follows:
Dilapidations Provision
£'000
Balance at the beginning of the year 118
Charged/(released) for the year 23
Balance at the end of the year 141
The dilapidations provision relates to the full expected cost of dilapidations
across the Group's properties.
Non-current trade and other payables Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Other payables 746 567 - -
Deferred income 454 367 - -
1,200 934 - -
The Directors consider that the carrying amount of trade and other payables
and provisions 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. There is an additional scheme in place which pays at up to 25% of
annual total fixed pay at the end of eleven years of service.
The actuarial assumptions relating to the above provisions are outlined below:
Gratuity Long-term bonus
2023 2022 2023 2022
Discount rate 7.40% 7.50% 7.40% 7.50%
Salary increment rate 13.00% 15.00% 13.00% 15.00%
Withdrawal rate 10.00% 15.00% 10.00% 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
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Current liabilities:
Lease liabilities 980 976 731 731
Non-current liabilities:
Lease liabilities 2,178 3,050 2,171 2,803
3,158 4,026 2,902 3,534
There are currently no other borrowings within the Group.
Group Non-current Lease liabilities Current Lease liabilities
Total
£'000 £'000 £'000
1 October 2022 3,050 976 4,026
Cash-flows:
Repayment - (979) (979)
Accrued interest - 111 111
Non-cash:
Reclassification (872) 872 -
30 September 2023 2,178 980 3,158
1 October 2021 3,866 948 4,814
Cash-flows:
Repayment - (941) (941)
Accrued interest - 134 134
Non-cash:
Additions - 125 125
Foreign exchange revaluation - (106) (106)
Reclassification (816) 816 -
30 September 2022 3,050 976 4,026
Company Non-current Lease liabilities Current Lease liabilities
Total
£'000 £'000 £'000
1 October 2022 2,803 731 3,534
Cash-flows:
Repayment - (731) (731)
Accrued interest - 99 99
Non-cash:
Reclassification (632) 632 -
30 September 2023 2,171 731 2,902
1 October 2021 3,416 731 4,147
Cash-flows:
Repayment - (731) (731)
Accrued interest - 118 118
Non-cash:
Reclassification (613) 613 -
30 September 2022 2,803 731 3,534
16 Financial instruments and risk management
Group - Financial instruments by category 2023 2022
£'000 £'000
Financial assets - measured at amortised cost
Non-current
Accrued income 5,036 2,094
Other receivables 69 77
5,105 2,171
Current
Trade and other receivables 3,393 2,814
Accrued income 10,507 7,759
Cash and cash equivalents 24,738 20,249
38,638 30,822
Prepayments are excluded, as this analysis is required only for financial
instruments.
Financial liabilities - held at amortised cost 2023 2022
£'000 £'000
Non-current
Trade and other payables 746 567
Lease liabilities 2,178 3,050
2,924 3,617
Current
Lease liabilities 980 976
Trade and other payables 1,200 1,536
Pension costs 51 46
Accruals & provisions 3,530 3,119
5,761 5,677
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 2023 2022
£'000 £'000
Financial assets - measured at amortised cost
Current
Amounts owed by Group undertakings & other receivables 2,320 2,058
Cash and cash equivalents 186 289
2,506 2,347
Financial liabilities - held at amortised cost 2023 2022
£'000 £'000
Non-current
Lease liabilities 2,171 2,803
2,171 2,803
Current
Lease liabilities 731 731
Trade and other payables 77 97
Accruals 71 74
879 902
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
2023 (2022: £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:
2023 2022
£'000 £'000
Trade receivables
Group 1 86 26
Group 2 2,766 2,466
Group 3 5 11
2,857 2,503
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 7 customers (2022: 4 customers) with trade
receivable balances each representing in excess of 5% of the total trade
receivables of £2,857,000 (2022: £2,503,000). Of these customers, none are
categorised within Group 1 (2022: none), 7 are within Group 2 representing 90%
of total trade receivables (2022: 4 customers), with none in Group 3 (2022:
none).
There are no trade receivables within the Parent Company.
2023 2022
£'000 £'000
Cash at bank and short-term deposits
A1 24,735 20,246
Not rated 3 3
24,738 20,249
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 2023 the Group had no forward foreign exchange contracts in
place (2022: 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
£'000 £'000 £'000 £'000 £'000 £'000
30 September 2023
Financial assets 81 3,062 5,580 923 2,782 187
Financial liabilities - (103) (18) (1,109) - -
Total exposure 81 2,959 5,562 (186) 2,782 187
AUD USD EUR INR DKK BND
30 September 2022
Financial assets 339 1,341 3,553 1,110 1,855 227
Financial liabilities - (155) (3) (981) - -
Total exposure 339 1,186 3,550 129 1,855 227
The following table illustrates the sensitivity of profit and equity in regard
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 GBP had strengthened against the foreign currencies by 10% then this would
have had the following impact:
30 September 2023 AUD USD EUR INR DKK BND
£'000 £'000 £'000 £'000 £'000 £'000
Loss for the year (7) (269) (506) 17 (253) (17)
Equity total (7) (269) (506) 17 (253) (17)
30 September 2022 AUD USD EUR INR DKK BND
Loss for the year (31) (108) (323) (12) (169) (21)
Equity total (31) (108) (323) (12) (169) (21)
If the GBP had weakened against the foreign currencies by 10% then this would
have had the following impact:
30 September 2023 AUD USD EUR INR DKK BND
£'000 £'000 £'000 £'000 £'000 £'000
Gain for the year 9 329 618 (21) 309 21
Equity total 9 329 618 (21) 309 21
30 September 2022 AUD USD EUR INR DKK BND
Gain for the year 38 132 394 14 206 25
Equity total 38 132 394 14 206 25
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 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
£'000 £'000 £'000 £'000
30 September 2023
Lease liabilities 936 763 1,645 -
Trade and other payables 6,287 746 - -
30 September 2022
Lease liabilities 977 958 2,224 183
Trade and other payables 5,971 567 - -
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 2023 the Group's total managed
capital amounted to £36,885,000 (2022: £26,732,000); Company's capital as of
30 September 2023 was £16,209,000 (2022: £15,893,000).
17 Share capital
2023 2022
£'000 £'000
Issued, allotted, called up and fully paid:
29,513,486 (2021: 29,513,486) Ordinary Shares of 0.5 pence 147 147
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 year end there were 12 shares (2022: 12 shares remaining in Treasury
Stock) at an average cost of £2.10 per share (2022: £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 2023 under the SAYE scheme. A
charge of £209,000 (2022: £60,000) 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 2023 2022
Scheme SAYE LTIP
Exercise price (£) 9.28 0.005
Number of options granted 27,766 15,000
Vesting period (years) 3 years 3 to 4 years
Option life (years) 3.5 years 3 to 4 years
Risk free rate 3.19% 1.75%
Volatility 39% 109%
Dividend yield 3.00% 1% to 2%
Fair value (£) 3.88 9.45
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.
During the year options were granted as summarised in the table below:
2023 2023 2022 2022
Weighted Weighted
average average
Number of exercise Number of exercise
Options price Options price
£ £
Outstanding at start of year 154,008 2.46 278,912 2.03
Granted 27,766 9.28 15,000 0.005
Lapsed (1,824) (5.92) (28,090) (2.29)
Exercised - - (111,814) (1.092)
Outstanding at 30 September 179,950 3.48 154,008 2.46
Exercisable at 30 September - - - -
For the options outstanding at 30 September 2023, the weighted average fair
values and the weighted average remaining contractual lives (being the time
period from 30 September 2023 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 3.49
SAYE 2021 2.03 1.34
LTIP 2022 9.45 4.41
SAYE 2023 3.88 2.84
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 £348,000 (2022: £330,000).
At the year end the contributions payable to the scheme were £51,000 (2022:
£46,000). In addition to this there are retirement benefits relating to the
India subsidiary which are disclosed in note 14.
20 Annual General Meeting
The Annual General Meeting is to be held on 1 February 2024. 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 2023 or
2022, 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 2023 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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