TIDMCER
RNS Number : 0818G
Cerillion PLC
23 November 2020
23 November 2020
AIM: CER
Cerillion plc
("Cerillion" or "Company" or "Group")
Final results for the year ended 30 September 2020
Cerillion plc, the billing, charging and customer relationship
management software solutions provider, presents its annual results
for the 12 months ended 30 September 2020.
Highlights
Financial:
-- All key financial performance measures reached record highs
-- Revenue(1) rose by 11% to GBP20.8m (2019: GBP18.8m)
- recurring revenue(2) contributed GBP6.0m (2019: GBP5.1m), 29%
of total revenue
- at the year end, on an annualised basis, recurring revenue was
up 57% year-on-year to GBP7.9m (2019: GBP5.0m)
-- New orders matched last year's record at GBP23.3m (2019:
GBP23.3m) - consolidating 78% increase in 2019
-- Back-order book(3) increased by 41% to GBP31.0m at the year-end (2019: GBP22.0m)
-- Adjusted EBITDA(4) increased by 27% to GBP5.8m (2019: GBP4.6m)
- adjusted EBITDA margin rose to 27.9% (2019: 24.3%)
-- Adjusted profit before tax(5) up by 7% to GBP3.7m (2019: GBP3.5m)
-- Adjusted earnings per share(6) increased by 10% to 12.4p (2019: 11.3p)
-- Reported profit before tax up by 8.0% to GBP2.6m (2019: GBP2.4m)
-- Reported earnings per share up 13% to 8.8p (2019: 7.8p)
-- Net cash increased by 54% to GBP7.7m (2019: GBP5.0m)
-- Increased final dividend of 3.75p per share proposed (2019:
3.3p), bringing the total dividend for the year to 5.5p per share
(2019: 4.9p), an increase of 12%
Operational:
-- Smooth adjustment to remote working in response to the
coronavirus pandemic, with no significant impact to the sales
processes, implementation projects or customer service
-- Largest ever contract won in September 2020 (GBP11.2m),
continuing the trend of winning bigger contracts with larger
customers
-- Strong pipeline of new business opportunities
-- The Board believes that Cerillion is well-positioned for
further progress over the new financial year
Louis Hall, CEO of Cerillion, commented:
"Cerillion has delivered an excellent performance. Revenue,
pre-tax profits and the back-order book are at record levels, and
we closed our largest ever contract win in the final quarter of the
financial year, continuing a trend of larger wins. While the
coronavirus pandemic has created severe disruption globally, it has
underlined the importance of critical infrastructure and services,
including telecommunications, our core market.
"The business has adapted effectively to remote working and we
start the new financial year with greater revenue visibility than
at the beginning of any previous financial year. We have a strong
new customer pipeline and view both short and longer-term prospects
very positively."
For further information please contact:
Cerillion plc c/o KTZ Communications
Louis Hall, CEO, Oliver Gilchrist, T: 020 3178 6378
CFO
Liberum (Nomad and Broker) T: 020 3100 2000
Bidhi Bhoma, Euan Brown, William
Hall
KTZ Communications T: 020 3178 6378
Katie Tzouliadis, Dan Mahoney
About Cerillion
Cerillion has a 20-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. 90 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 in
Sydney and Miami .
The business was originally part of Logica plc before its
management buyout, led by CEO, Louis Hall, in 1999. The Company
joined AIM in March 2016.
Notes
Note 1 Revenue derived from software licence, support and
maintenance, Software-as-a-Service ("SaaS") and third-party
sales.
Note 2 Recurring revenue includes annualised support and
maintenance, managed service and Skyline revenue.
Note 3 Back order book consists of GBP25.1m of sales contracted
but not yet recognised at the end of the reporting period plus
GBP5.9m of annualised support and maintenance revenue. It is
anticipated that 75% of the GBP25.1m 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 depreciation and
amortisation ("EBITDA") is calculated by taking operating profit
and adding back depreciation & amortisation, share-based
payment charge and exceptional items.
Note 5 Adjusted profit before tax is calculated after adding
back amortisation of acquired intangible assets, share-based
payment charge and exceptional items.
Note 6 Adjusted earnings per share is calculated by taking
profit after tax and adding back amortisation of acquired
intangible assets, share-based payment charge and exceptional items
and is divided by the weighted average number of shares in issue
during the period. There is no tax impact relating to these
items.
Note 7 Gartner does not endorse any vendor, product or service
depicted in its 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.
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 reaching record
highs. Revenue increased by 11% year-on-year to GBP20.8m (2019:
GBP18.8m), adjusted profit before tax rose by 7% to GBP3.7m (2019:
GBP3.5m) and the back-order book was up by 41% to GBP31.0m (2019:
GBP22.0m).
New orders at GBP23.3m matched last year's record (2019:
GBP23.3m), and included the largest initial contract the Company
has signed in its history. This continued the Company's trend
towards bigger deal sizes with larger customers, reflecting the
growing recognition in the marketplace of the quality of our
solution and services.
The Company's performance was also supported by strong demand
from existing customers, with sales to existing accounts up by 88%
to GBP9.4m (2019: GBP5.0m).
The global coronavirus pandemic has not significantly affected
the Company's operations. The transition to remote working was
effected smoothly and while precautions continue to be taken
regarding staff safety, our sales processes, implementation
projects and customer support services are all working well.
Looking to the future, demand for billing, charging and customer
relationship management ("CRM") solutions in the Company's core
telecommunications market is set to continue to rise. Telecoms
operators are seeing strong data traffic levels as a consequence of
national lockdowns across the globe, and 5G rollouts are driving a
wave of investment in both telecoms infrastructure and ancillary
systems. Cerillion remains well-placed to benefit from this and to
grow both in Europe and its other international markets.
With a very healthy pipeline of potential new business and
implementations for new customers, we expect the Company to make
further strong progress in the new financial year.
Financial Overview
Total revenue for the year to 30 September 2020 rose by 11% to
GBP20.8m (2019: GBP18.8m). As is typical, existing customers
(classified as those acquired before the beginning of the reporting
period) accounted for a high proportion of total revenue,
generating 97% of the overall result (2019: 80%).
Recurring revenue, which is derived from support and maintenance
and managed service contracts, contributed GBP6.0m to total
revenue, approximately 29% of overall Group revenue (2019: GBP5.1m,
27%). At 30 September 2020, recurring revenue on an annualised
basis was 57% higher year-on-year at GBP7.9m (30 September 2019:
GBP5.0m), boosted by a 205% increase in annualised managed service
contract revenue (2019: 96%).
The Group's revenue streams are categorised in three segments:
software revenue (including Software-as-a-Service); services
revenue; and revenue from other activities. Software revenue
principally comprises software licences and related support and
maintenance sales, while services revenue is generated by software
implementations and ongoing account development work. Revenue from
other activities is mainly from the reselling of third-party
products.
-- Software (including Software-as-a-Service) revenue decreased
by 16% to GBP7.6m (2019: GBP9.1m). This was due to the
reduction in licence sales during the year to GBP1.6m
(2019: GBP3.9m). Software revenues accounted for 37% of
total revenues (2019: 48%).
-- Services revenue increased by 44% to GBP11.3m (2019: GBP7.9m)
and comprised 54% of total revenue (2019: 42%). This was
due to a significant increase in new customer implementation
work, following the closure of four major new enterprise
contracts during the previous financial year.
-- Third-party income remained constant at GBP1.8m (2019:
GBP1.8m) and comprised 9% of total revenue (2019: 10%).
Gross margin at 74% (2019: 75%) was in line with
expectations.
Operating expenses increased by 9% to GBP12.5m (2019: GBP11.5m).
Personnel costs of GBP5.8m (2019: GBP5.6m) accounted for 47% (2019:
48%) of operating expenses.
Adjusted EBITDA for the year increased by 27% to GBP5.8m (2019:
GBP4.6m), mainly driven by higher revenues. The Board considers
adjusted EBITDA to be a key performance indicator for Cerillion as
it adds back exceptional items and key non-cash transactions, being
share-based payments, depreciation and amortisation.
We continued to invest in our product sets, including our cloud
platform, and the charge for amortisation of intangibles was
GBP1.9m (2019: GBP1.7m). Expenditure on tangible fixed assets was
GBP0.3m (2019: GBP0.4m). Operating profit increased by 11% to
GBP2.8m (2019: GBP2.5m), with GBP0.1m of the increase arising on
the adoption of IFRS 16.
Adjusted profit before tax rose by 7% to GBP3.7m (2019: GBP3.5m)
and adjusted earnings per share increased by 10% to 12.4p (2019:
11.3p). On a statutory basis, profit before tax was GBP2.6m (2019:
GBP2.4m) and earnings per share was 8.8p (2019: 7.8p).
Cash Flow and Banking
The Group continued to generate strong cash flows and closed the
financial year with net cash of GBP7.7m, up by 54% against the same
point last year (30 September 2019: GBP5.0m). This net position is
after the payment of GBP1.2m of debt repayments (2019: GBP1.0m) and
GBP1.5m in dividends (2019: GBP1.4m). Total Group cash at the
year-end was GBP8.3m (2019: GBP6.8m) and total debt stood at
GBP0.6m (2019: GBP1.8m). It is anticipated that the remaining debt
outstanding at year-end will be repaid during FY 2021.
Dividend
The Board is pleased to propose a 14% increase in the final
dividend to 3.75p per share (2019: 3.3p). Together with the interim
dividend of 1.75p per share (2019: 1.6p), this brings the total
dividend for the year to 5.5p per share (2019: 4.9p), an increase
of 12%.
The dividend, which is subject to shareholder approval at the
Company's Annual General Meeting to be held on 5 February 2021,
will become payable on 9 February 2021 to those shareholders on the
Company's register as at the close of business on the record date
of 4 January 2021. The ex-dividend date is 31 December 2020.
Operational Overview
Whilst the COVID-19 pandemic has presented some challenges,
particularly the need to move to remote working, we have adjusted
well to the change in circumstances, and have successfully
completed a number of implementations remotely.
This global shift to remote working has however emphasised the
dependence of the world economy on state-of-the-art telecoms
infrastructure. With this in mind, we expect to see increased
investment in the sector in general and an acceleration of
investment in 5G rollouts, with spending trickling down from core
network improvements to ancillary system upgrades and replacements.
Consequently, we expect demand for billing, charging and CRM
software in our core telecoms market to continue to grow.
Beyond these broad sector trends we expect a number of other
factors to drive demand for our specific offerings, including:
-- digital transformation to put digital engagement at the forefront of the customer experience;
-- the consolidation of multiple CRM, billing and charging systems onto a single platform;
-- demand for real-time charging systems to enable more
effective monetisation of data services; and
-- demand for more agile systems to enable the more rapid introduction of new products.
Cerillion's ability to address the market through a range of
flexible solutions remains a key strength. In addition to our
proven ability to support end-to-end transformation projects, the
Company can provide individual product modules, or subsets of
modules, to implement point solutions to address more granular
requirements. Earlier this year, we integrated our real-time
charging ("CCS") and product catalogue ("EPC") modules with other
legacy systems at Ignition Group, one of Africa's largest
telecommunications providers. The Company's solutions are also able
to support a broad range of communications service providers
("CSPs"), from traditional network operators to virtual network
operators ("VNOs") to enterprise connectivity solutions
providers.
The major new customer win announced in September marks an
important milestone for Cerillion, as it represents the Company's
largest ever initial contract value and reinforces the general
trend towards signing bigger deals with larger new customers. This
trend is an important contributor to driving the growth of the
business, as these engagements typically involve higher recurring
revenues.
The new customer wins and ongoing implementation work with
existing customers create a strong platform for further growth in
the new financial year. The back-order book at 30 September 2020
was up by 41% to an all-time record of GBP31.0m (2019: GBP22.0m),
providing far greater visibility of revenues than at the beginning
of any previous financial year. We have stepped up our delivery
resources accordingly, and our offshore centre in Pune, India still
retains ample capacity for further growth.
We continued to invest in R&D over the year to further
improve our product set. This included the release of Cerillion 8,
the next generation of our enterprise platform, which now
includes:
-- Cerillion Business Insights, a powerful, embedded analytics
module that unlocks the full value of customer data by enabling
users to easily explore, visualise and query data in real-time;
-- enhanced support for B2B2X business models, including product
margin analysis and a highly customisable data model, making it
easy to map additional product and service attributes required for
seamless integration with digital ecosystems;
-- a completely redesigned user interface offering context
personalisation, task-based navigation and separate
microservices-based apps, all designed to increase customer service
efficiency and reduce CSR training needs; and
-- further improvements in putting digital engagement at the
forefront of the customer experience, with streamlined navigation
and communications, saving customers time and effort when reporting
faults or raising queries natively within Self Service.
Our ambition is to retain our status as a 'Visionary' in
Gartner's highly regarded annual report(8) , 'Magic Quadrant for
Integrated Revenue and Customer Management (IRCM) for CSPs', where
we have been recognised for the past three consecutive years it has
been published. The report assesses vendors for their "completeness
of vision" and "ability to execute", as well as taking customer
references.
Outlook
Cerillion is well-positioned for further growth over the new
financial year. The back-order book is at a record level, and the
pipeline of new prospects is strong. The Company has adapted
effectively to the changes caused by the global pandemic crisis,
and can benefit from the market trends it has driven. In addition,
its financial position is strong, with good cash flows and growing
recurring revenue.
Our increasing success in the marketplace, alongside positive
market trends, supports our positive view of the Company's short
and longer term prospects for growth.
A M Howarth L T Hall
Non-executive Chairman Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2020
Year to Year to
30 September 30 September
2020 2019
Notes GBP GBP
Revenue 2 20,813,925 18,751,781
Cost of sales (5,465,710) (4,698,282)
-------------- --------------
Gross profit 15,348,215 14,053,499
Operating expenses (12,545,475) (11,531,711)
Adjusted EBITDA* 5,805,645 4,557,915
Depreciation and amortisation (2,934,178) (2,013,012)
Share-based payment charge 18 (68,727) (23,115)
Operating profit 3 2,802,740 2,521,788
Finance income 4 49,990 6,375
Finance costs 5 (214,142) (79,506)
-------------- --------------
Profit before taxation 2,638,588 2,448,657
Taxation 6 (28,783) (135,890)
Profit for the year 2,609,805 2,312,767
============== ==============
Other comprehensive income
Items that will or may be reclassified
to profit or loss:
Exchange difference on translating
foreign (165,075) 130,807
operations
-------------- --------------
Total comprehensive income
for the year 2,444,730 2,443,574
============== ==============
Earnings per share
Basic earnings per share - continuing 8
and total operations 8.8 pence 7.8 pence
============== ==============
Diluted earnings per share -
continuing and total operations 8.8 pence 7.8 pence
============== ==============
The Group has no other recognised gains or losses for the
current year.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2020
2020 2019
Notes GBP GBP
ASSETS
Non-current assets
Goodwill 9 2,053,141 2,053,141
Other intangible assets 9 4,475,236 5,210,766
Property, plant and equipment 10 787,885 853,206
Right-of-use assets 11 4,389,175 -
Trade and other receivables 13 2,439,119 2,376,478
Deferred tax assets 12 145,060 133,578
--------------- -------------------
14,289,616 10,627,169
--------------- -------------------
Current assets
Trade and other receivables 13 9,516,568 8,166,271
Cash and cash equivalents 16 8,311,867 6,771,406
--------------- -------------------
17,828,435 14,937,677
-------------------
TOTAL ASSETS 32,118,051 25,564,846
--------------- -------------------
LIABILITIES
Non-current liabilities
Borrowings 15 - (570,946)
Lease liabilities 11 (4,655,772) -
Deferred tax liabilities 12 (883,823) (955,569)
--------------- -------------------
(5,539,595) (1,526,515)
--------------- -------------------
Current liabilities
Trade and other payables 14 (9,020,502) (7,293,357)
Lease liabilities 11 (922,706) -
Borrowings 15 (609,359) (1,200,000)
--------------- -------------------
(10,552,567) (8,493,357)
--------------- -------------------
TOTAL LIABILITIES (16,092,162) (10,019,872)
--------------- -------------------
NET ASSETS 16,025,889 15,544,974
=============== ===================
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Share capital 17 147,567 147,567
Share premium account 13,318,725 13,318,725
Treasury stock 17 (375,025) -
Share option reserve 151,619 158,515
Foreign exchange reserve (46,981) 118,094
Retained earnings 2,829,984 1,802,073
-------------------
TOTAL EQUITY 16,025,889 15,544,974
=============== ===================
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2020
2020 2019
GBP GBP
Cash flows from operating activities
Profit for the year 2,609,805 2,312,767
Adjustments for:
Taxation 28,783 135,890
Finance income (49,990) (6,375)
Finance costs 214,142 79,506
Share option charge 68,727 23,115
Depreciation 1,058,169 311,363
Amortisation 1,876,009 1,701,649
------------ ------------
5,805,645 4,557,915
Increase in trade and other receivables (1,412,938) (1,606,038)
Increase in trade and other payables 2,501,200 2,333,695
------------ ------------
Cash generated from operations 6,893,907 5,285,572
Finance costs (214,142) (79,506)
Finance income 49,990 6,375
Tax paid (123,171) (112,879)
NET CASH GENERATED FROM OPERATING
ACTIVITIES 6,606,584 5,099,562
Cash flows from investing activities
Capitalisation of intangible assets (1,108,473) (833,781)
Purchase of property, plant and
equipment (330,098) (394,789)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,438,571) (1,228,570)
Cash flows from financing activities
Borrowings repaid (1,161,587) (1,022,124)
Purchase of treasury stock (737,506) -
Receipts from exercise of share 195,395 -
options
Principal elements of finance leases (411,653) -
Dividends paid (1,490,431) (1,357,620)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (3,605,782) (2,379,744)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,562,231 1,491,248
Translation differences (21,770) 25,856
Cash and cash equivalents at beginning
of year 6,771,406 5,254,302
CASH AND CASH EQUIVALENTS AT
OF YEAR 8,311,867 6,771,406
============ ============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2019
Ordinary Share Treasury Share Foreign Retained Total
share premium stock option exchange earnings
capital reserve reserve
GBP GBP GBP GBP GBP GBP GBP
Balance at 1
October 2018 147,567 13,318,725 - 135,400 (12,713) 846,926 14,435,905
Profit for the
year - - - - - 2,312,767 2,312,767
Other comprehensive
income:
Exchange
differences
on
translating
foreign
operations - - - - 130,807 - 130,807
----------- ------------ ---------- -----------
Total
comprehensive
income - - - - 130,807 2,312,767 2,443,574
Transactions
with owners:
Share option
charge - - - 23,115 - - 23,115
Dividends - - - - - (1,357,620) (1,357,620)
---------- ----------- ------------ ---------- ----------- ------------ ------------
Total
transactions
with owners - - - 23,115 - (1,357,620) (1,334,505)
---------- ----------- ------------ ---------- ----------- ------------ ------------
Balance as at
30 September
2019 147,567 13,318,725 - 158,515 118,094 1,802,073 15,544,974
========== =========== ============ ========== =========== ============ ============
Ordinary Share Treasury Share Foreign Retained Total
share premium stock option exchange earnings
capital reserve reserve
GBP GBP GBP GBP GBP GBP GBP
Balance at 1
October 2019 147,567 13,318,725 - 158,515 118,094 1,802,073 15,544,974
Profit for the
year - - - - - 2,609,805 2,609,805
Other comprehensive
income:
Exchange
differences
on
translating
foreign
operations - - - - (165,075) - (165,075)
----------- ------------ ---------- -----------
Total
comprehensive
income - - - - (165,075) 2,609,805 2,444,730
Transactions
with owners:
Share option
charge - - - 68,727 - - 68,727
Purchase of
treasury
stock - - (737,506) - - - (737,506)
Exercise of
share
options - - 362,481 (75,623) - (91,463) 195,395
Dividends - - - - - (1,490,431) (1,490,431)
---------- ----------- ------------ ---------- ----------- ------------ ------------
Total
transactions
with owners - - (375,025) (6,896) - (1,581,894) (1,963,815)
---------- ----------- ------------ ---------- ----------- ------------ ------------
Balance as at
30 September
2020 147,567 13,318,725 (375,025) 151,619 (46,981) 2,829,984 16,025,889
========== =========== ============ ========== =========== ============ ============
NOTES TO THE ACCOUNTS
1 Critical accounting estimates and judgements and other sources of estimation uncertainty
1 (a) Critical accounting estimates and judgements
The preparation of Financial Statements under IFRS requires the
use of certain critical accounting assumptions, and requires
management to exercise its judgement and to make estimates in the
process of applying Cerillion's accounting policies.
Judgements
(i) Capitalisation of development costs
Development costs are capitalised only after the technical and
commercial feasibility of the asset for sale or use have been
established. This is determined by our intention to complete and/or
use the intangible asset. The future economic benefits of the asset
are reviewed using detailed cash flow projections. The key
judgement is whether there will be a market for the products once
they are available for sale.
(ii) Revenue recognition
The Group assesses the products and services promised in its
contracts with customers and identifies a performance obligation
for each promise to transfer to the customer a product or service
(or bundle of products and services) that is distinct. This
assessment is performed on a contract by contract basis and
involves significant judgement. The determination of whether
performance obligations are distinct or not affects the timing and
quantum of revenue and profit recognised in each period.
Estimates
(i) Revenue recognition
For contracts where goods or services are transferred over time,
revenue is recognised in line with the percentage completed in
terms of effort to date as a percentage of total forecast effort.
Total forecast is prepared by project managers on a monthly basis
and reviewed by the project office and senior management team on a
monthly basis. The forecast requires management to be able to
accurately estimate the effort required to complete the project and
affects the timing and quantum of revenue and profit recognised on
these contracts in each period.
(ii) Impairment of non-financial assets
All non-current assets are tested for impairment whenever events
or circumstances indicate that their carrying value may be
impaired. Additionally, goodwill is subject to an annual impairment
test. An impairment loss is recognised in the Group statement of
comprehensive income to the extent that an asset's carrying value
exceeds its recoverable amount, which represents the higher of the
asset's net realisable value and its value in use.
(iii) Depreciation and amortisation
Depreciation and amortisation rates are based on estimates of
the useful economic lives and residual values of the assets
involved. The assessment of these useful economic lives is made by
projecting the economic lifecycle of the asset. The key judgement
is estimating the useful economic life of the development costs
capitalised, a review is conducted annually by project.
Depreciation and amortisation rates are changed where economic
lives are re-assessed and technically obsolete items written off
where necessary.
(iv) Calculation of future minimum lease payments
The calculation of lease liabilities requires the Group to
determine an incremental borrowing rate ("IBR") to discount future
minimum lease payments. The IBR is the rate of interest that the
Group would have to pay to borrow over a similar term, and with a
similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what the Group 'would have
to pay', which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the terms and
conditions of the lease.
1 (b) Other sources of estimation uncertainty
(i) Recoverability of trade debtors and accrued income
Management use their judgement when determining whether trade
debtors and accrued income are considered recoverable or where a
provision for impairment is considered necessary. The assessment of
recoverability will include consideration of whether the balance is
with a long-standing client, whether the customer is experiencing
financial difficulties, the fact that balances are recognised under
contract and that the products sold are mission -critical to the
customer's business.
2 Segment information
During the year ended 30 September 2020, the Group was 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.
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.
2020 2019
GBP GBP
Revenue
Services 11,326,196 7,891,085
Software 6,657,289 8,161,818
Software-as-a-Service 984,518 905,175
Third-party 1,845,922 1,793,703
----------- -----------
Total revenue 20,813,925 18,751,781
=========== ===========
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 GBP12,994,913 (2019: GBP8,965,033).
Accounting policies
Year ended 30 September
2020 (i) (ii) (iii) (iv) Total
GBP GBP GBP GBP GBP GBP
Services 11,326,196
implementation
fees 7,528,326 - - - 7,528,326
ongoing account
development work - - 3,797,870 - 3,797,870
Software 6,657,289
initial licence
fees 1,449,647 - - - 1,449,647
sale of additional
licences - 151,752 - - 151,752
ongoing maintenance
and support fees 5,055,890 - - - 5,055,890
Software-as-a-Service 984,518 984,518 - - - 984,518
Third-Party 1,845,922 - - - 1,845,922 1,845,922
Total 20,813,925 15,018,381 151,752 3,797,870 1,845,922 20,813,925
============ =========== ======== ========== ========== ===========
Accounting policies
Year ended 30 September 2019 (i) (ii) (iii) (iv) Total
GBP GBP GBP GBP GBP GBP
Services 7,891,085
implementation
fees 5,071,013 - - - 5,071,013
ongoing account
development work - - 2,820,072 - 2,820,072
Software 8,161,818
initial licence
fees 2,978,091 - - - 2,978,091
sale of additional
licences - 969,478 - - 969,478
ongoing maintenance
and support fees 4,214,249 - - - 4,214,249
Software-as-a-Service 905,175 905,175 - - - 905,175
Third-Party 1,793,703 - - - 1,793,703 1,793,703
Total 18,751,781 13,168,528 969,478 2,820,072 1,793,703 18,751,781
=========== ============= ======== =========== ========== ===========
(a) Geographical information
As noted above, the internal reporting of the Group's
performance does not require that the statement of financial
position information is gathered on the basis of the business
streams. However, the Group operates within discrete geographical
markets such that capital expenditure, total assets and net assets
of the Group are split between these locations as follows:
Europe MEA Americas Asia Pacific
GBP GBP GBP GBP
Year ended 30 September
2020
Revenue - by customer
location 13,478,228 508,667 3,283,377 3,543,653
Capital expenditure 1,417,080 - - 21,491
Non-current assets 13,301,609 - - 988,007
Total assets 30,552,219 - - 1,565,832
Net assets 15,789,432 - - 236,457
=========== ======== ========== =============
Europe MEA Americas Asia Pacific
GBP GBP GBP GBP
Year ended 30 September
2019
Revenue - by customer
location 10,369,113 29,667 6,059,644 2,293,357
Capital expenditure 1,049,536 - - 179,034
Non-current assets 10,324,666 - - 302,503
Total assets 24,729,262 - - 835,584
Net assets 15,243,658 - - 301,316
=========== ======= ========== =============
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 2020 2019
segment GBP GBP
Customer
No. 1 Europe 4,483,638 503,440
No. 2 Asia Pacific 2,822,605 1,443,528
No. 3 Americas 1,659,425 3,674,824
No. 4 Europe 560,618 2,214,981
============= ========== ==========
3 Operating profit
2020 2019
GBP GBP
Operating profit is stated after (crediting)/charging:
Employee benefits expenses 11,923,335 10,196,561
Depreciation 1,058,169 311,363
Amortisation of intangibles 1,876,009 1,701,649
Research and development costs 341,834 465,920
Bad debt expense /(credit) 178,983 (32,941)
Foreign exchange losses 323,083 40,169
Operating leases * 126,265 846,187
Fees payable to Cerillion's principal
auditor:
- Audit of Cerillion plc's annual accounts 8,400 8,000
- Audit of subsidiaries 62,600 59,500
- Non-audit services - tax services 20,000 9,400
Fees payable to associates of principal
auditor:
- Audit of subsidiaries 7,500 -
Other costs 2,085,007 2,624,185
----------- ---------------
Total cost of sales and operating expenses 18,011,185 16,229,993
=========== ===============
*The Group has adopted IFRS 16 in the year ended 30 September
2020 and the disclosure of leases has changed accordingly, see Note
23 and Note 11 for further information.
4 Finance income
2020 2019
GBP GBP
Finance income:
Bank interest receivable 5,949 6,375
Unwinding discount of contracts with significant 44,041 -
financing component
------- ------
49,990 6,375
======= ======
5 Finance costs
2020 2019
GBP GBP
Finance costs:
Interest payable in respect of loans (38,414) (77,973)
Interest and finance charges for lease (174,476) -
liabilities
Other interest payable (1,252) (1,533)
(214,142) (79,506)
========== =========
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:
2020 2019
GBP GBP
Current tax credit - UK - -
Current tax expense - overseas 123,170 112,879
-------- --------
Current tax expense - total 123,170 112,879
-------- --------
Deferred tax credit (56,323) (16,757)
Deferred tax - adjustment in respect of prior
year (38,064) 39,768
-------- --------
Deferred tax (credit) /charge - total (94,387) 23,011
Total tax charge 28,783 135,890
======== ========
(b) Factors affecting total tax for the year
The tax assessed for the year differs from the standard rate
of corporation tax in the United Kingdom 19.0% (2019: 19.0%).
The differences are explained as follows:
Profit on ordinary activities before tax 2,638,588 2,448,657
Profit on ordinary activities multiplied by
standard rate of corporation tax in the United
Kingdom of 19.0% (2019: 19.0%) 501,333 465,245
Effect of:
Expenses not deductible for tax purposes 353,342 364,591
Non-taxable income for tax purposes (386,800) (373,624)
Difference in tax rates 107,942 60,217
Other temporary differences - 3,876
Prior year tax adjustment (38,064) 39,768
Other permanent differences - relating to share
options (97,054) -
Enhanced relief for research and development (411,916) (424,183)
Total tax charge 28,783 135,890
========= =========
There are currently no recognised or unrecognised deferred tax
assets or liabilities within the Parent Company accounts.
7 Dividends
(a) Dividends paid during the reporting period
The Board paid the final dividend in respect of 2019 of 2.8p per
share and declared and paid an interim 2020 dividend of 1.75p
(2019: 1.6p) per share. Total dividends paid during the reporting
period were GBP1,490,431 (2019: GBP1,357,620).
(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 3.75p per fully
paid Ordinary Share (2019: 3.3p). The aggregate amount of the
proposed dividend expected to be paid out of retained earnings at
30 September 2020, but not recognised as a liability at the year
end is GBP1,106,756 (2019: GBP973,945). Since the year end the
Directors of Cerillion Technologies Limited have approved a GBP3.0
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.
2020 2019
Profit attributable to equity holders
of the Company (GBP) 2,609,805 2,312,767
Weighted average number of Ordinary Shares
in issue (number) 29,513,486 29,513,486
Less weighted average number of shares (9,911) -
held in Treasury
----------- -----------
Weighted average number of Ordinary Shares
in issue (number) 29,503,575 29,513,486
Effect of share options in issue 309,223 267,700
----------- -----------
Weighted average shares for diluted earnings
per share 29,812,798 29,781,186
=========== ===========
Basic earnings per share (pence per share) 8.8 7.8
Diluted earnings per share (pence per
share) 8.8 7.8
9 Intangible assets
Group Goodwill Purchased Intellectual Software External Total
customer property development software
contracts rights costs licences
GBP GBP GBP GBP GBP GBP
Cost
At 1 October
2018 2,053,141 4,382,654 2,567,160 2,383,646 - 11,386,601
Additions - - - 833,781 - 833,781
----------
At 30 September
2019 2,053,141 4,382,654 2,567,160 3,217,427 - 12,220,382
----------- ----------- ------------- ------------- ---------- -----------
Additions - - - 1,088,365 20,108 1,108,473
Reclassification* - - - - 210,345 210,345
----------
At 30 September
2020 2,053,141 4,382,654 2,567,160 4,305,792 230,453 13,539,200
----------- ----------- ------------- ------------- ---------- -----------
Amortisation
At 1 October
2018 - 1,565,233 916,843 772,750 - 3,254,826
Provided in the
year - 626,093 366,737 708,819 - 1,701,649
----------
At 30 September
2019 - 2,191,326 1,283,580 1,481,569 - 4,956,475
----------- ----------- ------------- ------------- ---------- -----------
Provided in the
year - 626,093 366,737 864,960 18,219 1,876,009
Reclassification* - - - - 178,339 178,339
----------
At 30 September
2020 - 2,817,419 1,650,317 2,346,529 196,558 7,010,823
----------- ----------- ------------- ------------- ---------- -----------
Net book amount
at 30 September
2020 2,053,141 1,565,235 916,843 1,959,263 33,895 6,528,377
=========== =========== ============= ============= ========== ===========
Net book amount
at
30 September
2019 2,053,141 2,191,328 1,283,580 1,735,858 - 7,263,907
=========== =========== ============= ============= ========== ===========
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 GBP2,053,141, 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 2020, less an estimate of costs to sell,
there is significant headroom above the carrying value of the
cash-generating unit and therefore no impairment exists. The
calculations show that a reasonably possible change, as assessed by
the Directors, would not cause the carrying amount of the CGU to
exceed its recoverable amount.
*The Company's external software licences were previously
presented as tangible assets in the balance sheet. However,
management has assessed that these assets are not closely linked to
underlying hardware and can be used independently, the cost and
accumulated amortisation of those was reclassified to intangible
assets.
10 Property plant and equipment
Group Leasehold Computer Fixtures Total
improvements equipment and fittings
GBP GBP GBP GBP
Cost
At 1 October
2018 585,745 1,201,147 270,553 2,057,445
Additions 138,062 232,284 24,443 394,789
Disposals - - - -
Exchange difference 15,056 12,887 9,336 37,279
At 30 September
2019 738,863 1,446,318 304,332 2,489,513
-------------- ----------- -------------- -----------
Additions - 326,954 3,144 330,098
Disposals - (91,053) (3,141) (94,194)
Reclassification* - (210,345) - (210,345)
Exchange difference (26,115) (15,496) (9,684) (51,295)
-------------- ----------- -------------- -----------
At 30 September
2020 712,748 1,456,378 294,651 2,463,777
-------------- ----------- -------------- -----------
Depreciation
At 1 October
2018 198,484 941,779 148,729 1,288,992
Provided in the
year 53,085 193,602 64,676 311,363
Disposals - - - -
Exchange difference 15,476 11,603 8,873 35,952
At 30 September
2019 267,045 1,146,984 222,278 1,636,307
-------------- ----------- -------------- -----------
Provided in the
year 67,509 224,572 57,977 350,058
Disposals - (91,053) (3,140) (94,193)
Reclassification* - (178,339) - (178,339)
Exchange difference (16,011) (12,907) (9,023) (37,941)
At 30 September
2020 318,543 1,089,257 268,092 1,675,892
-------------- ----------- -------------- -----------
Net book amount
at 30 September
2020 394,205 367,121 26,559 787,885
============== =========== ============== ===========
Net book amount
at
30 September
2019 471,818 299,334 82,054 853,206
============== =========== ============== ===========
All depreciation charges are included within operating expenses
and no impairment has been charged.
As referred to in note 15 the Group's loan is secured over all
the assets of the Group.
There were no property, plant and equipment assets owned by the
Parent Company.
*The reclassification is explained in note 9.
11 Leases
Group
This note provides information for leases where the Group is a
lessee. The Group leases offices in London and India, along with
some IT equipment.
(i). amounts recognised in the consolidated statement of
financial position
The consolidated statement of financial position shows the
following amounts relating to leases:
Group Company
30 September 1 October 30 September 1 October
Right-of-use assets 2020 2019 2020 2019
GBP GBP GBP GBP
Properties 4,383,327 5,060,934 3,668,011 4,173,943
IT Equipment 5,848 36,353 - -
4,389,175 5,097,287 3,668,011 4,173,943
------------- ---------- ------------- ----------
Group Company
30 September 1 October 30 September 1 October
Lease liabilities 2020 2019 2020 2019
GBP GBP GBP GBP
Current 922,706 582,127 731,000 365,500
Non-current 4,655,772 5,408,004 4,012,028 4,600,500
5,578,478 5,990,131 4,743,028 4,966,000
------------- ---------- ------------- ----------
Additions to the right-of-use assets during the 2020 financial
year were GBPnil.
(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 30 September
Depreciation charge of right-of-use 2020 2019
assets GBP GBP
Properties 677,606 -
IT Equipment 30,505 -
708,111 -
------------- -------------
Interest expense (included in finance 174,476 -
cost)
Expense relating to short-term leases 120,797 -
(included in operating expenses)
Expenses relating to low value assets 5,468 -
that are not shown above as short-term
leases (included in operating expenses)
The total cash outflow for leases in 2020 was GBP 586,132 .
The property within the Company had a depreciation charge for
the year of GBP505,932 (2019: GBPnil).
12 Deferred tax
Deferred tax asset
Group Accelerated Other temporary Total
capital differences
allowances
GBP GBP GBP
1 October 2018 46,842 122,251 169,093
Foreign exchange movement on opening
deferred tax asset - 11,428 11,428
Debited to statement of comprehensive
income (25,789) (21,154) (46,943)
30 September 2019 21,053 112,525 133,578
=========== =============== ========
Group Accelerated Other temporary Total
capital differences
allowances
GBP GBP GBP
1 October 2019 21,053 112,525 133,578
Foreign exchange movement on opening
deferred tax asset (3,273) (7,887) (11,160)
Credited to statement of comprehensive
income 622 22,020 22,642
30 September 2020 18,402 126,658 145,060
=========== =============== ========
Deferred tax liability
Group
The deferred tax liability arose in respect of the fair value
uplift of intangible assets, with GBP1,320,465 arising on the
acquisition of Cerillion Technologies Limited in March 2016 and
GBP70,660 relating to the acquisition of "Net Solutions Services"
by Cerillion Technologies Limited in 2015.
2020 2019
GBP GBP
At 1 October 955,569 979,501
Debited to statement of comprehensive
income in respect of net ACAs & other
temporary differences 47,394 159,166
Credited to statement of comprehensive
income in respect of acquisitions (119,140) (183,098)
---------- ----------
As at 30 September 883,823 955,569
========== ==========
There are no deferred tax assets or deferred tax liabilities
recognised within the Parent Company as at 30 September 2020 (2019:
GBPnil).
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
2020 2019
GBP GBP
Trade receivables 2,687,472 2,805,864
Contract assets 8,494,767 7,107,393
Contract liabilities 5,084,999 3,557,283
Contract assets, which are included in 'Accrued income' within
trade and other receivables and are composed of the current and
non-current balances. Contract liabilities, which are included in
'Deferred income' within trade and other payables.
Payment terms and conditions in customer contracts may vary. In
some cases, customers pay in advance of the delivery of solutions
or services; in other cases, payment is due as services are
performed or in arrears following the delivery of the solutions or
services. Differences in timing between revenue recognition and
invoicing result in trade receivables, contract assets or contract
liabilities in the statement of financial position.
Contract assets refer to accrued income and arise when revenue
is recognised, but invoicing is contingent on performance of other
performance obligations or on completion of contractual milestones.
Contract assets are transferred to receivables when the rights
become unconditional, typically upon invoicing of the related
performance obligations in the contract or upon achieving the
requisite project milestone.
Contract liabilities refer to deferred income and result from
customer payments in advance of the satisfaction of the associated
performance obligations and relate primarily to prepaid support or
other recurring services. Deferred income is released as revenue is
recognised.
Significant changes in the contract assets and contract
liabilities balances during the period are driven by the timing of
income recognition and when associated invoices are raised.
Specifically, revenue recognised in the year in relation to
deferred income brought forward from prior year of GBP3,003,462
(2019: GBP1,585,275).
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 GBP86,599 (2019: GBP48,944). The total amount of
accrued costs to acquire a contract are GBP203,629 (2019:
GBP184,745).
The total amount of revenue allocated to unsatisfied performance
obligations is GBP25,102,075 (2019: GBP17,587,772). It is estimated
that 75% will be recognised over the next 18 months, the remainder
over the following year thereafter.
There are no contract balances within the Parent Company (2019:
GBPnil).
Current receivables Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
Trade receivables 2,687,472 2,805,864 - -
Accrued income 6,055,648 4,730,915 - -
Amounts owed by Group undertakings - - 1,908,131 1,719,497
Other receivables 366,875 390,524 32,029 -
Prepayments 406,573 238,968 8,066 3,626
--------- --------- --------- ---------
9,516,568 8,166,271 1,948,226 1,723,123
========= ========= ========= =========
Non-current receivables Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
Accrued income 2,439,119 2,376,478 - -
========= ========= ========= =========
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:
2020 2019
GBP GBP
Group
Trade receivables 3,015,131 2,951,383
ECL reserve (327,659) (145,519)
---------- --------------
2,687,472 2,805,864
========== ==============
The Parent Company had no trade receivables in either
period.
The other classes of assets within trade and other receivables
do not contain impaired assets.
The net carrying value is judged to be a reasonable
approximation of fair value.
The following is an ageing analysis of those trade receivables
that were not past due and those that were past due but not
impaired. These relate to a number of independent customers for
whom there is no recent history of default.
2020 2019
GBP GBP
Group
Not past due 2,065,185 2,660,707
Up to 3 months 395,178 132,681
3 to 6 months 51,771 -
Older than 6 months 175,338 12,476
---------- --------------
2,687,472 2,805,864
========== ==============
Of the trade debt older than 6 months as at 30 September 2020,
being GBP175,338 (2019: GBP12,476), cash of GBP122,471 (2019:
GBPnil) has been received since the year end.
The following is an ageing analysis of those trade receivables
that were individually considered to be impaired:
2020 2019
GBP GBP
Group
Not past due - -
Up to 3 months 98,324 390
3 to 6 months 39,682 -
Older than 6 months 189,653 145,129
-------- ------------
327,659 145,519
======== ============
14 Trade and other payables
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
Trade payables 736,157 505,559 53,539 46,777
Taxation - - - -
Other taxation and social security 551,990 181,508 - 10,961
Pension contributions 42,232 42,188 - -
Other payables 481,391 555,556 250 -
Accruals 2,123,733 2,451,263 66,830 842,427
Deferred income 5,084,999 3,557,283 - -
9,020,502 7,293,357 120,619 900,165
========= ========= ======= =======
The Directors consider that the carrying amount of trade and
other payables approximates to their fair values.
15 Borrowings and financial liabilities
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
Current liabilities:
Secured loans 609,359 1,200,000 609,359 1,200,000
Lease liabilities 922,706 - 731,000 -
Non-current liabilities:
Secured loans - 570,946 - 570,946
Lease liabilities 4,655,772 - 4,012,028 -
6,187,837 1,770,946 5,352,387 1,770,946
========= ========= ========= =========
15a Terms and repayment schedule
The Facility Agreement between the Company and HSBC Bank plc
made available a loan of up to GBP5 million (the "Loan") for the
purpose of assisting with the payment of the cash element of the
acquisition of Cerillion Technologies Limited.
The Loan is secured over the assets of the Group and was drawn
down in full in March 2016. The terms and conditions of outstanding
loans are as follows:
(a) it bears interest at the rate of 2.5 per cent. per annum
over the Bank of England Base Rate as published from time to
time;
(b) is repayable by the Company by quarterly repayments in the
amount of GBP250,000 inclusive of interest, for the first three
years of the term, and thereafter in an amount of GBP300,000
inclusive of interest, in accordance with an agreed repayment
schedule;
(c) is terminable on a change of control of the Company and
repayable following an event of default; and
(d) is for a term of five years from the date of first
drawdown.
Group and Company Non-current Current
Borrowings Borrowings Total
GBP GBP GBP
1 October 2019 570,946 1,200,000 1,770,946
Cash-flows:
Repayment - (1,161,587) (1,161,587)
Non-cash:
Reclassification (570,946) 570,946 -
------------------- ------------------- ------------
30 September 2020 - 609,359 609,359
=================== =================== ============
Non-current Current
Borrowings Borrowings Total
Group and Company GBP GBP GBP
1 October 2018 1,793,070 1,000,000 2,793,070
Cash-flows:
Repayment - (1,022,124) (1,022,124)
Non-cash:
Reclassification (1,222,124) 1,222,124 -
------------------- ------------------- ------------
30 September 2019 570,946 1,200,000 1,770,946
=================== =================== ============
Group Non-current Current
Lease liabilities Lease liabilities
Total
GBP GBP GBP
1 October 2019 - - -
Recognised on adoption of IFRS
16 5,408,004 582,127 5,990,131
------------------- ------------------- ------------
1 October 2019 post adoption
of IFRS 16 5,408,004 582,127 5,990,131
Cash-flows:
Repayment - (586,132) (586,132)
Accrued interest - 174,479 174,479
Non-cash:
Reclassification (752,232) 752,232 -
------------------- ------------------- ------------
30 September 2020 4,655,772 922,706 5,578,478
=================== =================== ============
Company Non-current Current
Lease liabilities Lease liabilities
Total
GBP GBP GBP
1 October 2019 - - -
Recognised on adoption of IFRS
16 4,600,500 365,500 4,966,000
------------------- ------------------- ------------
1 October 2019 post adoption
of IFRS 16 4,600,500 365,500 4,966,000
Cash-flows:
Repayment - (369,504) (369,504)
Accrued interest - 146,532 146,532
Non-cash:
Reclassification (588,472) 588,472 -
------------------- ------------------- ------------
30 September 2020 4,012,028 731,000 4,743,028
=================== =================== ============
16 Financial instruments and risk management
Group - Financial instruments by category 2020 2019
GBP GBP
Financial assets - loans
and receivables
Non-current
Accrued income 2,439,119 2,376,478
=========== ===========
Current
Trade and other receivables 3,054,347 3,196,388
Accrued income 6,055,648 4,730,915
Cash and cash equivalents 8,311,867 6,771,406
-----------
17,421,862 14,698,709
=========== ===========
Prepayments are excluded, as this analysis is required only for
financial instruments.
Financial liabilities - held 2020 2019
at amortised cost GBP GBP
Non-current
Borrowings - 570,946
Lease liabilities 4,655,772 -
4,655,772 570,946
========== ==============
Current
Current borrowings 609,359 1,200,000
Lease liabilities 922,706 -
Trade and other payables 1,217,548 1,061,115
Pension costs 42,232 42,188
Accruals 2,123,733 2,451,263
----------
4,915,578 4,754,566
========== ==============
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 2020 2019
category GBP GBP
Financial assets - loans
and receivables
Current
Amounts owed by Group undertakings
& other receivables 1,940,160 1,719,497
Cash and cash equivalents 114,129 169,163
----------
2,054,289 1,888,660
========== ==========
Financial liabilities - held 2020 2019
at amortised cost GBP GBP
Non-current
Borrowings - 570,946
Lease liabilities 4,012,028 -
4,012,028 570,946
========== ==========
Current
Current borrowings 609,359 1,200,000
Lease liabilities 731,000 -
Trade and other payables 53,789 46,777
Accruals 66,830 842,427
1,460,978 2,089,204
========== ==========
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 2020 (2019: GBPnil).
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:
2020 2019
GBP GBP
Trade receivables
Group 1 295,153 1,849,871
Group 2 2,274,277 707,722
Group 3 118,042 248,271
---------- ----------
2,687,472 2,805,864
========== ==========
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 6 customers (2019: 2 customers) with
trade receivable balances each representing in excess of 5% of the
total trade receivables of GBP2,687,472 (2019: 2,805,864). Of these
customers, 1 is categorised within Group 1 representing 11% of
total trade receivables (2019: nil), 5 are within Group 2
representing 53% of total trade receivables (2019: 1 customer),
with none in Group 3 (2019: 1 customer).
There are no trade receivables within the Parent Company.
2020 2019
GBP GBP
Cash at bank and short-term deposits
A1 8,309,074 6,768,218
Not rated 2,793 3,188
---------- --------------
8,311,867 6,771,406
========== ==============
A1 rating means that the risk of default for the investors and
the policy holder is deemed to be very low.
Not rated balances relate to petty cash amounts. All cash within
the Parent Company is within the A1 category.
Market risk - foreign exchange risk
Exposure to currency exchange rates arise from the Group's
overseas sales and purchases, which are primarily denominated in US
Dollars (USD), Australian Dollars (AUD) and Euros (EUR). There is
no foreign exchange exposure within the Parent Company.
To mitigate the Group's exposure to foreign currency risk,
non-GBP cash flows are monitored and forward exchange contracts are
entered into in accordance with the Group's risk management
policies. Generally, the Group's risk management procedures
distinguish short-term foreign currency cash flows (due within 6
months) from longer-term cash flows (due after 6 months). Where the
amounts to be paid and received in a specific currency are expected
to largely offset one another, no further hedging activity is
undertaken. Forward exchange contracts are mainly entered into for
significant long-term foreign currency exposures that are not
expected to be offset by other same-currency transactions.
As at 30 September 2020 the Group had no forward foreign
exchange contracts in place (2019: none) to mitigate exchange rate
exposure arising from forecast income in US Dollars, Australian
Dollars and Euros.
Foreign currency denominated financial assets and liabilities
which expose the Group to currency risk are disclosed below. The
amounts shown are those reported to key management translated into
GBP at the closing rate:
AUD USD EUR INR DKK BND
30 September 2020
Financial assets 374,834 3,117,456 2,202,588 722,885 2,845,424 729,482
Financial liabilities - (101,187) (40,063) (509,071) - -
Total exposure 374,834 3,016,269 2,162,525 213,814 2,845,424 729,482
======== ========== =========== ========== ========== ==========
AUD USD EUR INR DKK BND
30 September 2019
Financial assets 298,452 5,025,829 2,697,106 665,743 229,950 2,232,614
Financial liabilities - (148,032) (23,227) (535,533) - -
Total exposure 298,452 4,877,797 2,673,879 130,210 229,950 2,232,614
======== ========== =========== ========== ========== ==========
The following table illustrates the sensitivity of profit and
equity in regards to the Group's financial assets and financial
liabilities and the US Dollar, Australian Dollar, Euro, Indian
Rupee, Danish Krone and Brunei Dollar to GBP exchange rate 'all
other things being equal'. It assumes a +/- 10% change to each of
the foreign currency to GBP exchange rates. These percentages have
been determined based on the average market volatility in exchange
rates in the previous 12 months. The sensitivity analysis is based
on the Group's foreign currency financial instruments held at each
reporting date and also takes into account forward exchange
contracts that offset effects from changes in currency exchange
rates.
If the GBP had strengthened against the foreign currencies by
10% then this would have had the following impact:
30 September 2020 AUD USD EUR INR DKK BND
Loss for the year (34,076) (274,206) (196,593) (19,438) (258,675) (66,317)
========= ========== ========== ========= ========== ==========
Equity total (34,076) (274,206) (196,593) (19,438) (258,675) (66,317)
========= ========== ========== ========= ========== ==========
30 September 2019 AUD USD EUR INR DKK BND
Loss for the year (27,132) (443,436) (243,080) (11,837) (20,869) (202,965)
========= ========== ========== ========= ========== ==========
Equity total (27,132) (443,436) (243,080) (11,837) (20,869) (202,965)
========= ========== ========== ========= ========== ==========
If the GBP had weakened against the foreign currencies by 10%
then this would have had the following impact:
30 September 2020 AUD USD EUR INR DKK BND
Gain for the year 41,648 335,141 240,281 23,757 316,158 81,054
======= ======== ======== ======= ======== ========
Equity total 41,648 335,141 240,281 23,757 316,158 81,054
======= ======== ======== ======= ======== ========
30 September 2019 AUD USD EUR INR DKK BND
Gain for the year 33,161 541,977 297,098 14,468 25,507 248,068
======= ======== ======== ======= ======== ========
Equity total 33,161 541,977 297,098 14,468 25,507 248,068
======= ======== ======== ======= ======== ========
Exposures to foreign exchange rates vary during the year
depending on the volume of overseas transactions. Nonetheless, the
analysis above is considered to be representative of the Group's
exposure to currency risk.
Market Risk - cash flow interest rate risk
Cerillion had outstanding borrowing within the Group and
Company, as disclosed in note 18.
These were loans taken out with HSBC to facilitate the purchase
of shares prior to the Admission on AIM.
The Group's policy is to minimise interest rate cash flow risk
exposures on long-term financing. Longer-term borrowings are
therefore usually at fixed rates. At 30 September 2020, the Group
is exposed to changes in market interest rates through bank
borrowings at variable interest rates. Other borrowings are at
fixed interest rates. The exposure to interest rates for the
Group's cash at bank and short-term deposits is considered
immaterial.
The following table illustrates the sensitivity of profit and
equity to a reasonably possible change in interest rates of +/- 1%.
These changes are considered to be reasonably possible based on
observation of current market conditions. The calculations are
based on a change in the average market interest rate for each
period, and the financial instruments held at each reporting date
that are sensitive to changes in interest rates. All other
variables are held constant.
Profit for the year Equity
+1% -1% +1% -1%
30 September 2020 (11,621) 13,101 (11,621) 13,101
============== ========== ========= =======
30 September 2019 (21,928) 21,761 (21,928) 21,761
============== ========== ========= =======
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.
Between Between
Less than 1 and 2 2 and 5 Over 5
1 year years years years
30 September 2020
Borrowings 614,793 - - -
Lease liabilities 913,473 936,879 2,651,816 1,644,750
Trade and other
payables 3,935,503 - - -
========== ============= ============== ==============
30 September 2019
Borrowings 1,242,252 626,914 - -
Trade and other
payables 3,736,074 - - -
========== ============= ============== ==============
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 repay the
existing loans, whilst maintaining 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.
17 Share capital
2020 2019
GBP GBP
Issued, allotted, called up and fully paid:
29,513,486 (2019: 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.
In February 2020, the Company acquired 172,622 of its own shares
in the market, at GBP2.10 per share, to be held as Treasury Stock
to be used to satisfy the exercise of share options. In March 2020
172,610 of these shares were issued on the exercise of share
options. In September 2020, the Company acquired 125,000 of its own
shares in the market, at GBP3.00 per share, all 125,000 shares were
held as Treasury Shares at the year end. At the year end there were
125,012 shares remaining in Treasury Stock at an average cost of
GBP3.00 per share.
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 was
introduced in 2019. A charge of GBP68,727 (2019: GBP23,115) has
been reflected in the consolidated statement of comprehensive
income, with the corresponding entry recognised within the share
option reserve.
The fair value of options granted in the current year and the
assumptions used in the calculation are shown below:
Year of grant 2017 2017 2019
Scheme SAYE LTIP SAYE
Exercise price (GBP) 1.132 0.05 1.092
Number of options granted 189,845 300,000 132,917
Vesting period (years) 3 years 3 to 3.5 years 3 years
Option life (years) 3.5 years 5 to 5.5 years 3.5 years
Risk free rate 0.50% 0.49% 0.50%
Volatility 41% 41% 41%
Dividend yield 3.00% 3.33% 3.00%
Fair value (GBP) 0.44 0.53 0.43
The share option schemes are issued by the Parent Company,
therefore the disclosures within this note cover the Group and
Parent Company, the share-based payment expense is recharged to
Cerillion Technologies Limited as this is where the option holders
are employed.
Share options relating to the SAYE 2017 were exercised during
the year ended 30 September 2020, with Treasury Shares being used
to settle the options exercised. Since the year end, 20 October
2020, half of the LTIP share options were exercised, being options
over 125,000 shares.
During the year options were granted as summarised in the table
below:
2020 2020 2019 2019
Weighted Weighted
average average
Number of exercise Number of exercise
Options price Options price
GBP GBP
Outstanding at start of year 555,522 0.62 439,845 0.49
Granted - - 132,912 1.09
Expired - - (17,235) 1.13
Exercised (172,610) (1.13) - -
Outstanding at 30 September 382,912 0.38 555,522 0.62
========== ========= ========== =========
Exercisable at 30 September - - - -
========== ========= ========== =========
19 Retirement benefits
The Group operates a group personal contribution pension scheme
for the benefit of the employees. The pension cost charge for the
year represents contributions payable by the Group to the fund and
amounted to GBP313,181 (2019: GBP322,658). At the year end the
contributions payable to the scheme were GBP42,232 (2019:
GBP42,188).
20 Future lease payments
From 1 October 2019, the Group has recognised right-of-use
assets for these leases, except for short-term and low value
leases, see Note 23 and Note 11 for further information. In the
prior year, the Group had commitments under non-cancellable
operating leases in respect of land and buildings and plant and
machinery. The Group's future minimum operating lease payments were
as follows:
2020 2019
Group GBP GBP
Within one year - 570,839
Between one and five years - 3,152,777
After five years - 2,375,750
------- ----------
- 6,099,366
======= ==========
There are no lease commitments within the Parent Company.
21 Annual General Meeting
The Annual General Meeting is to be held on 5 February 2021.
Notice of the AGM will be despatched to shareholders with
Cerillion's report and accounts.
22 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 2020 or 2019, 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 2020 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.
23 First time adoption of IFRS 16 "Leases"
This section explains the impact of the adoption of IFRS 16
"Leases" on the Group's financial statements .
The Group has adopted IFRS 16 "Leases" retrospectively from 1
October 2019 but has not restated comparatives for the 2019
reporting period, as permitted under the specific transition
provisions in the standard. The reclassifications and the
adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 October 2019. The new
accounting policies are disclosed within the "Leases" policy
below.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 October 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
October 2019 was 3.0%. There were no leases previously classified
as finance leases.
(i) Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted
by the standard:
-- relying on previous assessments on whether leases are onerous
as an alternative to performing an impairment review - there were
no onerous contracts as at 1 October 2019; and
-- accounting for operating leases with a remaining lease term
of less than 12 months as at 1 October 2019 as short-term
leases
The Group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
Group relied on its assessment made applying IAS 17 and
Interpretation 4 Determining whether an Arrangement contains a
Lease.
(ii) Measurement of lease liabilities Group
30 Sep
2019
GBP
Operating lease commitments disclosed as at 30
September 2019 6,099,366
----------
Discounted using the lessee's incremental borrowing
rate at the date of initial application 6,002,352
Less: low value/short-term leases recognised on
a straight-line basis as expense (12,221)
----------
Lease liability recognised as at 1 October 2019 5,990,131
==========
Of which are:
Current lease liabilities 582,127
Non-current lease liabilities 5,408,004
----------
5,990,131
==========
The Parent Company recognised a lease liability of GBP4,966,000
as at 1 October 2019, which was split GBP365,500 as current and
GBP4,600,500 as non-current.
(iii) Measurement of right-of-use assets
The associated right-of-use assets were measured on a
retrospective basis as if the new rules had always been applied.
The right-of-use assets were measured at the amount equal to the
lease liability, adjusted by the amount of any prepaid or accrued
lease payments relating to that lease recognised in the balance
sheet as at 30 September 2019. There were no onerous lease
contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
(iv) Adjustments recognised in the statement of financial
position on 1 October 2019
The change in accounting policy affected the following items in
the balance sheet on 1 October 2019:
-- Right-of-use assets - increased by GBP5,097,287 (Parent Company: GBP4,173,943)
-- Accruals - decreased by GBP892,844 (Parent Company: GBP792,057)
-- Lease liabilities - increased by GBP5,990,131 (Parent Company: GBP4,966,000).
The net impact on retained earnings on 1 October 2019 was GBPnil
(Parent Company: GBPnil).
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END
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