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RNS
Cerillion PLC  -  CER   

Final Results

Released 07:00 27-Nov-2017

RNS Number : 5090X
Cerillion PLC
27 November 2017
 

27 November 2017

AIM: CER

 

Cerillion plc

("Cerillion" or "the Company" or "the Group")

Final results for the year ended 30 September 2017

 

Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2017. 

Highlights1 

Financial:

·   Strong results reflecting buoyant software revenue growth

·   Revenue up by 8.3% to £16.0m (annualised 2016: £14.8m)

-     extension of contracts with existing customers made a strong contribution to software sales 

·     Recurring revenue5 up by 9.6% to £4.4m

-     c. 28% of total revenues

·     Back order book6 stood at £13.1m (2016: £9.3m) - up 40.8%

·     EBITDA up by 17.8% to £3.6m (annualised 2016: £3.1m)

-     EBITDA margin up to 22.6% (annualised 2016: 20.7%)

·     Adjusted profit before tax up by 8.4% to £2.5m (annualised 2016: £2.3m)

·     Earnings per share of 6.9p (annualised 2016: 1.3p)

·     Cerillion Technologies Limited earnings per share of 7.9p (2016: 6.8p7)

·     Proposed final dividend of 2.8p per share, bringing the total dividend for the year to 4.2p per share (2016: 3.9p) growth of 7.7%

 

Operational:

·     Two large new Enterprise customer wins in Europe

·     A further four new customers signed for Skyline, Cerillion's cloud billing solution

·     New Enterprise Product Catalogue module introduced

·     Included in the 'Visionaries' quadrant of the Gartner Magic Quadrant for Integrated Revenue and Customer Management for CSPs for the 2nd consecutive year

·     Outlook for continuing progress remains very positive

 

Louis Hall, CEO of Cerillion, commented:

"I am pleased to present our second set of full year results as an AIM-quoted Company. Cerillion has continued to make strong progress, and I am delighted not just with the substantial rise in software revenues, but also the progress we have made with margins, aided by licence extensions with existing customers.

"Cerillion continues to generate significant revenues from its existing customer base and we have additionally secured contracts with a number of major new customers. We believe the Company's inclusion in the 'Visionaries' quadrant of the Gartner Magic Quadrant for Integrated Revenue and Customer Management for CSPs for the second year in a row is an indication of the quality of our offering and the importance we place on customer service.

"As we go into the 2018 financial year, we remain very positive about prospects for Cerillion's continuing progress, underpinned by a strong pipeline of prospects across EMEA, Asia Pacific and Americas."

 

For further information please contact:

 

Cerillion plc

Louis Hall, CEO

Oliver Gilchrist, CFO

 

 

c/o KTZ Communications

T: 020 3178 6378

 

 

 

Shore Capital (Nomad and Broker)

 

T: 020 7408 4090

Toby Gibbs

Mark Percy

 

 

 

 

 

KTZ Communications

 

T: 020 3178 6378

Katie Tzouliadis

Irene Bermont-Penn

Emma Pearson

 

 

 

 

 

 

About Cerillion

 

Cerillion is a leading provider of mission critical software for billing, charging and CRM, with an 18 year track record in providing comprehensive revenue and customer management solutions. The Company has 81 customer installations across 43 countries, principally serving the telecommunications market, but also utilities and financial services.

 

Led by a highly experienced management team, the Company is headquartered in London and has operations in Pune, India, where its Global Solutions Centre is located, and in Sydney and Miami. Cerillion's CEO, Louis Hall, led the management buyout from Logica plc in 1999.

 

 

Cerillion plc

Cerillion plc acquired Cerillion Technologies Limited on 18 March 2016 in conjunction with the completion of its IPO on AIM. The table below summarises the highlights for Cerillion plc, reflecting trading for the full year to 30 September 2017 and for the period from 18 March 2016 to 30 September 2016.  Prior to 18 March 2016, Cerillion plc had no trading activity.  

In addition, the table includes full year trading highlights for Cerillion Technologies Limited, Cerillion (India) pvt and Cerillion Inc (collectively, CTL Group), for the year to 30 September 2017 and the year to 30 September 2016. These are provided to give a clearer picture of the year-on-year trading activity of the underlying Group1.

 

Cerillion plc

 

CTL Group

 

2017

2016

 

2017

2016

 

£'000

£'000

 

£'000

£'000

 

Audited

Audited

 

Unaudited

Unaudited

Revenue

 16,033

8,365

 

16,033

 14,810

Key revenue streams2:

 

 

 

 

 

Services

 7,284

5,359

 

 7,284

 8,688

Software & Software as a Service

 7,901

2,615

 

 7,901

 5,315

 

 

 

 

 

 

Recurring revenue

4,448

2,196

 

4,448

 4,059

 

 

 

 

 

 

New orders

 13,496

6,478

 

 13,496

 10,797

 

 

 

 

 

 

Back order book

13,147

9,285

 

13,147

 9,285

 

 

 

 

 

 

Profit before tax

1,995

239

 

2,395

 2,083

Add back:  - IPO costs

-

746

 

-

-

-     Amortisation of acquired intangibles

993

497

 

80

80

-     Fair value loss on forward contracts

-

121

 

-

121

Adjusted profit before tax3

 2,988

1,603

 

2,475

 2,284

 

 

 

 

 

 

Employee numbers:

 

 

 

 

 

Onshore

84

83

 

79

79

India

87

79

 

87

78

Total

171

162

 

166

157

 

Notes

Note 1     Cerillion plc acquired Cerillion Technologies Limited on 18 March 2016 in conjunction with the completion of its IPO on AIM.  Prior to 18 March 2016, Cerillion plc had no trading activity.  Consequently, save for the dividend, earnings per share and net assets information, the 2017 results and comparative 2016 figures reported in these highlights and in the Chairman and Chief Executive Officer's Report are based on the unaudited CTL Group proforma consolidated figures which include Cerillion Technologies Limited and its subsidiaries (Cerillion (India) pvt and Cerillion Inc).  Financial Information for Cerillion plc, is extracted from the audited year end IFRS accounts.

Note 2     Full analysis of the revenue streams for Cerillion plc can be found in the segmental reporting disclosure note 2.

Note 3     Adjusted profit before tax is calculated after adding back IPO costs, unrealised fair value movement on forward exchange contracts and amortisation of acquired intangible assets.

Note 4     Revenue derived from software licence, support and maintenance, SaaS and managed services sales.

Note 5     Recurring revenue includes annualised support and maintenance, managed service and Skyline revenue.

Note 6     Back order book consists of £9.0m of sales contracted but not yet recognised at the end of the reporting period plus £4.1m of annualised support and maintenance revenue.  It is anticipated that 75% of the £9.0m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 4 to 5 quarters.

Note 7     Based on earnings for Cerillion Technologies Limited for the current and comparative period and the total number of Cerillion plc shares in issue as at 30 September 2017 and 30 September 2016 respectively.

 

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

 

Introduction

 

Cerillion plc was admitted to trading on AIM on 18 March 2016, towards the end of the first half of its financial year ended 30 September 2016, and we are now very pleased to report the Group's results for the second year as a publicly quoted company. 

 

The CTL Group business is well established, and has an 18 year track record of providing mission critical software for billing, charging and customer relationship management ("CRM"), predominantly to the telecommunications market, but also to the utilities and financial services sectors.

 

We are continuing to drive growth in our core telecoms market, where demand for billing and charging solutions is growing, driven by technological and regulatory change.  At the same time, we are also seeking to develop in new market sectors, supported by our new Software-as-a-Service ("SaaS") billing product, Cerillion Skyline, which facilitates billing and the collection of payments from any type of subscription or usage-based service.   

 

We are pleased to report that Cerillion has continued to make good progress over the second half of its financial year and that results are in line with market expectations. Revenue has increased year-on-year by 8.3% to £16.0m, whilst EBITDA is up by 17.8% to £3.6m and adjusted profit before tax is up by 8.4% to £2.5m. All year-on-year comparisons are with the full year 2016 numbers for CTL Group. 

 

These encouraging results have been supported by strong demand from our established customer base, as well as implementations for new customers in Europe.

 

Financial Overview

 

CTL Group Proforma Consolidated Income Statement - for the year ended 30 September 2017

 

 

Year to 30 September

2017

 

Year to 30 September 2016

 

 

£'000

 

£'000

 

 

Unaudited

 

Unaudited

Revenue

 

    16,033

 

14,810

Cost of sales

 

(3,815)

 

(4,019)

Gross profit

 

 12,218

 

 10,791

Administrative expenses

 

(8,601)

 

(7,719)

EBITDA

 

 3,617

 

 3,072

Depreciation and amortisation

 

(1,109)

 

(872)

Operating profit

 

 2,508

 

 2,200

Finance costs

 

(118)

 

(123)

Finance income

 

5

 

6

Profit before taxation

 

2,395

 

 2,083

Taxation

 

(61)

 

(74)

Profit for the year

 

     2,334

 

   2,008

 

 

 

 

 

Adjusted profit before taxation:

 

2017

 

2016

 

 

£'000

 

£'000

 

 

Unaudited

 

Unaudited

Profit before taxation

 

2,395

 

 2,083

Add back:

 

 

 

 

Amortisation of acquired intangibles

 

 80

 

 80  

Unrealised fair value movement on forward exchange contracts

-

 

121

 

 

 

 

 

Adjusted profit before taxation

 

 2,475  

 

 2,284

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit:

 

 £'000

 

 £'000

Operating profit

 

 2,508

 

 2,200

Add back:

 

 

 

 

Amortisation of acquired intangibles

 

 80

 

 80

 

 

 

 

 

Adjusted operating profit

 

 2,588

 

 2,280

 

 

 

 

 

 

Total revenue for the year to 30 September 2017 rose by 8.3% to £16.0m (2016: £14.8m). Our existing customer base typically drives a very high proportion of total annual income and established customers (those acquired at least 12 months before the beginning of the reporting period) generated 81% of total revenue in the year (2016: 93%). The reduction in the proportion of revenue derived from our existing customer base was lower in 2017 due to a larger contribution from implementation work with new customers.

 

A significant part of the Group's revenues continues to be underpinned by recurring income, which is derived from support and maintenance and managed service contracts.  Recurring revenues accounted for 28% of the Group's income (2016: 27%), having risen by 10% year-on-year to £4.4m (2016: £4.1m). 

 

Our revenue streams are broadly divided into three segments: software revenue, which principally comprises software licence sales, and support and maintenance sales; services revenue, which is generated by software implementations and other services work; and revenues from other activities, mainly the reselling of third party products.

 

·    Software revenue rose by 49% to £7.9m (2016: £5.3m), aided by the completion of licence extensions with existing customers, and accounted for 49% of total revenues (2016: 36%). 

 

·    Services revenue decreased by 16% to £7.3m (2016: £8.7m) and constituted 45% of total revenue (2016: 59%).  The decrease was largely due to more focus in 2017 on new customer implementations, where a significant proportion of revenue is derived from licence income.

 

·     Third party income remained constant at £0.8m (2016: £0.8m) and comprised 5% of total revenue (2016: 5%).

 

Administrative expenses increased by 11% to £8.6m (2016: £7.7m) and included personnel costs at £4.7m (2016: £4.5m).

 

Adjusted operating profit increased by 14% to £2.6m (2016: £2.3m), mainly driven by the increase in total revenue. The charge for amortisation of R&D costs was £0.8m (2016: £0.5m).  The increase was due to continued investment in our product set, including investment in our cloud billing platform, Cerillion Skyline.  Expenditure on tangible fixed assets was £0.2m (2016: £0.3m).

 

Adjusted profit before tax rose by 8.4% to £2.5m (2016: £2.3m) and adjusted earnings per share was 7.9p (2016: 6.8p5).

 

Cash Flow and Banking

 

Net cash as at 30 September 2017 stood at £1.6m (2016: £0.4m), with total Group cash at £5.3m (2016: £5.0m) and total debt at £3.7m (2016: £4.6m).

 

Dividend

 

In line with the Company's dividend policy of paying out between a third to half of the Group's free cash flow every year, subject to the Group's performance, the Board is pleased to propose a final dividend of 2.8p per share (2016: 2.6p). Together with the interim dividend of 1.4p per share (2016: 1.3p), this brings the total dividend for the year to 4.2p per share (2016: 3.9p).

 

The dividend will become payable on 7 February 2018 to those shareholders on the Company's register as at the close of business on the record date of 5 January 2018.  The ex-dividend date is 4 January 2018.

 

Operational Overview

 

We have continued to make good progress with our core solution, the Group's pre-integrated Enterprise BSS/OSS suite, which includes our new, real-time, Convergent Charging System ("CCS"). Across our product suite, new orders were up 25% over the year to £13.5m (2016: £10.8m). All of these new customer orders are now under way, and provide Cerillion with increased revenue visibility for the new financial year and beyond. 

 

Typically, because our implementation projects are governed by long term, high value contracts, the business enjoys a high level of revenue visibility through both its back order book and its annualised support revenue. At the year end, the combined value of annualised support revenue and the back order book - which consists of unperformed, contracted work under purchase orders and contracted work that is still subject to the receipt of purchase order - rose by 40.8% to £13.1m (2016: £9.3m).

 

We began work on two major new customer implementations during the year. The first of these was with Scarlet, a quad-play service provider operating in the Belgian market, which is a subsidiary of Proximus, a major European telco. Cerillion is migrating Scarlet from its current, legacy systems to Cerillion's pre-integrated, billing, charging and CRM product suite, in order to support Scarlet's on-going growth and to help it to respond to customer demand for the next generation of convergent services and real-time service control. A key factor in Scarlet's selection of Cerillion was the advanced capability provided by our CCS module.  We also began a major new implementation with a wholesale telecoms operator in Europe, where we will also provide our pre-integrated billing, charging and CRM product suite.  The new platform will enable this customer to manage the provision of services to its retail partners.

 

As in 2016, CCS continues to be a key driver for new sales of our software solutions as it enables communications service providers ("CSPs") to converge prepaid and postpaid charging and billing on the same software platform. This provides significant cost savings and performance-related benefits to customers, as well as the flexibility to support multiple service types. CCS can be deployed in many ways too, including as a standalone charging engine, as a replacement for legacy prepaid systems, or as an integral part of Cerillion's core end-to-end billing and CRM solution. 

 

We won four new customers for Cerillion Skyline, our Software-as-a-Service billing solution. Skyline enables businesses to bill and collect recurring revenue from subscription and usage-based services, and over time, we expect to expand our addressable market, both within the telecoms sector and in new industry verticals with this product. The cloud (SaaS) delivery model provides many advantages for our customers, including faster and lower cost implementation, easier integration, continuous product updates, and greater flexibility in launching new services. New customers signed up this year include a UK-based B2B telecoms provider, an established Scandinavian fibre broadband company, a specialist HR software vendor and a smart advertising platform start-up.

We continue to invest across our solutions, making further improvements to Cerillion Skyline, CCS and our other modules. During the year, as planned, we brought our new Enterprise Product Catalogue module to the market, which enhances our ability to manage the increasingly complex product and service bundles that our customers need to succeed in their markets.

 

After the period end, on 23 October 2017, we were delighted to be designated in the "Visionaries" quadrant of Gartner's newly published report, "Magic Quadrant for Integrated Revenue and Customer Management ("IRCM") for CSPs".  This is the fourth consecutive year that Cerillion has been included in this annual review of IRCM vendors and the second year that we have been designated in the "Visionaries" quadrant.  Gartner's Magic Quadrant report evaluates vendors across a broad range of criteria, including product strategy, sales & marketing strategies, innovation and client references, and companies are positioned according to "completeness of vision" and "ability to execute".  Gartner evaluated both Cerillion Enterprise and Cerillion Skyline, and we believe our designation reflects the Company's growing stature and reputation as a leading IRCM vendor.  In addition to this, we were pleased to see that Cerillion was the highest rated supplier in the Integrated Revenue and Customer Management (IRCM) CSPs market, based on six customer reviews, as of 21 November 2017, on the Gartner Peer Insights platform for its Enterprise BSS/OSS Suite8.

 

Outlook

 

We remain very positive about the outlook for the Group and are pursuing a strong pipeline of prospects across EMEA, Asia Pacific and the Americas.  We therefore believe that Cerillion remains well-positioned for continuing progress over the new financial year.

 

 

A M Howarth

L T Hall

Non-executive Chairman

Chief Executive Officer

24 November 2017

24 November 2017

 

 

Notes

Note 8     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.

The Gartner Report(s) described herein, (the "Gartner Report(s)") represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of these Financial Statements/Annual Results/Accounts) and the opinions expressed in the Gartner Report(s) are subject to change without notice.

Gartner Peer Insights reviews constitute the subjective opinions of individual end-users based on their own experiences, and do not represent the views of Gartner or its affiliates.

 

 

Consolidated Statement of Comprehensive Income

 

 

 

 

Year to
30 September 2017

 

Year to
30 September 2016

 

Notes

 

£

 

£

 

 

 

 

 

 

Revenue

2

 

16,032,976

 

8,364,774*

 

 

 

 

 

 

Cost of sales

 

 

(3,814,488)

 

(2,262,699)

 

 

 

 

 

 

Gross profit

 

 

12,218,488

 

6,102,075

 

 

 

 

 

 

Administrative expenses

 

 

(8,602,252)

 

(4,209,334)

Depreciation and amortisation

 

 

(1,507,927)

 

(714,250)

 

 

 

 

 

 

Operating profit before exceptional items

 

 

2,108,309

 

1,178,491

 

 

 

 

-

 

 

Exceptional item - IPO costs

 

 

 

(746,055)

 

 

 

 

 

 

Operating profit

3

 

2,108,309

 

432,436

 

 

 

 

 

 

Finance income

5

 

4,611

 

6,059

Finance costs

6

 

(117,569)

 

(199,559)

 

 

 

 

 

 

Profit before taxation

 

 

1,995,351

 

238,936

 

 

 

 

 

 

Taxation

7

 

27,328

 

68,032

 

 

 

 

 

 

Profit for the year

 

 

2,022,679

 

306,968

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Exchange difference on translating foreign

 

 

(38,026)

 

145,913

operations

 

 

 

 

 


 

Total comprehensive profit for the year

 

 

 

 

1,984,653

 

 

 

452,881

 

Earnings per share

 

 

 

 

 

Basic earnings per share - continuing and total operations

10

 


6.9 pence

 


1.3 pence

Diluted earnings per share - continuing and total operations

 

 

 

6.8 pence

 

 

1.3 pence

 

 

 

 

 

 

 

All transactions are attributable to the owners of the parent.

 

The group has no other recognised gains or losses for the current year.

 

* Revenue from acquisition, as the Group came into existence on 18 March 2016.

 

 

Consolidated Statement of Financial Position

 

 

 

Group

 

 

 

 

2017

 

2016

 

Notes

 

£

 

£

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill

11

 

2,053,141

 

2,053,141

Intangible assets

11

 

6,571,158

 

6,979,370

Property, plant and equipment

12

 

359,939

 

411,505

Deferred tax assets

14

 

270,123

 

320,546

 

 

 

9,254,361

 

9,764,562

Current assets

 

 

 

 

 

Trade and other receivables

15

 

8,508,826

 

9,164,872

Cash and cash equivalents

 

 

5,338,935

 

5,006,185

 

 

 

13,847,761

 

14,171,057

 

 

 

 

 

 

TOTAL ASSETS

 

 

23,102,122

 

23,935,619

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings

18

 

(2,693,139)

 

(3,572,602)

Other payables

19

 

-

 

(120,000)

Deferred tax liabilities

14

 

(1,076,166)

 

(1,280,805)

 

 

 

(3,769,305)

 

(4,973,407)

Current liabilities

 

 

 

 

 

Trade and other payables

16

 

(4,573,705)

 

(5,007,214)

Borrowings

16

 

(1,000,000)

 

(1,000,000)

 

 

 

(5,573,705)

 

(6,007,214)

 

TOTAL LIABILITIES

 

 

 

(9,343,010)

 

 

(10,980,621)

 

NET ASSETS

 

 

 

13,759,112

 

 

12,954,998

 

 

 

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS

 

 

 

 

 

Share capital

21

 

147,567

 

147,567

Share premium account

 

 

13,318,725

 

13,318,725

Foreign exchange reserve

 

 

107,887

 

145,913

Retained profit/(loss)

 

 

184,933

 

(657,207)

 

 

 

 

 

 

TOTAL EQUITY

 

 

13,759,112

 

12,954,998

 

 

 

 

 

 

 

               

The financial statements were approved and authorised for issue by the Board of Directors on 24 November 2017. Signed on behalf of the Board of Directors by:

 

 

 

L T Hall   -   Director

Company Number 09472870

 

The accompanying accounting policies and notes form an integral part of these financial statements.

 

 

 

Company Statement of Financial Position

 

 

 

 

Company

 

 

 

2017

 

2016

 

Notes

 

£

 

£

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Investments in subsidiaries

13

 

14,651,571

 

14,651,571

 

 

 

14,651,571

 

14,651,571

Current assets

 

 

 

 

 

Trade and other receivables

15

 

2,973,834

 

57,490

Cash and cash equivalents

 

 

10,780

 

3,457,157

 

 

 

2,984,614

 

3,514,647

 

 

 

 

 

 

TOTAL ASSETS

 

 

17,636,185

 

18,166,218

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings

18

 

(2,693,139)

 

(3,572,602)

 

 

 

(2,693,139)

 

(3,572,602)

Current liabilities

 

 

 

 

 

Trade and other payables

16

 

(202,115)

 

(72,146)

Borrowings

16

 

(1,000,000)

 

(1,000,000)

 

 

 

(1,202,115)

 

(1,072,146)

 

TOTAL LIABILITIES

 

 

 

(3,895,254)

 

 

(4,644,748)

 

NET ASSETS

 

 

 

13,740,931

 

 

13,521,470

 

 

 

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS

 

 

 

 

 

Share capital

21

 

147,567

 

147,567

Share premium account

 

 

13,318,725

 

13,318,725

Retained profit

 

 

274,639

 

55,178

 

 

 

 

 

 

TOTAL EQUITY

 

 

13,740,931

 

13,521,470

 

 

 

 

 

 

 

The financial statements were approved and authorised for issue by the Board of Directors on 24 November 2017. Signed on behalf of the Board of Directors by:

 

 

 

 

L T Hall   -   Director

Company Number 09472870

 

The accompanying accounting policies and notes form an integral part of these financial statements.

 

 

Consolidated Statement of Cash Flows


 

 

Group

 

 

2017

 

2016

 

Notes

£

 

Cash flows from operating activities

 

 

 

Profit for the year

 

2,022,679

 

Adjustments for:

 

 

 

Taxation

 

(27,328)

 

Finance income

 

(4,611)

 

Finance costs

 

117,569

 

Depreciation

 

249,715

 

Amortisation

 

1,258,212

 

571,555

 

 

3,616,236

 

1,146,686

Decrease/(increase) in trade and other receivables

 

656,046

 

Decrease in trade and other payables

 

(724,060)

 

(101,524)

Cash generated/(used in) operations

 

3,548,222

 

(720,704)

Finance costs

 

(117,569)

 

Finance income

 

4,611

 

Tax received/(paid)

 

7,845

 

NET CASH GENERATED FROM/(USED IN) OPERATING ACTIVITIES

 

3,443,109

 

(818,137)

 

 

 

 

Cash flows from investing activities

 

 

 

Acquisition of subsidiary undertakings, net of cash and overdrafts acquired

 

-

 

Capitalisation of development costs

 

(850,000)

 

Purchase of property, plant and equipment

 

(197,808)

 

(136,993)

NET CASH USED IN INVESTING ACTIVITIES

 

(1,047,808)

 

(11,867,304)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of equity shares

 

-

 

Borrowings repaid

 

(879,463)

 

Borrowings received

 

-

 

Dividends paid

 

(1,180,539)

 

(383,675)

 

 

 

 

 

NET CASH (USED IN)/GENERATED FROM FINANCING ACTIVITIES

 

(2,060,002)

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

335,299

 

Translation differences

 

(2,549)

 

Cash and cash equivalents at beginning of year

 

5,006,185

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

 

 

5,338,935

 

 

5,006,185

 

 

 

 

 

 

 

 

 

 

                             

 

The accompanying accounting policies and notes form an integral part of these financial statements.
 

 

 

Company Statement of Cash Flows

 

 

 

Company

 

 

2017

 

2016

 

Notes

£

 

Cash flows from operating activities

 

 

 

Profit for the year

 

1,400,000

 

Adjustments for:

 

 

 

Taxation

 

100,000

 

Finance costs

 

116,773

 

77,770

 

 

1,616,773

 

1,097,123

Increase in trade and other receivables

 

(2,916,344)

 

Increase/(Decrease) in trade and other payables

 

29,969

 

(557,226)

Cash (used in)/generated from operations

 

(1,269,602)

 

526,930

Finance costs

 

(116,773)

 

NET CASH (USED IN)/GENERATED FROM OPERATING ACTIVITIES

 

(1,386,375)

 

454,328

 

 

 

 

Cash flows from investing activities

 

 

 

Acquisition of subsidiary undertakings

 

-

 

(14,651,571)

NET CASH USED IN INVESTING ACTIVITIES

 

-

 

(14,651,571)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of equity shares

 

-

 

Borrowings repaid

 

(879,463)

 

Borrowings received

 

-

 

Dividends paid

 

(1,180,539)

 

(383,675)

 

 

 

 

 

NET CASH (USED IN)/GENERATED FROM FINANCING ACTIVITIES

 

(2,060,002)

 

 

 

 

 

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

 

(3,446,377)

 

Cash and cash equivalents at beginning of year

 

3,457,157

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

 

 

10,780

 

 

3,457,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                             

 

The accompanying accounting policies and notes form an integral part of these financial statements

 

 

 

Consolidated Statement of changes in Equity

 

Group

 

Ordinary share capital

 

Share premium

 

Foreign exchange reserve

 

Retained earnings

 

Total

 

 

 

£

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2015

 

      15,660

 

-

 

-

 

(580,500)

 

(564,840)

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

 

-

 

-

 

306,968

 

306,968

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

-

 

-

 

145,913

 

-

 

145,913

 

Total comprehensive income

 

-

 

-

 

145,913

 

306,968

 

452,881

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

Issue of shares

 

131,907

 

13,318,725

 

-

 

-

 

13,450,632

 

Dividends

 

-

 

-

 

-

 

(383,675)

 

(383,675)

 

Total transactions with owners

 

131,907

 

13,318,725

 

-

 

(383,675)

 

13,066,957

 

Balance as at 30 September 2016

 

147,567

 

13,318,725

 

 

145,913

 

(657,207)

 

12,954,998

 

 

 

 

 

 

Ordinary share capital

 

Share premium

 

Foreign exchange reserve

 

Retained earnings

 

Total

 

 

 

£

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2016

 

147,567

 

13,318,725

 

145,913

 

(657,207)

 

12,954,998

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

 

-

 

-

 

2,022,679

 

2,022,679

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

-

 

-

 

(38,026)

 

-

 

(38,026)

 

Total comprehensive income

 

-

 

-

 

(38,026)

 

2,022,679

 

1,984,653

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

-

 

-

 

-

 

(1,180,539)

 

(1,180,539)

 

Total transactions with owners

 

-

 

-

 

-

 

(1,180,539)

 

(1,180,539)

 

Balance as at 30 September 2017

 

147,567

 

13,318,725

 

 

107,887

 

184,933

 

13,759,112

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements

 

 

Company Statement of Changes in Equity

 

Company

 

Ordinary share capital

 

Share premium

 

Retained earnings

 

Total

 

 

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2015

 

15,660

 

-

 

(580,500)

 

(564,840)

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

 

-

 

1,019,353

 

1,019,353

 

Total comprehensive income

 

-

 

-

 

1,019,353

 

1,019,353

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

Issue of shares

 

131,907

 

13,318,725

 

-

 

13,450,632

 

Dividends

 

-

 

-

 

(383,675)

 

(383,675)

 

Total transactions with owners

 

131,907

 

13,318,725

 

(383,675)

 

13,066,957

 

 

 

Balance as at 30 September 2016

 

147,567

 

13,318,725

 

55,178

 

13,521,470

 

 

 

 

 

 

 

 

Ordinary share capital

 

Share premium

 

Retained earnings

 

Total

 

 

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2016

 

147,567

 

13,318,725

 

55,178

 

13,521,470

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

 

-

 

1,400,000

 

1,400,000

 

Total comprehensive income

 

-

 

-

 

1,400,000

 

1,400,000

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

Dividends

 

-

 

-

 

(1,180,539)

 

(1,180,539)

 

Total transactions with owners

 

-

 

-

 

(1,180,539)

 

(1,180,539)

 

 

 

Balance as at 30 September 2017

 

147,567

 

13,318,725

 

274,639

 

13,740,931

 

 

The accompanying accounting policies and notes form an integral part of these financial statements

 

 

 

Notes to the financial statements for the year ended 30 September 2017

1       PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below.

 

Basis of preparation

The Company is a public limited company, which was incorporated in England and Wales on 5 March 2015. The address of its registered office is 25 Bedford Street, London, WC2E 9ES. The principal activity of the Group is a supplier and developer of telecommunication software solutions and equipment. In the prior year the principal activity was to act as a platform to acquire the entire issued share capital of Cerillion Technologies Limited for the purpose of admission to AIM. These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and IFRIC interpretations endorsed by the European Union (EU). The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are held at fair value.

 

The Financial information contained in this announcement does not constitute statutory financial statements for the year ended 30 September 2017 within the meaning of section 435 of the Companies Act 2006, but is extracted from those financial statements. Statutory accounts for Cerillion plc for the year ended 30 September 2016 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 30 September 2017 will be delivered to the Registrar of Companies following the Group's Annual General Meeting.

The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The Company's directors are responsible for the preparation of the financial statements.

 

The preparation of the financial statements in conformity with IFRSs requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.  Further details regarding areas requiring significant assumptions and estimates are provided in Note 1 to the financial statements.

 

There is no material difference between the fair value of financial assets and liabilities and their carrying amount.

 

The functional and presentational currency is UK Sterling. Amounts in the financial statements have been rounded to the nearest pound.

 

 

Going concern

The Directors have assessed the current financial position of the Group, along with future cash flow requirements for a period in excess of 12 months from the date of signing the financial statements, to determine if the Group has the financial resources to continue as a going concern for the foreseeable future.

 

The conclusion of this assessment is that it is appropriate that the Group be considered a going concern, based on forecast profitability and positive cash inflows. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.

 

 

Basis of consolidation

The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 30 September 2017. All subsidiaries have a reporting date of 30 September with the exception of the Indian subsidiary, which has a mandatory reporting date of 31 March. The Indian subsidiary is consolidated using its management accounts through to 30 September.

 

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary or a business is the fair values of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity interests issued to the Group. The consideration transferred includes the fair values of any asset or liability resulting from a contingent consideration arrangement.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date. Acquisition-related costs are expensed as incurred.

 

Intercompany transactions, unrealised gains and losses on intragroup transactions and balances between group companies are eliminated on consolidation.

 

 

New and Revised Standards

 

IFRS in issue but not applied in the current financial statements

The following IFRS and IFRIC Interpretations have been issued but have not been applied by the Company in preparing these financial statements as they are not as yet effective. The Company intends to adopt these Standards and Interpretations when they become effective, rather than adopt them early.

 

·     IFRS 9, 'Financial instruments', effective date 1 January 2018

·     IFRS 15, 'Revenue from Contracts with Customers', effective date 1 January 2018

·     IFRS 16, 'Leases', effective date 1 January 2019

·     Disclosure Initiative: Amendments to IAS 7: Statement of Cash Flows (effective: 1 January 2017, but not yet adopted by the EU)

·     Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective: 1 January 2017, but not yet adopted by the EU).

 

The above standards are yet to be subject to a detailed review. IFRS 9 will impact both the measurement and disclosure of financial instruments, IFRS 15 may have an impact on revenue recognition and related disclosures and IFRS 16 will impact the treatment of leases currently treated as operating leases. Beyond this, it is not practicable to provide a reasonable estimate of the effect of IFRS 9, IFRS 15 and IFRS 16 until a detailed review has been completed.

 

 

Segmental reporting

In accordance with IFRS 8, segmental information is presented based on the way in which financial information is reported internally to the chief operating decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board who makes strategic decisions.

 

During the year ended 30 September 2017 (2016: since the acquisition of Cerillion Technologies Limited), the Group was organised into four main business segments for revenue purposes:

 

·  Services: relates to revenue from providing services to customers on new implementation projects and enhancements.

·   Software: relates to support and maintenance revenue derived from people using the software as well as the licences to use the software.

·    Software as a Service: relates to monthly subscriptions for a managed service or to use products on a pay as you go service.

·     3rd Party: relates to revenue derived from 3rd party services or licences, re-billable expenses and pass through of selling on hardware.

Assets are used across all segments and therefore are not split between segments.

Foreign currency translation

 

(i) Functional and presentation currency

Items included in the Financial Statements are measured using the currency of the primary economic environment in which entities operate ('the functional currency'). The Financial Statements are presented in sterling, which is the Parent Company's functional and presentation currency. There has been no change in the functional currency during the current or preceding period.

 

(ii) Transactions and balances

Transactions in foreign currencies are translated into sterling using monthly average exchange rates. This is permissible in this case as there are no significant fluctuations between the currencies with which the entity operates. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date and any exchange differences arising are taken to profit or loss.

 

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

 

(iii) Foreign operations

In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than the GBP are translated into GBP upon consolidation. The functional currency of the entities in the Group has remained unchanged during the reporting period.

 

On consolidation, assets and liabilities have been translated into GBP at the closing rate at the reporting date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into GBP at the closing rate. Income and expenses have been translated into GBP at the average rate over the reporting period. Exchange differences arising from significant foreign subsidiaries are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

 

 

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable net of sales related taxes.

 

The Group follows the principals of IAS 18 "Revenue" in determining appropriate revenue recognition policies. In principle revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group.

 

Revenue is derived from sales of standard licensed products (including installation, implementation, maintenance and support fees), additional licences, on-going account development work, third party time and material works.

 

The excess of amounts invoiced over revenue recognised are included in deferred income. If the amount of revenue recognised exceeds the amount invoiced the excess is included within accrued income.

 

In applying the income recognition policies below where there is a requirement for a contract to be signed, income is recognised in accordance with the policy when the contract has been signed or persuasive evidence of an arrangement exists.

  

 

(i) Sale of standard licensed products

Revenue from standard licensed products comprises two elements, being:

• Initial licence and implementation fees ("inception fees")

• Ongoing maintenance and support fees


With the contract detailing separately the contract value and payment milestones for each element.

 

When each element operates independently of the other, the Group will recognise inception fees and ongoing maintenance and support fees on the following basis.

 

Revenue for initial licence and implementation fees in relation to products which are not modified to meet the specific requirements of each customer and follow a straightforward implementation profile is recognised at the point at which the customer has the ability and right to use all prepaid licences on the installed solution.

 

Revenue from ongoing maintenance and support fees are recognised on a pro-rated basis over the duration of the contract.

 

Where a licenced product requires significant customer modifications and implementation is complex, revenue is recognised on applying the percentage of completion method to total contract value with estimates based on the total number of hours performed on the project compared to the total number of hours expected to complete the project. Provision is made for any losses on the contract as soon as they are foreseen.

 

(ii) Sale of additional licences

Revenue from the sale of additional licences is recognised when the additional licences are delivered to the customer.

 

(iii) Ongoing account development work

Ongoing account development work is generally provided on a fixed price basis and as such revenue is recognised based on the percentage completion or delivery of the relevant project, whichever is most appropriate for the transaction. Where percentage completion is used it is estimated based on the total number of hours performed on the project compared to the total number of hours expected to complete the project. Provision is made for any losses as soon as they are foreseen.

 

(iv) Third party time, material works and re-billable expenses

Revenue on contracted third party time and material works is recognised on a time basis using pre agreed day rates.

 

Revenue on re-billable expenses is recognised as incurred. In the case of third party time, material works and re-billable expenses the Group is considered to be acting as principal as it is the primary obligor in the sales transaction, the Group can select the supplier of the service and the Group holds the credit risk in the transaction.

 

 

Cost of sales

Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads, including indirect overheads that can reasonably be allocated, have been classified as cost of sales.

 

 

Taxation and deferred taxation

The income tax expense or income for the period is the tax payable on the current period's taxable income. This is based on the national income tax rate enacted or substantively enacted for each jurisdiction with any adjustment relating to tax payable in previous years and changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date.  The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. 

 

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of temporary differences can be deducted.  The carrying amount of deferred tax assets are reviewed at each reporting date.

 

Deferred tax liabilities are generally recognised in full, although IAS 12 'Income Taxes' specifies limited exemptions. As a result of these exemptions the Group does not recognise deferred tax on temporary differences relating to goodwill, or to its investments in subsidiaries. Temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

 

 

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. These are the only types of lease utilised by the entity. Operating lease payments for assets leased from third parties are charged to profit or loss on a straight line basis over the period of the lease, on an accrued basis.

 

 

Impairment

Goodwill and assets that are subject to amortisation are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

 

 

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and other short term highly liquid deposits with original maturities of three months or less.

 

 

Financial instruments

 

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs. Subsequent measurement of financial assets and financial liabilities is described below.

 

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

 

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement financial assets are classified into the following categories upon initial recognition:                                       

 

Derivative financial instruments

Derivative financial instruments held by the Group comprise forward foreign currency contracts and are recognised at fair value. The Group has not applied hedge accounting and the gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

 

 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Company's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

 

 

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that Cerillion will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade and other receivables may be impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit or loss within 'cost of sales'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'cost of sales' in the profit or loss.

 

 

Classification and subsequent measurement of financial liabilities

The Group's financial liabilities include trade and certain other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest.

 

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to Cerillion prior to the end of the financial period which are unpaid.

 

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

 

Equity

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

 

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

 

The ordinary share capital account represents the amount subscribed for shares at nominal value.

 

Retained earnings include all results as disclosed in the statement of comprehensive income.

 

Foreign exchange reserve - comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into Sterling.

 

 

Provisions

Provisions are recognised when Cerillion has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

 

Provisions are the best estimate of the expenditure required to settle the obligation at the current reporting date.

 

 

Property, plant and equipment (PPE)

PPE is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

 

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Cerillion and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

 

Depreciation on plant and machinery and fixtures and fittings is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

·     Leasehold Improvements           Life of lease

·     Fixtures and fittings                    3 - 4 years

·     Computer Equipment                3 years

 

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting

date.

 

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss.

 

 

Intangible assets and amortisation

 

(i) Software

Expenditure on research is written off in the period in which it is incurred. Development expenditure incurred on specific projects is capitalised where the Board is satisfied that the following criteria have been met:

• it is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

• the expenditure attributable to the software product during its development can be reliably measured.

 

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

 

Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed 5 years.

 

(ii) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets and liabilities assumed at the date of acquisition. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment testing is carried out by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.
 

(iii) Purchased customer contracts

Purchased customer contracts acquired as part of a business combination are recognised at fair value if they are project specific and there is a level of certainty that there will be future recovery. Customer contracts are amortised over the perceived period that they will generate economic benefits. This is calculated using in depth analysis of future revenue from cash flow forecasts.

 

The customer contracts acquired as part of the acquisition of Cerillion Technologies Limited are to be amortised over a period of 7 years.

 

(iv) Intellectual property rights

Intellectual property rights acquired as part of a business combination are recognised at fair value based on an estimate of future profits. Intellectual property rights are amortised over the perceived period that they will generate economic benefits. This is calculated using in depth analysis of future revenue from cash flow forecasts.

 

The intellectual property rights acquired as part of the acquisition of Cerillion Technologies Limited are to be amortised over a period of 7 years.

 

 

Interest

Interest income and expense are recognised using the effective interest method and comprise amounts receivable and payable on bank deposits and bank borrowings respectively.

 

 

Post-retirement benefits

Defined contribution schemes

The defined contribution schemes provide benefits based on the value of contributions made. The amounts charged as expenditure for the defined contribution scheme represents the contributions payable by Cerillion for the accounting years in respect of the schemes.

 

 

Exceptional items

Exceptional items are those significant items, and are one off items, that are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance. Transactions that were recorded as exceptional items during the prior year were the costs associated with the IPO of Cerillion plc.

 

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 judgment 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

Revenue is recognised on the basis of implementation of the project. In respect of long term contracts the revenue is in line with 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 key judgement is accurately forecasting the effort required to complete the project.

 

(iii) 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 15 and 19.

 

Estimates

(i) Business combinations

Management uses valuation techniques in determining the fair values of various elements of a business combination.

 

On initial recognition, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their provisional fair values. In measuring fair value, management uses estimates about future cash flows and discount rates, however, actual results may vary.

 

(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. Refer to notes 11 and 12.

 

2       Segment information

During the year ended 30 September 2017, 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.

 

 

 

2017

 

 

2016

 

£

 

£

Revenue

 

 

 

Services

7,283,678

 

5,358,998

Software

7,594,346

 

2,467,507

Software as a Service

306,834

 

147,266

3rd party

848,118

 

391,003

Total revenue

16,032,976

 

8,364,774

 

 

 

 

 

             

 

(a) Geographical information

As noted above, the internal reporting of the Group's performance does not require that the statement of financial position information is gathered on the basis of the business streams. However, the Group operates within discrete geographical markets such that capital expenditure, total assets and net assets of the Group are split between these locations as follows:

 

 

Europe

 

MEA

 

Americas

 

Asia Pacific

 

£

 

£

 

£

 

£

Year ended 30 September 2017

 

 

 

 

 

 

 

Revenue

7,425,865

 

1,040,313

 

6,206,583

 

1,360,215

Capital expenditure

1,030,452

 

-

 

-

 

17,613

Total assets

22,567,238

 

-

 

-

 

534,884

Net assets

13,587,658

 

-

 

-

 

171,454

 

 

 

Europe

 

MEA

 

Americas

 

Asia Pacific

 

£

 

£

 

£

 

£

Year ended 30 September 2016

 

 

 

 

 

 

 

Revenue

1,851,745

 

888,575

 

4,835,022

 

789,432

Capital expenditure

686,774

 

-

 

-

 

51,330

Total assets

23,392,783

 

-

 

-

 

542,836

Net assets

12,397,168

 

-

 

-

 

557,830

 

 

Cerillion receives greater than 10% of revenue from individual customers in the following geographical regions:

 

 

 

Operating

 

2017

 

2016

 

 

 

segment

 

£

 

£

Customer

 

 

 

 

 

 

 

No. 1

 

 

Americas

 

3,637,472

 

4,239,879

No. 2

 

 

MEA

 

2,046,630

 

859,256

No. 3

 

 

Americas

 

1,770,640

 

-

 

 

3       Operating profit

 

2017

 

2016

 

£

 

£

Operating profit is stated after (crediting)/charging:

 

 

 

Depreciation

249,715

 

142,695

Amortisation of intangibles

1,258,212

 

571,555

Research and development costs

303,849

 

172,978

Exceptional item - IPO costs

-

 

746,055

Bad debt expense

174,551

 

495,649

Foreign exchange losses/(gains)

464,858

 

(544,389)

Operating leases

614,906

 

412,852

Fees payable to Cerillion's principal auditor:

 

 

 

- Audit of Cerillion plc's annual accounts

6,000

 

5,000

- Audit of subsidiaries

44,000

 

40,000

- Non-audit services - tax services

11,000

 

12,400

- Non-audit services - corporate finance

-

 

145,000

- Non-audit services - other

5,500

 

8,000

Fees payable to associates of principal auditor:

 

 

 

- Audit of subsidiaries

10,182

 

8,000

- Non-audit services - tax services

24,048

 

13,200

 

 

 

 

 

             

4       Directors and employees

 

2017

 

2016

Group

£

 

£

Employee costs (including Directors):

 

 

 

Wages and salaries

7,897,555

 

4,079,149

Social security costs

602,462

 

311,036

Payments into defined contribution pension schemes

336,465

 

170,521

 

8,836,482

 

4,560,706

 

 

 

 

 

 

2017

 

2016

 

Number

 

Number

The average number of employees (including Directors) during the year was made up as follows:

 

 

 

Management and administration

21

 

20

Sales and marketing

14

 

12

Support and development staff

131

 

125

Executive Directors

3

 

3

Non-executive Directors

2

 

2

 

171

 

162

             

For details of Directors' remuneration, refer to the Remuneration report on pages 17 and 18. Key management personnel is covered in note 23.


 

5       Finance income

 

2017

 

2016

 

£

 

£

Finance income:

 

 

 

Bank interest receivable

4,611

 

6,059

 

 

 

 

6       Finance costs

 

2017

 

2016

 

£

 

£

Finance costs:

 

 

 

Interest payable in respect of loans

(116,772)

 

(78,149)

Other interest payable

(797)

 

-

Fair value loss on forward exchange contracts

-

 

(121,410)

 

(117,569)

 

(199,559)

 

 

 

 

 

             

7       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:

 

2017

2016

 

 

£

£

 

Current tax expense/ (credit)

229,263

(3,804)

 

Deferred tax (credit)

(256,591)

(64,228)

 

Total tax (credit)

(27,328)

(68,032)

 

 

 

 

 

(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 19.5% (2016: 20.0%). The differences are explained as follows:

 

 

 

 

Profit on ordinary activities before tax

1,995,351

238,936

 

 

 

Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.5% (2016: 20.0%)

389,093

47,787

 

 

 

Effect of:

 

 

Expenses not deductible/income not taxable for tax purposes

8,529

195,446

Difference in tax rates

20,123

23,506

Other temporary differences

3,477

(120,470)

Surrender of tax losses

-

29,113

Losses carried forward

-

26,918

R&D tax credit payable

-

(21,107)

Enhanced relief for research and development

(448,550)

(249,225)

Total tax (credit)

(27,328)

(68,032)

 

 

There are currently no deferred tax assets or liabilities recognised within the parent company accounts. Taxable losses within the parent company totalling £134,591 (2016: £134,591) have been carried forward, but no deferred tax asset has been recognised in relation to these losses due to the uncertainty surrounding the timing of their recovery.

 

 

8       Profit attributable to Cerillion plc

The profit for the financial year of the Parent Company, Cerillion plc was £1,400,000 (2016: £1,019,353). As permitted by section 408 of the Companies Act 2006, no separate income statement is presented in respect of the Parent Company.

 

 

9       Dividends

(a)   Dividends paid during the reporting period

The Board paid the final dividend in respect of 2016 of 2.6p per share and declared and paid an interim 2017 dividend of 1.4p (2016: 1.3p) per share. Total dividends paid during the reporting period were £1,180,539 (2016: £383,675).

 

(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 2.8p per fully paid Ordinary share (2016: 2.6p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2017, but not recognised as a liability at the year end is £826,378 (2016: £767,351).

 

 

10     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.

 

 

 

2017

 

2016

 

 

 

 

 

Profit attributable to equity holders of the Company (£)

 

2,022,679

 

306,968

 

 

 

 

 

Weighted average number of Ordinary Shares in issue (number)

 

29,513,486

 

23,425,877

Effect of share options in issue

 

33,492

 

-

Weighted average shares for diluted earnings per share

 

29,546,978

 

23,425,877

 

 

 

 

 

Basic earnings per share (pence per share)

 

6.9

 

1.3

Diluted earnings per share (pence per share)

 

6.8

 

1.3

 

 

There were no potentially dilutive equity instruments in issue during the prior year.

 

 

 

11     Intangible assets

Group

 

Goodwill

 

Purchased customer contracts

 

Intellectual property rights

 

Software development costs

 

Total

 

 

£

 

£

 

£

 

£

 

£

Cost

 

 

 

 

 

 

 

 

 

 

At 1 October 2015

 

-

 

-

 

-

 

-

 

-

Acquired

 

80,000

 

4,382,654

 

2,567,160

 

-

 

7,029,814

Arising on acquisition

 

1,973,141

 

-

 

-

 

-

 

1,973,141

Additions

 

-

 

-

 

-

 

601,111

 

601,111

At 30 September 2016

 

2,053,141

 

4,382,654

 

2,567,160

 

601,111

 

9,604,066

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

-

 

-

 

850,000

 

850,000

At 30 September 2017

 

 2,053,141

 

4,382,654

 

2,567,160  

 

1,451,111

 

10,454,066  

 

 

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

 

 

 

At 1 October 2015

 

-

 

-

 

-

 

-

 

-

Provided in the year

 

-

 

313,047

 

183,369

 

75,139

 

571,555

At 30 September 2016

 

-

 

313,047

 

183,369

 

75,139

 

571,555

 

 

 

 

 

 

 

 

 

 

 

Provided in the year

 

-

 

626,093  

 

366,737

 

265,382

 

1,258,212

At 30 September 2017

 

 -  

 

939,140  

 

 550,106

 

 340,521 

 

1,829,767

 

 

 

 

 

 

 

 

 

 

 

Net book amount at 30 September 2017

 

2,053,141

 

3,443,514

 

2,017,054

 

1,110,590 

 

8,624,299

 

 

 

 

 

 

 

 

 

 

Net book amount at
30 September 2016

 

2,053,141

 

4,069,607

 

2,383,791

 

525,972

 

9,032,511

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation has been included in administrative expenses in the statement of comprehensive income.

 

The carrying value of goodwill included within the Cerillion plc balance sheet is £2,053,141, which is allocated to the cash-generating unit ("CGU") of Cerillion Technologies Limited Group. The CGU's recoverable amount has been determined based on its fair value less costs to sell. As Cerillion plc was established to purchase the CTL Group the fair value less costs to sell has been calculated based on the market capitalisation of Cerillion plc less the estimated costs to sell the CTL Group.

 

Using an average market share price of Cerillion plc for the year ended 30 September 2017, 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.

 

 

 

12     Property plant and equipment

Group

 

Leasehold  improvements

 

Computer  equipment

 

Furniture  and fittings

 

Total

 

 

 

£

 

£

 

£

 

£

 

Cost

 

 

 

 

 

 

 

 

 

At 1 October 2015

 

-

 

-

 

-

 

-

 

Acquisition

 

 588,807

 

 3,221,908

 

 759,094

 

 4,569,809

 

Additions

 

-

 

126,448

 

10,545

 

136,993

 

Exchange difference

 

16,406

 

12,910

 

9,524

 

38,840

 

At 30 September 2016

 

605,213

 

3,361,266

 

779,163

 

4,745,642

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

 170,519

 

27,289

 

 197,808

 

Disposals

 

-

 

(2,000)

 

(1,500)

 

(3,500)

 

Exchange difference

 

(2,633)

 

(2,073)

 

(1,529)

 

(6,235)

 

At 30 September 2017

 

 602,580

 

 3,527,712

 

 803,423

 

 4,933,715

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

 

 

At 1 October 2015

 

-

 

-

 

-

 

-

 

Acquisition

 

 573,895

 

 2,848,847

 

 746,268

 

 4,169,010

 

Provided in the year

 

8,916

 

125,472

 

8,307

 

142,695

 

Exchange difference

 

11,582

 

5,064

 

5,786

 

22,432

 

At 30 September 2016

 

594,393

 

2,979,383

 

760,361

 

4,334,137

 

 

 

 

 

 

 

 

 

 

 

Provided in the year

 

7,057

 

225,529

 

17,129

 

249,715

 

Disposals

 

-

 

(2,000)

 

(1,000)

 

(3,000)

 

Exchange difference

 

(2,669)

 

(2,671)

 

(1,736)

 

(7,076)

 

At 30 September 2017

 

 598,781

 

3,200,241

 

 774,754

 

 4,573,776

 

 

 

 

 

 

 

 

 

 

 

Net book amount at 30 September 2017

 

 3,799

 

 327,471

 

 28,669

 

 359,939

 

 

 

 

 

 

 

 

 

 

 

Net book amount at

30 September 2016

 

10,820

 

381,883

 

18,802

 

411,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                       

 

 

All depreciation charges are included within admin expenses and no impairment has been charged.

 

As referred to in note 18 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.

 

 

13     Investments in subsidiaries

The group

At 30 September 2017 the company's subsidiary undertakings, all of which have been included in the group financial statements, were:

 

Name

Country of

incorporation

Percentage of

 shares held

Year end

Nature of

 Business

 

 

 

 

 

Cerillion Technologies Limited*

UK

100%

30 September

Software services

Cerillion Inc

USA

100%

 

30 September

Software services

 

 

 

 

 

Cerillion Technologies (India) Private Limited

India

100%**

 

31 March***

Software services

 

* Cerillion Technologies Limited is the only subsidiary owned directly by Cerillion plc. Cerillion Technologies Limited is the parent for the other two subsidiaries

** includes holdings held indirectly through Cerillion Inc

*** For the purpose of the group financial statements for the year ended 30 September 2017, management accounts have been drawn up to 30 September 2017.

 

The company

 

Investments

 in subsidiary

 undertakings

 

 

£

Cost and net book value:

 

 

As at 1 October 2015

 

-

Additions

 

14,651,571

As at 30 September 2016

 

14,651,571

Additions

 

-

As at 30 September 2017

 

14,651,571

 

 

14     Deferred tax

Deferred tax asset

 

Group

Accelerated capital allowances

Other temporary differences

Total

 

£

£

£

 

 

 

 

1 October 2015

-

-

-

Deferred tax asset acquired

169,888

184,166

354,054

Foreign exchange movement on opening deferred tax asset

-

12,584

12,584

(Charged)/credited to profit or loss

(56,242)

10,150

(46,092)

30 September 2016

113,646

206,900

320,546

 

 

 

Group

Accelerated capital allowances

Other temporary differences

Total

 

£

£

£

 

 

 

 

1 October 2016

113,646

206,900

320,546

Foreign exchange movement on opening deferred tax asset

-

(2,375)

(2,375)

Repayment of tax deposit

-

(100,000)

(100,000)

Credited to profit or loss

4,682

47,270

51,952

30 September 2017

118,328

151,795

270,123

 

 

Deferred tax liability

 

Group

The deferred tax liability arose in respect of the fair value uplift of intangible assets, with £1,320,465 arising on the acquisition of Cerillion Technologies Limited in March 2016 and £70,660 relating to the acquisition of "Net Solutions Services" by Cerillion Technologies Limited in 2015.

 

 

 

 

 

2017

 

Fair value uplift on acquisitions

2016

 

£

 

£

 

 

 

 

At 1 October 2016

1,280,805

 

-

Deferred tax liability acquired

-

 

70,660

Deferred tax arising on acquisition of Cerillion Technologies Ltd

-

 

1,320,465

Credited to profit or loss

(204,639)

 

(110,320)

As at 30 September 2017

1,076,166

 

1,280,805

 

There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2017 (2016: £nil).

 

 

15     Trade and other receivables

 

 

The group

The company

 

2017

2016

2017

2016

 

£

£

£

£

 

 

 

 

 

Trade receivables

1,956,936

2,894,015

-

-

Accrued income

5,866,024

5,565,952

-

-

Amounts owed by group undertakings

-

-

2,967,584

54,238

Other receivables

492,662

464,500

-

-

Prepayments

193,204

240,405

6,250

3,252

 

8,508,826

9,164,872

2,973,834

57,490

 

 

 

 

 

 

Credit quality of receivables

A detailed review of the credit quality of each client is completed before an engagement commences and the concentration of credit risk is limited as exposure is spread over a large number of clients.

 

The credit risk relating to trade receivables is analysed as follows:

 

2017

 

2016

 

£

 

£

Group

 

 

 

Trade receivables

2,301,586

 

3,598,795

Bad debt provision

(344,650)

 

(704,780)

 

1,956,936

 

2,894,015

 

 

 

 

 

             

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.

 

 

 

2017

 

2016

 

£

 

£

Group

 

 

 

Not past due

1,598,807

 

983,403

Up to 3 months

80,898

 

973,520

3 to 6 months

154,139

 

291,492

Older than 6 months

123,092

 

645,600

 

1,956,936

 

2,894,015

 

 

 

 

 

             

Of the trade debt older than 6 months as at 30 September 2017, being £123,092 (2016: £645,600), cash of £93,693 (2016: £514,267) has been received since the year end.

 

The following is an ageing analysis of those trade receivables that were individually considered to be impaired:

 

 

2017

 

2016

 

£

 

£

Group

 

 

 

Not past due

16,982

 

108,206

Up to 3 months

25,926

 

322,086

3 to 6 months

101,347

 

133,913

Older than 6 months

200,395

 

140,575

 

344,650

 

704,780

 

 

 

 

 

             

 

16     Trade and other payables

 

     The group

     The company

 

2017

2016

2017

2016

 

£

£

£

£

 

 

 

 

 

Trade payables

732,185

336,684

34,162

16,564

Taxation

236,822

99,714

100,000

-

Other taxation and social security

170,854

255,876

49,133

41,312

Pension contributions

40,413

38,653

-

-

Other payables

427,940

453,212

-

-

Derivative financial instrument

-

121,410

-

-

Accruals

1,221,442

1,729,473

18,820

14,270

Deferred income

1,744,049

1,972,192

-

-

Loans (note 18)

1,000,000

1,000,000

1,000,000

1,000,000

 

5,573,705

6,007,214

1,202,115

1,072,146

 

The directors consider that the carrying amount of trade and other payables approximates to their fair values.

 

 

17     Non-current other payables

 

     The group

     The company

 

2017

2016

2017

2016

 

£

£

£

£

 

 

 

 

 

Other payables

-

120,000

-

-

 

-

120,000

-

-

 

 

Other payables comprise the amount outstanding on the purchase of the "Net Solutions Services" business by Cerillion Technologies Limited during its year ended 30 September 2015. The total balance outstanding at 30 September 2017 is £nil, the debt having been settled in full during the year (2016: £240,000 payable by two equal instalments of £120,000, one of which was shown in current liabilities).

 

 

18     Borrowings and financial liabilities

 

     The group

     The company

 

2017

2016

2017

2016

 

£

£

£

£

 

 

 

 

 

Current liabilities:

 

 

 

 

Secured loans

1,000,000

1,000,000

1,000,000

1,000,000

 

 

 

 

 

Non-current liabilities:

 

 

 

 

Secured loans

2,693,139

3,572,602

2,693,139

3,572,602

 

3,693,139

4,572,602

3,693,139

4,572,602

 

 

 

18a Terms and repayment schedule

The Facility Agreement between the Company and HSBC Bank plc made available a loan of up to £5 million (the "Loan") for the purpose of assisting with the payment of the cash element of the Acquisition.

 

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 £250,000 inclusive of interest, for the first three years of the term, and thereafter in an amount of £300,000 inclusive of interest, in accordance with an agreed repayment schedule;

(c) is terminable on a change of control of the Company and repayable following an event of default; and

(d) is for a term of five years from the date of first drawdown.

 

 

19     Financial instruments and risk management

Group

 

 

Financial instruments by category

 

2017

£

 

2016

£

 

Financial assets - loans and receivables

 

 

 

 

 

Trade and other receivables

 

2,449,598

 

3,358,515

 

Accrued income

 

5,866,024

 

5,565,952

 

Unpaid share capital

 

-

 

-

 

Cash and cash equivalents

 

5,338,935

 

5,006,185

 

 

 

13,654,557

 

13,930,652

                   

 

Prepayments are excluded, as this analysis is required only for financial instruments.

 

Financial liabilities - held at amortised cost

 

2017

£

 

2016

             £

Non-current

 

 

 

 

 

Borrowings

 

2,693,139

 

3,572,602

 

Other payables

 

-

 

120,000

 

 

 

2,693,139

 

3,692,602

 

Current

 

 

 

 

 

Current borrowings

 

1,000,000

 

1,000,000

 

Trade and other payables

 

1,330,979

 

1,045,772

 

Pension costs

 

40,413

 

38,653

 

Accruals

 

1,221,442

 

1,729,473

 

 

 

3,592,834

 

3,813,898

 

             

 

Statutory liabilities and deferred income are excluded from the trade payables balance, as this analysis is required only for financial instruments.

 

Financial liabilities - at fair value through profit and loss

 

 

2017

£

 

2016

          £

Derivative financial instruments

 

-

 

121,410

 

 

 

-

 

121,410

 

             

 

There is no material difference between the book value and the fair value of the financial assets and financial liabilities disclosed above.

 

The Group's multinational operations expose it to financial risks that include market risk, credit risk, foreign currency risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years, with the exception of currency risk where forward currency contracts have been entered into during the year.

 

Credit quality of financial assets

 

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (S&P) (if available) or to historical information about counterparty default rates:

 

 

2017

 

2016

 

£

 

£

Trade receivables

 

 

 

Group 1

1,900

 

131,788

Group 2

1,939,473

 

2,677,325

Group 3

15,563

 

84,902

 

1,956,936

 

2,894,015

 

 

 

 

 

               

 

Group 1 - new customers (less than 6 months).

Group 2 - existing customers (more than 6 months) with no defaults in the past.

Group 3 - existing customers (more than 6 months) with some defaults in the past.

 

 

 

2017

 

2016

 

£

 

£

Cash at bank and short-term deposits

 

 

 

A1

5,336,036

 

5,003,700

Not rated

2,899

 

2,485

 

5,338,935

 

5,006,185

 

 

 

 

 

             

 

A1 rating means that the risk of default for the investors and the policy holder is deemed to be very low.

Not rated balances relate to petty cash amounts.

 

Market risk - foreign exchange risk

 

Exposure to currency exchange rates arise from the Group's overseas sales and purchases, which are primarily denominated in US dollars (USD), Australian dollars (AUD) and Euros (EUR). There is no foreign exchange exposure within the parent company.

 

To mitigate the Group's exposure to foreign currency risk, non-GBP cash flows are monitored and forward exchange contracts are entered into in accordance with the Group's risk management policies. Generally, the Group's risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows (due after 6 months). Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by other same-currency transactions.

 

 

 

As at 30 September 2016 the group had forward foreign exchange contracts in place to mitigate exchange rate exposure arising from forecast income in US dollars, Australian Dollars and Euros. The contracts are considered by management to be part of economic hedge arrangements but have not been formally designated as hedging instruments, so are treated as held for trading in accordance with IAS 39. The above contract was settled during the year ended 30 September 2017 and no other contracts were entered into.

 

Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into GBP at the closing rate:

 

 

 

AUD

 

USD

 

EUR

 

INR

30 September 2017

 

 

 

 

 

 

 

 

Financial assets

 

269,699

 

7,662,036

 

1,376,700

 

365,994

Financial liabilities

 

-

 

(141,917)

 

(15,395)

 

(378,943)

Total exposure

 

269,699 

 

7,520,119 

 

 1,361,305

 

(12,949) 

 

 

 

 

 

 

 

 

 

 

 

AUD

 

USD

 

EUR

 

INR

30 September 2016

 

 

 

 

 

 

 

 

Financial assets

 

162,863

 

4,462,267

 

1,424,000

 

366,804

Financial liabilities

 

(117,806)

 

(1,259,697)

 

(615,115)

 

(329,079)

Total exposure

 

45,507 

 

3,202,570 

 

 808,885

 

37,725 

 

The following table illustrates the sensitivity of profit and equity in regards to the Group's financial assets and financial liabilities and the US dollar, Australian Dollar, Euro and Indian Rupee to GBP exchange rate 'all other things being equal'. It assumes a +/- 10% change to each of the foreign currency to GBP exchange rates. These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each reporting date and also takes into account forward exchange contracts that offset effects from changes in currency exchange rates.

 

If the GBP had strengthened against the foreign currencies by 10% then this would have had the following impact:

 

30 September 2017

 

AUD

 

USD

 

EUR

 

INR

 

 

 

 

 

 

 

 

 

Loss for the year

 

(24,518) 

 

(683,647) 

 

(123,755) 

 

1,177 

 

 

 

 

 

 

 

 

 

Equity total

 

(24,518) 

 

(683,647) 

 

(123,755) 

 

1,177 

 

 

 

 

 

 

 

 

 

30 September 2016

 

AUD

 

USD

 

EUR

 

INR

 

 

 

 

 

 

 

 

 

Loss for the year

 

(4,096) 

 

(291,143) 

 

(73,535) 

 

(3,430) 

 

 

 

 

 

 

 

 

 

Equity total

 

(4,096) 

 

(291,143) 

 

(73,535) 

 

(3,430) 

 

 

 

If the GBP had weakened against the foreign currencies by 10% then this would have had the following impact:

 

30 September 2017

 

AUD

 

USD

 

EUR

 

INR

 

 

 

 

 

 

 

 

 

Profit for the year

 

29,967 

 

835,569 

 

151,256

 

(1,439)

 

 

 

 

 

 

 

 

 

Equity total

 

29,967 

 

835,569 

 

151,256

 

(1,439)

 

 

 

 

 

 

 

 

 

30 September 2016

 

AUD

 

USD

 

EUR

 

INR

 

 

 

 

 

 

 

 

 

Profit for the year

 

5,006 

 

355,841 

 

89,876

 

4,192

 

 

 

 

 

 

 

 

 

Equity total

 

5,006 

 

355,841 

 

89,876

 

4,192

 

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.

 

Market Risk - cash flow interest rate risk

 

Cerillion had outstanding borrowing within the group and company, as disclosed in note 18.

 

These were loans taken out with HSBC to facilitate the purchase of shares prior to the Admission on AIM.

 

The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. At 30 September 2017, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group's cash at bank and short-term deposits is considered immaterial.

 

The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1%. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

 

 

 

 

Profit for the year

 

Equity

 

 

+1%

 

-1%

 

+1%

 

-1%

 

 

 

 

 

 

 

 

 

30 September 2017

 

(38,643) 

 

38,354 

 

(38,643) 

 

38,354 

 

 

 

 

 

 

 

 

 

30 September 2016

 

(30,564) 

 

30,499 

 

(30,564) 

 

30,499 

 

 

 

 

 

 

 

 

 

 

Liquidity risk

 

Cerillion actively maintains cash that is designed to ensure Cerillion has sufficient available funds for operations and planned expansions. The table below analyses Cerillion's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

 

 

 

Less than 1 year

 

Between 1 and 2 years

 

Between 2 and 5 years

 

Over 5 years

 

 

 

 

 

30 September 2017

 

 

 

 

 

 

 

 

Borrowings

 

1,000,000

 

1,000,000

 

1,693,139

 

-

Trade and other payables

 

4,573,705

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2016

 

 

 

 

 

 

 

 

Borrowings

 

1,000,000

 

1,000,000

 

2,572,602

 

-

Trade and other payables

 

5,007,214

 

120,000

 

-

 

-

 

 

 

 

 

 

 

 

 

 

Capital risk management

 

The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders through optimising the debt and equity balance.

 

The Group monitors cash balances and prepares regular forecasts, which are reviewed by the board. Since the year end the Directors have proposed the payment of a dividend. In order to maintain or adjust the capital structure, the Group may, in the future, adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

 

 

20     Fair value measurement of financial instruments

Financial assets and financial liabilities measured at fair value are required to be grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

- Level 3: unobservable inputs for the asset or liability.

The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 30 September 2017:

 

Classes of financial liabilities measured at fair value - carrying amounts

Level 1

 

Level 2

 

Level 3

 

Total

2017

 

2017

 

2017

 

2017

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

Derivative financial instruments

-

 

-

 

-

 

-

 

 

Classes of financial liabilities measured at fair value - carrying amounts

Level 1

 

Level 2

 

Level 3

 

Total

2016

 

2016

 

2016

 

2016

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

Derivative financial instruments

-

 

121,410

 

-

 

121,410

 

There were no transfers between Level 1 and Level 2 in 2017 or 2016 and no derivative financial instruments within the Parent Company.

 

Measurement of fair value of financial instruments

 

The Group's finance team performs valuations of financial items for financial reporting purposes, with valuation techniques selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The Group's foreign currency forward contracts (Level 2) are not traded in active markets, so have been fair valued using observable forward exchange rates corresponding to the maturity of the contract. The effects of non-observable inputs are not significant for foreign currency forward contracts.

 

 

21     Share capital

 

 

2017

 

2016

 

 

£

 

£

Issued, allotted, called up and fully paid:

 

 

 

 

29,513,486 (2016: 29,513,486) Ordinary shares of 0.5 pence

 

147,567

 

147,567

 

 

The Ordinary Shares have been classified as Equity. The Ordinary Shares have attached to them full voting and capital distribution rights.

 

The Company does not have an authorised share capital.

 

On 1 October 2015 the issued share capital of the Company was £59,363.955 divided into 8,740,822 A ordinary shares of £0.005 each with an amount paid up of £0.00125 per share and 3,131,969 ordinary shares of £0.005 each with an amount paid up of £0.00125 per share.

 

On 3 November 2015 the amounts outstanding were fully paid up by way of irrevocable undertakings to pay from the shareholders.

 

Pursuant to a resolution of the Directors on 9 November 2015 and a general meeting of the Shareholders on 9 November 2015, the 8,740,822 A ordinary shares of £0.005 each in the capital of the Company were redesignated as 8,740,822 Ordinary Shares.

 

Pursuant to a resolution of the Directors and a general meeting of the Company on 9 November 2015, and a subscription agreement on the same date, Livingbridge VC LLP, on behalf of funds managed by it, subscribed for 5,263,158 Ordinary Shares for an aggregate subscription price of £4 million.

 

By shareholder resolutions passed at the annual general meeting of the Company held on 11 March 2016:

(a) the directors were generally and unconditionally authorised in accordance with section 551 of the Act to exercise all of the powers of the Company to allot Ordinary Shares up to an aggregate nominal amount of £61,887.69 as follows:

(i) 4,482,800 Ordinary Shares pursuant to the Acquisition; and

(ii) 7,894,737 Ordinary Shares pursuant to the Placing.

 

 

22     Retirement benefits

The group operates a group personal contribution pension scheme for the benefit of the employees. The pension cost charge for the year represents contributions payable by the group to the fund and amounted to £336,465 (2016: £170,521).

 

23     Related party transactions

(i) Remuneration of Key Management Personnel

 

The Group and Company consider that the Directors are their key management personnel and further detail of their remuneration is disclosed in the Remuneration report for 2017.

 

No key personnel other than the directors have been identified in relation to the period ended 30 September 2016.

 

(ii) Related party transactions

 

As at 1 October 2015 the directors owed the following amounts in respect of unpaid share capital:

 

O C R Gilchrist              £2,687

L T Hall                        £32,778

G J O'Connor               £9,058 

 

The amounts were fully paid up on 3 November 2015 by way of an irrevocable undertaking to pay, which took place prior to IPO.

 

No further related party transactions took place during the period.

 

 

24     Future lease payments

The Group had commitments under non-cancellable operating leases in respect of land and buildings and plant and machinery. The Group's future minimum operating lease payments are as follows:

 

 

2017

 

2016

Group

£

 

£

 

 

 

 

Within one year

251,440

 

541,268

Between one and five years

41,902

 

350,489

 

293,342

 

891,757

 

 

 

 

 

             

There are no lease commitments within the parent company.

 

On 16 October 2017 the group entered into a 10 year lease for a new London Office, through to 31 December 2027. The lease is rent free for the first year, at £365,500 for years two and three and £731,000 per annum for the remaining years.

 

25     Charge over assets

In providing the group with banking, credit card and forward currency facilities, the group's bankers HSBC plc hold:

·      a fixed charge over all present freehold and leasehold property;

·      a first charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and

·      a first floating charge over all assets, both present and future.

 

26     Contingent asset

The group have a contingent asset in relation to a legal claim regarding receivables outstanding from a customer. Management believe that it is likely that a material amount will be collected. The group has recognised an immaterial amount within revenue based on it being virtually certain.

 

 

27     Subsequent events

There have been no subsequent events requiring adjustment or disclosure within the financial statements.

 

 

28     Ultimate controlling party

In the opinion of the Directors, there was no ultimate controlling party at 30 September 2017 or 30 September 2016.

 


This information is provided by RNS
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