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RNS
Cerillion PLC   -  CER   

Final Results

Released 07:00 25-Nov-2019

RNS Number : 4238U
Cerillion PLC
25 November 2019
 

 

25 November 2019

AIM: CER                                                    

 

Cerillion plc

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

Final results for the year ended 30 September 2019

 

Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2019.

 

Highlights

Financial:

·

All key financial performance measures reached record highs

·

Revenue1 rose by 8% to £18.8 m (2018: £17.4m)

 

-

recurring revenue2 contributed £5.1m (2018: £5.0m), 27% of total revenue

 

-

at the year end, on an annualised basis, recurring revenue was up 17% year-on-year to £5.0m (2018: £4.3m)

·

New orders rose by 78% to £23.3m (2018: £13.0m)

 

-

strong second half weighting to major contract signings

·

Back-order book3 increased by 69% to £22.0m at the year-end (2018: £13.0m)

·

Adjusted EBITDA4 increased by 16% to £4.6m (2018: £3.9m)

·

adjusted EBITDA margin rose to 24.3% (2018: 22.7%)

·

Profit before tax up by 36.0% to £2.4m (2018: £1.8m)

·

Adjusted profit before tax5 up by 12% to £3.5m (2018: £3.1m)

·

Adjusted earnings per share6 increased by 3.3% to 11.3p (2018: 10.9p)

·

Proposed final dividend of 3.3p per share, bringing the total dividend for the year to 4.9p per share (2018: 4.5p), an increase of 9%

·

Net cash doubled to £5.0m (2018: £2.5m)

 

Operational:

·

Four major new enterprise customers were signed, with contract values ranging from £3.7m to £5.3m, reflecting the continuing trend towards winning larger contracts with larger customers

 

-

three of the four major new contracts were signed in H2

·

A further major new contract worth £2.9m was signed in the first quarter of the new financial year

·

Strong pipeline of new business opportunities

·

The Board believes that Cerillion remains well-positioned for further progress over the new financial year

 

Louis Hall, CEO of Cerillion, commented:

"Cerillion has delivered a strong performance with revenue, pre-tax profits and new orders all achieving record highs. The four major new customer wins continued a trend towards larger deal sizes with larger customers and stand us in good stead for further new wins. Three of the four were signed in the second half, increasing our back-order book to a new high.  With a further major new win secured in October, we start the new financial year with greater revenue visibility than at the beginning of any previous financial year." 

"Industry trends in our core telecoms market mean that demand for our solutions remains strong and with recent sales success, a strong new customer pipeline, the ability to rollout new and enhanced product modules, and ongoing recognition by industry analysts, the Company is very well placed for continued progress."

 

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 /

Sarah Mather (Corporate Advisory)

Henry Willcocks (Corporate Broking)

 

 

 

 

 

KTZ Communications

 

T: 020 3178 6378

Katie Tzouliadis

Dan Mahoney

 

 

 

 

 

 

About Cerillion

 

Cerillion has a 20-year track record in providing mission-critical software for billing, charging and customer relationship management ("CRM"), mainly to the telecommunications sector but also to other markets, including utilities and financial services. The Company has c. 90 customer installations across c. 40 countries.

 

Headquartered in London, Cerillion has operations in Pune, India, where its Global Solutions Centre is located, as well as in Sydney and Miami.

The business was originally part of Logica plc before its management buyout, led by CEO, Louis Hall, in 1999. The Company joined AIM in March 2016.

Notes

 

Note 1     Revenue derived from software licence, support and maintenance, Software as a Service ("SaaS") and third party sales.

Note 2     Recurring revenue includes annualised support and maintenance, managed service and Skyline revenue.

Note 3     Back order book consists of £17.6m of sales contracted but not yet recognised at the end of the reporting period plus £4.4m of annualised support and maintenance revenue.  It is anticipated that 75% of the £17.6m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 to 18 months.

Note 4     Adjusted earnings before interest depreciation and amortisation (EBITDA) is calculated by taking operating profit and adding back depreciation & amortisation, share based payment charge and exceptional items.

Note 5     Adjusted profit before tax is calculated after adding back amortisation of acquired intangible assets, share based payment charge and exceptional items.

Note 6     Adjusted earnings per share is calculated by taking profit after tax and adding back amortisation of acquired intangible assets, share based payment charge and exceptional items and is divided by the weighted average number of shares in issue during the period. There is no tax impact relating to these items.

Note 7     Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation.  Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

 

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

 

Introduction

 

Cerillion delivered a strong performance in its fourth year as a publicly quoted company, with revenue, profit before tax and new orders all reaching new highs. Revenue increased by 8% year-on-year to £18.8m (2018: £17.4m), adjusted profit before tax rose by 12% to £3.5m (2018: £3.1m) and new orders were up by 78% to £23.3m (2018: £13.0m).

 

Our new orders included some of the largest initial contracts the Company has signed in its history, continuing a trend towards larger deal sizes with larger customers. This is very encouraging and we believe it reflects growing recognition of the Cerillion brand in our marketplace.

 

As we indicated with the announcement of our interim results, the Company's performance is heavily second half weighted this year, with three of the four major new deals secured in the period signed in the second half. As well as these wins, Cerillion's performance across the year was also supported by strong demand from its established customer base.

 

Looking to the future, demand for billing, charging and customer relationship management ("CRM") solutions in the telecommunications market is rising, underpinned by a number of factors including technological and regulatory changes. Cerillion remains well-placed to grow both in Europe and its other international markets.  The new financial year has started very well, with a major new contract won in October, which has further boosted our back-order book. With a very healthy pipeline of potential new business and implementations for new customers, we expect the Company to make further strong progress this financial year.

 

Financial Overview

 

Total revenue for the year to 30 September 2019 rose by 8% to £18.8m (2018: £17.4m). As is typical, existing customers (classified as those acquired before the beginning of the reporting period) drove a high proportion of total revenue, generating 80% of the overall result (2018: 75%).

 

Recurring income, which is derived from support and maintenance and managed service contracts, contributed £5.1m to total revenue, approximately 27% of overall Group income (2018: £5.0m, 29%). However, as at 30 September 2019, recurring revenue on an annualised basis increased by 17% to £5.0m (30 September 2018: £4.3m), boosted by a 96% increase in annualised managed service contract revenue (2018: 39%).

 

The Group's revenue streams are categorised in three segments: software revenue (including Software-as-a-Service); services revenue; and revenue from other activities. Software revenue principally comprises software licences and related support and maintenance sales, while services revenue is generated by software implementations and ongoing account development work.  Revenue from other activities is mainly the reselling of third-party products.

 

Software (including Software-as-a-Service) revenue increased by 40% to £9.1m (2018: £6.5m).  The increase reflected the major new deals signed with new customers as well as licence extensions with existing customers. Software revenues accounted for 48% of total revenues (2018: 37%). 

 

Services revenue decreased by 14% to £7.9m (2018: £9.2m) and comprised 42% of total revenue (2018: 53%). The dip between 2018 and 2019 mainly reflected the timing of the commencement of the major new customer implementations. Work on all but one of the major new contracts signed in the year started in the fourth quarter. By contrast, in 2018, there was a concurrence of work on three major new customer implementation projects throughout most of the year.

 

Third party income increased to £1.8m (2018: £1.7m) and comprised 10% of total revenue (2018: 10%).

 

Gross margin has increased to 75% (2018: 72%) due to the increase in weighting towards licence revenue.

 

Operating expenses increased by 8% to £11.5m (2018: £10.7m).  Personnel costs of £5.6m (2018: £4.8m) accounted for close to 52% of administrative expenses.

 

Adjusted EBITDA for the year increased by 16% to £4.6m (2018: £3.9m), mainly driven by the increase in total revenue. The Board consider adjusted EBITDA to be a key performance indicator for Cerillion as it adds back exceptional items and key non-cash balances, being share based payments, depreciation and amortisation.

 

We continued to invest in our product sets, including our cloud platform, and the charge for amortisation of intangibles was £1.7m (2018: £1.4m).  Expenditure on tangible fixed assets was £0.4m (2018: £0.7m). Operating profit was £2.5m (2018: £1.9m).

 

Adjusted profit before tax rose by 12% to £3.5m (2018: £3.1m) and adjusted earnings per share increased by 3.3% to 11.3p (2018: 10.9p). On a statutory basis, profit before tax was £2.4m (2018: £1.8m) and earnings per share was 7.8p (2018: 6.9p).

 

Cash Flow and Banking

 

The Group continued to generate strong cash flows and closed the financial year with net cash of £5.0m, up by 100% against the same point last year (30 September 2018: £2.5m). This net position is after the payment of £1.0m of debt (2018: £900,000) and £1,357,620 in dividends (2018: £1,269,080). Total Group cash at the year-end was £6.8m (2018: £5.3m) and total debt stood at £1.8m (2018: £2.8m).

 

Dividend

 

The Board is pleased to propose an increased final dividend of 3.3p per share (2018: 3.0p). Together with the interim dividend of 1.6p per share (2018: 1.5p), this brings the total dividend for the year to 4.9p per share (2018: 4.5p), an increase of 9%.

 

The dividend, which is subject to shareholder approval at the Company's Annual General Meeting to be held on 7 February 2020, will become payable on 11 February 2020 to those shareholders on the Company's register as at the close of business on the record date of 3 January 2020.  The ex-dividend date is 2 January 2020.

 

Operational Overview

 

Demand for software for billing, charging and customer relationship management ("CRM") in our core market of telecommunications continues to grow. This is driven by a number of factors, including:

 

·    technological change (e.g. the introduction of 5G mobile networks);

·    regulatory change (e.g. the new GDPR data security regulation in Europe);

·    the consolidation of multiple CRM, billing and charging systems onto a single platform;

·    demand for real-time charging systems to enable more effective monetisation of data services; and

·    demand for more agile systems to enable the more rapid introduction of new products.

 

Our charging module ("CCS") remains an important component of our solutions set, enabling communications service providers ("CSPs") to converge prepaid and postpaid charging and billing on the same software platform. This drives significant cost savings as well as performance-related benefits, including the ability to support multiple service types. We provide CCS in many ways - 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. 

 

The four major contracts won this financial year and the post period win, signed in October, were secured across the Company's key international geographies, Europe, the US, Asia-Pacific and MEA ("Middle East and Africa").  As previously highlighted, the deal sizes are large and with high quality CSPs and this typically provides increased opportunity for licence extensions and additional new business.  Larger CSPs are also more likely to utilise our managed services offering, which helps to drive our recurring income base.

 

These new wins and ongoing implementation work with existing customers provide for a strong platform for further growth in the new financial year. The back-order book at 30 September 2019 was up by 69% to an all-time record of £22.0m (2018: £13.0m), providing far greater visibility of revenues than at the beginning of any previous financial year. We have stepped up our delivery resources accordingly, with our offshore centre in Pune, India still retaining ample capacity for further growth. 

 

We continued to invest in R&D over the year to further improve both our enterprise platform and Cerillion Skyline. Our ambition is to retain our status as a 'Visionary' in Gartner's highly regarded annual report7, 'Magic Quadrant for Integrated Revenue and Customer Management (IRCM) for CSPs', where we have been recognised for the past three consecutive years in this quadrant.  The report assesses vendors for their "completeness of vision" and "ability to execute" as well as taking customer references.

 

Outlook

 

With record new orders, which has lifted the back-order book to a new high, Cerillion has a strong platform for further growth over the new financial year. Our focus over the coming year will be on successfully executing implementations as well as continuing to ensure that we convert further new business prospects. 

 

We believe that the increasing recognition of the quality of our solutions, alongside positive market trends, bode well for both short and longer-term prospects for the business.

 

 

A M Howarth

L T Hall

Non-executive Chairman

Chief Executive Officer

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2019

 

 

 

 

Year to
30 September 2019

 

Year to
30 September 2018

 

Notes

 

£

 

£

 

 

 

 

 

 

Revenue

2

 

 

18,751,781

 

17,352,597

 

 

 

 

 

 

Cost of sales

 

 

(4,698,282)

 

(4,775,585)

 

 

 

 

 

 

Gross profit

 

 

14,053,499

 

12,577,012

 

 

 

 

 

 

Operating expenses

 

 

(11,531,711)

 

(10,686,351)

 

 

 

 

 

 

Adjusted EBITDA

 

 

4,557,915

 

3,931,798

Depreciation and amortisation

 

 

(2,013,012)

 

(1,744,076)

Share based payment charge

17

 

(23,115)

 

(135,400)

Exceptional items

3

 

-

 

(161,661)

 

 

 

 

 

 

Operating profit

3

 

2,521,788

 

1,890,661

 

 

 

 

 

 

Finance income

4

 

6,375

 

9,556

Finance costs

5

 

(79,506)

 

(100,287)

 

 

 

 

 

 

Profit before taxation

 

 

2,448,657

 

1,799,930

 

 

 

 

 

 

Taxation

6

 

(135,890)

 

131,144

 

 

 

 

 

 

Profit for the year

 

 

2,312,767

 

1,931,074

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Items that will or may be reclassified to profit or loss:

 

 

 

 

 

Exchange difference on translating foreign

 

 

130,807

 

(120,600)

operations

 

 

 

 

 


 

Total comprehensive profit for the year

 

 

 

 

2,443,574

 

 

 

1,810,474

 

Earnings per share

 

 

 

 

 

Basic earnings per share - continuing and total operations

8

 


7.8 pence

 


6.5 pence

Diluted earnings per share - continuing and total operations

 

 

 

7.8 pence

 

 

6.4 pence

 

 

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

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2019

 

 

 

2019

 

2018

 

2017

 

Notes

 

£

 

£

 

£

ASSETS

 

 

 

 

(Restated)

 

(Restated)

Non-current assets

 

 

 

 

 

 

 

Goodwill

9

 

2,053,141

 

2,053,141

 

2,053,141

Other intangible assets

9

 

5,210,766

 

6,078,634

 

6,571,158

Property, plant and equipment

10

 

853,206

 

768,453

 

359,939

Trade and other receivables

12

 

2,376,478

 

577,288

 

768,240

Deferred tax assets

11

 

133,578

 

169,093

 

270,123

 

 

 

10,627,169

 

9,646,609

 

10,022,601

Current assets

 

 

 

 

 

 

 

Trade and other receivables

12

 

8,166,271

 

8,359,423

 

7,740,586

Cash and cash equivalents

 

 

6,771,406

 

5,254,302

 

5,338,935

 

 

 

14,937,677

 

13,613,725

 

13,079,521

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

25,564,846

 

23,260,334

 

23,102,122

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

14

 

(570,946)

 

(1,793,070)

 

(2,693,139)

Deferred tax liabilities

11

 

(955,569)

 

(979,501)

 

(1,275,880)

 

 

 

(1,526,515)

 

(2,772,571)

 

(3,969,019)

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

13

 

(7,293,357)

 

(5,051,858)

 

(4,336,883)

Current tax liabilities

 

 

-

 

-

 

(37,109)

Borrowings

13

 

(1,200,000)

 

(1,000,000)

 

(1,000,000)

 

 

 

(8,493,357)

 

(6,051,858)

 

(5,373,992)

 

TOTAL LIABILITIES

 

 

 

(10,019,872)

 

 

(8,824,429)

 

 

(9,343,011)

 

NET ASSETS

 

 

 

15,544,974

 

 

14,435,905

 

 

13,759,111

 

 

 

 

 

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS

 

 

 

 

 

 

 

Share capital

16

 

147,567

 

147,567

 

147,567

Share premium account

 

 

13,318,725

 

13,318,725

 

13,318,725

Share option reserve

 

 

158,515

 

135,400

 

-

Foreign exchange reserve

 

 

118,094

 

(12,713)

 

107,887

Retained profit

 

 

1,802,073

 

846,926

 

184,932

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

15,544,974

 

14,435,905

 

13,759,111

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 September 2019

 

 

2019

 

2018

 

 

£

 

£

Cash flows from operating activities

 

 

 

 

Profit for the year

 

2,312,767

 

1,931,074

Adjustments for:

 

 

 

 

Taxation

 

135,890

 

(131,144)

Finance income

 

(6,375)

 

(9,556)

Finance costs

 

79,506

 

100,287

Share option charge

 

23,115

 

135,400

Depreciation

 

311,363

 

319,017

Amortisation

 

1,701,649

 

1,425,059

 

 

4,557,915

 

3,770,137

Increase in trade and other receivables

 

(1,606,038)

 

(427,885)

Increase in trade and other payables

 

2,333,695

 

587,066

Cash generated from operations

 

5,285,572

 

3,929,318

Finance costs

 

(79,506)

 

(100,287)

Finance income

 

6,375

 

9,556

Tax paid

 

(112,879)

 

(101,314)

NET CASH GENERATED FROM OPERATING ACTIVITIES

 

5,099,562

 

3,737,273

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Capitalisation of development costs

 

(833,781)

 

(932,535)

Purchase of property, plant and equipment

 

(394,789)

 

(729,988)

NET CASH USED IN INVESTING ACTIVITIES

 

(1,228,570)

 

(1,662,523)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Borrowings repaid

 

(1,022,124)

 

(900,069)

Dividends paid

 

(1,357,620)

 

(1,269,080)

 

 

 

 

 

NET CASH USED IN FINANCING ACTIVITIES

 

(2,379,744)

 

(2,169,149)

 

 

 

 

 

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

 

1,491,248

 

(94,399)

Translation differences

 

25,856

 

9,766

Cash and cash equivalents at beginning of year

 

5,254,302

 

5,338,935

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

 

 

6,771,406

 

 

5,254,302

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2019

 

Ordinary share capital

 

Share premium

 

Share option reserve

 

Foreign exchange reserve

 

Retained earnings

 

Total

 

£

 

£

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2017

147,567

 

13,318,725

 

-

 

107,887

 

184,932

 

13,759,111

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

 

-

 

-

 

-

 

1,931,074

 

1,931,074

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

-

 

-

 

-

 

(120,600)

 

-

 

(120,600)

Total comprehensive income

-

 

-

 

-

 

(120,600)

 

1,931,074

 

1,810,474

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

Share option charge

-

 

-

 

135,400

 

-

 

-

 

135,400

Dividends

-

 

-

 

-

 

-

 

(1,269,080)

 

(1,269,080)

Total transactions with owners

-

 

-

 

135,400

 

-

 

(1,269,080)

 

(1,133,680)

Balance as at 30 September 2018

147,567

 

13,318,725

 

 

135,400

 

 

(12,713)

 

846,926

 

14,435,905

 

 

 

 

 

Ordinary share capital

 

 

 

 

Share premium

 

 

 

 

Share option reserve

 

 

 

 

Foreign exchange reserve

 

 

 

 

Retained earnings

 

 

 

 

Total

 

£

 

£

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2018

147,567

 

13,318,725

 

135,400

 

(12,713)

 

846,926

 

14,435,905

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

 

-

 

-

 

-

 

2,312,767

 

2,312,767

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

-

 

-

 

-

 

130,807

 

-

 

130,807

Total comprehensive income

-

 

-

 

-

 

130,807

 

2,312,767

 

2,443,574

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

Share option charge

-

 

-

 

23,115

 

-

 

-

 

23,115

Dividends

-

 

-

 

-

 

-

 

(1,357,620)

 

(1,357,620)

Total transactions with owners

-

 

-

 

23,115

 

-

 

(1,357,620)

 

(1,334,505)

Balance as at 30 September 2019

147,567

 

13,318,725

 

 

158,515

 

 

118,094

 

1,802,073

 

15,544,974

 

 

 

NOTES TO THE ACCOUNTS

 

1        Critical accounting estimates and judgements and other sources of estimation uncertainty

1 (a) Critical accounting estimates and judgements

The preparation of Financial Statements under IFRS requires the use of certain critical accounting assumptions, and requires management to exercise its judgement and to make estimates in the process of applying Cerillion's accounting policies.

 

Judgements

(i) Capitalisation of development costs

Development costs are capitalised only after the technical and commercial feasibility of the asset for sale or use have been established. This is determined by our intention to complete and/or use the intangible asset. The future economic benefits of the asset are reviewed using detailed cash flow projections. The key judgement is whether there will be a market for the products once they are available for sale.

 

(ii) Revenue recognition

The Group assesses the products and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a product or service (or bundle of products and services) that is distinct. This assessment is performed on a contract by contract basis and involves significant judgement. The determination of whether performance obligations are distinct or not affects the timing and quantum of revenue and profit recognised in each period.

 

Estimates

(i) Revenue recognition

For contracts where goods or services are transferred over time, revenue is recognised in line with the percentage completed in terms of effort to date as a percentage of total forecast effort. Total forecast is prepared by project managers on a monthly basis and reviewed by the project office and senior management team on a monthly basis. The forecast requires management to be able to accurately estimate the effort required to complete the project and affects the timing and quantum of revenue and profit recognised on these contracts in each period.

 

(ii) Impairment of non-financial assets

All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying value may be impaired. Additionally, goodwill is subject to an annual impairment test. An impairment loss is recognised in the Group statement of comprehensive income to the extent that an asset's carrying value exceeds its recoverable amount, which represents the higher of the asset's net realisable value and its value in use.

 

(iii) Depreciation and amortisation

Depreciation and amortisation rates are based on estimates of the useful economic lives and residual values of the assets involved. The assessment of these useful economic lives is made by projecting the economic lifecycle of the asset. The key judgement is estimating the useful economic life of the development costs capitalised, a review is conducted annually by project. Depreciation and amortisation rates are changed where economic lives are re-assessed and technically obsolete items written off where necessary.

 

1 (b) Other sources of estimation uncertainty

(i) Recoverability of trade debtors and accrued income

Management use their judgement when determining whether trade debtors and accrued income are considered recoverable or where a provision for impairment is considered necessary. The assessment of recoverability will include consideration of whether the balance is with a long standing client, whether the customer is experiencing financial difficulties, the fact that balances are recognised under contract and that the products sold are mission-critical to the customer's business.

 

 

2        Segment information

During the year ended 30 September 2019, 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.

 

 

2019

 

 

2018

 

£

 

£

Revenue

 

 

 

Services

7,891,085

 

9,197,735

Software

8,161,818

 

5,588,087

Software-as-a-Service

905,175

 

898,529

Third party

1,793,703

 

1,668,246

Total revenue

18,751,781

 

17,352,597

 

 

 

 

 

             

 

The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy. Revenue recognised on performance obligations partially satisfied in previous periods was £8,965,033 (2018: £12,566,505).

 

 

 

 

 

Accounting policies

 

 

 

Year ended 30 September 2019

(i)

(ii)

(iii)

(iv)

 

Total

 

 

£

 

£

£

£

£

 

£

 

 

 

 

 

 

 

 

 

 

Services

 7,891,085

 

 

 

 

 

 

 

 

 implementation fees

 

 

5,071,013

-

-

-

 

5,071,013

 

 ongoing account development work

 

 

-

-

2,820,072

-

 

2,820,072

Software

8,161,818

 

 

 

 

 

 

  

 

initial licence fees

 

 

 2,978,091

-

-

-

 

2,978,091

 

sale of additional licences

 

 

-

969,478

-

-

 

969,478

 

ongoing maintenance and support fees

 

 

4,214,249

-

-

-

 

4,214,249

Software-as-a-Service

   905,175

 

905,175

-

-

-

 

  905,175

 

 

 

 

 

 

 

 

 

 

Third Party

  1,793,703

 

-

-

-

1,793,703

 

 1,793,703

 

 

 

 

 

 

 

 

 

 

Total

18,751,781

 

13,168,528

969,478

2,820,072

1,793,703

 

18,751,781

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounting policies

 

 

 

Year ended 30 September 2018

(i)

(ii)

(iii)

(iv)

 

Total

 

 

£

 

£

£

£

£

 

£

 

 

 

 

 

 

 

 

 

 

Services

 9,197,735

 

 

 

 

 

 

 

 

 implementation fees

 

 

4,104,532

-

-

-

 

4,104,532

 

 ongoing account development work

 

 

-

-

5,093,203

-

 

5,093,203

Software

5,588,087

 

 

 

 

 

 

 

 

initial licence fees

 

 

 964,647

-

-

-

 

964,647

 

sale of additional licences

 

 

-

497,947

-

-

 

497,947

 

ongoing maintenance and support fees

 

 

4,125,493

-

-

-

 

4,125,493

Software-as-a-Service

   898,529

 

898,529

-

-

-

 

  898,529

 

 

 

 

 

 

 

 

 

 

Third Party

  1,668,246

 

-

-

-

1,668,246

 

 1,668,246

 

 

 

 

 

 

 

 

 

 

Total

17,352,597

 

10,093,201

497,947

5,093,203

1,668,246

 

17,352,597

 

 

 

 

 

 

 

 

 

 

 

(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 2019

 

 

 

 

 

 

 

 

Revenue - by customer location

10,369,113

 

29,667

 

6,059,644

 

2,293,357

Capital expenditure

1,049,536

 

-

 

-

 

179,034

Non-current assets

10,324,666

 

-

 

-

 

302,503

Total assets

24,729,262

 

-

 

-

 

835,584

Net assets

15,243,658

 

-

 

-

 

301,316

 

 

 

Europe

 

MEA

 

Americas

 

Asia Pacific

 

£

 

£

 

£

 

£

Year ended 30 September 2018

 

 

 

 

 

 

 

Revenue - by customer location

12,376,044

 

463,960

 

3,459,507

 

1,053,086

Capital expenditure

1,651,735

 

-

 

-

 

10,788

Non-current assets

9,488,303

 

-

 

-

 

158,306

Total assets

22,738,507

 

-

 

-

 

521,827

Net assets

14,357,599

 

-

 

-

 

78,306

 

 

 

All revenue is contracted within the UK subsidiary Cerillion Technologies Limited and therefore all revenue is domiciled in the Europe segment.

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

 

 

 

Operating

 

2019

 

2018

 

 

 

segment

 

£

 

£

Customer

 

 

 

 

 

 

 

No. 1

 

 

Americas

 

3,674,824

 

121,179

No. 2

 

 

Europe

 

2,214,981

 

3,700,187

No. 3

 

 

Europe

 

613,112

 

2,317,726

No. 4

 

 

Europe

 

833,301

 

1,795,246

 

 

3        Operating profit

 

2019

 

2018

 

£

 

£

Operating profit is stated after (crediting)/charging:

 

 

 

Depreciation

311,363

 

319,017

Amortisation of intangibles

1,701,649

 

1,425,059

Research and development costs

465,920

 

68,132

Bad debt (credit) / expense

(32,941)

 

174,540

Foreign exchange losses / (gains)

40,169

 

(208,324)

Operating leases

846,187

 

919,914

Exceptional items

-

 

161,661

Fees payable to Cerillion's principal auditor:

 

 

 

- Audit of Cerillion plc's annual accounts

8,000

 

6,000

- Audit of subsidiaries

59,500

 

44,000

- Non-audit services - tax services

9,400

 

10,950

- Non-audit services - other

-

 

18,031

Fees payable to associates of principal auditor:

 

 

 

- Audit of subsidiaries

-

 

10,008

- Non-audit services - tax services

-

 

21,115

 

 

 

 

 

             

The exceptional items in 2018 represent one-off costs incurred from the relocation of the London office caused by over-lapping rental periods.

The current year auditor fees relate to PwC, the prior year relate to Grant Thornton.

 

4        Finance income

 

2019

 

2018

 

£

 

£

Finance income:

 

 

 

Bank interest receivable

6,375

 

9,556

 

5        Finance costs

 

2019

 

2018

 

£

 

£

Finance costs:

 

 

 

Interest payable in respect of loans

(77,973)

 

(99,931)

Other interest payable

(1,533)

 

(356)

 

(79,506)

 

(100,287)

 

6        Taxation

(a) Analysis of tax charge for the year

The tax charge for the Group is based on the profit for the year and represents:

 

2019

2018

 

 

£

£

 

Current tax credit - UK

-

(37,108)

 

Current tax expense - overseas

112,879

111,246

 

Current tax expense - total

112,879

74,138

 

Deferred tax charge / (credit)

23,011

(205,282)

 

Total tax charge/(credit)

135,890

(131,144)

 

 

 

 

 

(b) Factors affecting total tax for the year

 

 

The tax assessed for the year differs from the standard rate of corporation tax in the United Kingdom 19.0% (2018: 19.0%). The differences are explained as follows:

 

 

 

 

Profit on ordinary activities before tax

2,448,657

1,799,930

 

 

 

Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.0% (2018: 19.0%)

465,245

341,987

 

 

 

Effect of:

 

 

Expenses not deductible/income not taxable for tax purposes

(9,033)

118,005

Difference in tax rates

60,217

(68,502)

Other temporary differences

3,876

-

Prior year tax adjustment

39,768

(37,108)

Losses carried forward

-

(1,692)

Enhanced relief for research and development

(424,183)

(483,834)

Total tax charge / (credit)

135,890

(131,144)

 

There are currently no deferred tax assets or liabilities recognised within the Parent Company accounts. Taxable losses within the Parent Company totalling £nil (2018: £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.

 

 

7        Dividends

(a)   Dividends paid during the reporting period

The Board paid the final dividend in respect of 2018 of 2.8p per share and declared and paid an interim 2019 dividend of 1.6p (2018: 1.5p) per share. Total dividends paid during the reporting period were £1,357,620 (2018: £1,269,080).

 

(b)   Dividends not recognised at the end of the reporting period

Since the year end the Directors have proposed the payment of a dividend in respect of the full financial year of 3.3p per fully paid Ordinary Share (2018: 3.0p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2019, but not recognised as a liability at the year end is £973,945 (2018: £885,405). Since the year end the Directors of Cerillion Technologies Limited have approved a £3million dividend to Cerillion plc.

 

 

8        Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

 

 

 

2019

 

2018

 

 

 

 

 

Profit attributable to equity holders of the Company (£)

 

2,312,767

 

1,931,074

 

 

 

 

 

Weighted average number of Ordinary Shares in issue (number)

 

29,513,486

 

29,513,486

Effect of share options in issue

 

267,700

 

436,696

Weighted average shares for diluted earnings per share

 

29,781,186

 

29,950,182

 

 

 

 

 

Basic earnings per share (pence per share)

 

7.8

 

6.5

Diluted earnings per share (pence per share)

 

7.8

 

6.4

 

 

9        Intangible assets

Group

 

Goodwill

 

Purchased customer contracts

 

Intellectual property rights

 

Software development costs

 

Total

 

 

£

 

£

 

£

 

£

 

£

Cost

 

 

 

 

 

 

 

 

 

 

At 1 October 2017

 

2,053,141

 

4,382,654

 

2,567,160

 

1,451,111

 

10,454,066

Additions

 

-

 

-

 

-

 

932,535

 

932,535

At 30 September 2018

 

2,053,141

 

4,382,654

 

2,567,160

 

2,383,646

 

11,386,601

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

-

 

-

 

833,781

 

833,781

At 30 September 2019

 

 2,053,141

 

4,382,654

 

2,567,160  

 

3,217,427

 

12,220,382  

 

 

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

 

 

 

At 1 October 2017

 

-

 

939,140

 

550,106

 

340,521

 

1,829,767

Provided in the year

 

-

 

626,093

 

366,737

 

432,229

 

1,425,059

At 30 September 2018

 

-

 

1,565,233

 

916,843

 

772,750

 

3,254,826

 

 

 

 

 

 

 

 

 

 

 

Provided in the year

 

-

 

626,093  

 

366,737

 

708,819

 

1,701,649

At 30 September 2019

 

 -  

 

2,191,326  

 

 1,283,580

 

1,481,569 

 

4,956,475

 

 

 

 

 

 

 

 

 

 

 

Net book amount at 30 September 2019

 

2,053,141

 

2,191,328

 

1,283,580

 

1,735,858

 

7,263,907

 

 

 

 

 

 

 

 

 

 

Net book amount at
30 September 2018

 

2,053,141

 

2,817,421

 

1,650,317

 

1,610,896

 

8,131,775

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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

 

Using an average market share price of Cerillion plc for the year ended 30 September 2019, less an estimate of costs to sell, there is significant headroom above the carrying value of the cash-generating unit and therefore no impairment exists.

 

The calculations show that a reasonably possible change, as assessed by the Directors, would not cause the carrying amount of the CGU to exceed its recoverable amount.

 

10      Property plant and equipment

Group

 

Leasehold  improvements

 

Computer  equipment

 

Fixtures  and fittings

 

Total

 

 

 

£

 

£

 

£

 

£

 

Cost

 

 

 

 

 

 

 

 

 

At 1 October 2017

 

602,580

 

3,527,713

 

803,422

 

4,933,715

 

Additions

 

 421,789

 

 166,741

 

 141,458

 

 729,988

 

Disposals

 

(425,162)

 

(2,481,828)

 

(666,223)

 

(3,573,213)

 

Exchange difference

 

(13,462)

 

(11,479)

 

(8,104)

 

(33,045)

 

At 30 September 2018

 

585,745

 

1,201,147

 

270,553

 

2,057,445

 

 

 

 

 

 

 

 

 

 

 

Additions

 

138,062

 

232,284

 

24,443

 

394,789

 

Exchange difference

 

15,056

 

12,887

 

9,336

 

37,279

 

At 30 September 2019

 

 738,863

 

 1,446,318

 

 304,332

 

 2,489,513

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

 

 

At 1 October 2017

 

598,781

 

3,200,241

 

774,754

 

4,573,776

 

Provided in the year

 

 38,326

 

 232,869

 

 47,822

 

 319,017

 

Disposals

 

(425,162)

 

(2,481,828)

 

(666,223)

 

(3,573,213)

 

Exchange difference

 

(13,461)

 

(9,503)

 

(7,624)

 

(30,588)

 

At 30 September 2018

 

198,484

 

941,779

 

148,729

 

1,288,992

 

 

 

 

 

 

 

 

 

 

 

Provided in the year

 

53,085

 

193,602

 

64,676

 

311,363

 

Exchange difference

 

15,476

 

11,603

 

8,873

 

35,952

 

At 30 September 2019

 

267,045

 

1,146,984

 

 222,278

 

 1,636,307

 

 

 

 

 

 

 

 

 

 

 

Net book amount at 30 September 2019

 

 471,818

 

 299,334

 

 82,054

 

 853,206

 

 

 

 

 

 

 

 

 

 

 

Net book amount at

30 September 2018

 

387,261

 

259,368

 

121,824

 

768,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                       

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

 

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.

 

 

11       Deferred tax

Deferred tax asset

 

Group

Accelerated capital allowances

Other temporary differences

Total

 

£

£

£

 

 

 

 

1 October 2017

118,328

151,795

270,123

Foreign exchange movement on opening deferred tax asset

-

(9,933)

(9,933)

Debited to statement of comprehensive income

(71,486)

(19,611)

(91,097)

30 September 2018

46,842

122,251

169,093

 

Group

Accelerated capital allowances

Other temporary differences

Total

 

£

£

£

 

 

 

 

1 October 2018

46,842

122,251

169,093

Foreign exchange movement on opening deferred tax asset

-

11,428

11,428

Debited to statement of comprehensive income

(25,789)

(21,154)

(46,943)

30 September 2019

21,053

112,525

133,578

 

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.

 

 

2019

 

 

2018

 

£

 

£

 

 

 

 

At 1 October as previously stated

779,787

 

1,076,166

Prior year adjustment - reclassification from current tax liability

199,714

 

199,714

At 1 October restated

979,501

 

1,275,880

Debited to statement of comprehensive income in respect of net ACAs & other temporary differences

159,166

 

-

Credited to statement of comprehensive income in respect of acquisitions

(183,098)

 

(296,379)

As at 30 September

955,569

 

979,501

 

There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2019 (2018: £nil).
 

12      Trade and other receivables and other contract balances

Contract balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

 

The Group

 

2019

2018

 

£

£

 

 

 

 

 

 

Trade receivables

2,805,864

2,136,147

Contract assets

7,107,393

6,327,831

Contract liabilities

3,557,283

1,898,651

 

Contract assets, which are included in 'Accrued income' within trade and other receivables and are composed of the current and non-current balances. Contract liabilities, which are included in 'Deferred income' within trade and other payables.

 

Payment terms and conditions in customer contracts may vary. In some cases, customers pay in advance of the delivery of solutions or services; in other cases, payment is due as services are performed or in arrears following the delivery of the solutions or services. Differences in timing between revenue recognition and invoicing result in trade receivables, contract assets or contract liabilities in the statement of financial position.

 

Contract assets refer to accrued income and arise when revenue is recognised, but invoicing is contingent on performance of other performance obligations or on completion of contractual milestones. Contract assets are transferred to receivables when the rights become unconditional, typically upon invoicing of the related performance obligations in the contract or upon achieving the requisite project milestone.

 

Contract liabilities refer to deferred income and result from customer payments in advance of the satisfaction of the associated performance obligations and relate primarily prepaid support or other recurring services. Deferred income is released as revenue is recognised.

 

Significant changes in the contract assets and contract liabilities balances during the period are driven by the timing of income recognition and when associated invoices are raised. Specifically, revenue recognised in the year in relation to deferred income brought forward from prior year of £1,585,275 (2018: £1,703,759).

 

When certain costs to acquire a contract meet defined criteria, those costs are deferred as contract assets. The total amount of deferred contract assets (commission fees recognised in prepaid assets) are £48,944 (2018: £nil). The total amount of accrued costs to acquire a contract are £184,745 (2018: £83,657).

 

The total amount of revenue allocated to unsatisfied performance obligations is £17,587,772 (2018: £8,849,200). It is estimated that 75% will be recognised over the next 18 months, the remainder over the following year thereafter.

 

There are no contract balances within the Parent Company (2018: £nil).

 

 

 

 

Current receivables

The Group

The Company

 

2019

2018

2019

2018

 

£

£

£

£

 

 

 

 

 

Trade receivables

2,805,864

2,136,147

-

-

Accrued income

4,730,915

5,750,543

-

-

Amounts owed by group undertakings

-

-

1,719,497

4,099,176

Other receivables

390,524

287,666

-

-

Prepayments

238,968

185,067

3,626

6,009

 

8,166,271

8,359,423

1,723,123

4,105,185

 

 

 

 

 

Non-current receivables

The Group

The Company

 

2019

2018

2019

2018

 

£

£

£

£

 

 

 

 

 

 

 

 

 

 

Accrued income

2,376,478

577,288

-

-

 

 

 

 

 

The amounts owed by group undertakings are unsecured, interest free and repayable on demand.

Credit quality of receivables

A detailed review of the credit quality of each client is completed before an engagement commences.

 

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

 

2019

 

2018

 

£

 

£

Group

 

 

 

Trade receivables

2,951,383

 

2,776,026

ECL reserve

(145,519)

 

(639,879)

 

2,805,864

 

2,136,147

 

 

 

 

 

             

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.

 

2019

 

2018

 

£

 

£

Group

 

 

 

Not past due

2,660,707

 

1,391,620

Up to 3 months

132,681

 

192,367

3 to 6 months

-

 

366,615

Older than 6 months

12,476

 

185,545

 

2,805,864

 

2,136,147

 

 

 

 

 

             

Of the trade debt older than 6 months as at 30 September 2019, being £12,476 (2018: £185,545), cash of £nil (2018: £nil) has been received since the year end.

 

 

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

 

 

2019

 

2018

 

£

 

£

Group

 

 

 

Not past due

-

 

-

Up to 3 months

390

 

425,451

3 to 6 months

-

 

14,417

Older than 6 months

145,129

 

200,011

 

145,519

 

639,879

 

 

 

 

 

             

13      Trade and other payables

 

     The Group

     The Company

 

2019

2018

2019

2018

 

£

£

£

£

 

 

(Restated)

 

(Restated)

Trade payables

505,559

960,034

46,777

126,741

Taxation

-

-

-

-

Other taxation and social security

181,508

91,249

10,961

72,373

Pension contributions

42,188

39,322

-

-

Other payables

555,556

465,645

-

-

Accruals

2,451,263

1,596,957

842,427

582,986

Deferred income

3,557,283

1,898,651

-

-

Loans (note 14)

1,200,000

1,000,000

1,200,000

1,000,000

 

8,493,357

6,051,858

2,100,165

1,782,100

 

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

 

 

14      Borrowings and financial liabilities

 

     The Group

     The Company

 

2019

2018

2019

2018

 

£

£

£

£

 

 

 

 

 

Current liabilities:

 

 

 

 

Secured loans

1,200,000

1,000,000

1,200,000

1,000,000

 

 

 

 

 

Non-current liabilities:

 

 

 

 

Secured loans

570,946

1,793,070

570,946

1,793,070

 

1,770,946

2,793,070

1,770,946

2,793,070

 

14a Terms and repayment schedule

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

 

The Loan 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.

 

 

 

Non-current Borrowings

 

Current Borrowings

 

 

Total

 

£

 

£

 

£

 

 

 

 

 

 

1 October 2018

1,793,070

 

1,000,000

 

2,793,070

Cash-flows:

 

 

 

 

 

Repayment

-

 

 

(1,022,124)

Non-cash:

 

 

 

 

Reclassification

(1,222,124)

 

1,222,124

 

-

30 September 2019

570,946

 

1,200,000

 

1,770,946

 

 

 

 

 

 

 

                       

 

 

Non-current Borrowings

 

Current Borrowings

 

 

Total

 

£

 

£

 

£

 

 

 

 

 

 

1 October 2017

2,693,139

 

1,000,000

 

3,693,139

Cash-flows:

 

 

 

 

 

Repayment

-

 

 

(900,069)

Non-cash:

 

 

 

 

Reclassification

(900,069)

 

900,069

 

-

30 September 2018

1,793,070

 

1,000,000

 

2,793,070

 

 

 

 

 

 

 

                       

 

 

15      Financial instruments and risk management

Group

 

 

Financial instruments by category

 

2019

£

 

2018

£

 

Financial assets - loans and receivables

 

 

 

 

 

Non-current -

 

 

 

 

 

Accrued income

 

2,376,478

 

577,288

 

Current

 

 

 

 

 

Trade and other receivables

 

3,196,388

 

2,423,813

 

Accrued income

 

4,730,915

 

5,750,543

 

Cash and cash equivalents

 

6,771,406

 

5,254,302

 

 

 

14,698,709

 

13,428,658

                   

 

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

 

 

Financial liabilities - held at amortised cost

 

2019

£

 

2018

             £

Non-current

 

 

 

 

 

Borrowings

 

570,946

 

1,793,070

 

 

 

570,946

 

1,793,070

 

Current

 

 

 

 

 

Current borrowings

 

1,200,000

 

1,000,000

 

Trade and other payables

 

1,061,115

 

1,425,679

 

Pension costs

 

42,188

 

39,322

 

Accruals

 

2,451,263

 

1,596,956

 

 

 

4,754,566

 

4,061,957

 

             

 

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

 

Company

 

 

Financial instruments by category

 

2019

£

 

2018

£

 

Financial assets - loans and receivables

 

 

 

 

 

Current

 

 

 

 

 

Amounts owed by group undertakings

1,719,497

 

4,099,176

 

Cash and cash equivalents

 

169,163

 

25,665

 

 

 

1,888,660

 

4,124,841

                   

 

Financial liabilities - held at amortised cost

 

2019

£

2018

             £

Non-current

 

 

 

 

 

Borrowings

 

570,946

 

1,793,070

 

 

 

570,946

 

1,793,070

 

Current

 

 

 

 

 

Current borrowings

 

1,200,000

 

1,000,000

 

Trade and other payables

 

46,777

 

126,741

 

Accruals

 

842,427

 

582,986

 

 

 

2,089,204

 

1,709,727

 

 

There is no material difference between the book value and the fair value of the financial assets and financial liabilities disclosed above for either the Group or Parent Company.

 

There were no derivative financial instruments in existence as at 30 September 2019 (2018: £nil).

 

The Group's multinational operations expose it to financial risks that include market risk, credit risk, foreign currency risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years.

 

Credit quality of financial assets

 

The credit quality of financial assets 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:

 

2019

 

2018

 

£

 

£

Trade receivables

 

 

 

Group 1

1,849,871

 

55,215

Group 2

707,722

 

1,668,857

Group 3

248,271

 

412,075

 

2,805,864

 

2,136,147

 

 

 

 

 

               

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

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

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

 

At the year end there are 2 customers (2018: 7 customers) with trade receivable balances each representing in excess of 5% of the total trade receivables of £2,805,864. Of these customers, 1 is categorised within Group 3 above (2018: 2), representing 8% of total trade receivables, with the remainder within Group 2.

 

There are no trade receivables within the Parent Company.

 

 

2019

 

2018

 

£

 

£

Cash at bank and short-term deposits

 

 

 

A1

6,768,218

 

5,251,059

Not rated

3,188

 

3,243

 

6,771,406

 

5,254,302

 

 

 

 

 

             

 

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

Not rated balances relate to petty cash amounts. All cash within the Parent Company is within the A1 category.

 

Market risk - foreign exchange risk

 

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

 

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

 

 

As at 30 September 2019 the Group had no forward foreign exchange contracts in place (2018: none) to mitigate exchange rate exposure arising from forecast income in US Dollars, Australian Dollars and Euros.

 

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

 

 

 

AUD

 

USD

 

EUR

 

INR

 

DKR

 

BND

30 September 2019

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

298,452

 

5,025,829

 

2,697,106

 

665,743

 

229,560

 

2,232,614

Financial liabilities

 

-

 

(148,032)

 

(23,227)

 

(535,533)

 

-

 

-

Total exposure

 

298,452

 

4,877,797

 

 2,673,879

 

130,210

 

229,560

 

2,232,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AUD

 

USD

 

EUR

 

INR

 

DKR

 

BND

30 September 2018

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

72,921

 

2,741,242

 

2,857,232

 

366,443

 

-

 

-

Financial liabilities

 

-

 

(92,676)

 

(11,161)

 

(443,522)

 

-

 

-

Total exposure

 

72,921

 

2,648,566

 

 2,846,071

 

(77,079)

 

-

 

-

 

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

 

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

 

30 September 2019

 

AUD

 

USD

 

EUR

 

INR

 

DKR

 

BND

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

(27,132) 

 

(443,436) 

 

(243,080) 

 

(11,837) 

 

(20,869) 

 

(202,965) 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity total

 

(27,132) 

 

(443,436) 

 

(243,080) 

 

(11,837) 

 

(20,869) 

 

(202,965) 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2018

 

AUD

 

USD

 

EUR

 

INR

 

DKR

 

BND

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/gain for the year

 

(6,629) 

 

(240,779) 

 

(258,734) 

 

7,007 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity total

 

(6,629) 

 

(240,779) 

 

(258,734) 

 

7,007 

 

 

 

 

 

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

 

30 September 2019

 

AUD

 

USD

 

EUR

 

INR

 

DKR

 

BND

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain for the year

 

33,161 

 

541,977

 

297,098

 

14,468

 

25,507

 

248,068

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity total

 

33,161 

 

541,977

 

297,098

 

14,468

 

25,507

 

248,068

 

 

 

 

 

 

 

 

 

 

 

 

 

30 September 2018

 

AUD

 

USD

 

EUR

 

INR

 

DKR

 

BND

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) for the year

 

8,102 

 

294,285 

 

316,230

 

(8,564)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity total

 

8,102 

 

294,285 

 

316,230

 

(8,564)

 

 

 

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.

 

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 2019, 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 2019

 

(21,928) 

 

21,761 

 

(21,928) 

 

21,761 

 

 

 

 

 

 

 

 

 

30 September 2018

 

(33,050) 

 

32,759 

 

(33,050) 

 

32,759 

 

 

 

 

 

 

 

 

 

 

 

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 2019

 

 

 

 

 

 

 

 

Borrowings

 

1,242,252

 

626,914

 

-

 

-

Trade and other payables

 

7,534,229

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

30 September 2018

 

 

 

 

 

 

 

 

Borrowings

 

1,178,065

 

1,242,257

 

627,112

 

-

Trade and other payables

 

5,251,572

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

                             

 

Capital risk management

 

The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders through optimising the debt and equity balance. In the short-term this means generating sufficient cash to repay the existing loans, whilst maintaining the dividend policy and investment in research and development.

 

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

 

The Parent Company has the same approach to capital risk management, with the additional focus of monitoring dividends up from group companies to ensure that sufficient reserves are in place to maintain the dividend policy.

 

 

16      Share capital

 

 

2019

 

2018

 

 

£

 

£

Issued, allotted, called up and fully paid:

 

 

 

 

29,513,486 (2018: 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.

 

 

17      Share based payments

The Group introduced a Save as You Earn ("SAYE") share option scheme and a Long-Term Incentive Plan ("LTIP") in 2017. The Group is required to reflect the effects of share-based payment transactions in its statement of comprehensive income and statement of financial position. For the purposes of calculating the fair value of share options granted, the Black Scholes Pricing Model has been used by the Group in respect of the SAYE schemes, the LTIP has been fair valued using a Monte-Carlo Simulation Model. Fair values have been calculated on the date of grant.

 

A new Save as You Earn ("SAYE") share option scheme was introduced in 2019 (2018: nil). A charge of £23,115 (2018: £135,400) has been reflected in the consolidated statement of comprehensive income, with the corresponding entry recognised within the share option reserve.

 

The fair value of options granted in the current year and the assumptions used in the calculation are shown below:

 

Year of grant

 

2017

2017

2019

Scheme

 

SAYE

LTIP

SAYE

 

 

 

 

 

Exercise price (£)

 

1.132

0.05

1.092

Number of options granted

 

   189,845

300,000

   132,917

Vesting period (years)

 

3 years

3 to 3.5 years

3 years

Option life (years)

 

3.5 years

5 to 5.5 years

3.5 years

Risk free rate

 

0.50%

0.49%

0.50%

Volatility

 

41%

41%

41%

Dividend yield

 

3.00%

3.33%

3.00%

Fair value (£)

 

0.44

0.53

0.43

 

 

 

 

 

 

The share option schemes are issued by the Parent Company, therefore the disclosures within this note cover the Group and Parent Company, the share based payment expense is recharged to Cerillion Technologies Limited as this is where the option holders are employed.

 

During the year no options were granted as summarised in the table below:

 

 

 

 

 

2019

 

 

Number of

 Options

2019

Weighted

 average

 exercise

 price

2018

 

 

Number of

 Options

2018

Weighted

 average

 exercise

 price

 

 

 

£

 

£

 

 

 

 

 

 

 

Outstanding at start of year

439,845

0.49

489,845

0.44

 

Granted

132,912

1.09

-

-

 

Expired

(17,235)

1.13

(50,000)

0.005

 

Outstanding at 30 September

555,522

0.62

439,845

0.49

 

 

 

 

 

 

 

Exercisable at 30 September

-

-

-

-

 

 

18      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 £322,658 (2018: £331,133). At the year end the contributions payable to the scheme were £42,188 (2018: 39,322).

 

 

19      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:

 

2019

 

2018

Group

£

 

£

 

 

 

 

Within one year

570,839

 

399,658

Between one and five years

3,152,777

 

2,568,252

After five years

2,375,750

 

3,106,750

 

6,099,366

 

6,074,660

 

 

 

 

 

             

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.

 

20      Annual General Meeting

The Annual General Meeting is to be held on 7 February 2020.  Notice of the AGM will be despatched to shareholders with Cerillion's report and accounts.

21      Preliminary Announcement

The financial information set out in the announcement does not constitute the Company's full statutory accounts for the years ended 30 September 2019 or 2018. The financial information for the year ended 30 September 2018 is derived from the statutory accounts for that year, except for a prior year adjustment as disclosed in note 22, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, it did not draw attention to any matters by way of emphasis without qualifying their report and it did not contain a statement under s498(2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 30 September 2019 has been completed and the accounts will be delivered to the Registrar of Companies before the Company's Annual General Meeting.  This announcement is derived from the statutory accounts for that year.

 

22      Re-presentation of the 2018 Statement of Financial Position

As part of the year end audit process the Group has identified that temporary differences relating to the potential tax on future receipts of dividends from the Indian subsidiary to Cerillion Technologies Limited had been incorrectly recorded within current tax liabilities rather than included within the deferred tax liability. The 2018 Statement of Financial Positions, and related notes, have been restated to correctly disclose the amount of deferred tax of £199,714 (Parent Company: £100,000), which had been included within current tax liabilities in error. The Parent Company balance of £100,000 should have been recorded within its subsidiary Cerillion Technologies Limited and therefore its current tax liability has been corrected through reserves, and reflected within the subsidiary's books, rather than by generating a deferred tax liability in the Parent Company. The 2017 Statement of Financial Positions has also been restated and presented as the error existed as at the beginning of the year to 30 September 2018. There was no impact on total assets, net assets or the Statement of Comprehensive Income for the year to 30 September 2018.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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