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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Cerillion Plc | LSE:CER | London | Ordinary Share | GB00BYYX6C66 | ORD 0.5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 1,585.00 | 1,570.00 | 1,600.00 | 1,585.00 | 1,585.00 | 1,585.00 | 72 | 07:47:03 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Computers & Software-whsl | 39.17M | 12.93M | 0.4391 | 36.10 | 466.73M |
TIDMCER
RNS Number : 8990T
Cerillion PLC
20 November 2023
AIM: CER
Cerillion plc
("Cerillion" or "Company" or "Group")
Final results for the year ended 30 September 2023
Record financial performance
Strong platform for continued growth
Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2023.
Highlights
Year ended 30 September 2023 2022 Change ------------------------------- --------- --------- ---------- Revenue GBP39.2m GBP32.7m +20% Annualised recurring revenue (2) GBP14.8m GBP12.4m +19% Adjusted EBITDA(4) GBP18.1m GBP13.8m +32% Adjusted EBITDA margin 46.2% 42.0% +4 2 0bps Adjusted profit before tax(5) GBP16.8m GBP11.9m +41% Statutory profit before tax GBP16.1m GBP10.9m +48% Adjusted basic earnings per share(6) 46.2p 35.2p +31% Statutory basic earnings per share 43.8p 31.7p +38% Total dividend per share 11.3p 9.1p +24% Net cash GBP24.7m GBP20.2m +22% ------------------------------- --------- --------- ----------
Financial:
-- A record year across key financial performance measures
-- Revenue up 20% to a record GBP39.2m (2022: GBP32.7m), driven by major new customer implementations, significant licence revenue and strong demand from existing customers
-- Annualised recurring revenue up 19% to GBP14.8m (2022: GBP12.4m)
-- Back-order book(3) at GBP45.4m at the financial year-end (30 September 2022: GBP45.4m); now at a record GBP52.5m following the recent EUR12.4m contract win with a new European Tier-1 customer
-- New customer sales pipeline(7) up 16% to a record GBP243m at 30 September 2023 (30 September 2022: GBP209m)
-- Strong balance sheet with net cash up 22% to GBP24.7m (30 September 2022: GBP20.2m)
-- Final dividend of 8.0p per share proposed (2022: 6.5p), bringing the total dividend for the year to 11.3p per share (2022: 9.1p), an increase of 24%
Operational:
-- Major new implementation covering mobile services completed for Telesur in H2; second phase covering its fixed-line network is now under way
-- Record orders of GBP30.8m to existing customers, up by 85% year-on-year
- reflects the benefits of recent larger customer wins and includes major new contract worth GBP15.1m signed in H2
-- Continued expansion of newer resource centres in Bulgaria and India, and sales team presence added in the USA
-- AI-based functionality introduced in latest product release, issued in November 2023
-- Pipeline of new business opportunities stands at a record high and includes larger potential contracts
-- Cerillion well-positioned for further growth in FY24 and beyond
Louis Hall, CEO of Cerillion plc, commented:
"It has been another year of strong growth and development. Revenue, pre-tax profit, and the new customer sales pipeline all reached new highs. Record orders to existing customers - some 79% of total revenue for the year - shows the importance of our existing customer base, and the recent closure of a EUR12.4m deal with a Tier-1 telco is another demonstration of our widening market appeal.
"We continued to invest in our product set, introducing AI for the first time, and also expanded our resource base, particularly at our newer centres in Ahmedabad, Indore and Sofia.
"The market backdrop remains extremely favourable. Numerous factors continue to drive telco investment in the enterprise software layer that connects their network infrastructure to their customers and allows them to enhance monetisation of their network infrastructure assets. In a slower growth environment for telcos, the need to extract more revenue from existing assets and improve operational efficiency are just as important drivers for improving or replacing the enterprise software layer as investment in new 5G and fibre infrastructure.
"Cerillion's financial position remains very strong, supported by significant net cash, increasing levels of recurring income and strong cash generation. Together with a record back-order book and strong new customer sales pipeline, this leaves us confident about Cerillion's growth prospects in the new financial year and beyond."
For further information please contact:
Cerillion plc c/o KTZ Communications Louis Hall, CEO, Andrew Dickson, T: 020 3178 6378 CFO Liberum (Nomad and Broker) T: 020 3100 2000 Bidhi Bhoma, Ben Cryer, Matthew Hogg T: 020 7496 3000 Singer Capital Markets (Joint Broker) Rick Thompson, James Fischer KTZ Communications T: 020 3178 6378 Katie Tzouliadis, Robert Morton
About Cerillion
Cerillion has a 24-year track record in providing mission-critical software for billing, charging and customer relationship management ("CRM"), mainly to the telecommunications sector but also to other markets, including utilities and financial services. The Company has c. 80 customer installations across c. 45 countries.
Headquartered in London, Cerillion also has operations in India and Bulgaria.
The business was originally part of Logica plc before its management buyout, led by CEO, Louis Hall, in 1999. The Company joined AIM in March 2016.
Notes
Note 1 Revenue derived from software licence, support and maintenance, Software-as-a-Service ("SaaS") and third-party sales.
Note 2 Recurring revenue includes support and maintenance, managed service and Skyline revenue.
Note 3 Back order book consists of GBP36.7m of sales contracted but not yet recognised at the end of the reporting period plus GBP8.7m of annualised support and maintenance revenue. It is anticipated that c. 45% of the GBP36.7m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 months.
Note 4 Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") is calculated by taking operating profit and adding back depreciation & amortisation and share-based payment charge.
Note 5 Adjusted profit before tax is calculated by taking reported profit before tax and adding back amortisation of acquired intangible assets and share-based payment charge.
Note 6 Adjusted earnings per share is calculated by taking profit after tax and adding back amortisation of acquired intangible assets and share-based payment charge and is divided by the weighted average number of shares in issue during the period.
Note 7 New Customer Sales Pipeline is the total, unweighted value of all qualified sales prospects.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
Cerillion continues to perform very strongly and financial results for the year have set new record highs on key measures. Revenue increased by 20% year-on-year to a record GBP39.2m (2022: GBP32.7m), and adjusted profit before tax rose by 41% to a new high of GBP16.8m (2022: GBP11.9m), which was meaningfully ahead of the prior consensus market forecast, as reported in our October trading update. At financial year-end, the total value of our new customer sales pipeline had increased by 16% to a record GBP243m (2022: GBP209m), which reflects the growing demand that we are seeing in the marketplace.
This excellent performance was achieved against slower economic growth globally. We believe that this backdrop is likely to stimulate market interest in our product-based SaaS solutions as telcos seek to maximise investment returns on critical 5G and fibre infrastructure, as well as on existing infrastructure assets and comment further on this below.
New orders for the financial year under review increased slightly to GBP31.6m (2022: GBP29.4m), and the new financial year has started strongly with a major new contract worth approximately EUR12.4m signed with a new Tier-1 customer. It is worth noting that key criteria in the selection process were the commercial, operational and financial advantages of our 'out-of-the-box' product model, and especially the ease with which our software enables new products and packages to be created and launched by our customers to their end-customers. Our highly-configurable, 'out-of-the-box' product solution enables much lower total cost of ownership and much faster time-to-market than the traditional best-of-breed or bespoke approaches.
The recent Tier-1 new customer signing continues a trend towards winning larger customers. As we have previously commented, this has multiple benefits. In addition to providing further proof points of the quality of our product offering, larger customers typically generate higher income over the long-term since they are generally more active, with broader and deeper requirements and larger budgets. Larger deals also typically have a higher software licence element and therefore tend to be margin enhancing.
New orders from existing accounts increased by 85% year-on-year to GBP30.8m (2022: GBP16.7m). This substantial uplift mainly reflected the presence of the larger customers that we have signed in recent years, but it was also driven by some large deals with a number of smaller customers.
In order to support the significant acceleration of the Company's growth rate, we have continued to increase resources in our main operations in India and Bulgaria. We also added new sales presence in the USA, Belgium and Singapore over the year.
Looking to the future, demand for billing, charging, customer relationship management ("CRM") and digital customer experience solutions in the Company's core telecommunications market is driven by a very broad range of factors. These include the need to: realise greater value from existing infrastructure assets; improve operational efficiency; adapt rapidly to changing market conditions; and maximise value from new infrastructure investments in 5G and fibre rollouts. Cerillion remains well-placed to benefit from these drivers, and to grow, both in Europe and internationally. We also expect to gain from increasing market acceptance of SaaS-based product solutions.
The pipeline of potential new business opportunities is very strong, and the Company is well-positioned to make further strong progress in the new financial year.
Financial Overview
Total revenue for the year to 30 September 2023 rose by 20% to GBP39.2m (2022: GBP32.7m). As is typical, existing customers (classified as those acquired before the beginning of the reporting period) accounted for a very high proportion of total revenue, generating 99% of the overall result (2022: 98%).
Recurring revenue, which is derived from support and maintenance, and managed service contracts, increased by 23% to GBP12.9m and comprised approximately 33% of total revenue (2022: GBP10.5m, 32%). At 30 September 2023, recurring revenue on an annualised basis was 19% higher year-on-year at GBP14.8m (30 September 2022: GBP12.4m), boosted by a 41% increase in annualised managed service contract revenue (2022: 67% increase) as more customers contracted for these services.
The Group's revenue streams are categorised into three segments: software revenue (including Software-as-a-Service); services revenue; and revenue from other activities. Software revenue principally comprises software licences and related support and maintenance, and managed service sales, while services revenue is generated by software implementations and ongoing account development work. Revenue from other activities is mainly from the reselling of third-party products.
-- Software (including Software-as-a-Service) revenue increased by 64% to GBP21.1m (2022: GBP12.9m). This included initial licence recognition for recent, large new customer wins. Software revenues accounted for 54% of total revenues (2022: 39%). -- Services revenue decreased by 15% to GBP15.5m (2022: GBP18.3m). This reduction largely reflected a reduction in concurrent implementation work on new customer projects. Services revenue comprised 40% of total revenue (2022: 56%). -- Third-party income increased by 62% to GBP2.6m (2022: GBP1.6m) and comprised 7% of total revenue (2022: 5%).
Gross margin was slightly ahead of the prior year at 78.6% (2022: 77.9%), reflecting the higher proportion of licence revenue recognised.
Operating expenses increased by 17.2% to GBP15.3m (2022: GBP13.0m). This included an unfavourable year-on-year foreign exchange impact of GBP0.6m due to retranslation of balance sheet items at year end. Excluding this, operating expenses increased by 12%, reflecting strong focus on cost control. Personnel costs were GBP8.7m (2022: GBP7.4m) and accounted for 57% (2022: 57%) of operating expenses.
Adjusted EBITDA for the year increased by 32% to GBP18.1m (2022: GBP13.8m), driven mainly by higher revenues, and supported by favourable foreign exchange rates. The Board considers adjusted EBITDA to be a key performance indicator for Cerillion as it adds back key non-cash transactions, being share-based payments, depreciation and amortisation.
We continued to invest in our product set, and the charge for amortisation of intangibles was GBP1.4m (2022: GBP1.9m). Expenditure on tangible fixed assets was GBP0.3m (2022: GBP0.6m). Operating profit increased by 43% to GBP15.3m (2022: GBP10.7m) due to the increase in revenue, as well as operational leverage.
Adjusted profit before tax rose by 41% to GBP16.8m (2022: GBP11.9m) and adjusted earnings per share increased by 31% to 46.2p (2022: 35.2p). On a statutory basis, profit before tax increased by 48% to GBP16.1m (2022: GBP10.9m) and earnings per share increased by 38% to 43.8p (2022: 31.7p).
Cash Flow and Banking
The Group continued to generate strong cash flows, and closed the financial year with net cash up by 22% against the same point last year to GBP24.7m (30 September 2022: GBP20.2m). This was after GBP2.9m of dividend payments (2022: GBP2.2m). Total debt at the year-end remained GBPnil (2022: GBPnil).
Dividend
The Board is pleased to propose a 23% increase in the final dividend to 8.0p per share (2022: 6.5p). Together with the interim dividend of 3.3p per share (2021: 2.6p), this brings the total dividend for the year to 11.3p per share (2022: 9.1p), an increase of 24%.
The dividend, which is subject to shareholder approval at the Company's Annual General Meeting to be held on 1 February 2024, will be payable on 8 February 2024 to those shareholders on the Company's register as at the close of business on the record date of 29 December 2023. The ex-dividend date is 28 December 2023.
Operational and Market Overview
High points over the year included the completion of some major implementations. One was for Neos Networks, a leading UK business telecoms provider, where we replaced three independent systems, and another was for Telesur, the leading telecommunications provider in Suriname, where we migrated the telco's mobile services to our platform. Our work for Telesur continues with the digital transformation of its fixed-line services. In June 2023, we signed a major new six-year contract with an existing telecommunications customer, worth a total of GBP15.1 million, which just tops our previous largest ever customer win, signed in 2022. The GBP15.1 million win followed a GBP10 million contract signing in the first half of the year with an existing customer.
Our latest major new contract was agreed in November 2023 and is with a Tier-1 telco, based in Europe. Worth an initial EUR12.4 million, we expect this engagement to grow significantly in value over time. It also supports our view that the trend towards signing larger deals with larger customers will continue as our product-based approach gains wider acceptance. As previously emphasised, contracts with larger customers normally involve higher recurring revenues and have much greater upsell potential, therefore they contribute significantly to the ongoing growth of the business.
As we grow across the globe, and global labour markets evolve, we continue to expand our operating locations, recruiting the best talent cost-effectively and supporting our expanding global customer base. We enlarged our teams at our newer locations in Sofia, Bulgaria and at Ahmedabad and Indore in India and have maintained a mix of remote and office-based working. The competition for technology professionals remained relatively strong during most of the financial year, but pressures eased significantly from the peaks reached in the prior year. Nevertheless, we remain focused on potential inflation in people costs and continue to manage carefully the mix and location of resource.
Our investment in R&D exceeded last year's levels and we have continued to advance our technology, launching two major new releases of our product set, as scheduled. The most recent of these releases was Cerillion 23.2, which went live in early November 2023. A key feature of this latest release was the introduction of AI. This will specifically support the ease and agility with which our customers can create and release new product sets within our Enterprise Product Catalogue, by enabling non-technical telco staff to use natural language to define complex product bundles. These are then constructed automatically, significantly reducing the time and complexity of this key task.
Significant telco investment in critical 5G and fibre infrastructure continues and will continue to flow down to the ancillary systems that connect this infrastructure to customers and revenue. Against this macro backdrop, we anticipate that the current global economic slowdown will place more pressure on telcos to find efficiencies in their digital real-estate. We believe that this is likely to encourage further market take-up of the flexible, highly configurable, product-based SaaS solutions that Cerillion offers, rather than the more bespoke solutions, or best-of-breed platforms, available from traditional vendors. In addition to this, we anticipate that telcos will seek to improve their digital real-estate in order to save costs, by improving business efficiency and consolidating multiple customer bases onto a single platform, as well as driving revenue from existing infrastructure assets, by providing the market with more innovative products based on those assets.
Cerillion's ability to address the market through a range of flexible solutions remains compelling. As well as our proven ability to support end-to-end transformation projects, the Company offers the flexibility to provide individual product modules, or subsets of modules, to implement point solutions that address specific requirements. The Company's solutions are also able to support a broad range of CSPs, from traditional network operators and virtual network operators ("VNOs") to enterprise connectivity solutions providers.
Outlook
The Company is growing strongly, and its product-based SaaS approach leaves it well placed to continue to benefit from the broad range of positive market drivers, as discussed above. We are also encouraged by the increasing visibility the brand is gaining in what remains a huge marketplace. Our recent Tier-1 new customer win reflects this and Cerillion's inclusion in two Gartner Market Guides* (which evaluated suppliers based on product portfolio, geographic spread and progress in the last year), published earlier in 2023, also highlights the Company's growing reputation and the breadth and completeness of its product portfolio.
Looking ahead, the recent new customer win, ongoing implementation work with existing customers, and the major new deals signed with existing customers all create a strong platform for further growth. The back-order book, now at a record GBP52.5m, underpins revenue visibility, and the new customer sales pipeline, also at a new high, contains large deal opportunities. This leaves Cerillion well-placed to deliver another strong performance in the new financial year and beyond.
Cerillion's financial position remains very strong, supported by significant net cash, increasing levels of recurring income and strong cash flows. We therefore view the future with confidence and will continue to invest across the business to support ongoing growth.
A M Howarth L T Hall Non-executive Chairman Chief Executive Officer
*Gartner "Market Guide for CSP Customer Management and Experience Solutions" By Analyst(s): Juha Korhonen, Amresh Nandan, Chris Meering, Susan Welsh de Grimaldo. Published 10 April 2023, and Gartner "Market Guide for CSP Revenue Management and Monetization Solutions" By Analyst(s): Amresh Nandan, Chris Meering, Juha Korhonen. Published 9 November 2022.
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Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2023
Year to Year to 30 September 30 September 2023 2022 Notes GBP'000 GBP'000 Revenue 2 39,170 32,726 Cost of sales (8,364) (7,221) -------------- -------------- Gross profit 30,806 25,505 Operating expenses (15,273) (13,031) Impairment losses on financial assets 3 (256) (1,770) Adjusted EBITDA* 18,083 13,750 Depreciation and amortisation (2,597) (2,986) Share-based payment charge 18 (209) (60) Operating profit 3 15,277 10,704 Finance income 4 956 337 Finance costs 5 (119) (146) -------------- -------------- Profit before taxation 16,114 10,895 Taxation 6 (3,183) (1,551) Profit for the year 12,931 9,344 ============== ============== Other comprehensive (expense) / income Items that will or may be reclassified to profit or loss: Exchange difference on translating foreign (95) 70 operations -------------- -------------- Total comprehensive income for the year 12,836 9,414 ============== ============== Earnings per share Basic earnings per share - continuing 8 and total operations 43.8 pence 31.7 pence ============== ============== Diluted earnings per share - continuing and total operations 43.7 pence 31.6 pence ============== ==============
All transactions are attributable to the owners of the parent.
* Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") is calculated by taking operating profit and adding back depreciation & amortisation and share-based payment charge.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2023
2023 2022 Notes GBP'000 GBP'000 ASSETS Non-current assets Goodwill 9 2,053 2,053 Other intangible assets 9 2,374 2,653 Property, plant and equipment 10 780 980 Right-of-use assets 11 2,352 3,057 Trade and other receivables 13 5,105 2,171 Deferred tax assets 12 268 260 ------------ ------------ 12,932 11,174 ------------ ------------ Current assets Trade and other receivables 13 15,115 11,205 Cash and cash equivalents 16 24,738 20,249 ------------ ------------ 39,853 31,454 ------------ TOTAL ASSETS 52,785 42,628 ------------ ------------ LIABILITIES Non-current liabilities Trade and other payables 14 (1,200) (934) Lease liabilities 11 (2,178) (3,050) Deferred tax liabilities 12 (671) (719) ------------ ------------ (4,049) (4,703) ------------ ------------ Current liabilities Trade and other payables 14 (10,871) (10,217) Lease liabilities 11 (980) (976) (11,851) (11,193) ------------ ------------ TOTAL LIABILITIES (15,900) (15,896) ------------ ------------ NET ASSETS 36,885 26,732 ============ ============ EQUITY ATTRIBUTABLE TO SHAREHOLDERS Ordinary share capital 17 147 147 Share premium account 13,319 13,319 Treasury stock 17 - - Share option reserve 346 137 Foreign exchange reserve (192) (97) Retained earnings 23,265 13,226 ------------ TOTAL EQUITY 36,885 26,732 ============ ============
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2023
2023 2022 Notes GBP'000 GBP'000 Cash flows from operating activities Profit for the year 12,931 9,344 Adjustments for: Taxation 6 3,183 1,551 Finance income 4 (956) (337) Finance costs 5 119 146 Share option charge 18 209 60 Depreciation 10,11 1,171 1,085 Amortisation 9 1,426 1,901 --------- --------- 18,083 13,750 Increase in trade and other receivables (6,468) (1,182) Increase in trade and other payables 671 1,324 --------- --------- Cash generated from operations 12,286 13,892 Finance costs 5 (119) (146) Finance income 4 580 337 Tax paid (2,997) (1,745) NET CASH GENERATED FROM OPERATING ACTIVITIES 9,750 12,338 Cash flows from investing activities Capitalisation of intangible assets 9 (1,147) (983)
Purchase of property, plant and equipment 10 (278) (626) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (1,425) (1,609) Cash flows from financing activities Purchase of treasury stock - (827) Receipts from exercise of share options - 122 Principal elements of finance leases 11 (868) (807) Dividends paid 7 (2,892) (2,243) --------- --------- NET CASH USED IN FINANCING ACTIVITIES (3,760) (3,755) NET INCREASE IN CASH AND CASH EQUIVALENTS 4,565 6,974 Translation differences (76) 101 Cash and cash equivalents at beginning of year 20,249 13,174 CASH AND CASH EQUIVALENTS AT OF YEAR 24,738 20,249 ========= =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2023
Ordinary Share Treasury Share Foreign Retained Total share premium stock option exchange earnings capital account reserve reserve GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Balance at 1 October 2021 147 13,319 - 128 (167) 6,778 20,205 Profit for the year - - - - - 9,344 9,344 Other comprehensive income: Exchange differences on translating foreign operations - - - - 70 - 70 ---------- ----------- ---------- ----------- Total comprehensive income - - - - 70 9,344 9,414 Transactions with owners: Share option charge - - - 60 - - 60 Purchase of treasury stock - - (827) - - - (827) Exercise of share options - - 827 (51) - (653) 123 Dividends - - - - - (2,243) (2,243) ----------- ---------- ----------- ---------- ----------- ----------- -------- Total transactions with owners - - - 9 - (2,896) (2,887) ----------- ---------- ----------- ---------- ----------- ----------- -------- Balance as at 30 September 2022 147 13,319 - 137 (97) 13,226 26,732 =========== ========== =========== ========== =========== =========== ======== Ordinary Share Treasury Share Foreign Retained Total share premium stock option exchange earnings capital account reserve reserve GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Balance at 1 October 2022 147 13,319 - 137 (97) 13,226 26,732 Profit for the year - - - - - 12,931 12,931 Other comprehensive income: Exchange differences on translating foreign operations - - - - (95) - (95) ---------- ----------- ---------- ----------- Total comprehensive income - - - - (95) 12,931 12,836 Transactions with owners: Share option charge - - - 209 - - 209 Dividends - - - - - (2,892) (2,892) ----------- ---------- ----------- ---------- ----------- ----------- -------- Total transactions with owners - - - 209 - (2,892) (2,683) ----------- ---------- ----------- ---------- ----------- ----------- -------- Balance as at 30 September 2023 147 13,319 - 346 (192) 23,265 36,885 =========== ========== =========== ========== =========== =========== ========
NOTES TO THE ACCOUNTS
1 Critical accounting estimates and judgements and other sources of estimation uncertainty
1 (a) Critical accounting estimates and judgements
The preparation of Financial Statements under IFRS requires the use of certain critical accounting assumptions, and requires management to exercise its judgement and to make estimates in the process of applying Cerillion's accounting policies.
Judgements
(i) Capitalisation of development costs
Development costs are capitalised only after the technical and commercial feasibility of the asset for sale or use have been established. This is determined by our intention to complete and/or use the intangible asset. The future economic benefits of the asset are reviewed using detailed cash flow projections. The key judgement is whether there will be a market for the products once they are available for sale.
(ii) Revenue recognition
The Group assesses the products and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a product or service (or bundle of products and services) that is distinct. This assessment is performed on a contract by contract basis and involves significant judgement. The determination of whether performance obligations are distinct or not affects the timing and quantum of revenue and profit recognised in each period.
Estimates
(i) Revenue recognition
For contracts where goods or services are transferred over time, revenue is recognised in line with the percentage completed in terms of effort to date as a percentage of total forecast effort. Total forecast effort is prepared by project managers on a monthly basis and reviewed by the project office and senior management team on a monthly basis. The forecast requires management to be able to accurately estimate the effort required to complete the project and affects the timing and quantum of revenue and profit recognised on these contracts in each period.
(ii) Depreciation and amortisation
Depreciation and amortisation rates are based on estimates of the useful economic lives and residual values of the assets involved. The assessment of these useful economic lives is made by projecting the economic lifecycle of the asset. The key judgement is estimating the useful economic life of the development costs capitalised, a review is conducted annually by project. Depreciation and amortisation rates are changed where economic lives are re-assessed and technically obsolete items written off where necessary.
Management has considered the above areas of estimation and concluded that there are no deemed material changes arising from changes in underlying assumptions.
1 (b) Other sources of estimation uncertainty
(i) Recoverability of trade debtors and accrued income
Management use their judgement when determining whether trade debtors and accrued income are considered recoverable or where a provision for impairment is considered necessary. The assessment of recoverability will include consideration of whether the balance is with a long-standing client, whether the customer is experiencing financial difficulties, the fact that balances are recognised under contract and that the products sold are mission-critical to the customer's business. Refer to notes 13 and 16.
(ii) Calculation of future minimum lease payments
The calculation of lease liabilities requires the Group to determine an incremental borrowing rate ("IBR") to discount future minimum lease payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.
2 Segment information
The Group continues to be organised into four main business segments for revenue purposes.
Under IFRS 8 there is a requirement to show the profit or loss for each reportable segment and the total assets and total liabilities for each reportable segment if such amounts are regularly provided to the chief operating decision-maker. There are no other material items that are separately presented to the chief operating decision-maker.
In respect of the profit or loss for each reportable segment the expenses are not reported by segment and cannot be allocated on a reasonable basis and, as a result, the analysis is limited to the Group revenue.
Assets and liabilities are used or incurred across all segments and therefore are not split between segments.
2023 2022 GBP'000 GBP'000 Revenue Services 15,540 18,272 Software 16,653 9,854 Software-as-a-Service 4,401 3,006 Third-party 2,576 1,594 -------- -------- Total revenue 39,170 32,726 ======== ========
The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy. Revenue recognised on performance obligations partially satisfied in previous periods was GBP29,993,000 (2022: GBP19,929,000).
Accounting policies Year ended 30 September 2023 (i) (ii) (iii) (iv) Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Services 15,540 implementation fees 7,683 - - - 7,683 ongoing account development work - - 7,857 - 7,857 Software 16,653 initial licence fees 6,055 - - - 6,055 sale of additional licences - 2,091 - - 2,091 ongoing maintenance and support fees * 8,507 - - - 8,507 Software-as-a-Service 4,401 4,401 - - - 4,401 Third-Party 2,576 - - - 2,576 2,576 Total 39,170 26,646 2,091 7,857 2,576 39,170 ======== ======== ======== ======== ======== ========
* Includes maintenance and support performed by third parties.
Accounting policies Year ended 30 September 2022 (i) (ii) (iii) (iv) Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Services 18,272 implementation fees 6,598 - - - 6,598 ongoing account development work - - 11,674 - 11,674 Software 9,854 initial licence fees 765 - - - 765 sale of additional licences - 1,612 - - 1,612 ongoing maintenance and support fees * 7,477 - - - 7,477 Software-as-a-Service 3,006 3,006 - - - 3,006 Third-Party 1,594 - - - 1,594 1,594 Total 32,726 17,846 1,612 11,674 1,594 32,726 ======== ======== ========== ======== ========== =========
* Includes maintenance and support performed by third parties.
(a) Geographical information
As noted above, the internal reporting of the Group's performance does not require that the statement of financial position information is gathered on the basis of the business streams. However, the Group operates within discrete geographical markets such that capital expenditure, total assets and net assets of the Group are split between these locations as follows:
UK & Europe MEA Americas Asia Pacific GBP'000 GBP'000 GBP'000 GBP'000 Year ended/As at 30 September 2023 Revenue - by customer location 19,452 10,722 7,887 1,109 Capital expenditure 1,402 - - 23 Non-current assets 12,438 - - 494 Total assets 51,633 - - 1,152 Trade receivables - by customer location 2,247 396 21 193 Accrued income - by customer location 5,875 6,896 2,770 2 Net assets 36,938 - - (53) ============ ======== ========= ============= UK & Europe MEA Americas Asia Pacific GBP'000 GBP'000 GBP'000 GBP'000 Year ended/As at 30 September 2022 Revenue - by customer location 20,389 3,166 7,938 1,233 Capital expenditure 1,548 - - 60 Non-current assets 10,496 - - 678 Total assets 41,100 - - 1,528 Trade receivables - by customer location 1,129 1,007 164 203 Accrued income - by customer location 7,607 1,405 813 28 Net assets 26,519 - - 213 ============ ======== ========= =============
All revenue is contracted within the UK subsidiary Cerillion Technologies Limited and therefore all revenue is domiciled in the Europe segment.
Cerillion receives greater than 10% of revenue from individual customers in the following geographical regions:
Operating 2023 2022 segment GBP'000 GBP'000 Customer No. 1 MEA 7,719 506 No. 2 Americas 5,693 3,418 No. 3 Europe 5,259 4,818 No. 4 UK 2,382 3,400 ========== ======== ======== 3 Operating profit 2023 2022 GBP'000 GBP'000 Operating profit is stated after (crediting)/charging: Employee benefits expenses 15,933 13,943 Depreciation 1,171 1,085 Amortisation of intangibles 1,426 1,901 Research and development costs 572 385 Impairment losses on financial assets 256 1,770 Foreign exchange losses/(gains) 251 (367) Operating leases 280 157 Fees payable to Cerillion's principal auditors: - Audit of Cerillion plc's annual financial statements 20 14 - Audit of subsidiaries 110 80 - Non-audit services - tax services 6 81 - Non-audit services - other services 30 4 Fees payable to associates of principal auditors: - Audit of subsidiaries 9 9 Other costs 3,829 2,960 -------- --------- Total cost of sales, operating expenses and impairment losses on financial assets 23,893 22,022 ======== =========
The impairment losses on financial assets relates to the provisions made against the risk of non-recovery of receivables. The write-off during the prior year was predominantly due to an assessment over certain implementation work that may not be fully recoverable.
4 Finance income 2023 2022 GBP'000 GBP'000 Finance income: Bank interest 580 75 Unwinding discount of contracts with significant financing component 376 262 -------- -------- 956 337 ======== ======== 5 Finance costs 2023 2022 GBP'000 GBP'000 Finance costs: Interest and finance charges for lease liabilities (111) (134) Other interest payable (8) (12) (119) (146) ======== ======== 6 Taxation
(a) Analysis of tax charge for the year
The tax charge for the Group is based on the profit for the year and represents:
2023 2022 GBP'000 GBP'000 Current tax expense - UK 3,074 1,525 Current tax - adjustment in respect of prior year (9) 1 Current tax expense - overseas 198 197 ------- ------- Current tax expense - total 3,263 1,723 ------- ------- Deferred tax credit (85) (154) Deferred tax - adjustment in respect of prior year 5 (18) ------- ------- Deferred tax credit - total (80) (172) Total tax charge 3,183 1,551 ======= ======= (b) Factors affecting total tax for the year The tax assessed for the year is lower (2022: lower) than the standard rate of corporation tax in the United Kingdom 22.0% (2022: 19.0%). The differences are explained as follows: Profit on ordinary activities before tax 16,114 10,895 Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 22.0% (2022: 19.0%) 3,542 2,070 Effect of: Expenses not deductible for tax purposes 287 258 Difference in tax rates 5 15 Other temporary differences 51 (52) Foreign tax - other 13 (8) Prior year tax adjustment (9) 1 Prior year tax adjustment - deferred tax 5 (18) Other permanent differences - relating to share options - (135) Enhanced relief for research and development (711) (580) Total tax charge 3,183 1,551 ====== ======
There are currently no recognised or unrecognised deferred tax assets or liabilities within the Parent Company financial statements. In the Spring Budget 2021, the Government announced that from 1 April 2023 the main rate of UK corporation tax rate will increase from 19% to 25%. This new rate was substantively enacted on 24 May 2021 and therefore its impact was reflected in the measurement of deferred taxes in the prior year financial statements. In the current year ended 30 September 2023, the impact of the increase to 25% from 1 April 2023 resulted in the standard tax rate of 22.0%.
7 Dividends (a) Dividends paid during the reporting period
The Board paid the final dividend in respect of 2022 of 6.5p per share, on 7 February 2023, and declared and paid an interim 2023 dividend of 3.3p (2022: 2.6p) per share on 23 June 2023. Total dividends paid during the reporting period were GBP2,892,000 (2022: GBP2,243,000).
(b) Dividends not recognised at the end of the reporting period
Since the year end the Directors have proposed the payment of a dividend in respect of the full financial year of 8.0p per fully paid Ordinary Share (2022: 6.5p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2023, but not recognised as a liability at the year end is GBP2,361,000 (2022: GBP1,918,000). Since the year end the Directors of Cerillion Technologies Limited have approved a GBP5.0 million dividend to Cerillion plc.
8 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.
2023 2022 Profit attributable to equity holders of the Company (GBP'000) 12,931 9,344 Weighted average number of Ordinary Shares in issue (number) 29,513,486 29,513,486 Less weighted average number of shares held in Treasury (12) (10,627) ----------- ----------- Weighted average number of Ordinary Shares in issue (number) 29,513,474 29,502,859 Effect of share options in issue 107,894 56,858 ----------- ----------- Weighted average shares for diluted earnings per share 29,621,368 29,559,717 =========== =========== Basic earnings per share (pence per share) 43.8 31.7 Diluted earnings per share (pence per share) 43.7 31.6 9 Intangible assets Group Goodwill Purchased Intellectual Software External Total customer property development software contracts rights costs licences GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Cost At 1 October 2021 2,053 4,383 2,567 5,254 252 14,509 Additions - - - 965 18 983 At 30 September 2022 2,053 4,383 2,567 6,219 270 15,492 --------- ----------- ------------- ------------- ---------- -------- Additions - - - 1,146 1 1,147 At 30 September 2023 2,053 4,383 2,567 7,365 271 16,639 --------- ----------- ------------- ------------- ---------- -------- Amortisation At 1 October 2021 - 3,444 2,017 3,203 221 8,885 Provided in the year - 626 367 885 23 1,901 At 30 September 2022 - 4,070 2,384 4,088 244 10,786 --------- ----------- ------------- ------------- ---------- -------- Provided in the year - 313 183 915 15 1,426 At 30 September 2023 - 4,383 2,567 5,003 259 12,212 --------- ----------- ------------- ------------- ---------- -------- Net book amount at 30 September 2023 2,053 - - 2,362 12 4,427 ========= =========== ============= ============= ========== ======== Net book amount at 30 September 2022 2,053 313 183 2,131 26 4,706 ========= =========== ============= ============= ========== ========
Amortisation has been included in operating expenses in the consolidated statement of comprehensive income.
The carrying value of goodwill included within the Cerillion plc consolidated statement of financial position is GBP2,053,000 (2022: GBP2,053,000), which is allocated to the cash-generating unit ("CGU") of Cerillion Technologies Limited Group. The CGU's recoverable amount has been determined based on its fair value less costs to sell. As Cerillion plc was established to purchase the CTL Group the fair value less costs to sell has been calculated based on the market capitalisation of Cerillion plc less the estimated costs to sell the CTL Group.
Using an average market share price of Cerillion plc for the year ended 30 September 2023, less an estimate of costs to sell, there is significant headroom above the carrying value of the cash-generating unit and therefore no impairment exists. The calculations show that a reasonably possible change, as assessed by the Directors, would not cause the carrying amount of the CGU to exceed its recoverable amount.
10 Property plant and equipment Group Leasehold Computer Fixtures Total improvements equipment and fittings GBP'000 GBP'000 GBP'000 GBP'000 Cost At 1 October 2021 731 1,605 294 2,630 Additions - 623 3 626 Disposals - (59) - (59) Exchange difference 28 24 10 62 At 30 September 2022 759 2,193 307 3,259 -------------- ----------- -------------- -------- Additions - 244 34 278 Exchange difference (31) (31) (12) (74) -------------- ----------- -------------- -------- At 30 September 2023 728 2,406 329 3,463 -------------- ----------- -------------- -------- Accumulated Depreciation At 1 October 2021 376 1,208 287 1,871 Provided in the
year 72 335 5 412 Disposals - (59) - (59) Exchange difference 23 22 10 55 At 30 September 2022 471 1,506 302 2,279 -------------- ----------- -------------- -------- Provided in the year 71 385 10 466 Exchange difference (26) (24) (12) (62) At 30 September 2023 516 1,867 300 2,683 -------------- ----------- -------------- -------- Net book amount at 30 September 2023 212 539 29 780 ============== =========== ============== ======== Net book amount at 30 September 2022 288 687 5 980 ============== =========== ============== ========
All depreciation charges are included within operating expenses and no impairment has been charged.
There were no property, plant and equipment assets owned by the Parent Company.
11 Leases
Group
This note provides information for leases where the Group is a lessee. The Group leases offices in London and India, along with some IT equipment.
(i) Amounts recognised in the consolidated and company statements of financial position
The consolidated and company statements of financial position show the following amounts relating to leases:
Group Company 30 September 30 September 30 September 30 September Right-of-use 2023 2022 2023 2022 assets GBP'000 GBP'000 GBP'000 GBP'000 Properties 2,343 3,044 2,150 2,656 IT Equipment 9 13 - - 2,352 3,057 2,150 2,656 ------------- ------------- ------------- ------------- Group Company 30 September 30 September 30 September 30 September Lease liabilities 2023 2022 2023 2022 GBP'000 GBP'000 GBP'000 GBP'000 Current 980 976 731 731 Non-current 2,178 3,050 2,171 2,803 3,158 4,026 2,902 3,534 ------------- ------------- ------------- -------------
Additions to the right-of-use assets during the 2023 financial year were GBPnil (2022: GBP131,000). There were lease disposals during the year with net book value totalling GBPnil (2022: GBP106,000).
(ii) Amounts recognised in the consolidated statement of comprehensive income
The consolidated statement of comprehensive income shows the following amounts relating to leases:
30 September 30 September Depreciation charge of right-of-use 2023 2022 assets GBP'000 GBP'000 Properties 701 672 IT Equipment 4 1 705 673 ------------- ------------- Interest expense (included in finance cost) 111 134 Expense relating to short-term leases (included in operating expenses) 261 157 Expenses relating to low value assets 19 - that are not shown above as short-term leases (included in operating expenses)
The total cash outflow for leases in 2023 was GBP 979,000 (2022: GBP 941,000 ).
The property within the Company had a depreciation charge for the year of GBP506,000 (2022: GBP506,000).
12 Deferred tax
Deferred tax asset
Group Accelerated Other temporary Total capital differences allowances GBP'000 GBP'000 GBP'000 1 October 2021 21 188 209 Foreign exchange movement on opening deferred tax asset 3 19 22 Credited to statement of comprehensive income 2 27 29 30 September 2022 26 234 260 =========== =============== ======= Group Accelerated Other temporary Total capital differences allowances GBP'000 GBP'000 GBP'000 1 October 2022 26 234 260 Foreign exchange movement on opening deferred tax asset (4) (20) (24) Credited to statement of comprehensive income 4 28 32 30 September 2023 26 242 268 =========== =============== =======
Deferred tax liabilities
Group
Part of the deferred tax liability arose in respect of the fair value uplift of intangible assets, with GBP1,320,000 arising on the acquisition of Cerillion Technologies Limited in March 2016 and GBP71,000 relating to the acquisition of "Net Solutions Services" by Cerillion Technologies Limited in 2015, which has been written down to GBPnil as at 30 September 2023 (2022: GBP95,000). The deferred tax liabilities also include GBP671,000 (2022: GBP624,000), which is driven by expected future amortisation on R&D intangibles in Cerillion Technologies Limited where full relief has been taken in the year the assets were capitalised. This amortisation will be treated as non-deductible for corporation tax purposes and therefore a deferred tax liability arises.
2023 2022 GBP'000 GBP'000 At 1 October 719 862 Debited to statement of comprehensive income in respect of net ACAs & other temporary differences 47 46 Credited to statement of comprehensive income in respect of acquisitions (95) (189) -------- -------- As at 30 September 671 719 ======== ========
There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2023 (2022: GBPnil).
13 Trade and other receivables and other contract balances
Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
Group 2023 2022 GBP'000 GBP'000 Trade receivables 2,857 2,503 Contract assets 15,543 9,853 Contract liabilities 5,039 4,613
Contract assets, which are included in 'Accrued income' within trade and other receivables and are composed of the current and non-current balances. Contract liabilities, which are included in 'Deferred income' within trade and other payables.
Payment terms and conditions in customer contracts may vary. In some cases, customers pay in advance of the delivery of solutions or services; in other cases, payment is due as services are performed or in arrears following the delivery of the solutions or services. Differences in timing between revenue recognition and invoicing result in trade receivables, contract assets or contract liabilities in the statement of financial position.
Contract assets refer to accrued income and arise when revenue is recognised, but invoicing is contingent on performance of other performance obligations or on completion of contractual milestones. Contract assets are transferred to receivables when the rights become unconditional, typically upon invoicing of the related performance obligations in the contract or upon achieving the requisite project milestone.
Contract liabilities refer to deferred income and result from customer payments in advance of the satisfaction of the associated performance obligations and relate primarily to prepaid support or other recurring services. Deferred income is released as revenue is recognised.
Significant changes in the contract assets and contract liabilities balances during the period are driven by the timing of income recognition and when associated invoices are raised. Specifically, revenue recognised in the year in relation to deferred income brought forward from prior years of GBP4,195,000 (2022: GBP4,105,000).
When certain costs to acquire a contract meet defined criteria, those costs are deferred as contract assets. The total amount of deferred contract assets (commission fees recognised in prepaid assets) are GBP132,000 (2022: GBP226,000). The total amount of accrued costs to acquire a contract are GBP352,000 (2022: GBP305,000).
The total amount of revenue allocated to unsatisfied performance obligations is GBP36,732,000 (2022: GBP37,420,000). It is estimated that 45% will be recognised over the next 12 months, the remainder over the following years thereafter.
There are no contract balances within the Parent Company (2022: GBPnil).
Current receivables Group Company 2023 2022 2023 2022 GBP'000 GBP'000 GBP'000 GBP'000 Trade receivables 2,857 2,503 - - Accrued income 10,507 7,759 - - Amounts owed by Group undertakings - - 2,320 2,058 Other receivables 536 311 - - Prepayments 1,215 632 10 8 ------- ------- ------- ------- 15,115 11,205 2,330 2,066 ======= ======= ======= ======= Non-current receivables Group Company 2023 2022 2023 2022 GBP'000 GBP'000 GBP'000 GBP'000 Accrued income 5,036 2,094 - - Other receivables 69 77 - - ------- ------- ------- ------- 5,105 2,171 - - ======= ======= ======= =======
The amounts owed by Group undertakings are unsecured, interest free and repayable on demand.
Credit quality of receivables
A detailed review of the credit quality of each client is completed before an engagement commences. The credit risk relating to trade receivables is analysed as follows:
2023 2022 GBP'000 GBP'000 Group Trade receivables 3,219 2,744 Specific provision (304) (193) ECL reserve (377) (232) -------- -------- 2,538 2,319 ======== ========
The ECL Provision above includes an amount relating to accrued income of GBP319,000 (2022: GBP184,000).
The Parent Company had no trade receivables in either period. The other classes of assets within trade and other receivables do not contain impaired assets. The net carrying value is judged to be a reasonable approximation of fair value.
Movements in the provision for the impairment of trade receivables and accrued income were as follows:
Specific ECL provision Provision GBP'000 GBP'000 Balance at the beginning of the year 193 232 Charged for the year 111 377 Utilised for the year - (232) Balance at the end of the year 304 377 ========== =============
The following is an ageing analysis of those trade receivables that were not past due and those that were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.
2023 2022 GBP'000 GBP'000 Group Not past due 1,432 1,714 Up to 3 months 1,318 735 3 to 6 months 57 6 Older than 6 months 50 48 -------- --------- 2,857 2,503 ======== =========
Of the trade debt older than 6 months as at 30 September 2023, being GBP50,000 (2022: GBP48,000), cash of GBPnil (2022: GBP8,000) has been received since the year end.
The following is an ageing analysis of those trade receivables that were individually considered to be impaired:
2023 2022 GBP'000 GBP'000 Group Not past due 28 33 Up to 3 months 28 14 3 to 6 months 1 150 Older than 6 months 305 45 -------- -------- 362 242 ======== ======== 14 Trade and other payables Current trade and other payables Group Company 2023 2022 2023 2022 GBP'000 GBP'000 GBP'000 GBP'000 Trade payables 858 1,154 77 97 Taxation 1,052 776 - 1 Other taxation and social security 453 495 59 64 Pension contributions 51 46 - - Other payables 342 382 - - Provisions 141 118 - - Accruals 3,389 3,001 71 74 Deferred income 4,585 4,245 - - 10,871 10,217 207 236 ======= ======= ======= =======
Movements in the provisions were as follows:
Dilapidations Provision GBP'000 Balance at the beginning of the year 118 Charged/(released) for the year 23 Balance at the end of the year 141 =============
The dilapidations provision relates to the full expected cost of dilapidations across the Group's properties.
Non-current trade and other Group Company payables 2023 2022 2023 2022 GBP'000 GBP'000 GBP'000 GBP'000 Other payables 746 567 - - Deferred income 454 367 - - 1,200 934 - - ======= ======= ======= =========
The Directors consider that the carrying amount of trade and other payables and provisions approximates to their fair values. The non-current other payable above relates to provisions for gratuity and long-term bonuses within the Indian subsidiary.
Gratuity - The Indian subsidiary, Cerillion Technologies India Private Limited, provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The unfunded plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. There is a vesting condition of five years of service for benefit payment.
Long-term bonus - The employees (Band II, III and IV only) are eligible for a loyalty bonus at 20% of annual total fixed pay as at the end of the third year, 10% of annual total fixed pay as at the end of four and half years and 10% of annual total fixed pay as at the end of the sixth year provided they are employed with the Indian subsidiary, Cerillion Technologies India Private Limited, for at least three years/four and half years/six years, as the case maybe, after completion of probationary period. The Group's liability is actuarially determined at the end of each year. Actuarial losses/gains are recognised in the Statement of Comprehensive Income in the year in which they arise. There is an additional scheme in place which pays at up to 25% of annual total fixed pay at the end of eleven years of service.
The actuarial assumptions relating to the above provisions are outlined below:
Gratuity Long-term bonus 2023 2022 2023 2022 Discount rate 7.40% 7.50% 7.40% 7.50% Salary increment rate 13.00% 15.00% 13.00% 15.00% Withdrawal rate 10.00% 15.00% 10.00% 15.00%
The mortality rates assumed in the calculation for the Gratuity and Long-term bonus are based on the Indian Assured Lives Mortality (2012-14) ultimate ("IALM ult).
Management have considered sensitivities to changes in the key assumptions above and concluded that there are unlikely to be any material impacts arising from reasonable changes in these assumptions.
15 Borrowings and financial liabilities Group Company 2023 2022 2023 2022 GBP'000 GBP'000 GBP'000 GBP'000 Current liabilities: Lease liabilities 980 976 731 731 Non-current liabilities: Lease liabilities 2,178 3,050 2,171 2,803 3,158 4,026 2,902 3,534 ======= ======= ======= =======
There are currently no other borrowings within the Group.
Group Non-current Current Lease liabilities Lease liabilities Total GBP'000 GBP'000 GBP'000 1 October 2022 3,050 976 4,026 Cash-flows: Repayment - (979) (979) Accrued interest - 111 111 Non-cash: Reclassification (872) 872 - ------------------- ------------------- --------- 30 September 2023 2,178 980 3,158 =================== =================== ========= 1 October 2021 3,866 948 4,814 Cash-flows: Repayment - (941) (941) Accrued interest - 134 134 Non-cash: Additions - 125 125 Foreign exchange revaluation - (106) (106) Reclassification (816) 816 - ------------------- ------------------- --------- 30 September 2022 3,050 976 4,026 =================== =================== ========= Company Non-current Current Lease liabilities Lease liabilities Total GBP'000 GBP'000 GBP'000 1 October 2022 2,803 731 3,534 Cash-flows: Repayment - (731) (731) Accrued interest - 99 99 Non-cash: Reclassification (632) 632 - ------------------- ------------------- --------- 30 September 2023 2,171 731 2,902 =================== =================== ========= 1 October 2021 3,416 731 4,147 Cash-flows: Repayment - (731) (731) Accrued interest - 118 118 Non-cash: Reclassification (613) 613 - ------------------- ------------------- --------- 30 September 2022 2,803 731 3,534 =================== =================== ========= 16 Financial instruments and risk management Group - Financial instruments by category 2023 2022 GBP'000 GBP'000 Financial assets - measured at amortised cost Non-current Accrued income 5,036 2,094 Other receivables 69 77 --------- --------- 5,105 2,171 ========= ========= Current Trade and other receivables 3,393 2,814 Accrued income 10,507 7,759 Cash and cash equivalents 24,738 20,249 --------- --------- 38,638 30,822 ========= =========
Prepayments are excluded, as this analysis is required only for financial instruments.
Financial liabilities - held 2023 2022 at amortised cost GBP'000 GBP'000 Non-current Trade and other payables 746 567 Lease liabilities 2,178 3,050 2,924 3,617 ========= ========== Current Lease liabilities 980 976 Trade and other payables 1,200 1,536 Pension costs 51 46 Accruals & provisions 3,530 3,119 --------- ---------- 5,761 5,677 ========= ==========
Statutory liabilities and deferred income are excluded from the trade payables balance, as this analysis is required only for financial instruments.
Company
Financial instruments by 2023 2022 category GBP'000 GBP'000 Financial assets - measured at amortised cost Current Amounts owed by Group undertakings & other receivables 2,320 2,058 Cash and cash equivalents 186 289 --------- 2,506 2,347 ========= ========= Financial liabilities - held 2023 2022 at amortised cost GBP'000 GBP'000 Non-current Lease liabilities 2,171 2,803 2,171 2,803 ========= ========= Current Lease liabilities 731 731 Trade and other payables 77 97 Accruals 71 74 879 902 ========= =========
There is no material difference between the book value and the fair value of the financial assets and financial liabilities disclosed above for either the Group or Parent Company.
There were no derivative financial instruments in existence as at 30 September 2023 (2022: GBPnil).
The Group's multinational operations expose it to financial risks that include market risk, credit risk, foreign currency risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years.
Credit quality of financial assets
The credit quality of financial assets can be assessed by reference to external credit ratings (S&P) (if available) or to historical information about counterparty default rates:
2023 2022 GBP'000 GBP'000 Trade receivables Group 1 86 26 Group 2 2,766 2,466 Group 3 5 11 -------- -------- 2,857 2,503 ======== ========
Group 1 - new customers (less than 6 months).
Group 2 - existing customers (more than 6 months) with no defaults in the past.
Group 3 - existing customers (more than 6 months) with some defaults in the past.
At the year end there are 7 customers (2022: 4 customers) with trade receivable balances each representing in excess of 5% of the total trade receivables of GBP2,857,000 (2022: GBP2,503,000). Of these customers, none are categorised within Group 1 (2022: none), 7 are within Group 2 representing 90% of total trade receivables (2022: 4 customers), with none in Group 3 (2022: none).
There are no trade receivables within the Parent Company.
2023 2022 GBP'000 GBP'000 Cash at bank and short-term deposits A1 24,735 20,246 Not rated 3 3 -------- --------- 24,738 20,249 ======== =========
A1 rating means that the risk of default for the investors and the policy holder is deemed to be very low.
Not rated balances relate to petty cash amounts. All cash within the Parent Company is within the A1 category.
Market risk - foreign exchange risk
Exposure to currency exchange rates arise from the Group's overseas sales and purchases, which are primarily denominated in US Dollars (USD), Danish Krone (DKK) and Euros (EUR). There is no foreign exchange exposure within the Parent Company.
To mitigate the Group's exposure to foreign currency risk, non-GBP cash flows are monitored and forward exchange contracts are entered into in accordance with the Group's risk management policies. Generally, the Group's risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows (due after 6 months). Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by other same-currency transactions.
As at 30 September 2023 the Group had no forward foreign exchange contracts in place (2022: none) to mitigate exchange rate exposure.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into GBP at the closing rate:
AUD USD EUR INR DKK BND GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 30 September 2023 Financial assets 81 3,062 5,580 923 2,782 187 Financial liabilities - (103) (18) (1,109) - - Total exposure 81 2,959 5,562 (186) 2,782 187 ========= ========= ========= ========= ========= ========= AUD USD EUR INR DKK BND 30 September 2022 Financial assets 339 1,341 3,553 1,110 1,855 227 Financial liabilities - (155) (3) (981) - - Total exposure 339 1,186 3,550 129 1,855 227 ========= ========= ========= ========= ========= =========
The following table illustrates the sensitivity of profit and equity in regard to the Group's financial assets and financial liabilities and the US Dollar, Australian Dollar, Euro, Indian Rupee, Danish Krone and Brunei Dollar to GBP exchange rate 'all other things being equal'. It assumes a +/- 10% change to each of the foreign currency to GBP exchange rates. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each reporting date.
If GBP had strengthened against the foreign currencies by 10% then this would have had the following impact:
AUD USD EUR INR DKK BND 30 September 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Loss for the year (7) (269) (506) 17 (253) (17) ========= ========= ========= ========= ========= ========= Equity total (7) (269) (506) 17 (253) (17) ========= ========= ========= ========= ========= ========= 30 September 2022 AUD USD EUR INR DKK BND Loss for the year (31) (108) (323) (12) (169) (21) ========= ========= ========= ========= ========= ========= Equity total (31) (108) (323) (12) (169) (21) ========= ========= ========= ========= ========= =========
If the GBP had weakened against the foreign currencies by 10% then this would have had the following impact:
AUD USD EUR INR DKK BND 30 September 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Gain for the year 9 329 618 (21) 309 21 ========= ========= ========= ========= ========= ========= Equity total 9 329 618 (21) 309 21 ========= ========= ========= ========= ========= ========= 30 September 2022 AUD USD EUR INR DKK BND Gain for the year 38 132 394 14 206 25 ========= ========= ========= ========= ========= ========= Equity total 38 132 394 14 206 25 ========= ========= ========= ========= ========= =========
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.
Market Risk - cash flow interest rate risk
The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group's cash at bank and short-term deposits is considered immaterial.
Liquidity risk
Cerillion actively maintains cash that is designed to ensure Cerillion has sufficient available funds for operations and planned expansions. The table below analyses Cerillion's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Between Between Less than 1 and 2 2 and 5 Over 5 1 year years years years GBP'000 GBP'000 GBP'000 GBP'000 30 September 2023 Lease liabilities 936 763 1,645 - Trade and other payables 6,287 746 - - ========== ========== ========== ========== 30 September 2022 Lease liabilities 977 958 2,224 183 Trade and other payables 5,971 567 - - ========== ========== ========== ==========
Capital risk management
The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders through optimising the debt and equity balance. In the short-term this means generating sufficient cash to maintain the dividend policy and investment in research and development.
The Group monitors cash balances and prepares regular forecasts, which are reviewed by the Board. Since the year end the Directors have proposed the payment of a dividend. In order to maintain or adjust the capital structure, the Group may, in the future, adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Parent Company has the same approach to capital risk management, with the additional focus of monitoring dividends up from Group companies to ensure that sufficient reserves are in place to maintain the dividend policy.
The capital structure consists of the Group's equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings. As of the year ended 30 September 2023 the Group's total managed capital amounted to GBP36,885,000 (2022: GBP26,732,000); Company's capital as of 30 September 2023 was GBP16,209,000 (2022: GBP15,893,000).
17 Share capital 2023 2022 GBP'000 GBP'000 Issued, allotted, called up and fully paid: 29,513,486 (2021: 29,513,486) Ordinary Shares of 0.5 pence 147 147 ======== ========
The Ordinary Shares have been classified as Equity. The Ordinary Shares have attached to them full voting and capital distribution rights. The Company does not have an authorised share capital.
At the year end there were 12 shares (2022: 12 shares remaining in Treasury Stock) at an average cost of GBP2.10 per share (2022: GBP2.10).
18 Share-based payments
The Group introduced a Save as You Earn ("SAYE") share option scheme and a Long-Term Incentive Plan ("LTIP") in 2017. The Group is required to reflect the effects of share-based payment transactions in its statement of comprehensive income and statement of financial position. For the purposes of calculating the fair value of share options granted, the Black Scholes Pricing Model has been used by the Group in respect of the SAYE schemes, the LTIP has been fair valued using a Monte-Carlo Simulation Model. Fair values have been calculated on the date of grant.
A new Save as You Earn ("SAYE") share option scheme and a new Long-Term Incentive Plan ("LTIP") were introduced in 2021 and additional options were granted during the year ended 30 September 2023 under the SAYE scheme . A charge of GBP209,000 (2022: GBP60,000) has been reflected in the consolidated statement of comprehensive income, with the corresponding entry recognised within the share option reserve.
The fair value of options granted in the current and prior year and the assumptions used in the calculation are shown below:
Year of grant 2023 2022 Scheme SAYE LTIP Exercise price (GBP) 9.28 0.005 Number of options granted 27,766 15,000 Vesting period (years) 3 years 3 to 4 years Option life (years) 3.5 years 3 to 4 years Risk free rate 3.19% 1.75% Volatility 39% 109% Dividend yield 3.00% 1% to 2% Fair value (GBP) 3.88 9.45
The share option schemes are issued by the Parent Company, therefore the disclosures within this note cover the Group and Parent Company, the share-based payment expense is recharged to Cerillion Technologies Limited as this is where the option holders are employed.
During the year options were granted as summarised in the table below:
2023 2023 2022 2022 Weighted Weighted average average Number of exercise Number of exercise Options price Options price GBP GBP Outstanding at start of year 154,008 2.46 278,912 2.03 Granted 27,766 9.28 15,000 0.005 Lapsed (1,824) (5.92) (28,090) (2.29) Exercised - - (111,814) (1.092) Outstanding at 30 September 179,950 3.48 154,008 2.46 ========== ========= ========== ========= Exercisable at 30 September - - - - ========== ========= ========== =========
For the options outstanding at 30 September 2023, the weighted average fair values and the weighted average remaining contractual lives (being the time period from 30 September 2023 until the lapse date of each share option) are set out below:
Weighted average Weighted average fair value of remaining contractual options outstanding life GBP Years LTIP 2021 4.39 3.49 SAYE 2021 2.03 1.34 LTIP 2022 9.45 4.41 SAYE 2023 3.88 2.84 19 Retirement benefits
The Group operates a personal contribution pension scheme for the benefit of the employees. The pension cost charge for the year represents contributions payable by the Group to the fund and amounted to GBP 348,000 (2022: GBP 330,000 ). At the year end the contributions payable to the scheme were GBP51,000 (2022: GBP46,000). In addition to this there are retirement benefits relating to the India subsidiary which are disclosed in note 14.
20 Annual General Meeting
The Annual General Meeting is to be held on 1 February 2024. Notice of the AGM will be despatched to shareholders with Cerillion's report and accounts.
21 Preliminary Announcement
The financial information set out in the announcement does not constitute the Company's full statutory accounts for the years ended 30 September 2023 or 2022, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified; it did not draw attention to any matters by way of emphasis without qualifying their report and it did not contain a statement under s498(2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 30 September 2023 has been completed and the accounts will be delivered to the Registrar of Companies before the Company's Annual General Meeting and will be available on the Company's website at www.cerillion.com. This announcement is derived from the statutory accounts for that year.
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November 20, 2023 02:00 ET (07:00 GMT)
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