Annual Report and Financial Statements 2022
Annual Report and Financial Statements 2022
Cerillion plc
Cerillion plc
09472870
Solicitors:
Orrick, Herrington & Sutcliffe (Europe) LLP
107 Cheapside
London
EC2V 6DN
Company
Information
Company
registration
number:
Registered
office:
Directors:
25 Bedford Street
London
England
WC2E 9ES
L T Hall
A R Dickson
G J O’Connor
A M Howarth
M Dee
Secretary:
A R Dickson
Bankers:
HSBC UK Bank plc
69 Pall Mall
St James
London
SW1Y 5EY
Contents
Overview
Highlights
Chairman and Chief Executive Officer’s Report
Strategic Report
Corporate Governance Report
Board of Directors
Report of the Remuneration Committee
Report of the Audit Committee
Directors’ Report
Independent Auditors’ Report to the Members of
Cerillion plc
Cerillion plc Annual Report and Financial Statements 2022
Nominated
Adviser and
Broker:
Joint Broker:
Independent
Auditors:
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
PricewaterhouseCoopers LLP
Registered Auditor
Chartered Accountants
3 Forbury Place
23 Forbury Road
Reading, Berkshire
RG1 3JH
Financial Public
Relations:
KTZ Communications Limited
No. 1 Cornhill
London
EC3V 3ND
Principal Accounting Policies
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Notes to the Financial Statements
31
42
43
44
45
46
47
48
49
1
2
4
8
12
14
16
19
20
24
Overview
Who We Are
Cerillion provides mission-critical software for billing,
charging and customer relationship management
(“CRM”), primarily to the telecoms sector.
c. 80 customers
c. 45 countries
Headquartered in London, with
teams based in Brussels, Sofia,
Pune, Ahmedabad, Indore, Singapore
and Sydney
Existing customers typically generate over
80% of annual income
Global customer base c. 80 customers
Comprehensive SaaS-based product
in c. 45 countries
offering, provides significant operational
and commercial advantages
Long customer relationships –
Rising demand in telecoms marketplace,
typically 10+ years
driven by multiple factors, including
technological and regulatory change
Cerillion plc Annual Report and Financial Statements 2022
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1
Highlights
Financial Performance Highlights
Record highs across all key financial measures
Total Revenue +26%
£m
Recurring Revenue Run-Rate +25%
£m
Adj. PBT +40%
£m
Adj. EPS +38%
p
New Orders -12%
£m
Back-order Book +8%
£m
Net Cash +54%
£m
Dividend per share +28%
p
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| Cerillion plc Annual Report and Financial Statements 2022
Highlights
Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the
12 months ended 30 September 2022.
Highlights
Year ended 30 September
Revenue
Annualised recurring revenue5
Adjusted EBITDA2
Adjusted EBITDA margin
Adjusted profit before tax3
Statutory profit before tax
Adjusted basic earnings per share7
Statutory basic earnings per share
Total dividend per share
Net cash
2022
£32.7m
£12.4m
£13.8m
42.0%
£11.9m
£10.9m
35.2p
31.7p
9.1p
2021
£26.1m
£9.9m
£10.5m
40.3%
£8.5m
£7.4m
25.5p
21.8p
7.1p
£20.2m
£13.2m
Change
+26%
+25%
+31%
+170bps
+40%
+47%
+38%
+45%
+28%
+54%
Financial:
Operational:
Key financial performance measures reached new highs
Continued expansion of new resource centres in Bulgaria and India
Revenue1&4 up 26% to a record £32.7m (2021: £26.1m), driven by
major new customer implementations and strong demand from
existing customers
Back-order book6 reached a new high of £45.4m at the year-end (30
September 2021: £42.1m)
Strong balance sheet with net cash up 54% to £20.2m
(2021: £13.2m)
Final dividend of 6.5p per share proposed (2021: 5.0p), bringing the
total dividend for the year to 9.1p per share (2021: 7.1p), an increase
of 28%
New customer sales pipeline up 43% to a record £209m
(30 September 2021: £146m)
Louis Hall, CEO of Cerillion, commented:
Largest ever contract won in July 2022 (£15m), with Cable &
Wireless Seychelles (CWS), a full-service network operator –
continued the trend of winning bigger contracts and/or larger
customers
Gained Gold-level status for flagship BSS/OSS suite in the TM
Forum’s Open API Conformance Certification program in early
November 2022
Strong pipeline of new business opportunities
Cerillion well-positioned for further growth over the new financial
year and beyond
“It has been another year of very strong growth and development. Reported revenue, pre-tax profit and back-order all reached new highs. We have
maintained our top-line growth rate of c.25% for the second year running, building on the momentum of the last three to four years. We also secured
another record-breaking contract win, and continued to expand the business, enlarging our resources, especially in India and Bulgaria, and enhancing our
technology.
“We start the new financial year with a very high degree of visibility over our earnings, based on our very strong back-order book and higher level of
recurring income. The new business pipeline is very strong and includes a number of large potential deals.
“The market backdrop remains extremely favourable. The roll-out of 5G and digitisation, and the need to be able to react rapidly to changing market
conditions, means that telecom companies continue to drive investment in enterprise software. These tailwinds should help to support Cerillion’s continued
expansion over the longer term.”
Notes
Note 1
Note 2
Full analysis of the revenue streams for Cerillion plc can be found in the segmental reporting disclosure note 2.
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 3
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 4
Revenue derived from software licence, support and maintenance, Software-as-a-Service (“SaaS”) and third-party sales.
Note 5
Recurring revenue includes support and maintenance, managed service and Skyline revenue.
Note 6
Back order book consists of £37.4m of sales contracted but not yet recognised at the end of the reporting period plus £8.0m of annualised support and maintenance
revenue. It is anticipated that 75% of the £37.4m 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 7
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.
Cerillion plc Annual Report and Financial Statements 2022
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3
Chairman and
Chief Executive Officer’s Report
Introduction
Cerillion performed very strongly over the financial year, with revenue, profit before tax and the back-order book setting new record
highs. Revenue increased by 26% to £32.7m year-on-year (2021: £26.1m), slightly ahead of the 25% growth rate achieved in the last
financial year. Adjusted profit before tax rose by 40% to £11.9m (2021: £8.5m), which was significantly better than consensus market
expectations, as we reported in our trading update in October. In addition, the back-order book increased by 8% to £45.4m (2021:
£42.1m).
New orders over the year stood at £29.4m (2021: £33.3m). While this is a small year-on-year decrease, the total value of the new
customer sales pipeline has increased by 43% to £209.0m (2021: £146.4m) reflecting strong on-going demand for the Company’s
solutions. For a second year in a row, we signed the largest initial contract order in the Company’s history, securing a major contract
worth £15.0m with Cable & Wireless Seychelles.
The trend in recent years towards bigger deal sizes with larger customers has multiple benefits. It evidences the quality of our product
offering, adds customers that are typically more active and generate higher income over the long-term, and since larger deals frequently
have a higher software licence element, they tend to be margin enhancing.
The Company’s performance was also supported by continuing strong demand from existing customers, with orders from existing
accounts at £16.7m. This compared to £19.2m last year, which was a 105% increase on the prior year. The continuing strong
performance mainly reflected the increased presence of larger customers in the customer base, with commensurately broader and
deeper requirements as well as larger budgets.
In order to support the significant acceleration of the Company’s growth rate, we increased our resource in our main London and Pune
operations and expanded our new base in Sofia, Bulgaria, opened in September 2021. We also established new teams in India at
Indore and Ahmedabad.
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 set to rise further as telecoms businesses continue to invest in 5G and
fibre rollouts and in ancillary systems, which are essential to supporting and monetising those investments and to enabling telecoms
businesses to adapt to rapidly changing market conditions. Cerillion remains well-placed to benefit from this, and to grow both in Europe
and its other international markets. We also expect our growth to benefit from increasing market acceptance of SaaS-based product
solutions, which lower total cost of ownership and provide significant commercial and operational benefits.
With the pipeline of potential new business opportunities remaining very strong, we expect the Company to make further strong
progress in the new financial year.
Financial Overview
Total revenue for the year to 30 September 2022 rose by 26% to £32.7m (2021: £26.1m). 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 98% of the
overall result (2021: 96%).
Recurring revenue, which is derived from support and maintenance and managed service contracts, increased by 21% to £10.5m and
comprised approximately 32% of total revenue (2021: £8.6m, 33%). At 30 September 2022, recurring revenue on an annualised basis
was 25% higher year-on-year at £12.4m (30 September 2021: £9.9m), boosted by a 67% increase in annualised managed service
contract revenue (2021: 36%) as more customers contracted for these services.
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| Cerillion plc Annual Report and Financial Statements 2022
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, managed services and ongoing account development work. Revenue
from other activities is mainly from the reselling of third-party products.
• Software (including Software-as-a-Service) revenue decreased by 4% to £12.9m (2021: £13.4m). This was mainly due to the
timing of licence recognition for recent, large new customer wins where recognition will not occur until FY 2023. Software revenues
accounted for 39% of total revenues (2021: 51%).
• Services revenue increased by 54% to £18.3m (2021: £11.9m). This increase largely reflected concurrent implementation work
on new customer projects won in the prior year, as well as a strong flow of services work from live customers. Services revenue
comprised 56% of total revenue (2021: 46%).
• Third-party income doubled to £1.6m (2021: £0.8m) and comprised 5% of total revenue (2021: 3%).
Gross margin was in line with the prior year at 77.9% (2021: 78.3%).
Operating expenses increased by 2.9% to £13.0m (2021: £12.7m). This included a favourable year-on-year foreign exchange impact of
£0.9m due to retranslation of balance sheet items at year end. Excluding this, operating expenses increased by 9.9%, reflecting strong
focus on cost control. Personnel costs were flat at £7.4m (2021: £7.1m), and accounted for 57% (2021: 56%) of operating expenses.
Adjusted EBITDA for the year increased by 31% to £13.8m (2021: £10.5m), driven mainly by higher revenues, and supported by
favourable foreign exchange rates and higher resource utilisation. The Board considers adjusted EBITDA to be a key performance
indicator for Cerillion as it adds back exceptional items and key non-cash transactions, being share-based payments, depreciation and
amortisation.
We continued to invest in our product set, and the charge for amortisation of intangibles was £1.9m (2021: £1.9m). Expenditure on
tangible fixed assets was £0.6m (2021: £0.3m). Operating profit increased by 42% to £10.7m (2021: £7.5m) due to the increase in
revenue, as well as operational leverage.
Adjusted profit before tax rose by 40% to £11.9m (2021: £8.5m) and adjusted earnings per share increased by 38% to 35.2p (2021:
25.5p). On a statutory basis, profit before tax increased by 47% to £10.9m (2021: £7.4m) and earnings per share increased by 45% to
31.7p (2021: 21.8p).
Cash Flow and Banking
The Group continued to generate strong cash flows, and closed the financial year with net cash up by 54% against the same point last
year to £20.2m (30 September 2021: £13.2m). This was after £2.2m of dividend payments (2021: £1.7m). Total debt at the year-end
remained £nil (2021: £nil).
Dividend
The Board is pleased to propose a 30% increase in the final dividend to 6.5p per share (2021: 5.0p). Together with the interim dividend
of 2.6p per share (2021: 2.1p), this brings the total dividend for the year to 9.1p per share (2021: 7.1p), an increase of 28%.
The dividend, which is subject to shareholder approval at the Company’s Annual General Meeting to be held on 2 February 2023, will
become payable on 8 February 2023 to those shareholders on the Company’s register as at the close of business on the record date of
30 December 2022. The ex-dividend date is 29 December 2022.
Cerillion plc Annual Report and Financial Statements 2022
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5
Chairman and
Chief Executive Officer’s Report
Continued
Operational and Market Overview
Whilst the coronavirus pandemic is no longer directly affecting business operations, the global experience of remote-working – still
in place in many economies – has continued to emphasise the dependence of the world economy on state-of-the-art telecoms
infrastructure. Over the year, we continued to see high levels of investment in the sector in general, and an acceleration of investment
in 5G and fibre rollouts, with spending trickling down from core network improvements to ancillary system upgrades and replacements.
We expect to see these trends continue.
In addition, as the global cost of living crisis begins to bite, we anticipate increasing pressure on telcos to find efficiencies in their digital
real-estate. This is likely to encourage further market take-up of product-based SaaS solutions, which Cerillion offers, rather than the
more bespoke solutions available from more traditional vendors. We therefore fully expect demand for billing, charging, CRM and digital
customer experience software in our core telecoms market to continue to grow.
Beyond these broad sector trends, a number of other factors will continue to drive demand for our offerings. These include:
•
the acceleration of digital investments, initially driven by the pandemic as a necessity to ensure continuity of services, but now
increasingly a requirement to improve the customer experience. This means that Communication Service Providers (“CSPs”) are
now going beyond their digital front-ends and investing in wider digitalisation and in the transformation of their BSS/OSS systems in
•
•
•
•
order to automate and optimise customer engagement and deliver a seamless experience across all touchpoints;
the rollout of 5G and the evolution to 5G “Standalone” networks, which is driving further investment in convergent charging systems
and product catalogue solutions, as CSPs aim to maximise their opportunities in the B2B sector;
the requirement for agility; with CSPs facing the on-going threat from digital services providers and the hyperscalers, agility is more
important than ever. This is driving further investment in BSS/OSS platforms that will allow CSPs to pivot quickly and change
business processes to address new market opportunities, from the complexities of B2B/enterprise use cases to the simplest of
digital subscription services;
the need for CSPs to be able to respond rapidly to changing conditions in their markets, which fully integrated BSS/OSS product
solutions enable, heightened by current inflationary pressures and other macro-economic drivers; and
the trend to ‘low-code’ / ‘no-code’, with many CSPs now preferring to invest in products with standardised interfaces (Open
Application Programming Interfaces (“API”) for interoperability with other systems, and moving away from ‘customisation’ towards
‘configuration’.
Cerillion’s ability to address the market through a range of flexible solutions remains a key strength. As well as our proven ability to
support end-to-end transformation projects, the Company can provide individual product modules, or subsets of modules, to implement
point solutions that address more 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.
In July 2022, the Company announced a major new contract win with Cable & Wireless Seychelles (“CWS”), the main telecoms provider
in the Seychelles. This latest win is the Company’s largest initial contract agreement to date, and further enhances the Cerillion brand
in the marketplace. We expect the general trend towards signing bigger deals with larger new customers to continue. These contracts
normally involve higher recurring revenues and there is a much greater upsell opportunity as well. Therefore they contribute significantly
to the ongoing growth of the business. As mentioned previously, these larger contracts typically have a longer sales cycle than
smaller ones.
The new customer wins, ongoing implementation work with existing customers, and major new deals signed with existing customers,
create a strong platform for further growth in the new financial year. The back-order book at 30 September 2022 was up by 8% to an
all-time record of £45.4m (2021: £42.1m). This means that the Company has started the new financial year with far greater visibility of
revenues than any previous year.
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| Cerillion plc Annual Report and Financial Statements 2022
As we grow across the globe, and global labour markets evolve, we will continue to expand our operating locations, recruiting the best
talent cost-effectively and supporting our expanding global customer base. We continued to build our teams at our new locations in
Sofia, Bulgaria and at Ahmedabad and Indore in India and maintain a mix of remote and office-based working. The competition for
technology professionals remained strong during most of the financial year, however, we believe that we have seen a peak in demand
at our main operating locations and consequently expect those pressures to ease a little during the new financial year. Nevertheless, we
remain focused on potential inflation in people costs and intend to continue to manage carefully the mix and location of resource.
We continued to invest in R&D over the year, enhancing our technology and providing two major new releases of our product set as
scheduled. The most recent of these releases was Cerillion 22.2, which went live in early November 2022. The focus of this release
was a major upgrade of the ‘Wholesale Gateway’ module. This module supports the automation of the wholesale operations of network
operators (“NetCos”), and the upgraded version speeds up the on-boarding process of new service provider partners (“ServCos”). It also
simplifies the integration of business support systems between NetCos and ServCos, whilst providing a high level of security for NetCos
through a dedicated authorisation layer and comprehensive API (application programming interfaces) management policies.
In early November 2022, we were delighted to gain Gold-level status for the Company’s BSS/OSS suite in the TM Forum’s Open
API Conformance Certification program. Achieving this level underlines Cerillion’s commitment to delivering open and standards-based
products in accordance with the TM Forum’s Open API & Open Digital Architecture Manifesto, and puts Cerillion at the forefront
of adoption.
Outlook
The Company continues to grow strongly, and the Cerillion brand is gaining visibility in what is a huge marketplace.
Looking ahead, we are well-placed to deliver another strong performance in the new financial year, supported by a record order book.
The new customer sales pipeline is also at a record high and contains large deal opportunities.
Cerillion’s financial position is very robust. The Company continues to generate strong cash flows, maintains significant net cash,
and recurring income is rising. We are therefore well-placed to support ongoing growth, including taking advantage of any suitable
acquisitions opportunities as they arise.
The long-term trend of telecoms companies increasing investment in their networks and in digital transformation remains entrenched.
This should continue to benefit Cerillion’s own long-term growth prospects.
A M Howarth
Non-executive Chairman
25 November 2022
L T Hall
Chief Executive Officer
25 November 2022
Cerillion plc Annual Report and Financial Statements 2022
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7
Strategic
Report
The Directors present their strategic report for the year ended 30 September 2022.
Financial overview
Revenue for the year totalled £32,726,049 (2021: £26,070,815) and the gross profit was £25,504,666 (2021: £20,408,587). Profit after
tax was £9,344,179 (2021: £6,427,095). The Group’s net assets were £26,731,979 (2021: £20,205,443).
Business review
The review of the year-on-year trade relating to the Group is covered within the Chairman and Chief Executive Officer’s report, along with
a review of the cash flows.
Future outlook of the business
This section of the Strategic Report is covered within the Chairman and Chief Executive Officer’s report.
Summary of key performance indicators
The Directors have monitored the performance of the Group with particular reference to the following key performance indicators.
The key performance indicators are monitored against budget and reviewed by the Board:
Revenue
Key revenue streams*:
Services
Software & Software-as-a-Service
Recurring revenues
New orders
Back order book
Operating profit
Add back:
- Depreciation and amortisation
- Share-based payment charge
Adjusted EBITDA**
Profit before tax
Add back:
- Amortisation of acquired intangibles
- Share-based payment charge
Adjusted profit before tax***
Average employee numbers:
- UK
- India
- Other
Total
2022
£’000
32,726
18,272
12,860
2021
£’000
26,071
11,864
13,398
10,483
8,648
29,412
33,302
45,381
42,072
10,704
2,986
60
13,750
7,524
2,881
110
10,515
10,895
7,427
993
60
993
110
11,948
8,530
97
178
20
295
98
145
9
252
* Full analysis of the revenue streams for Cerillion plc can be found in the segmental reporting disclosure note 2.
** 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.
*** Adjusted profit before tax is calculated after adding back amortisation of acquired intangible assets and share-based payment charge. The Board
includes the add back of amortisation of acquired intangibles (intangibles arising from fair value adjustments) to the non-GAAP measure of adjusted
profit before tax, to reflect one of the key performance measures monitored by the Board and the Group’s analysts.
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| Cerillion plc Annual Report and Financial Statements 2022
Principal risks and uncertainties
Effectively managing risks is an integral part of Cerillion’s business. The Group has identified its main risks and is taking appropriate
action to manage and mitigate these risks. The Group’s multinational operations expose it to financial risks that include market risk,
credit risk, operational risk and liquidity risk. The Directors have split the risks into those relating to the Group and its business operations
and those relating to the industry and markets where the Group operates. The Directors review and agree policies for managing each of
these risks. These policies are detailed in note 19 to the financial statements.
The key risk factors affecting the Group’s performance are expected to include the following:
The success of the Group’s business is partly dependent on key personnel.
The Group’s future growth and success depends, in part, upon the leadership and performance of its management team, many of
whom have significant experience in the technology sector and would be difficult to replace. In particular, the Group is highly dependent
on the continued services of the Directors, the senior management team and other key employees, including technical personnel.
Competition for employees with the particular skill sets the Group requires is strong. The loss of executive officers, any members of
the senior management team or other key employees, the inability to recruit sufficiently qualified personnel, or the inability to replace
departing employees in a timely manner could have a material adverse effect on the Group’s business, financial condition and results of
operations.
Mitigation:
The Group has LTIP and SAYE share option schemes in place, as well as retention bonuses, to further incentivise and retain key
personnel.
Fluctuations or devaluations in foreign currencies could adversely affect the Group’s financial condition.
The Group services customers in c. 45 countries and, in the year ended 30 September 2022, 82% (2021: 72%) of the Group’s revenues
were generated outside of the UK, some of which were transacted in foreign currencies. To the extent that the Group’s business
transactions are not denominated in the same currency, the Group is exposed to foreign currency exchange rate risk. The Group
continually reviews contract denominations and exchange rates and enters into hedging currency contracts, where deemed appropriate.
Movements in foreign exchange rates on transactions outside of those hedged items could have an adverse effect on the Group’s
business, financial condition and results of operations.
Mitigation:
The Group continually reviews contract denominations and exchange rates and enters into hedging currency contracts, where deemed
appropriate. The Group moves balances between international currency accounts to mitigate the currency risk exposure and to provide
economic hedges between cash receipts and payments in foreign currencies. Advice is sought regularly from the Group’s bankers with
regard to foreign exchange strategy.
Changes in demands in the telecoms industry market are expected to impact the Group’s customers.
The Group generates a large proportion of its revenues from the telecoms industry. Prices for many telecoms products have declined
consistently in recent years, through a combination of regulatory intervention and market competition and these declining price trends
are expected to continue. It is possible that the pricing environment could become more difficult than currently anticipated by the
Group’s customers. Consequently, the Group’s customers may become less financially viable.
Any downturn in the global economy may affect the growth of the telecoms industry or result in reductions in telecoms expenditure. If
economic conditions were to deteriorate, or do not materially improve, the Group’s existing and potential customers may reduce their
expenditure with the Group as a result of their end customers reduction in demand for telecoms services. Any reduction in customer
expenditure could have an adverse effect on the Group’s business, financial condition and results of operations.
Furthermore, call volume reductions in the fixed line and mobile telephony sector have resulted from consumers being able
to communicate more readily by means of the Internet. The Group has traditionally been dependent on the fixed line, mobile
telecommunications, broadband and TV industries and on fixed line/mobile, broadband and TV volumes and revenues, which may fall
generally in the future.
Cerillion plc Annual Report and Financial Statements 2022
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9
Strategic
Report
Continued
The Group’s potential inability to adapt to changing customer demands could have an adverse effect on the Group’s business, financial
condition and results of operations.
Mitigation:
The Group maintains good relationships with its customers to ensure that its products and services meet their needs. Whilst
traditional, voice-based telecoms revenue streams may be declining, telcos are making major investments into 5G and fibre broadband
infrastructure, which is driving demand for further investment in the ancillary software systems provided by the Group that support the
network, and enable telcos to monetise these investments.
The telecommunications industry is characterised by rapid technological change and continually evolving
industry standards, which could harm the Group’s competitive position, render its products obsolete and
cause it to incur substantial costs to replace its products or implement new technologies.
The telecommunications industry is characterised by rapid technological change and frequent new service introductions. Significant
technological changes could render the Group’s technology and services obsolete. If the Group does not adapt to rapid technological
change, it could lose customers or market share. The Group’s success depends in part on its ability to adapt to the rapidly changing
market by continually improving the features, functionality, reliability and responsiveness of the Group’s existing services and by
successfully developing, introducing and marketing new features, services and applications to meet changing customer needs. There
can be no assurance that any of the Group’s technological developments will be successful. The Group may encounter delays and
incur additional development and production costs and expenses, over and above those expected by the Directors, in order to develop
technologies.
Additionally, the Group may require additional third-party licences to supplement new technology in order to remain competitive, and
it may not be able to acquire such licences on reasonable terms or at all. The Group cannot assure any investor that it will be able to
adapt to these challenges or respond successfully or in a cost-effective way to adequately meet them. The Group’s failure to do so
could adversely affect its ability to compete, retain customers or maintain its financial performance.
Mitigation:
The Group continues to invest heavily in research and development in order to keep pace with the changing market.
The Group is reliant on a relatively small number of customers and the loss or deterioration of business from
any one of the top five customers could materially affect the Group’s financial condition.
The Group is reliant on a relatively small number of customers and expects this reliance to increase in the short to medium term.
Revenue/customer concentration
Customers by size:
Number 1
Top 5
Top 10
Top 20
2022
14.7%
51.0%
74.5%
95.2%
2021
19.9%
51.6%
75.9%
93.0%
2020
21.5%
57.6%
80.2%
96.1%
Any deterioration of the Group’s relationship with any one of its top five customers could have a material adverse effect on the Group’s
business, financial condition, results of operations, future prospects and/or the price of the Ordinary Shares.
Any one of the Group’s customers may experience financial difficulties and may cease to trade, may decide not to renew their support
contracts or may be unable to continue to conduct business with the Group, which could materially affect the Group’s business,
financial condition and results of operations.
A large proportion of the Group’s cash receipts are driven by project milestones (plus payment terms), resulting in volatility over any given
year. Revenue is recognised alongside software installation (licence), percentage completion to successful implementation (services) or
term (support, managed service and hosting), resulting in comparably low volatility across any one year. Relatively large levels of accrued
income have built up in the past, whereby the Group has incurred considerable effort and expense in relation to certain projects that it
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| Cerillion plc Annual Report and Financial Statements 2022
is yet to receive payment for. In addition, certain customers have historically been offered longer payment terms, based on instalments
over a number of years. As a result, a number of the Group’s customers have in the past, and are likely in the future, to be in a position
where they will in effect be significant debtors.
Mitigation:
The Group monitors the credit risk associated with having high exposure with a small number of customers and continually monitors
working capital exposures, setting credit limits, restricting access to services and appointing legal representation when deemed
necessary.
Reporting on compliance with section 172 requirements
In performance of their statutory duties and in accordance with s172 (1) Companies Act 2006, the Board of Directors consider, both
individually and together, that they have acted in the way they consider, in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172 (1) (a-f) of the
Act.) in the decisions taken during the year ended 30 September 2022.
Each year, the Board undertakes an in-depth review of the Company’s strategy, including a business plan for subsequent years. Once
approved by the Board, the plan and strategy form the basis for financial budgets, resource plans and investment decisions and also the
future strategic direction of the Company. In making decisions concerning the business plan and future strategy, the Board has regard to
a variety of matters including the interests of various stakeholders, the consequences of its decisions in the long-term and its long term
reputation.
Stakeholder engagement
With employees
Consultation with employees or their representatives has continued at all levels, with the aim of ensuring that their views are taken into
account when decisions are made that are likely to affect their interests and that all employees are aware of the financial and economic
performance of their business units and of the Company as a whole. Communication with all employees continues with regular all
company meetings, briefing groups and the distribution of the annual report.
The Company is an equal opportunities employer. Applications for employment are always fully considered irrespective of gender,
ethnic origin, race, religion, sexual orientation or disability. Applications for employment by disabled persons are always fully considered,
bearing in mind the abilities of the applicant concerned. In the event of members of staff becoming disabled every effort is made to
ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the
training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
With suppliers, customers, and others
From the perspective of the Board, the Board has taken the lead in carrying out the duties of a Board in respect of the Company’s other
stakeholders, including engaging with them, having regard to their interests and the effect of that respect. The Board of the Company
has also considered relevant matters where appropriate.
We only work with suppliers and customers with an equivalent high regard for quality, ethics (including the prohibition of modern slavery
and anti-bribery), rights, a consideration for the environment, and commitment to our customers.
Shareholder information
The Group’s website at www.cerillion.com contains a wide range of information about its activities and visitors can download copies of
the report and financial statements in addition to newsletters and other articles of interest.
This report is approved by the Board on 25 November 2022 and signed on its behalf by:
L T Hall
Chief Executive Officer
Cerillion plc Annual Report and Financial Statements 2022
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11
Corporate Governance
Report
The Company’s Ordinary Shares trade on AIM and the Company has adopted the Quoted Companies Alliance Corporate Governance
Code For Small and Mid-Size Quoted Companies (the “QCA Code”). The Directors recognise that it is in the best interests of the
Company and its Shareholders to follow the QCA Code’s principles of Corporate Governance and to have in place risk controls
appropriate for a company of its size along with the NAPF Corporate Governance Policy and Voting Guidelines for AIM Companies.
Audit Committee
The audit committee comprises Alan Howarth and Mike Dee, both independent non-executive directors and is chaired by Mike Dee. In
compliance with the QCA Code, Mike Dee has relevant financial experience. The audit committee normally meets not less than twice
a year and has responsibility for, amongst other things, the planning and review of the Group’s annual report and financial statements
and half yearly reports and the involvement of the Group’s auditors in that process. The committee focuses in particular on compliance
with legal requirements, accounting standards and on ensuring that an effective system of internal financial control is maintained. The
ultimate responsibility for reviewing and approving the annual report and financial statements and the half yearly reports remains with the
Board.
The terms of reference of the audit committee cover such issues as membership and the frequency of meetings, as mentioned above,
together with the role of the secretary and the requirements of notice of and quorum for the right to attend meetings. The duties
of the audit committee covered in the terms of reference are: financial reporting, internal controls and risk management systems,
whistleblowing, internal audit, external audit and reporting responsibilities. The terms of reference also set out the authority of the
committee to exercise its duties.
Nominations Committee
The nominations committee comprises Alan Howarth and Mike Dee, both of whom are independent non-executive directors, and is
chaired by Alan Howarth. The nominations committee meet when appropriate and consider the composition of the Board, retirements
and appointments of additional and replacement directors and make appropriate recommendations to the Board. The nominations
committee met once during the year, to consider the position of Chief Financial Officer, and recommended the appointment of Andrew
Dickson to the Board.
Remuneration Committee
The remuneration committee comprises Alan Howarth and Mike Dee, both of whom are independent non-executive directors,
and is chaired by Alan Howarth. The remuneration committee normally meet at least once a year and has responsibility for making
recommendations to the Board on the Group’s policy on the remuneration of certain senior executives (including senior management),
including annual bonuses, the eligibility requirements for benefits under long term incentive schemes and for the determination, within
agreed terms of reference, of specific remuneration packages for each of the executive Directors, including pension rights, contracts of
employment and any compensation payments.
The terms of reference of the remuneration committee cover such issues as membership and frequency of meetings, as mentioned
above, together with the role of secretary and the requirements of notice of and quorum for and the right to attend meetings. The duties
of the remuneration committee covered in the terms of reference relate to the following: determining and monitoring policy on and
setting levels of remuneration, contracts of employment, early termination, performance related pay, pension arrangements, authorising
claims for expenses from the executive directors, reporting and disclosure, and remuneration consultants. The terms of reference also
set out the reporting responsibilities and the authority of the committee to exercise its duties.
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| Cerillion plc Annual Report and Financial Statements 2022
Cerillion plc has a culture based on ethical values and behaviours, which are promoted by the CEO and management team. The Board
seeks to maintain the highest standards of integrity and probity in the conduct of the Group’s operations. These values are enshrined in
the written policies and working practices adopted by all employees in the Group. The Company adopts a policy of equal opportunities
and diversity in the recruitment and engagement of staff, as well as during the course of their employment. It endeavours to promote
the best use of its human resources on the basis of individual skills and experience, matched against those required for the work to be
performed. The Company recognises the importance of investing in its employees and, as such, it provides opportunities for training
and personal development and encourages the involvement of employees in the planning and direction of their work. The Company
also recognises that commercial success depends on the full commitment of all its employees, and commits to respecting their human
rights, to providing them with favourable working conditions that are free from unnecessary risk, and to maintaining fair and competitive
terms and conditions of service at all times. These values are applied regardless of age, race, religion, gender, sexual orientation or
disability.
Cerillion plc Annual Report and Financial Statements 2022
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13
Board of
Directors
The Group is run by its Board of Directors, which currently has five members, including two independent non-executive directors, and
meets 10 times per year. The Non-executive Directors make a valuable contribution by bringing a breadth of business and relevant
professional experience to the Board and commit half a working day per month to their roles.
The Board has overall responsibility for the Group and there is a formal schedule of matters specifically reserved for decision by the
Board. It is responsible for the overall Group strategy, acquisition and divestment policy, corporate policies, approval of major capital
expenditure and consideration of significant capital matters.
The Chairman considers the operation of the Board and performance of the Directors on an ongoing basis as part of his duties and will
bring any areas of improvement he considers are needed to the attention of the Board. The Company has resolved to carry out a formal
board performance evaluation every three years.
The Directors are encouraged to attend training and continuing professional development courses as required. Updates are given to the
Board on developments in governance and regulations regularly. Andrew Dickson, following Oliver Gilchrist’s resignation on 4 February
2022, is the Company Secretary and supports the Chairman in ensuring that the Board receives the information and support it needs to
carry out its roles. When new directors join the Board they will receive an induction covering topics such as the operation of the Board,
Directors’ responsibilities, insider dealing, AIM Rules and governance documents.
Alan Miles Howarth, Non-executive Chairman (aged 77 years)
Alan Howarth has extensive senior executive experience in a range of national and international organisations in both the public and
private sector. At Ernst & Young he was one of the founding partners of the UK Management Consulting practice. For the last 20 years
he has managed a portfolio of non-executive appointments, as Chairman of both public and private companies primarily in the UK and
US Technology and Health sectors. He is a Non Executive Director of Tern Plc and a Board member of Open Health Group and the
Change Management Group. He is an Adviser to several other International concerns.
Louis Tancred Hall, Chief Executive Officer (aged 58 years)
Louis Hall is the CEO and founder of Cerillion, having led the management buyout of the original business from Logica in 1999. Louis
has worked in the enterprise software industry for over 25 years and prior to forming Cerillion held a number of product, sales and
management positions at Logica.
Andrew Richard Dickson, Chief Financial Officer (aged 41 years)
Andrew Dickson joined Cerillion as CFO in February 2022. Prior to this he spent seven years at The Vitec Group plc in a number of
senior roles, including Group Director of Finance based in London and Finance Director of a subsidiary business based in the USA. In
his earlier career, Andrew worked for Smiths Group plc, the FTSE 100 international engineering business, and qualified as a chartered
accountant with Deloitte LLP.
Oliver Campbell Radnor Gilchrist, Chief Financial Officer (aged 58 years)
Oliver Gilchrist joined Cerillion in 2001 as CFO and retired in February 2022.
Mike Dee, Non-executive Director (aged 67 years)
Mike Dee is a qualified accountant (CIMA). Until July 2015, he was CEO of Manx Telecom plc and led its successful AIM IPO in February
2014. Before becoming CEO of Manx Telecom plc in April 2011, he was its Director of Finance and had been part of the British
Telecom plc team which set up Manx Telecom plc in 1987. Prior to his 29 years at Manx Telecom plc, Mike spent four years at British
Telecom plc. Before that, Mike held accounting and company secretary positions with the Dowty Group, Iloman Engineering and Castle
Industries.
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| Cerillion plc Annual Report and Financial Statements 2022
Guy Jason O’Connor, Non-executive Director (aged 60 years)
Guy O’Connor is a co-founder of Cerillion and is now a Non-executive Director, having led business development at Cerillion since the
management buyout. Prior to joining Cerillion, Guy was Group Director for Matheson Investment International, a subsidiary of Jardine
Matheson Group.
Attendance at the relevant committees was as follows:
Committee Attendance
Alan Howarth
Mike Dee
Louis Hall
Andrew Dickson
Oliver Gilchrist
Guy O’Connor
Board
10/10
10/10
10/10
6/6
4/4
10/10
Audit
2/2
2/2
-
-
-
-
Nominations
Remuneration
1/1
1/1
-
-
-
-
1/1
1/1
-
-
-
-
Cerillion plc Annual Report and Financial Statements 2022
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15
Report of the
Remuneration Committee
Companies quoted on AIM are not required to provide a formal remuneration report. Therefore this report is provided for information
purposes to give greater transparency to the way Directors and key management are remunerated.
Composition and role of the Remuneration Committee
The Board has established a Remuneration Committee, which currently consists of Alan Howarth, Non-executive Director, who chairs
the committee and Mike Dee, Non-executive Director. The committee determines the specific remuneration packages for each of the
Executive Directors and key management. No Director is involved in any decisions as to his own remuneration.
Framework and policy on Executive Directors’ remuneration
The Group’s remuneration policy is designed to provide competitive rewards for its Executive Directors and key management, taking into
account the performance of the Group and individual Executives, together with comparisons of pay conditions throughout the markets
in which the Group operates. It is the aim of the committee to attract, retain and motivate high calibre individuals with a competitive
remuneration package. It is common practice in the industry for total remuneration to be influenced by bonuses and long-term
incentives.
The remuneration packages are constructed to provide a balance between fixed and variable rewards. Therefore remuneration
packages for Executive Directors normally include basic salary, discretionary bonuses, long-term incentive awards and benefits in kind.
In agreeing the level of basic salaries and annual bonuses, the committee takes into consideration the total remuneration that Executive
Directors could receive.
Basic salary
Basic salaries are reviewed on an annual basis. The committee seeks to establish a basic salary for each position, determined by
individual responsibilities and performance taking into account comparable salaries for similar positions in companies of a similar size in
the same market.
Incentive arrangements
Annual discretionary bonuses
These are designed to reflect the Group’s performance taking into account the performance of its peers, the markets in which the Group
operates and the Executive Directors’ contribution to that performance.
Long-term incentive awards
The Long-Term Incentive Plan (LTIP) was established to further incentivise the Senior Managers, who had limited equity in the Group,
in the creation of long-term value for shareholders. During the year ended 30 September 2021 the Board made new awards under the
LTIP, with 75,000 new options issued as part of the 2021 LTIP award. The options granted in June 2021 were exercisable at the nominal
value of the ordinary shares and were granted over an aggregate of 75,000 ordinary shares, representing approximately 0.25% of the
current issued share capital of the Company. The award provides for these options to vest: 32,500 options three years from the date of
grant; 32,500 options four years from the date of grant, 5,000 options five years from the date of the grant; and 5,000 options six years
from the date of the grant, subject to the achievement of targets for compound annual growth in the share price of the Company over
these vesting periods. The targets are as follows:
Below 10% compound annual growth:
10% compound annual growth:
18% compound annual growth:
Between 10% and 18% compound annual growth:
nil vesting
25% vesting
100% vesting
Straight-line vesting between 25% and 100%
In addition, the LTIPs are conditional on the Company’s adjusted annual earnings per share for each of the three, or five, years of the
initial vesting period to increase by at least 5% per annum. The LTIPs also contain standard provisions dealing with certain matters such
as cessation of employment and change of control.
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| Cerillion plc Annual Report and Financial Statements 2022
During the year ended 30 September 2022 the Board made new awards under the LTIP, with 15,000 new options issued as part of the
2022 LTIP award. The options granted in August 2022 were exercisable at the nominal value of the ordinary shares and were granted
over an aggregate of 15,000 ordinary shares, representing approximately 0.05% of the current issued share capital of the Company.
The award provides for these options to vest: 7,500 options three years from the date of grant; and 7,500 options four years from the
date of grant, subject to the achievement of targets for compound annual growth in the share price of the Company over these vesting
periods. The targets remained the same as those outlined above.
The 2019 SAYE scheme awards fully vested during the year ended 30 September 2022 and the existing options were exercised at a
price of £1.092 per share. In February 2022 the Company acquired some of its own shares in the market to be held as Treasury Stock
to be used to satisfy the exercise of share options under the 2019 SAYE scheme. 111,814 ordinary shares were subsequently issued
from Treasury for this purpose between March 2022 and August 2022.
During 2021 the Group introduced an additional Save as You Earn (SAYE) share option scheme whereby employees could elect to
contribute a monthly amount to be saved over three years to enable the exercise of options over Ordinary Shares of 0.5 pence each in
the Company. The options will be available for exercise from 1 August 2024, with an exercise price of £5.92, which was a 20% discount
to the closing price on the last trading date before the launch of the Plan.
In total up to 71,000 options over Ordinary Shares were awarded under the Plan, representing approximately 0.2% of the current issued
share capital of the Company.
There is a charge recognised in the current year financial statements of £60,465 (2021: £110,341) in total in respect of both the LTIP
and SAYE schemes.
Other benefits
Depending on the terms of their contracts, Executive Directors are entitled to contributions to pension plans, private medical insurance,
permanent health insurance and life assurance.
Service contracts and notice periods
All Executive Directors have employment contracts which are subject to between six and twelve months’ notice from either the
Executive or the Group, given at any time.
All Non-executive Directors have a remuneration agreement for an initial period of twelve months and thereafter on a rolling basis
subject to three months’ notice by either the Non-executive Director or the Group, given at any time. In the event of termination of their
appointment they are not entitled to any compensation.
Non-executive Directors’ fees are determined by the Executive Directors having regard to the need to attract high calibre individuals with
the right experience, the time and responsibilities entailed, and comparative fees paid in the market in which the Group operates. They
are not eligible for pensions. They may be invited to participate in the Group’s share option scheme.
Cerillion plc Annual Report and Financial Statements 2022
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17
Report of the
Remuneration Committee
Continued
Directors’ emoluments (audited)
The remuneration of each Director during the years ended 30 September 2022 and 30 September 2021 are detailed in the tables below:
2022
Executive
L T Hall
A R Dickson*
O C R Gilchrist**
G J O’Connor
Non-executive
A M Howarth
M Dee
G J O’Connor
Total
2021
Executive
L T Hall
O C R Gilchrist
G J O’Connor
Non-executive
A M Howarth
M Dee
Total
Salary
£
Benefits
£
Bonus
£
Pension
contribution
£
Total
2022
£
326,385
110,664
72,300
15,790
35,150
29,980
22,140
6,725
-
2,776
2,795
-
-
-
326,385
55,331
32,855
-
-
-
-
-
6,640
8,088
-
-
-
-
659,495
172,635
116,019
18,585
35,150
29,980
22,140
612,409
12,296
414,571
14,728
1,054,004
Salary
£
Benefits
£
Bonus
£
310,843
184,066
81,437
25,000
25,000
6,256
6,607
6,573
-
-
310,843
93,874
-
-
-
Pension
contribution
£
-
22,088
-
-
-
Total
2021
£
627,942
306,635
88,010
25,000
25,000
626,346
19,436
404,717
22,088
1,072,587
* Covers the period from 1 February 2022 to 30 September 2022. In addition, A R Dickson was the recipient of 15,000 LTIP share options issued in
August 2022.
** Covers the period from 1 October 2021 to 4 February 2022.
A M Howarth
Chairman of the Remuneration Committee
25 November 2022
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| Cerillion plc Annual Report and Financial Statements 2022
Report of the
Audit Committee
Membership and meetings of the Audit Committee
The Audit Committee is a committee of the Board and is composed entirely of Non-executive Directors, whom the Board considers to
be independent. The Audit Committee invites the Executive Directors and other senior managers to attend its meetings as appropriate.
During the year the Audit Committee was chaired by Mike Dee. The Audit Committee is considered to have sufficient, recent and
relevant financial experience to discharge its functions. The Audit Committee invites others, including the external auditors, to attend its
meetings as appropriate.
Role, responsibilities and terms of reference
The Audit Committee’s role is to assist the Board in the effective discharge of its responsibilities for financial reporting and internal
control.
The Audit Committee’s responsibilities include:
•
reviewing the integrity of the annual and interim financial statements of the Group, ensuring they comply with legal requirements,
accounting standards, the AIM Rules and any other formal announcements relating to the Group’s financial performance;
•
reviewing the Group’s internal financial control and risk management systems;
• monitoring and reviewing the requirement for an internal audit function; and
• overseeing the relationship with the external auditors, including agreeing of its remuneration, reviewing the scope of the audit
engagement, assessing its independence, monitoring the provision of non-audit services and considering its reports on the Group’s
financial statements.
Independence of external auditors
The Audit Committee keeps under review the relationship with the external auditors including:
•
the independence and objectivity of the external auditors, taking into account the relevant UK professional and regulatory
requirements and the relationship with the auditors as a whole, including the provision of non-audit services;
•
recommending to the Board and shareholders the re-appointment or otherwise of the external auditors for the following financial
period; and
•
the consideration of audit fees and any fees for non-audit services.
The Audit Committee develops and recommends to the Board the Company’s policy in relation to the provision of non-audit services by
the auditors and ensures that the provision of such services does not impair the external auditors’ independence.
M Dee
Chairman of the Audit Committee
25 November 2022
Cerillion plc Annual Report and Financial Statements 2022
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19
Directors’
Report
The directors present their report and the audited financial statements of the Group for the year ended 30 September 2022.
Directors
The directors of the company who were in office during the year and up to the date of signing the financial statements were:
L T Hall
G J O’Connor
A R Dickson (appointed 4 February 2022)
O C R Gilchrist (resigned 4 February 2022)
A M Howarth
M Dee
Directors’ Responsibilities Statement
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared
the group and the company financial statements in accordance with UK-adopted international accounting standards.
Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the group and company and of the profit or loss of the group for that period. In preparing the financial statements,
the directors are required to:
•
select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will
continue in business.
The directors are responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and
company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable
them to ensure that the financial statements comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ confirmations
In the case of each director in office at the date the directors’ report is approved:
• so far as the director is aware, there is no relevant audit information of which the group’s and company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit
•
information and to establish that the group’s and company’s auditors are aware of that information.
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| Cerillion plc Annual Report and Financial Statements 2022
Environmental, Social & Governance (“ESG”) Strategy
Introduction
As we continue to grow and develop the Company, we wish to ensure that Cerillion plays its role in protecting the environment,
contributing to society, and upholding high standards of business conduct and practice.
Our core values, as well as our purpose, drive our business decisions and the code of conduct we have defined in the Company’s Staff
Handbook. We have always sought to uphold high standards and to ensure that Cerillion is identified as a good corporate citizen.
We also recognise that Environmental, Social and Governance (“ESG”) issues are becoming increasingly important to our customers,
employees and shareholders.
An overview of our current ESG policies and practices and how we approach each area of ESG is provided below.
Environmental
• We minimise Cerillion’s environmental footprint by working with ISO:14001 accredited facilities management companies across our
offices.
• We use renewable energy suppliers and, where possible, implement green lighting solutions.
• We use ISO:14001 accredited data centre providers, and where possible, use members of the Climate Neutral Data Centre Pact
(CNDCP).
• We use IT recycling companies when disposing of old equipment.
• We provide recycling stations throughout our offices and only use Forest Stewardship Council (FSC) approved paper. We operate a
“no plastic cups” policy.
• Employees are encouraged to commute using public/shared transport and are offered the opportunity to participate in the
Government-backed “Cycle to Work” scheme in the UK.
• Our software products support energy reduction and greater energy efficiency. We list below the key environment benefits our
products deliver.
• Our solutions are fully web-based, enabling our customers to work from anywhere, reducing unnecessary travel for routine
business operations.
• Our software also helps our customers to reduce paper consumption by replacing paper bills and contracts with digital
alternatives.
• Our “pre-integrated” product solutions reduce the number of people required to travel to customer sites to implement complex
enterprise software.
• Our solutions enable our customers to consolidate multiple separate systems onto a single platform, which results in a reduction
in overall energy consumption.
Social
• A fundamental Company tenet is to treat all employees and applicants for jobs equitably, regardless of gender, ethnic origin, race,
religion, sexual orientation or disability.
• We have a strong commitment to fostering the growth and development of our employees so as to bring out the full potential of their
talents.
• We believe in engaging with our employees to promote dialogue and a sense of community and teamwork. In order to achieve this
we:
• Operate a dedicated Company intranet;
• Provide employees with regular updates on the Company’s business development and performance via email;
• Publish regular internal newsletters;
• Hold regular company meetings in all of our offices across the globe;
• Seek feedback from employees through an annual survey; and
• Organise social events to strengthen team relationships.
Cerillion plc Annual Report and Financial Statements 2022
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21
Directors’
Report
Continued
• The physical and mental wellbeing of our employees is very important to us. We provide several resources to ensure that our
employees have access to additional support. This includes:
• The Employee Assistance Programme, which provides independent help for mental health, financial and legal issues;
• Trained mental health first aiders across the business; and
• Private medical health insurance.
• We provide our employees with financial support, including income protection insurance and interest-free loans for the duration of
their employment.
• We support charity fundraisings, such as the annual Macmillan Cancer coffee morning, and this year committed to donating £50,000
to community based projects. This will assist those in need with food, clothing, utility bills and health expenses, where state funded
assistance is insufficient.
Governance
• Cerillion has adopted the Quoted Companies Alliance Corporate Governance Code for Small and Mid-Size Quoted Companies (the
“QCA Code”).
• Full details of adherence to the Code are available on the Investors’ section of the company’s website www.cerillion.com and
include the independence of the Board of Directors and those on the Remuneration Committee.
• We have assigned clear responsibilities to certain executives for ensuring that matters that may pose a risk to the Company’s
performance or reputation are brought to the Board’s attention at the earliest opportunity.
• Our anti-bribery and anti-corruption policy is reviewed by the Board annually and further sets out the responsibilities and expectations
of our employees for the prevention, detection and reporting of bribery and other forms of corruption.
• We operate an independent whistleblowing service, which enables any employee to confidentially report on any issues around
alleged wrongdoing or other Code contraventions.
• We ensure that any services delivered to our customers comply with relevant data privacy rules and are certified ISO:27001
compliant with respect to our handling of personal data relating to both customers and employees.
Streamlined Energy and Carbon Reporting (SECR)
The Group reached the thresholds for providing SECR disclosures for the first time in the prior year. The Group is a service-based
organisation with no manufacturing facilities and limited transportation requirements. As explained further below, each entity within the
group is exempt from the disclosure requirements and consequently no overall SECR disclosures have been provided.
Cerillion Technologies Limited is excluded from the SECR requirements as it does not meet the reporting thresholds. Cerillion Inc. and
Cerillion Technologies India Private Limited are also excluded from SECR requirements as they are overseas entities and are therefore
not caught by the UK regulatory requirements; and Cerillion plc is exempt from preparing the disclosure since it qualifies as being a low
energy user (below 40,000 kWh per annum).
Going concern
The Directors have assessed the current financial position of the Group and the Company, along with future cash flow requirements for
a period in excess of 12 months from the date of signing the financial statements, to determine if the Group and the Company has the
financial resources to continue as a going concern for the foreseeable future. The Group continues to grow revenues, profits and cash
flows and has a strong financial and cash position. In respect of severe but plausible downside sensitivity, the Board has considered
the effect of a material reduction in new sales made and delays in currently contracted receipts. The consequential forecasts still show
sufficient headroom to meet all its liabilities as they fall due.
The conclusion of this assessment is that it is appropriate that the Group and the Company be considered a going concern, based on
forecast profitability and positive cash inflows. For this reason, the Directors continue to adopt the going concern basis in preparing the
financial statements.
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| Cerillion plc Annual Report and Financial Statements 2022
Financial risk management
Information relating to the Group’s financial risk management is detailed in note 19 to the financial statements.
Indemnity provision
The Company maintains insurance in respect of its Directors and Officers against liabilities they may incur in the performance of their
duties which remains in force at the date of approval of the financial statements. The Company’s Articles of Incorporation provide that
the Directors of the Company shall be indemnified by the Company, to the extent permitted by law, against any cost incurred by them in
defending any proceedings brought against them arising out of their positions as Directors.
Research and development activities
Qualifying research and development expenditure incurred on the Group’s suite of products has been capitalised in line with the Group’s
accounting policy in the relevant period. Research and development comprises analysis, design, programming and testing of software
solutions. The Group will continue to invest in solutions to address new customer requirements as they arise and to take advantage
of technological advances in the underlying software platforms. Amounts not capitalised have been expensed to the consolidated
statement of comprehensive income.
The Group has expensed £385,449 (2021: £395,731) through the consolidated statement of comprehensive income during the year
and has capitalised software development costs of £965,427 (2021: £948,198).
Strategic report
Information in respect of the Business Review, Future Outlook of the Business, Employees; Principal Risks and Uncertainties and
Engagement with stakeholders are not shown in the Directors’ Report because they are presented in the Strategic Report in accordance
with s414c(ii) of the Companies Act 2006.
Subsequent events
There are no subsequent events requiring adjustment or disclosure within the financial statements.
Independent Auditors
PricewaterhouseCoopers LLP have expressed willingness to continue in office. In accordance with section 489(4) of the Companies Act
2006, a resolution proposing the reappointment of PricewaterhouseCoopers LLP will be put to the members at the forthcoming Annual
General Meeting.
APPROVED ON BEHALF OF THE BOARD
L T Hall
Director
25 November 2022
Cerillion plc Annual Report and Financial Statements 2022
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23
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Opinion
In our opinion, Cerillion plc’s group financial statements and company financial statements (the “financial statements”):
• give a true and fair view of the state of the group’s and of the company’s affairs as at 30 September 2022 and of the group’s profit
and the group’s and company’s cash flows for the year then ended;
• have been properly prepared in accordance with UK-adopted international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), which
comprise: the Consolidated and Company Statements of Financial Position as at 30 September 2022; the Consolidated Statement of
Comprehensive Income, the Consolidated and Company Statements of Cash flows and the Consolidated and Company Statements
of Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
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| Cerillion plc Annual Report and Financial Statements 2022
Our audit approach
Overview
Audit Scope
• As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also
addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Materiality
• Software licence revenue recognition (group)
• Capitalised development costs (group)
•
Impairment of investment (parent)
• Overall group materiality: £327,260 (2021: £260,700) based on 1% of total revenue.
• Overall company materiality: £200,800 (2021: £201,200) based on 1% of total assets.
• Performance materiality: £245,445 (2021: £195,500) (group) and £150,600 (2021: £150,900)
(company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Impairment of investment is a new key audit matter this year. Otherwise, the key audit matters below are consistent with last year.
Cerillion plc Annual Report and Financial Statements 2022
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25
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
Key audit matter
How our audit addressed the key audit matter
Software licence revenue recognition (group)
Software licence revenue includes the licenced product and related
services (see note 2 of the financial statements). Software revenue
recognition is considered a significant audit risk as there can be
significant judgement required in determining the performance
obligations within a contract and whether these performance
obligations are considered distinct for purposes of revenue
recognition. The conclusions on whether performance obligations
are distinct impacts whether revenue for core licenced product is
recognised at a point in time or over time based on percentage
of completion method. This method relies on the Group’s internal
measure of progress compared to total effort to complete the
performance obligations and involves a high degree of estimation
uncertainty.
The judgement and estimates involved in determining distinct
performance obligations and assessing the percentage of contract
completion could materially affect the timing and quantum of
revenue and profit recognised in each period.
Capitalised development costs (group)
The Group capitalises eligible employment costs of its software
developers, which are incurred on the development of its software
products. In order to determine the amount of cost that should be
capitalised, the Group must assess whether the cost meets the
capitalisation criteria set out in the relevant accounting standards.
Given the significant judgement involved in determining the amount
to be capitalised and the value of amounts capitalised, this financial
line item is susceptible to error and has been identified as a key
audit matter.
Impairment of investment (parent)
Investment in subsidiaries are recorded at cost less any provision
for permanent diminution in value. At each reporting date, an entity
is required to assess whether there is any indication that an asset
has been impaired (i.e. its carrying amount may be higher than its
recoverable amount). If there are any indication that an asset may
be impaired, then asset’s recoverable amount must be calculated.
As at 30 September 2022, the Company holds investment with a
carrying amount of £14,651,571 which is significant to the overall
financial statements of the Company and has been identified as a
key audit matter.
Our audit response included the following:
• Performing substantive test of details, including agreeing
elements to evidence of delivery and cash receipt, as
applicable.
• Assessing management’s historical ability to estimate using the
percentage of completion method by performing a retrospective
review.
• Considering the transparency and sufficiency of disclosures in
the annual report.
• Based on the work performed, as summarised above, we
have concluded that software licence revenue recognition is
appropriate.
Our audit response included the following:
• Considering whether expected revenue to be generated
supports the total costs to be capitalised.
• Determining whether projects met the criteria for recognition of
internally developed intangible assets in accordance with IAS
38.
• Performing tests of details on a sample basis, recalculating
and agreeing amounts capitalised from the time and expenses
system to payroll records.
• Based on the work performed, as summarised above, we have
concluded that amounts capitalised by the Group are materiality
appropriate.
Our audit responses included the following:
• Determining whether there are external or internal indicators of
impairment.
• Considering the financial position of subsidiaries to assess if
•
there is any indicator of impairment.
Inquiring management if they are aware of any indicators of
impairment.
• Based on the work performed, as summarised above, we
concluded that there are no indicators of impairment.
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| Cerillion plc Annual Report and Financial Statements 2022
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in
which they operate.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in
which they operate.
Full scope audit procedures were performed over Cerillion plc and its wholly owned subsidiary Cerillion Technologies Limited. Analytical
procedures and testing of specific account balances were performed over Cerillion Technologies (India) Private Limited, a wholly owned
subsidiary of Cerillion Technologies Limited.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group
Financial statements – Company
Overall materiality
£327,260 (2021: £260,700).
£200,800 (2021: £201,200).
How we determined it
1% of total revenue
1% of total assets
Rationale for
benchmark applied
Based on the benchmarks used in the annual
report, revenue is the primary measure used by
the shareholders in assessing the performance of
the group, and is a generally acceptable auditing
benchmark.
Based on the benchmarks used in the annual
report and the nature of the company, total assets
is the primary measure used by the shareholders
in assessing the performance of the company, and
is a generally accepted auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range
of materiality allocated across components was £200,800 - £294,500. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £245,445 (2021: £195,500) for the group financial
statements and £150,600 (2021: £150,900) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that an amount in the middle of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above £16,363
(group audit) (2021: £13,000) and £10,040 (company audit) (2021: £10,060) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
Cerillion plc Annual Report and Financial Statements 2022
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27
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of
accounting included:
• Critically assessing management’s future cash flow forecast model and underlying assumptions; and
• Performing stress testing of the group’s cash flow forecast model to assess available liquidity after accounting for various sensitivities
(such as reduced revenue and profitability).
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the
company’s ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’
Report for the year ended 30 September 2022 is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we
did not identify any material misstatements in the Strategic report and Directors’ Report.
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| Cerillion plc Annual Report and Financial Statements 2022
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations
related to breaches of AIM regulations, General Data Protection Regulation (GDPR) and employment and tax laws, and we considered
the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements such as Companies Act 2006. We evaluated management’s incentives
and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that
the principal risks were related to fraudulent manipulation of the accounts (including risk of management override of controls). Audit
procedures performed by the engagement team included:
• obtaining an understanding of the legal and regulatory framework applicable to the company and how the company is complying
with that framework;
• conducting inquires with management and those charged with governance around actual and potential litigation and claims;
reviewing minutes of meetings of those charged with governance; and
•
• performing audit procedures over the risk of management override of controls, including journal entries testing, assessing
reasonableness of accounting estimates, and incorporating elements of unpredictability to the nature of extent of audit procedures
performed by us.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also,
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We
will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling
to enable us to draw a conclusion about the population from which the sample is selected.
Cerillion plc Annual Report and Financial Statements 2022
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29
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
•
the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Alex Hookway (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Reading
25 November 2022
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| Cerillion plc Annual Report and Financial Statements 2022
Principal Accounting
Policies
The principal accounting policies applied in the preparation of these financial statements have been applied consistently to all the years
presented and are set out below.
Basis of preparation
The Company is a public limited company, which was incorporated in England and Wales on 5 March 2015 and domiciled in the United
Kingdom. The address of its registered office is 25 Bedford Street, London, England, WC2E 9ES. The principal activity of the Group is the
supply and development of telecommunication software solutions and equipment. These Group and Company financial statements have
been prepared in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Companies
Act 2006. The financial statements have been prepared under the historical cost convention. There is no material difference between the
fair value of financial assets and liabilities and their carrying amount.
The Company’s Directors are responsible for the preparation of the financial statements.
The preparation of the financial statements in conformity with IFRSs requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results
ultimately may differ from those estimates. Further details regarding areas requiring significant assumptions and estimates are provided in
Note 1 to the financial statements.
The functional and presentational currency is UK Sterling. Amounts in the financial statements have been rounded to the nearest pound.
Going concern
The Directors have assessed the current financial position of the Group and the Company, along with future cash flow requirements for
a period in excess of 12 months from the date of signing the financial statements, to determine if the Group and the Company has the
financial resources to continue as a going concern for the foreseeable future. The Group continues to grow revenues, profits and cash
flows and has a strong financial and cash position. In respect of severe but plausible downside sensitivity, the Board has considered
the effect of a material reduction in new sales made and delays in currently contracted receipts. The consequential forecasts still show
sufficient headroom to meet all its liabilities as they fall due.
The conclusion of this assessment is that it is appropriate that the Group and the Company be considered a going concern, based on
forecast profitability and positive cash inflows. For this reason, the Directors continue to adopt the going concern basis in preparing the
financial statements.
Basis of consolidation
The Group’s financial statements consolidate those of the Company and all of its subsidiaries as of 30 September 2022. All subsidiaries
have a reporting date of 30 September with the exception of the Indian subsidiary, which has a mandatory reporting date of 31 March.
The Indian subsidiary is consolidated using its management accounts through to 30 September.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a
subsidiary or a business is the fair values of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity
interests issued to the Group. The consideration transferred includes the fair values of any asset or liability resulting from a contingent
consideration arrangement.
Cerillion plc Annual Report and Financial Statements 2022
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31
Principal Accounting
Policies
Continued
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values on the acquisition date. Acquisition-related costs are expensed as incurred.
Intercompany transactions, unrealised gains and losses on intragroup transactions and balances between Group companies are
eliminated on consolidation.
New and revised standards
IFRS in issue but not applied in the current financial statements
Certain new accounting standards and interpretations have been published that are not mandatory for 30 September 2022 reporting
periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future transactions.
IFRS applied for the first time in the current financial statements
The Group has applied the following Standards and Amendments for the first time for their annual reporting period commencing
1 October 2021:
• Covid-19-related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16). The amendment permits a lessee to
apply the practical expedient regarding COVID-19 related rent concessions to rent concessions for which any reduction in lease
payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before
•
30 June 2021).
Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). The amendment
applies only to changes required by the reform to financial instruments and hedging relationships, changes in the basis of
determining contractual cash flows of financial assets, financial liabilities, lease liabilities, hedge accounting and disclosures.
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). The amendments
require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and
deductible temporary differences.
• Annual Improvements to IFRS Standards 2018-2020 Cycle. The amendment is to enhance the quality of standards, by amending
existing IFRS; IFRS 1, IFRS 9, IFRS 16, IAS 41.
The Amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly
affect the current or future periods.
Segmental reporting
In accordance with IFRS 8, segmental information is presented based on the way in which financial information is reported internally
to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board who makes strategic decisions.
During the years ended 30 September 2022 and 30 September 2021, the Group was organised into four main business segments for
revenue purposes:
• Services: relates to revenue from providing services to customers on new implementation projects and enhancements (see revenue
recognition policy (i) and (iii) on pages 34 and 35).
• Software: relates to support and maintenance revenue derived from people using the software as well as the licences to use the
software (see revenue recognition policy (i) and (ii) on pages 34 and 35).
• Software-as-a-Service: relates to monthly subscriptions for a managed service or to use products on a right to use basis (see
revenue recognition policy (i) on pages 34 and 35).
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| Cerillion plc Annual Report and Financial Statements 2022
• Third-Party: relates to revenue derived from third-party services or licences, re-billable expenses and pass through of selling on
hardware (see revenue recognition policy (iv) on page 35).
Assets are used across all segments and therefore are not split between segments.
Foreign currency translation
(i) Functional and presentation currency
Items included in the Financial Statements are measured using the currency of the primary economic environment in which entities
operate (‘the functional currency’). The Financial Statements are presented in Sterling, which is the Parent Company’s functional and
presentation currency. There has been no change in the functional currency during the current or preceding period.
(ii) Transactions and balances
Transactions in foreign currencies are translated into Sterling using monthly average exchange rates. This is permissible in this case as
there are no significant fluctuations between the currencies with which the entity operates. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date and any exchange differences arising are
taken to the Statement of comprehensive income.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the
transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when
fair value was determined.
(iii) Foreign operations
In the Group’s Financial Statements, all assets, liabilities and transactions of Group entities with a functional currency other than the GBP
are translated into GBP upon consolidation. The functional currency of the entities in the Group has remained unchanged during the
reporting period.
On consolidation, assets and liabilities have been translated into GBP at the closing rate at the reporting date. Goodwill and fair
value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and
translated into GBP at the closing rate. Income and expenses have been translated into GBP at the average rate over the reporting
period. Exchange differences arising from significant foreign subsidiaries are charged or credited to other comprehensive income and
recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences
recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.
Revenue recognition
The Group enters into revenue arrangements with customers to provide standard licensed products (including installation,
implementation, maintenance and support fees), additional licenses, on-going account development work, and third-party time and
materials, either individually or as part of an integrated offering of multiple services.
Contract existence and term
Certain criteria must be satisfied to recognise an arrangement as a revenue generating contract. Judgement arises when determining
if an enforceable contract is in place. Where services are offered on a trial basis or the customer’s ability and intention to pay are in
doubt, no revenue arrangement is deemed to exist and any monies received will be recognised as a liability (deferred income). Revenue
is recognised in accordance with policy when such time as a binding contract is in force or we have completed our obligations and no
amounts received are refundable.
Cerillion plc Annual Report and Financial Statements 2022
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33
Principal Accounting
Policies
Continued
Promises to a customer
At inception of the contract, 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.
Judgement is required when determining which promises are distinct and which are not. Generally, the Group’s products and services
sold follow a prescribed treatment and are consistent across customers. However, this can vary by customer contract depending on the
terms and conditions of the contract and requires evaluation of performance obligations for every contract.
Revenue to recognise: ‘The transaction price’
Revenue is measured at the fair value of the consideration received or receivable net of sales related taxes. When a contract includes
a significant financing component as a result of payments made in arrears (i.e. typically milestone payments made after one-year from
contract inception), the accounting effect of the adjustment for the financing component decreases the amount of revenue recognised
with a corresponding increase to finance income as the Group has provided financing to the customer. The Group’s contracts do not
typically include variable consideration.
Allocation of revenue
Once the Group has determined the transaction price, the total transaction price is allocated to each performance obligation using a
standalone selling price (‘SSP’) methodology. The standalone selling price is the observable price at which the Group sells a promised
good or service separately to a customer, or the estimated standalone selling price where sufficient standalone sales do not exist. The
standalone selling price is estimated using all information that is reasonably available and maximising observable inputs with approaches
including historical pricing, industry practice or using a residual approach.
Recognising revenue
The Group recognises revenue when, or as, it satisfies a performance obligation by transferring control of the good or service to a
customer. The judgement of when to recognise revenue is intrinsically linked to the performance obligation assessment because revenue
can only be recognised when or as the distinct performance obligation is satisfied.
(i) Sale of standard licensed products
Revenue from standard licensed products comprises three elements, being:
•
Initial licence and implementation fees (“inception fees”)
• Ongoing maintenance and support fees
• Software-as-a-Service
The determination of whether initial license and implementation fees represent distinct promises to customers is complex and requires
consideration of whether the licensed product requires significant customer modification and whether the implementation process is
complex. The Group does not typically provide upgrades or enhancements that are considered critical to the functionality of the licensed
product over the initial term.
Where a licensed product is not modified to meet the specific requirements of each customer and follows a straightforward
implementation profile, revenue is recognised at the point in time at which the customer has the ability and right to use all licences.
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| Cerillion plc Annual Report and Financial Statements 2022
Where a licenced product requires significant customer modifications and implementation is complex, revenue is recognised over time,
based on the percentage of completion method. This method relies on the Group’s internal measure of progress compared to total
effort to complete the modifications and implementation. Estimates are based on the total number of days performed on the project
compared to the total number of days expected to complete the project. The estimate of the total number of days to complete a project
is inherently judgemental and depends upon the complexity of the work being undertaken, the customisation being made to software
and the customer environment being interfaced to. The scope of projects frequently change and most frequently in agreement with
customer modifications. Consequently, the judgement of total estimate at completion is subjected to a high level of review at all stages
in a project life cycle. Provision is made for any losses on the contract as soon as they are foreseen.
Revenue from ongoing maintenance and support fees are recognised on a pro-rated basis over the duration of the contract.
Revenue earned from Software-as-a-Service arrangements for providing a licence and/or service usually on a monthly rolling basis.
Revenue is recognised over time based on the duration of the contract and the service time provided to date.
(ii) Sale of additional licences
Revenue from the sale of additional licences is recognised when the additional licences are delivered to the customer.
(iii) Ongoing account development work
Ongoing account development work is generally provided on a fixed price basis and as such revenue is recognised based on
the percentage of completion method or upon delivery of the relevant project, in accordance with the identification of the distinct
performance obligations within the arrangement. Where percentage of completion method is used, the estimate of the percentage
completed is calculated in a consistent manner with estimates for bundled licensed arrangements. Provision is made for any losses as
soon as they are foreseen.
(iv) Third-party time, material works and re-billable expenses
Revenue on contracted third-party time and material works is recognised on a time basis using pre agreed day rates.
Revenue on re-billable expenses is recognised as incurred. In the case of third-party time, material works and re-billable expenses the
Group is considered to be acting as principal as it is the primary obligor in the sales transaction, the Group can select the supplier of the
service and the Group holds the credit risk in the transaction.
The excess of amounts invoiced over revenue recognised are included in deferred income. If the amount of revenue recognised exceeds
the amount invoiced the excess is included within accrued income.
Existence of a significant financing component
When a contract includes a significant financing component as a result of payments to be made in arrears, the accounting effect of
the financing component decreases the amount of revenue recognised with a corresponding increase to interest income as Cerillion is
providing financing to the customer.
Contract costs
Incremental costs of obtaining a contract, principally sales commissions and agent fees, are capitalised if they are expected to be
recovered. Incremental costs include only those costs that would not have been incurred if the contract had not been obtained.
Contract costs are amortised over a period that is consistent with the pattern of transfer of the good or service to which the asset
relates. Costs to fulfil a contract include professional services internal and external costs and any licence inputs purchased from third
parties. These costs are capitalised where they relate to an identified specific contract, generate an asset for the Group and they will be
recovered over the course of the contract.
Cerillion plc Annual Report and Financial Statements 2022
|
35
Principal Accounting
Policies
Continued
Cost of sales
Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads,
including indirect overheads that can reasonably be allocated, have been classified as cost of sales.
Taxation and deferred taxation
The income tax expense or income for the period is the tax payable on the current period’s taxable income. This is based on the national
income tax rate enacted or substantively enacted for each jurisdiction with any adjustment relating to tax payable in previous years and
changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and
their carrying amounts in the Financial Statements. Current tax credits arise from the UK legislation regarding the treatment of certain
qualifying research and development costs, allowing for the surrender of tax losses attributable to such costs in return for a tax rebate.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset
or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date. The
relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax
asset or liability.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from
which the future reversal of temporary differences can be deducted. The carrying amount of deferred tax assets are reviewed at each
reporting date.
Deferred tax liabilities are generally recognised in full, although IAS 12 ‘Income Taxes’ specifies limited exemptions. As a result of
these exemptions, the Group does not recognise deferred tax on temporary differences relating to goodwill, or to its investments in
subsidiaries. Temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences
can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.
Leases
For any new contracts entered into on or after 1 October 2019, the Group considers whether a contract is, or contains a lease. A
lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in
exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations which are
whether:
•
•
•
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at
the time the asset is made available to the Group
the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of
use, considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the
right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group,
an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the
lease commencement date (net of any incentives received).
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| Cerillion plc Annual Report and Financial Statements 2022
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that are based on an index or a rate;
• amounts expected to be payable by the lessee under residual value guarantees;
•
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the Group’s incremental borrowing rate is used, being the rate that the individual lessee would
have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment
with similar terms, security and conditions. The incremental borrowing rates range between 3% to 5%.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third-party financing was received;
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by Cerillion, which does not
have recent third-party financing; and
• makes adjustments specific to the lease, eg term, country, currency and security.
Where the Group is exposed to potential future increases in variable lease payments based on an index or rate, these are not included
in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is
reassessed and adjusted against the right-of-use asset.
Subsequent to initial measurement, lease payments are allocated between principal, which reduces the liability, and finance cost. The
finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
•
the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the
Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
The Group also assesses the right-of-use asset for impairment when such indicators exist.
The Group has elected to account for short-term leases and leases of low value assets using the practical expedients. Instead of
recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a
straight-line basis over the lease term.
Cerillion plc Annual Report and Financial Statements 2022
|
37
Principal Accounting
Policies
Continued
The right-of-use assets and lease liabilities have been disclosed separately on the face of the Statement of Financial Position, within
Non-current assets and across Current & Non-current liabilities respectively.
Impairment
Goodwill and assets that are subject to amortisation are reviewed for impairment annually or whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to
sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash generating units).
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial
instrument and are measured initially at fair value adjusted for transaction costs that are directly attributable to the acquisition of the
financial asset. Subsequent measurement of financial assets and financial liabilities is described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial
asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged,
cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:
Trade and other receivables
Trade and other receivables are recognised initially at fair value, which is generally the original invoice amount, and subsequently
measured at amortised cost using the effective interest method, less provision for impairment. The Group applies the IFRS 9 simplified
approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions, which are readily convertible to
known amounts of cash and which are subject to insignificant risk of changes in value and have an original maturity of three months or less.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include trade and certain other payables. Financial liabilities are measured subsequently at amortised cost
using the effective interest method.
Trade payables
Trade payables are recognised initially at fair value, which is generally the original invoice value, and subsequently measured at amortised
cost using the effective interest method. These amounts represent liabilities for goods and services provided to Cerillion prior to the end
of the financial period which are unpaid.
Interest-bearing loans and other borrowings
Interest-bearing loans and other borrowings are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is
omitted where the effect of discounting is immaterial. Amortised cost is calculated by taking into account any issue costs, discount or
premium. The difference between the proceeds (net of directly attributable transactions costs) and the redemption value is recognised in
finance costs over the period of the borrowings.
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| Cerillion plc Annual Report and Financial Statements 2022
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised
cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
Equity
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.
The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated
with the issuing of shares are deducted from share premium, net of any related income tax benefits.
The ordinary share capital account represents the amount subscribed for shares at nominal value.
Where any Group company purchases the Company’s equity instruments, for example as the result of a share buy-back or a share-
based payment plan, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted
from equity attributable to the owners of Cerillion plc, as treasury shares until the shares are cancelled or reissued. Where such ordinary
shares are subsequently reissued, any consideration received, net of any directly attributable incremental transactions costs and the
related income tax effects, is included in equity attributable to the owners of Cerillion plc.
Retained earnings include all results as disclosed in the statement of comprehensive income.
Foreign exchange reserve – comprises foreign currency translation differences arising from the translation of financial statements of the
Group’s foreign entities into Sterling.
Provisions
Provisions are recognised when Cerillion has a present legal or constructive obligation as a result of past events, it is more likely than
not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
Provisions are the best estimate of the expenditure required to settle the obligation at the current reporting date.
Property, plant and equipment (“PPE”)
PPE is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to Cerillion and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are
incurred.
Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their cost or revalued amounts,
net of their residual values, over their estimated useful lives, as follows:
• Leasehold improvements
• Fixtures and fittings
• Computer equipment
Life of lease
3 – 4 years
3 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Cerillion plc Annual Report and Financial Statements 2022
|
39
Principal Accounting
Policies
Continued
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are
included in the statement of comprehensive income.
Intangible assets and amortisation
(i) Software (development expenditure & external software licences)
Expenditure on research is written off in the period in which it is incurred. Development expenditure incurred on specific projects is
capitalised where the Board is satisfied that the following criteria have been met:
•
it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
•
•
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are available;
and
•
the expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an
appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset in a subsequent period.
External software licence cost includes expenditure that is directly attributable to the acquisition of the items.
Computer software development expenditure and external software licences recognised as assets are amortised on a straight-line basis
over their estimated useful lives, which does not exceed 5 years.
(ii) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the assets and liabilities assumed at the date of
acquisition. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more
frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment
losses. Impairment testing is carried out by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.
(iii) Purchased customer contracts
Purchased customer contracts acquired as part of a business combination are recognised at fair value if they are project specific and
there is a level of certainty that there will be future recovery. Customer contracts are amortised over the perceived period that they will
generate economic benefits. This is calculated using in depth analysis of future revenue from cash flow forecasts.
The customer contracts acquired as part of the acquisition of Cerillion Technologies Limited are to be amortised on a straight-line basis
over a period of 7 years.
(iv) Intellectual property rights
Intellectual property rights acquired as part of a business combination are recognised at fair value based on an estimate of future profits.
Intellectual property rights are amortised over the perceived period that they will generate economic benefits. This is calculated using in
depth analysis of future revenue from cash flow forecasts.
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| Cerillion plc Annual Report and Financial Statements 2022
The intellectual property rights acquired as part of the acquisition of Cerillion Technologies Limited are being amortised on a straight-line
basis over a period of 7 years.
Investments in subsidiaries
Investments in subsidiaries are recorded at cost less any provision for permanent diminution in value.
Interest
Interest income and expense are recognised using the effective interest method and comprise amounts receivable and payable on bank
deposits and bank borrowings respectively.
Post-retirement benefits
Defined contribution schemes
The defined contribution schemes provide benefits based on the value of contributions made. The amounts charged as expenditure for
the defined contribution scheme represents the contributions payable by Cerillion for the accounting years in respect of the schemes.
Long-term employee benefits
Long-term employee benefits (long-term bonus and gratuity payments) are calculated annually by independent actuaries using the
projected unit credit method. The remeasurements arising from changes in underlying assumptions are recognised immediately through
profit or loss.
Exceptional items
Exceptional items are those significant items, and are irregular items, that are separately disclosed by virtue of their size or incidence to
enable a full understanding of the Group’s financial performance.
Share-based employee remuneration
The Company operates equity-settled share-based remuneration plans for its employees. None of the Company’s plans are cash-
settled.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair value of employees’ services is determined indirectly by reference
to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market
vesting conditions (for example profitability and sales growth targets and performance conditions). The fair value is determined by using
the Black-Scholes method.
All share-based remuneration is ultimately recognised as an expense in the statement of comprehensive income with a corresponding
credit to share option reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable.
Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous
estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current period. The
number of vested options ultimately exercised by holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital
up to the nominal (or par) value of the shares issued with any excess being recorded as share premium. Where shares are issued from
Treasury to settle the exercise of share options there is no impact to share capital or share premium.
Cerillion plc Annual Report and Financial Statements 2022
|
41
Consolidated Statement
of Comprehensive Income
For the year ended 30 September 2022
Revenue
Cost of sales
Gross profit
Operating expenses
Impairment losses on financial assets
Adjusted EBITDA*
Depreciation and amortisation
Share-based payment charge
Operating profit
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year
Other comprehensive income/(expense)
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign operations
Year to
30 September 2022
£
Year to
30 September 2021
£
32,726,049
26,070,815
Notes
2
(7,221,383)
(5,662,228)
25,504,666
20,408,587
(13,030,714)
(12,657,720)
3
(1,770,011)
(226,852)
13,750,055
10,515,283
(2,985,649)
(2,880,927)
22
(60,465)
(110,341)
3
5
6
7
10,703,941
7,524,015
336,986
(145,623)
66,810
(163,982)
10,895,304
7,426,843
(1,551,125)
(999,748)
9,344,179
6,427,095
70,238
(120,093)
Total comprehensive income for the year
9,414,417
6,307,002
Earnings per share
Basic earnings per share – continuing and total operations
10
31.7 pence
21.8 pence
Diluted earnings per share – continuing and total operations
31.6 pence
21.7 pence
All transactions are attributable to the owners of the parent.
The Group has no other recognised gains or losses for the current year.
* 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.
The accompanying accounting policies and notes form an integral part of these financial statements.
42
| Cerillion plc Annual Report and Financial Statements 2022
Consolidated Statement
of Financial Position
As at 30 September 2022
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Trade and other receivables
Deferred tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Trade and other payables
Lease liabilities
Deferred tax liabilities
Current liabilities
Trade and other payables
Lease liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Ordinary share capital
Share premium account
Treasury stock
Share option reserve
Foreign exchange reserve
Retained earnings
TOTAL EQUITY
Notes
2022
£
2021
£
11
11
12
13
16
15
16
19
17
13
15
17
13
21
21
2,053,141
2,653,225
979,880
3,056,997
2,171,377
259,625
2,053,141
3,571,787
758,670
3,705,723
2,015,422
209,211
11,174,245
12,313,954
11,204,221
20,249,100
31,453,321
10,178,628
13,174,471
23,353,099
42,627,566
35,667,053
(934,439)
(3,049,538)
(718,671)
(4,702,648)
(10,216,453)
(976,486)
(11,192,939)
(394,850)
(3,866,352)
(861,765)
(5,122,967)
(9,390,933)
(947,710)
(10,338,643)
(15,895,587)
(15,461,610)
26,731,979
20,205,443
147,567
13,318,725
(25)
136,958
(96,836)
13,225,590
147,567
13,318,725
(25)
128,130
(167,074)
6,778,120
26,731,979
20,205,443
The financial statements on pages 31 to 75 were approved and authorised for issue by the Board of Directors on 25 November 2022.
Signed on behalf of the Board of Directors by:
L T Hall
Director
Company Number 09472870
The accompanying accounting policies and notes form an integral part of these financial statements.
Cerillion plc Annual Report and Financial Statements 2022
|
43
Company Statement
of Financial Position
As at 30 September 2022
ASSETS
Non-current assets
Right-of-use assets
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Lease liabilities
Current liabilities
Trade and other payables
Lease liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Ordinary share capital
Share premium account
Treasury stock
Share option reserve
Retained earnings
TOTAL EQUITY
Notes
2022
£
2021
£
13
14
16
19
13
17
13
21
21
2,656,147
14,651,571
17,307,718
2,066,228
289,141
2,355,369
3,162,079
14,651,571
17,813,650
2,087,747
227,008
2,314,755
19,663,087
20,128,405
(2,803,234)
(2,803,234)
(3,416,663)
(3,416,663)
(236,170)
(731,000)
(967,170)
(199,705)
(731,000)
(930,705)
(3,770,404)
(4,347,368)
15,892,683
15,781,037
147,567
147,567
13,318,725
13,318,725
(25)
136,958
2,289,458
(25)
128,130
2,186,640
15,892,683
15,781,037
The Directors have taken advantage of the exemption available under Section 408 of the Companies Act and not presented the
statement of comprehensive income for the Parent Company. The total comprehensive income for the year was £2,999,527 (2021:
£2,999,554).
The financial statements on pages 31 to 75 were approved and authorised for issue by the Board of Directors on 25 November 2022.
Signed on behalf of the Board of Directors by:
L T Hall
Director
Company Number 09472870
The accompanying accounting policies and notes form an integral part of these financial statements.
44
| Cerillion plc Annual Report and Financial Statements 2022
Consolidated Statement
of Cash Flows
For the year ended 30 September 2022
Cash flows from operating activities
Profit for the year
Adjustments for:
Taxation
Finance income
Finance costs
Share option charge
Depreciation
Amortisation
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
Finance costs
Finance income
Tax paid
NET CASH GENERATED FROM OPERATING ACTIVITIES
Cash flows from investing activities
Capitalisation of intangible assets
Purchase of property, plant and equipment
NET CASH USED IN INVESTING ACTIVITIES
Cash flows from financing activities
Borrowings repaid
Purchase of treasury stock
Receipts from exercise of share options
Principal elements of finance leases
Dividends paid
Notes
2022
£
2021
£
9,344,179
6,427,095
1,551,125
(336,986)
145,623
60,465
1,084,581
1,901,068
999,748
(66,810)
163,982
110,341
1,007,265
1,873,661
13,750,055
10,515,282
(1,181,548)
1,323,530
(238,364)
(84,435)
13,892,037
10,192,483
(145,623)
336,986
(1,745,872)
(163,982)
66,810
(293,076)
12,337,528
9,802,235
(982,506)
(626,206)
(970,212)
(301,686)
(1,608,712)
(1,271,898)
-
(827,424)
122,102
(806,706)
(609,359)
(512,500)
1,249
(764,416)
(2,243,024)
(1,726,538)
7
5
6
22
12,13
11
6
5
11
12
13
9
NET CASH USED IN FINANCING ACTIVITIES
(3,755,052)
(3,611,564)
NET INCREASE IN CASH AND CASH EQUIVALENTS
Translation differences
Cash and cash equivalents at beginning of year
6,973,764
4,918,773
100,865
(56,169)
13,174,471
8,311,867
CASH AND CASH EQUIVALENTS AT END OF YEAR
20,249,100
13,174,471
The accompanying accounting policies and notes form an integral part of these financial statements.
Cerillion plc Annual Report and Financial Statements 2022
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45
Company Statement
of Cash Flows
For the year ended 30 September 2022
Cash flows from operating activities
Profit for the year
Adjustments for:
Taxation
Depreciation
Finance costs
Share option recharge to subsidiary
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Finance costs
NET CASH GENERATED FROM OPERATING ACTIVITIES
Cash flows from financing activities
Borrowings repaid
Purchase of treasury stock
Receipts from exercise of share options
Principal elements of finance leases
Dividends paid
Notes
2022
£
2021
£
13
22
2,999,527
2,999,554
473
505,932
117,573
60,465
446
505,932
140,986
110,341
3,683,970
3,757,259
21,519
35,992
(139,521)
78,640
3,741,481
3,696,378
(117,573)
(140,986)
3,623,908
3,555,392
-
(827,424)
122,102
(613,429)
(609,359)
(512,500)
1,249
(595,365)
9
(2,243,024)
(1,726,538)
NET CASH USED IN FINANCING ACTIVITIES
(3,561,775)
(3,442,513)
NET INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
62,133
227,008
112,879
114,129
CASH AND CASH EQUIVALENTS AT END OF YEAR
289,141
227,008
The accompanying accounting policies and notes form an integral part of these financial statements.
46
| Cerillion plc Annual Report and Financial Statements 2022
Consolidated Statement
of Changes in Equity
For the year ended 30 September 2022
Ordinary
share
capital
£
Share
premium
account
£
Treasury
stock
£
Share
option
reserve
£
Foreign
exchange
reserve
£
Retained
earnings
£
Total
£
Balance at 1 October 2020
147,567 13,318,725
(375,025)
151,619
(46,981)
2,829,984 16,025,889
Profit for the year
Other comprehensive income:
Exchange differences on translating
foreign operations
Total comprehensive income
Transactions with owners:
Share option charge
Purchase of treasury stock
Exercise of share options
Dividends
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110,341
(512,500)
-
887,500
(133,830)
-
-
375,000
(23,489)
-
6,427,095
6,427,095
(120,093)
-
(120,093)
(120,093)
6,427,095
6,307,002
-
-
-
-
-
-
-
110,341
(512,500)
(752,421)
1,249
(1,726,538)
(1,726,538)
(2,478,959)
(2,127,448)
Balance as at 30 September 2021
147,567 13,318,725
(25)
128,130
(167,074)
6,778,120 20,205,443
Ordinary
share
capital
£
Share
premium
account
£
Treasury
stock
£
Share
option
reserve
£
Foreign
exchange
reserve
£
Retained
earnings
£
Total
£
Balance at 1 October 2021
147,567 13,318,725
(25)
128,130
(167,074)
6,778,120 20,205,443
Profit for the year
Other comprehensive income:
Exchange differences on translating
foreign operations
Total comprehensive income
Transactions with owners:
Share option charge
Purchase of treasury stock
Exercise of share options
Dividends
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(827,424)
-
-
-
60,465
-
827,424
(51,637)
-
-
-
8,828
-
9,344,179
9,344,179
70,238
-
70,238
70,238
9,344,179
9,414,417
-
-
-
-
-
-
-
60,465
(827,424)
(653,685)
122,102
(2,243,024)
(2,243,024)
(2,896,709)
(2,887,881)
Balance as at 30 September 2022
147,567 13,318,725
(25)
136,958
(96,836) 13,225,590 26,731,979
The accompanying accounting policies and notes form an integral part of these financial statements.
Cerillion plc Annual Report and Financial Statements 2022
|
47
Company Statement
of Changes in Equity
For the year ended 30 September 2022
Balance at 1 October 2020
147,567 13,318,725
(375,025)
151,619
1,666,045 14,908,931
Ordinary
share
capital
£
Share
premium
£
Treasury
stock
£
Share
option
reserve
£
Retained
earnings
£
Total
£
Profit for the year
Total comprehensive income
Transactions with owners:
Share option charge
Purchase of treasury stock
Exercise of share options
Dividends
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110,341
(512,500)
-
-
-
110,341
(512,500)
887,500
(133,830)
(752,421)
1,249
-
-
(1,726,538)
(1,726,538)
375,000
(23,489)
(2,478,959)
(2,127,448)
-
-
2,999,554
2,999,554
2,999,554
2,999,554
Balance as at 30 September 2021
147,567 13,318,725
(25)
128,130
2,186,640 15,781,037
Balance at 1 October 2021
147,567 13,318,725
(25)
128,130
2,186,640 15,781,037
Ordinary
share
capital
£
Share
premium
£
Treasury
stock
£
Share
option
reserve
£
Retained
earnings
£
Total
£
Profit for the year
Total comprehensive income
Transactions with owners:
Share option charge
Purchase of treasury stock
Exercise of share options
Dividends
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(827,424)
-
-
2,999,527
2,999,527
2,999,527
2,999,527
60,465
-
-
-
60,465
(827,424)
827,424
(51,637)
(653,685)
122,102
-
-
-
(2,243,024)
(2,243,024)
8,828
(2,896,709)
(2,887,881)
Balance as at 30 September 2022
147,567 13,318,725
(25)
136,958
2,289,458 15,892,683
The accompanying accounting policies and notes form an integral part of these financial statements.
48
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the
Financial Statements
For the year ended 30 September 2022
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) 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. Refer to notes 11 and 12.
(iv) Calculation of future minimum lease payments
The calculation of lease liabilities requires the Group to determine an incremental borrowing rate (“IBR”) to discount future minimum
lease payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar
security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The
IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available or
when they need to be adjusted to reflect the terms and conditions of the lease.
Management has considered the above areas of estimation and concluded that there are no deemed material changes arising
from changes in underlying assumptions.
Cerillion plc Annual Report and Financial Statements 2022
|
49
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 16 and 19.
(ii) Recoverability of intercompany receivables (Parent Company only)
Management use their judgement when determining whether intercompany receivables are considered recoverable or where a
provision for impairment is considered necessary. The assessment of recoverability will include consideration of the nature of the
activity within the subsidiary, the trading performance and position of the subsidiary and how the subsidiary will make repayment.
No impairment provisions were required in relation to intercompany receivables in the current or preceding year.
(iii) Recoverability of investments in subsidiaries (Parent Company only)
Management assess the performance and position of subsidiaries annually to determine whether there is any indication that any of
the investments in subsidiaries might be impaired. There was no indication of impairment of the investments in subsidiaries at the
current or preceding year end.
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.
Revenue
Services
Software
Software-as-a-Service
Third-party
Total revenue
2022
£
2021
£
18,271,756
11,863,628
9,853,954
3,005,913
1,594,426
11,340,625
2,057,655
808,907
32,726,049
26,070,815
50
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy as outlined on
pages 34 and 35. Revenue recognised on performance obligations partially satisfied in previous periods was £19,928,729 (2021:
£12,703,901).
Accounting policies
Year ended 30 September 2022
Services
implementation fees
ongoing account development work
Software
initial licence fees
£
18,271,756
9,853,954
(i)
£
6,597,495
-
764,858
(ii)
£
-
-
-
sale of additional licences
-
1,611,694
ongoing maintenance and support fees
7,477,402
Software-as-a-Service
Third-Party
3,005,913
3,005,913
1,594,426
-
-
-
-
(iii)
£
-
11,674,261
-
-
-
-
-
(iv)
£
Total
£
-
-
-
-
-
-
6,597,495
11,674,261
764,858
1,611,694
7,477,402
3,005,913
1,594,426
1,594,426
Total
32,726,049 17,845,668
1,611,694 11,674,261
1,594,426 32,726,049
Accounting policies
Year ended 30 September 2021
Services
implementation fees
ongoing account development work
Software
initial licence fees
£
11,863,628
11,340,625
(i)
£
5,386,613
-
3,839,508
(ii)
£
-
-
-
sale of additional licences
-
910,787
ongoing maintenance and support fees
6,590,330
Software-as-a-Service
Third-Party
Total
2,057,655
2,057,655
808,907
-
(iii)
£
-
6,477,015
-
-
-
-
-
(iv)
£
Total
£
-
-
-
-
-
-
5,386,613
6,477,015
3,839,508
910,787
6,590,330
2,057,655
808,907
808,907
-
-
-
26,070,815
17,874,106
910,787
6,477,015
808,907 26,070,815
Cerillion plc Annual Report and Financial Statements 2022
|
51
Notes to the
Financial Statements
For the year ended 30 September 2022
Continued
(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:
Year ended/As at 30 September 2022
Revenue – by customer location
20,389,431
3,165,818
7,937,599
1,233,201
UK & Europe
£
MEA
£
Americas
£
Asia Pacific
£
Capital expenditure
Non-current assets
Total assets
Net assets
1,548,273
10,496,433
41,099,603
26,519,367
-
-
-
-
-
-
-
-
60,439
677,812
1,527,963
212,612
Year ended/As at 30 September 2021
Revenue – by customer location
18,729,415
2,052,625
3,478,079
1,810,696
UK & Europe
£
MEA
£
Americas
£
Asia Pacific
£
Capital expenditure
Non-current assets
Total assets
Net assets
1,218,040
11,371,807
34,104,087
20,250,312
-
-
-
-
-
-
-
-
53,858
942,147
1,562,966
(44,869)
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:
Customer
No. 1
No. 2
No. 3
Operating
segment
2022
£
2021
£
Europe
Americas
UK
4,817,806
3,417,612
3,400,054
2,708,264
555,716
5,195,842
52
| Cerillion plc Annual Report and Financial Statements 2022
3. Operating profit
Operating profit is stated after (crediting)/charging:
Employee benefits expenses (note 4)
Depreciation
Amortisation of intangibles
Research and development costs
Bad debt expense
Foreign exchange (gains)/losses
Operating leases
Fees payable to Cerillion’s principal auditors:
- Audit of Cerillion plc’s annual financial statements
- Audit of subsidiaries
- Non-audit services – tax services
- Non-audit services – other services
Fees payable to associates of principal auditors:
- Audit of subsidiaries
Other costs
Total cost of sales, operating expenses and impairment
losses on financial assets
2022
£
2021
£
13,943,441
1,084,581
1,901,068
385,449
1,770,011
(366,693)
157,089
14,300
80,300
81,474
4,278
12,602,628
1,007,265
1,873,662
395,731
226,852
494,903
125,834
13,000
73,000
38,430
-
9,000
2,957,810
7,500
1,687,995
22,022,108
18,546,800
The bad debt expense relates to the provisions made against the risk of non-recovery of receivables. The increase during the year
is predominantly due to an assessment over certain implementation work that may not be fully recoverable.
Cerillion plc Annual Report and Financial Statements 2022
|
53
Notes to the
Financial Statements
For the year ended 30 September 2022
Continued
4. Directors and employees
Group
Employee costs (including Directors):
Wages and salaries
Social security costs
Share-based payments
Other pensions costs
Group
2022
£
2021
£
12,596,335
11,290,025
956,740
60,465
329,901
881,904
110,341
320,358
13,943,441
12,602,628
2022
Number
2021
Number
The average number of employees (including Directors) during the year was made up as follows:
Management and administration
Sales and marketing
Support and development staff
Executive Directors
Non-executive Directors
27
18
245
2
3
295
27
18
202
3
2
252
The Company’s employees comprise the five Directors only (2021: 5). For details of Directors’ remuneration, refer to the
Remuneration report on pages 16 to 18. Key management personnel is covered in note 24.
5. Finance income
Finance income:
Bank interest receivable
Unwinding discount of contracts with significant financing component
6. Finance costs
Finance costs:
Interest payable in respect of loans
Interest and finance charges for lease liabilities
Other interest payable
54
| Cerillion plc Annual Report and Financial Statements 2022
2022
£
74,922
262,064
336,986
2022
£
-
(133,944)
(11,679)
(145,623)
2021
£
1,855
64,955
66,810
2021
£
(5,347)
(158,341)
(294)
(163,982)
7. Taxation
(a) Analysis of tax charge for the year
The tax charge for the Group is based on the profit for the year and represents:
Current tax expense - UK
Current tax - adjustment in respect of prior year
Current tax expense - overseas
Current tax expense - total
Deferred tax credit
Deferred tax - adjustment in respect of prior year
Deferred tax credit – total
Total tax charge
2022
£
2021
£
1,524,372
799,160
1,159
197,158
-
293,076
1,722,689
1,092,236
(153,541)
(18,023)
(171,564)
1,551,125
(92,336)
(152)
(92,488)
999,748
(b) Factors affecting total tax for the year
The tax assessed for the year is lower (2021: lower) than the standard rate of corporation tax in the United Kingdom 19.0%
(2021: 19.0%). The differences are explained as follows:
Profit on ordinary activities before tax
10,895,304
7,426,843
Profit on ordinary activities multiplied by standard rate of corporation tax in the
United Kingdom of 19.0% (2021: 19.0%)
2,070,108
1,411,100
Effect of:
Expenses not deductible for tax purposes
Non-taxable income for tax purposes
Difference in tax rates
Other temporary differences
Foreign tax – other
Prior year tax adjustment
Prior year tax adjustment – deferred tax
Other permanent differences – relating to share options
Enhanced relief for research and development
Total tax charge
257,001
-
15,256
(51,606)
(8,434)
1,159
(18,023)
(134,604)
(579,732)
1,551,125
219,344
(180,158)
64,625
28,310
78,760
-
(152)
(168,464)
(453,617)
999,748
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 has been reflected
in the measurement of deferred taxes in the financial statements.
Cerillion plc Annual Report and Financial Statements 2022
|
55
8. Profit attributable to Cerillion plc
The profit for the financial year of the Parent Company, Cerillion plc was £2,999,527 (2021: £2,999,554). As permitted by section
408 of the Companies Act 2006, no separate income statement is presented in respect of the Parent Company.
9. Dividends
(a) Dividends paid during the reporting period
The Board paid the final dividend in respect of 2021 of 5.0p per share, on 8 February 2022, and declared and paid an interim
2022 dividend of 2.6p (2021: 2.1p) per share on 17 June 2022. Total dividends paid during the reporting period were £2,243,024
(2021: £1,726,538).
(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 6.5p per fully paid
Ordinary Share (2021: 5.0p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at
30 September 2022, but not recognised as a liability at the year end is £1,918,377 (2021: £1,475,674). Since the year end the
Directors of Cerillion Technologies Limited have approved a £3.0 million dividend to Cerillion plc.
10. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number of Ordinary Shares in issue during the year.
Profit attributable to equity holders of the Company (£)
Weighted average number of Ordinary Shares in issue (number)
Less weighted average number of shares held in Treasury
Weighted average number of Ordinary Shares in issue (number)
Effect of share options in issue
Weighted average shares for diluted earnings per share
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
2022
2021
9,344,179
6,427,095
29,513,486
29,513,486
(10,627)
(30,149)
29,502,859
29,483,337
56,858
105,886
29,559,717
29,589,223
31.7
31.6
21.8
21.7
56
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued
11. Intangible assets
Group
Cost
Goodwill
£
Purchased
customer
contracts
£
Intellectual
property
rights
£
Software
development
costs
£
External
software
licences
£
Total
£
At 1 October 2020
2,053,141
4,382,654
2,567,160
4,305,792
230,453
13,539,200
Additions
-
-
-
948,198
22,014
970,212
At 30 September 2021
2,053,141
4,382,654
2,567,160
5,253,990
252,467
14,509,412
Additions
-
-
-
965,427
17,079
982,506
At 30 September 2022
2,053,141
4,382,654
2,567,160
6,219,417
269,546
15,491,918
Amortisation
At 1 October 2020
Provided in the year
At 30 September 2021
Provided in the year
At 30 September 2022
Net book amount at
30 September 2022
Net book amount at
30 September 2021
-
-
-
-
-
2,817,419
1,650,317
2,346,529
196,558
7,010,823
626,093
366,737
856,530
24,301
1,873,661
3,443,512
2,017,054
3,203,059
220,859
8,884,484
626,093
366,737
884,620
23,618
1,901,068
4,069,605
2,383,791
4,087,679
244,477
10,785,552
2,053,141
313,049
183,369
2,131,738
25,069
4,706,366
2,053,141
939,142
550,106
2,050,931
31,608
5,624,928
Amortisation has been included in operating expenses in the consolidated statement of comprehensive income.
The carrying value of goodwill included within the Cerillion plc consolidated statement of financial position is £2,053,141
(2021: £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 2022, 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.
Cerillion plc Annual Report and Financial Statements 2022
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57
12. Property plant and equipment
Group
Cost
At 1 October 2020
Additions
Disposals
Exchange difference
At 30 September 2021
Additions
Disposals
Exchange difference
At 30 September 2022
Accumulated Depreciation
At 1 October 2020
Provided in the year
Disposals
Exchange difference
At 30 September 2021
Provided in the year
Disposals
Exchange difference
At 30 September 2022
Leasehold
improvements
£
Computer
equipment
£
Fixtures
and fittings
£
Total
£
712,748
33,040
-
(14,932)
1,456,378
294,651
2,463,777
263,611
(105,325)
(9,944)
5,035
-
(5,558)
301,686
(105,325)
(30,434)
730,856
1,604,720
294,128
2,629,704
-
-
27,628
623,708
(58,724)
23,795
2,498
-
10,283
626,206
(58,724)
61,706
758,484
2,193,499
306,909
3,258,892
318,543
67,344
-
(10,058)
1,089,257
232,232
(105,325)
(7,999)
268,092
24,237
-
(5,289)
1,675,892
323,813
(105,325)
(23,346)
375,829
1,208,165
287,040
1,871,034
71,653
335,121
-
23,430
(58,724)
21,252
5,003
-
10,243
411,777
(58,724)
54,925
470,912
1,505,814
302,286
2,279,012
Net book amount at 30 September 2022
287,572
687,685
4,623
979,880
Net book amount at 30 September 2021
355,027
396,555
7,088
758,670
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.
58
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued 13. 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 shows the following amounts relating to leases:
Right-of-use assets
Properties
IT Equipment
Lease liabilities
Current
Non-current
Group
Company
30 September 2022
£
30 September 2021
£
30 September 2022
£
30 September 2021
£
3,043,937
3,705,723
2,656,147
3,162,079
13,060
-
-
-
3,056,997
3,705,723
2,656,147
3,162,079
Group
Company
30 September 2022
£
30 September 2021
£
30 September 2022
£
30 September 2021
£
976,486
3,049,538
4,026,024
947,710
3,866,352
4,814,062
731,000
2,803,234
3,534,234
731,000
3,416,663
4,147,663
Additions to the right-of-use assets during the 2022 financial year were £130,538 (2021: £nil). There were lease disposals during
the year with net book value totalling £106,460 (2021: £nil).
(ii) Amounts recognised in the consolidated statement of comprehensive income
The consolidated statement of comprehensive income shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Properties
IT Equipment
Interest expense (included in finance cost)
Expense relating to short-term leases (included in operating expenses)
30 September 2022
£
30 September 2021
£
672,431
373
672,804
133,944
156,681
677,604
5,848
683,452
158,341
120,674
Expenses relating to low value assets that are not shown above as short-term leases
(included in operating expenses)
408
5,160
The total cash outflow for leases in 2022 was £940,650 (2021: £922,757).
The property within the Company had a depreciation charge for the year of £505,932 (2021: £505,932).
Cerillion plc Annual Report and Financial Statements 2022
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59
Notes to the
Financial Statements
For the year ended 30 September 2022
Continued
14. Investments in subsidiaries
At 30 September 2022 the Company’s subsidiary undertakings, all of which have been included in the Group financial statements,
were:
Name
Cerillion Technologies Limited*
Cerillion Inc
Cerillion Technologies India Private Limited
Country of
incorporation
UK
USA
India
Percentage
and class of
shares held
Year end
Nature of
Business
100% - ordinary
30 September
Software services
100% - ordinary
30 September
Software services
100%** - ordinary
31 March***
Software services
* Cerillion Technologies Limited is the only subsidiary owned directly by Cerillion plc. Cerillion Technologies Limited is the parent for the other two
subsidiaries. Its registered office is the same as the Parent Company, being 25 Bedford Street, London, England, WC2E 9ES.
** includes holdings held indirectly through Cerillion Inc
*** For the purpose of the Group financial statements for the year ended 30 September 2022, management accounts have been drawn up to 30
September 2022.
Cerillion Inc’s registered office is: c/o Cohen & Grigsby, 625 Liberty Avenue, Pittsburgh, PA 15222-3152, USA. Cerillion Technologies India Private
Limited’s registered office is: Tower V, Wing 2B, Cyber City, Magarpatta City, Hadapsar, Pune 411013, India.
The Company
Cost and net book value:
As at 1 October 2020
Additions
As at 30 September 2021
Additions
As at 30 September 2022
Investments in
subsidiary undertakings
£
14,651,571
-
14,651,571
-
14,651,571
60
| Cerillion plc Annual Report and Financial Statements 2022
15. Deferred tax
Deferred tax asset
Group
1 October 2020
Foreign exchange movement on opening deferred tax asset
Credited to statement of comprehensive income
30 September 2021
Group
1 October 2021
Foreign exchange movement on opening deferred tax asset
Credited to statement of comprehensive income
30 September 2022
Accelerated
capital
allowances
£
18,402
833
1,755
20,990
Accelerated
capital
allowances
£
20,990
2,683
1,742
25,415
Other
temporary
differences
£
126,658
(7,112)
68,675
Total
£
145,060
(6,279)
70,430
188,221
209,211
Other
temporary
differences
£
188,221
19,261
26,728
234,210
Total
£
209,211
21,944
28,470
259,625
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.
At 1 October
Debited to statement of comprehensive income in respect of net ACAs & other temporary
differences
Credited to statement of comprehensive income in respect of acquisitions
As at 30 September
2022
£
861,765
45,544
(188,638)
718,671
2021
£
883,823
166,580
(188,638)
861,765
There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2022
(2021: £nil).
Cerillion plc Annual Report and Financial Statements 2022
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61
16. 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.
Trade receivables
Contract assets
Contract liabilities
Group
2022
£
2,502,608
9,853,285
4,612,511
2021
£
1,697,958
9,709,419
4,775,174
Contract assets, which are included in ‘Accrued income’ within trade and other receivables and are composed of the current and
non-current balances. Contract liabilities, which are included in ‘Deferred income’ within trade and other payables.
Payment terms and conditions in customer contracts may vary. In some cases, customers pay in advance of the delivery of
solutions or services; in other cases, payment is due as services are performed or in arrears following the delivery of the solutions
or services. Differences in timing between revenue recognition and invoicing result in trade receivables, contract assets or contract
liabilities in the statement of financial position.
Contract assets refer to accrued income and arise when revenue is recognised, but invoicing is contingent on performance of
other performance obligations or on completion of contractual milestones. Contract assets are transferred to receivables when the
rights become unconditional, typically upon invoicing of the related performance obligations in the contract or upon achieving the
requisite project milestone.
Contract liabilities refer to deferred income and result from customer payments in advance of the satisfaction of the associated
performance obligations and relate primarily to prepaid support or other recurring services. Deferred income is released as revenue
is recognised.
Significant changes in the contract assets and contract liabilities balances during the period are driven by the timing of income
recognition and when associated invoices are raised. Specifically, revenue recognised in the year in relation to deferred income
brought forward from prior years of £4,104,520 (2021: £4,700,894).
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 £225,869 (2021: £209,762). The total amount of
accrued costs to acquire a contract are £304,597 (2021: £242,916).
The total amount of revenue allocated to unsatisfied performance obligations is £37,420,003 (2021: £34,853,478). It is estimated
that 75% will be recognised over the next 18 months, the remainder over the following years thereafter.
There are no contract balances within the Parent Company (2021: £nil).
62
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued Current receivables
Trade receivables
Accrued income
Amounts owed by Group undertakings
Other receivables
Prepayments
Non-current receivables
Accrued income
Other receivables
Group
2022
£
2,502,608
7,758,649
-
311,229
631,735
2021
£
1,697,958
7,763,748
Company
2022
£
-
-
2021
£
-
-
-
2,058,502
2,079,936
235,981
480,941
-
7,726
-
7,811
11,204,221
10,178,628
2,066,228
2,087,747
Group
2022
£
2021
£
2,094,636
1,945,671
76,741
69,751
2,171,377
2,015,422
Company
2022
£
-
-
-
2021
£
-
-
-
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:
Group
Trade receivables
Specific provision
ECL provision
2022
£
2021
£
2,744,317
2,121,287
(193,501)
(231,841)
(201,827)
(221,502)
2,318,975
1,697,958
The ECL Provision above includes an amount relating to accrued income of £183,633 (2021: nil).
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.
Cerillion plc Annual Report and Financial Statements 2022
|
63
16. Trade and other receivables and other contract balances (continued)
Movements in the provision for the impairment of trade receivables were as follows:
Balance at the beginning of the year
Charged/(released) for the year
Utilised for the year
Balance at the end of the year
Specific
Provision
£
201,827
149,165
(157,491)
193,501
ECL provision
£
221,502
48,208
(221,502)
48,208
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.
Group
Not past due
Up to 3 months
3 to 6 months
Older than 6 months
2022
£
2021
£
1,713,716
1,104,013
734,637
5,994
48,261
463,995
102,174
27,776
2,502,608
1,697,958
Of the trade debt older than 6 months as at 30 September 2022, being £48,261 (2021: £27,776), cash of £7,689 (2021: £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:
Group
Not past due
Up to 3 months
3 to 6 months
Older than 6 months
2022
£
33,011
14,152
150,259
44,287
241,709
2021
£
141,696
219,203
29,574
32,856
423,329
64
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued
17. Trade and other payables
Current trade and other payables
Trade payables
Taxation
Other taxation and social security
Pension contributions
Other payables
Accruals
Deferred income
Group
2022
£
1,154,204
775,977
494,638
46,263
381,669
3,118,656
4,245,046
10,216,453
2021
£
490,055
799,160
421,847
46,383
519,171
2,339,143
4,775,174
9,390,933
Company
2022
£
96,657
919
64,254
-
-
74,340
-
2021
£
59,081
446
74,227
-
-
65,951
-
236,170
199,705
Movements in the provisions, which are included within accruals above, were as follows:
Balance at the beginning of the year
Charged/(released) for the year
Balance at the end of the year
Dilapidations
Provision
£
94,310
23,579
117,889
The dilapidations provision relates to the full expected cost of dilapidations across the Group’s properties.
Non-current trade and other payables
Other payables
Deferred income
Group
Company
2022
£
566,974
367,465
934,439
2021
£
394,850
-
394,850
2022
£
-
-
-
2021
£
-
-
-
The Directors consider that the carrying amount of trade and other payables 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.
Cerillion plc Annual Report and Financial Statements 2022
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65
17. Trade and other payables (continued)
The actuarial assumptions relating to the above provisions are outlined below:
Discount rate
Salary increment rate
Withdrawal rate
Gratuity
Long-term bonus
2022
7.50%
15.00%
15.00%
2021
6.20%
15.00%
15.00%
2022
7.50%
15.00%
15.00%
2021
5.10%
15.00%
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.
18. Borrowings and financial liabilities
Current liabilities:
Secured loans
Lease liabilities
Non-current liabilities:
Lease liabilities
Group
Company
2022
£
-
2021
£
-
2022
£
-
2021
£
-
976,486
947,710
731,000
731,000
3,049,538
4,026,024
3,866,352
4,814,062
2,803,234
3,534,234
3,416,663
4,147,663
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 was fully
repaid during the prior year.
Group and Company
1 October 2021
Cash-flows:
Repayment
30 September 2022
Non-current
Borrowings
£
Current
Borrowings
£
-
-
-
-
-
-
Total
£
-
-
-
66
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued Group and Company
1 October 2020
Cash-flows:
Repayment
30 September 2021
Group
1 October 2021
Cash-flows:
Repayment
Accrued interest
Non-cash:
Additions
Foreign exchange revaluation
Reclassification
30 September 2022
1 October 2020
Cash-flows:
Repayment
Accrued interest
Non-cash:
Reclassification
30 September 2021
Non-current
Borrowings
£
-
-
-
Current
Borrowings
£
609,359
Total
£
609,359
(609,359)
(609,359)
-
-
Non-current Lease
liabilities
£
Current Lease
liabilities
£
Total
£
3,866,352
947,710
4,814,062
-
-
-
-
(816,814)
3,049,538
(940,650)
133,944
125,128
(106,460)
816,814
976,486
(940,650)
133,944
125,128
(106,460)
-
4,026,024
4,655,772
922,706
5,578,478
-
-
(922,757)
158,341
(922,757)
158,341
(789,420)
3,866,352
789,420
947,710
-
4,814,062
Cerillion plc Annual Report and Financial Statements 2022
|
67
18. Borrowings and financial liabilities (continued)
Company
1 October 2021
Cash-flows:
Repayment
Accrued interest
Non-cash:
Reclassification
30 September 2022
1 October 2020
Cash-flows:
Repayment
Accrued interest
Non-cash:
Reclassification
30 September 2021
19. Financial instruments and risk management
Group
Financial instruments by category
Financial assets – measured at amortised cost
Non-current
Accrued income
Other receivables
Current
Trade and other receivables
Accrued income
Cash and cash equivalents
Non-current Lease
liabilities
£
Current Lease
liabilities
£
Total
£
3,416,663
731,000
4,147,663
-
-
(731,002)
117,573
(731,002)
117,573
(613,429)
2,803,234
613,429
731,000
-
3,534,234
4,012,028
731,000
4,743,028
-
-
(731,004)
135,639
(731,004)
135,639
(595,365)
3,416,663
595,365
731,000
-
4,147,663
2022
£
2021
£
2,094,636
1,945,671
76,741
69,751
2,171,377
2,015,422
2,813,837
7,758,649
1,933,939
7,763,748
20,249,100
13,174,471
30,821,586
22,872,158
Prepayments are excluded, as this analysis is required only for financial instruments.
68
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued Financial liabilities – held at amortised cost
Non-current
Trade and other payables
Lease liabilities
Current
Lease liabilities
Trade and other payables
Pension costs
Accruals
2022
£
2021
£
566,974
3,049,538
3,616,512
394,850
3,866,352
4,261,202
976,486
947,710
1,535,873
1,009,226
46,263
3,118,656
5,677,278
46,383
2,339,143
4,342,462
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
Financial assets – measured at amortised cost
Current
Amounts owed by Group undertakings & other receivables
Cash and cash equivalents
Financial liabilities – held at amortised cost
Non-current
Lease liabilities
Current
Lease liabilities
Trade and other payables
Accruals
2022
£
2021
£
2,058,502
2,079,936
289,141
227,008
2,347,643
2,306,944
2022
£
2021
£
2,803,234
2,803,234
3,416,663
3,416,663
731,000
96,657
74,340
901,997
731,000
59,081
65,951
856,032
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 2022 (2021: £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.
Cerillion plc Annual Report and Financial Statements 2022
|
69
19. Financial instruments and risk management (continued)
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:
Trade receivables
Group 1
Group 2
Group 3
2022
£
25,838
2021
£
838
2,466,259
1,628,518
10,511
68,602
2,502,608
1,697,958
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 4 customers (2021: 5 customers) with trade receivable balances each representing in excess of 5% of
the total trade receivables of £2,502,608 (2021: £1,697,958). Of these customers, none are categorised within Group 1 (2021:
none), 4 are within Group 2 representing 86% of total trade receivables (2021: 5 customers), with none in Group 3 (2021: none).
There are no trade receivables within the Parent Company.
Cash at bank and short-term deposits
A1
Not rated
2022
£
2021
£
20,245,806
13,172,172
3,294
2,299
20,249,100
13,174,471
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 2022 the Group had no forward foreign exchange contracts in place (2021: none) to mitigate exchange rate
exposure.
70
| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued 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:
30 September 2022
Financial assets
Financial liabilities
Total exposure
30 September 2021
Financial assets
Financial liabilities
Total exposure
AUD
USD
EUR
INR
DKK
BND
338,844
1,341,281
3,552,826
1,109,776
1,855,143
227,480
-
(154,998)
(3,167)
(980,546)
-
-
338,844
1,186,283
3,549,659
129,230
1,855,143
227,480
AUD
USD
EUR
INR
DKK
BND
361,918
2,395,709
1,355,140
898,789
2,151,192
413,787
-
(87,411)
(5,389)
(546,586)
-
-
361,918
2,308,298
1,349,751
352,203
2,151,192
413,787
The following table illustrates the sensitivity of profit and equity in regards to the Group’s financial assets and financial liabilities and
the US Dollar, Australian Dollar, Euro, Indian Rupee, Danish Krone and Brunei Dollar to GBP exchange rate ‘all other things being
equal’. It assumes a +/- 10% change to each of the foreign currency to GBP exchange rates. The sensitivity analysis is based on
the Group’s foreign currency financial instruments held at each reporting date.
If GBP had strengthened against the foreign currencies by 10% then this would have had the following impact:
30 September 2022
Loss for the year
Equity total
30 September 2021
Loss for the year
Equity total
AUD
USD
EUR
INR
DKK
BND
(30,804)
(107,844)
(322,696)
(11,748)
(168,649)
(30,804)
(107,844)
(322,696)
(11,748)
(168,649)
(20,680)
(20,680)
AUD
USD
EUR
INR
DKK
BND
(32,902)
(32,902)
(209,845)
(122,705)
(209,845)
(122,705)
(32,018)
(32,018)
(195,563)
(195,563)
(37,617)
(37,617)
If the GBP had weakened against the foreign currencies by 10% then this would have had the following impact:
30 September 2022
Gain for the year
Equity total
30 September 2021
Gain for the year
Equity total
AUD
37,649
37,649
AUD
40,213
40,213
USD
EUR
131,809
131,809
394,407
394,407
USD
EUR
256,478
256,478
149,972
149,972
INR
14,359
14,359
INR
39,134
39,134
DKK
206,127
206,127
DKK
239,021
239,021
BND
25,276
25,276
BND
45,976
45,976
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.
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71
19. Financial instruments and risk management (continued)
Market Risk – cash flow interest rate risk
The loans taken out with HSBC to facilitate the purchase of shares prior to the Admission on AIM and have now been repaid, as
disclosed in note 18.
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.
30 September 2022
Lease liabilities
Trade and other payables
30 September 2021
Lease liabilities
Trade and other payables
Less than
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years
977,375
5,971,407
958,275
566,974
2,223,696
182,750
-
-
926,303
4,615,759
931,919
394,850
2,427,264
913,750
-
-
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 2022 the Group’s total managed capital amounted to £26,731,979
(2021: £20,205,443); Company’s capital as of 30 September 2022 was £15,892,683 (2021: £15,781,037).
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| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued 20. Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value are required to be grouped into three Levels of a fair value hierarchy.
The three Levels are defined based on the observability of significant inputs to the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly; and
• Level 3: unobservable inputs for the asset or liability.
There were no derivative financial instruments in existence nor any other financial instruments measured at fair value on a recurring
basis at 30 September 2022 (2021: £nil).
There were no transfers between Level 1 and Level 2 in 2022 or 2021 and no derivative financial instruments within the Group.
Measurement of fair value of financial instruments
The Group’s finance team performs valuations of financial items for financial reporting purposes, with valuation techniques selected
based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information.
When the Group enters into foreign currency forward contracts (Level 2) as they are not traded in active markets, they would be
fair valued using observable forward exchange rates corresponding to the maturity of the contract. The effects of non-observable
inputs are not expected to be significant should the Group enter into foreign currency forward contracts.
21. Share capital
Issued, allotted, called up and fully paid:
29,513,486 (2021: 29,513,486) Ordinary Shares of 0.5 pence
2022
£
2021
£
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.
At the beginning of the year the Group held 12 shares in Treasury Stock. In February 2022, the Company acquired 111,814 of its
own shares in the market, at £7.40 per share, to be held as Treasury Stock to be used to satisfy the exercise of share options.
In March to August 2022 111,814 of these shares were issued on the exercise of share options. At the year end there were 12
shares (2021: 12 shares) remaining in Treasury Stock at an average cost of £2.10 per share (2021: £2.10).
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73
22. 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 2022 under the LTIP. A charge of £60,465 (2021: £110,341)
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
Scheme
Exercise price (£)
Number of options granted
Vesting period (years)
Option life (years)
Risk free rate
Volatility
Dividend yield
Fair value (£)
2022
LTIP
0.005
15,000
3 to 4 years
3 to 4 years
1.75%
109%
1% to 2%
9.45
2021
SAYE
5.92
71,000
2021
LTIP
0.005
75,000
3 years
3 to 6 years
3.5 years
3 to 6 years
0.16%
35%
3.00%
2.03
1.00%
83%
1.00%
4.39
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.
The SAYE 2019 scheme matured during the year and 111,814 share options were exercised, with Treasury Shares being used to
settle all of the options exercised. In the prior year Share options relating to the LTIP 2017 were exercised, with Treasury Shares
being used to settle the options exercised.
During the year options were granted as summarised in the table below:
Outstanding at start of year
Granted
Lapsed
Exercised
Outstanding at 30 September
2022
Number
of Options
278,912
15,000
(28,090)
(111,814)
154,008
2022
Weighted average
exercise price
£
2.03
0.005
(2.29)
(1.092)
2.46
2021
Number
of Options
382,912
146,000
-
(250,000)
278,912
2021
Weighted average
exercise price
£
0.38
2.88
-
(0.005)
2.03
Exercisable at 30 September
-
-
-
-
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| Cerillion plc Annual Report and Financial Statements 2022
Notes to the Financial StatementsFor the year ended 30 September 2022Continued
For the options outstanding at 30 September 2022, the weighted average fair values and the weighted average remaining
contractual lives (being the time period from 30 September 2022 until the lapse date of each share option) are set out below:
LTIP 2021
SAYE 2021
LTIP 2022
23. Retirement benefits
Weighted average
fair value of options
outstanding
£
Weighted average
remaining
contractual life
Years
4.39
2.03
9.45
4.49
2.34
5.41
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 £329,901 (2021: £320,358). At the year end the
contributions payable to the scheme were £46,263 (2021: £46,383). In addition to this there are retirement benefits relating to the
India subsidiary which are disclosed in note 17.
24. Related party transactions
(i) Remuneration of Key Management Personnel
The Group and Company consider that the Directors are their key management personnel and further detail of their remuneration is
disclosed in the Remuneration report for 2022.
No key personnel other than the Directors have been identified in relation to the year ended 30 September 2022 (2021: none).
(ii) Related party transactions
The aggregate dividends paid to Directors during the year were £683,102 (2021: £545,585). No other related party transactions
took place during the year (2021: none).
25. Charge over assets
In providing the Group with banking, credit card and forward currency facilities, the Group’s bankers HSBC plc hold:
• a fixed charge over all present freehold and leasehold property;
• a first charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and
• a first floating charge over all assets, both present and future.
26. Contingent assets / liabilities
The Group has no contingent assets or liabilities as at 30 September 2022 (2021: nil).
27. Subsequent events
There have been no subsequent events requiring adjustment or disclosure within the financial statements.
28. Ultimate controlling party
In the opinion of the Directors, there was no ultimate controlling party at 30 September 2022 or 30 September 2021.
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75
Notes
Cerillion plc
25 Bedford Street
London
WC2E 9ES
United Kingdom
Tel: +44 20 7927 6000
Email: info@cerillion.com
Web: www.cerillion.com