Annual Report and Financial Statements 2023
Cerillion plc
Company
Information
Company
registration
number:
09472870
Solicitors:
Orrick, Herrington & Sutcliffe (Europe) LLP
107 Cheapside
London
EC2V 6DN
Registered
office:
25 Bedford Street
London
WC2E 9ES
Directors:
L T Hall
A R Dickson
G J O’Connor
A M Howarth
M Dee
Secretary:
A R Dickson
Independent
Auditors:
PricewaterhouseCoopers LLP
Registered Auditor
Chartered Accountants
4th Floor, One Reading Central
23 Forbury Road
Reading, Berkshire
RG1 3JH
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
Nominated
Adviser and
Broker:
Joint Broker:
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Singer Capital Markets
1 Bartholomew Lane
London
EC2N 2AX
Financial Public
Relations:
KTZ Communications Limited
No. 1 Cornhill
London
EC3V 3ND
Bankers:
HSBC UK Bank plc
69 Pall Mall
St James
London
SW1Y 5EY
National Westminster Bank
332 High Holborn
London
WC1V 7PA
1
3
5
9
14
16
18
21
22
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
35
46
47
48
49
50
51
52
53
Independent Auditors’ Report to the Members of Cerillion plc 27
Cerillion plc Annual Report and Accounts 2023
Overview
Who We Are
Cerillion provides mission-critical software for billing,
charging and customer relationship management
(“CRM”), primarily to the telecoms sector.
London - HQ
Brussels
Sofia
Ahmedabad
Pune
Indore
Singapore
Sydney
c. 80 customers
c. 45 countries
Headquartered in London, with a Global
Existing customers typically generate over
Solutions Centre in Pune, India, and
operations in Bulgaria, USA and Australia
90% of annual income
Product offering is recognised in global
Global customer base c. 80 customers in
analyst reports
c. 45 countries
Long customer relationships
– typically 10+ years
Rising demand in telecoms marketplace,
driven by multiple factors, including
technological and regulatory change
Cerillion plc Annual Report and Accounts 2023
|
1
Overview
Financial Performance Highlights
Record highs across all key financial measures
Total Revenue +20%
£m
17.4
18.8
20.8
32.7
26.1
Annualised Recurring Revenue Run-Rate +19%
£m
39.2
9.9
7.9
4.3
5.0
14.8
12.4
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
Adj. PBT +41%
£m
Adj. EPS +31%
p
New Orders +7%
£m
23.3
23.3
13.0
Back-order Book +0%
£m
33.3
29.4
31.6
Sup port Revenue Run Rate
Rolling Back Order
31.0
22.0
13.0
42.1
45.4
45.4
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
Net Cash +22%
£m
Dividend per Share +24%
p
24.7
20.2
4.5
4.9
5.5
11.3
9.1
7.1
13.2
7.7
2.5
5.0
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
2
| Cerillion plc Annual Report and Accounts 2023
3.13.53.78.511.916.820182019202020212022202310.911.312.425.535.246.2201820192020202120222023 Highlights
Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the
12 months ended 30 September 2023.
Highlights
Year ended 30 September
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
Financial:
A record year across key financial performance measures
Revenue1&4 up 20% to a record £39.2m (2022: £32.7m),
driven by major new customer implementations, significant
licence revenue and strong demand from existing
customers
Annualised recurring revenue up 19% to £14.8m
(2022: £12.4m)
Back-order book6 at £45.4m at the financial year-end
(30 September 2022: £45.4m); now at a record £52.5m
following the recent €12.4m contract win with a new
European Tier-1 customer
Operational:
2023
£39.2m
£14.8m
£18.1m
46.2%
£16.8m
£16.1m
46.2p
43.8p
11.3p
£24.7m
2022
£32.7m
£12.4m
£13.8m
42.0%
£11.9m
£10.9m
35.2p
31.7p
9.1p
£20.2m
Change
+20%
+19%
+32%
+420bps
+41%
+48%
+31%
+38%
+24%
+22%
New customer sales pipeline8 up 16% to a record £243m at
30 September 2023 (30 September 2022: £209m)
Strong balance sheet with net cash up 22% to £24.7m (30
September 2022: £20.2m)
Final dividend of 8.0p per share proposed (2022: 6.5p), bringing
the total dividend for the year to 11.3p per share (2022: 9.1p),
an increase of 24%
Major new implementation covering mobile services
AI-based functionality introduced in latest product release,
completed for Telesur in H2; second phase covering its
fixed-line network is now under way
Record orders of £30.8m to existing customers, up by 85%
year-on-year
– reflects the benefits of recent larger customer wins and
includes major new contract worth £15.1m signed in H2
Continued expansion of newer resource centres in Bulgaria
and India, and sales team presence added in the USA
issued in November 2023
Pipeline of new business opportunities stands at a record high
and includes larger potential contracts
Cerillion well-positioned for further growth in FY24 and beyond
Cerillion plc Annual Report and Accounts 2023
|
3
Highlights
Continued
Louis Hall, CEO of Cerillion, commented:
“It has been another year of strong growth and development. Revenue, pre-tax profit and the new customer sales pipeline all reached
new highs. Record orders to existing customers – some 79% of total revenue for the year - shows the importance of our existing
customer base, and the recent closure of a €12.4m deal with a Tier-1 telco is another demonstration of our widening market appeal.
“We continued to invest in our product set, introducing AI for the first time, and also expanded our resource base, particularly at our
newer centres in Ahmedabad, Indore and Sofia.
“The market backdrop remains extremely favourable. Numerous factors continue to drive telco investment in the enterprise software
layer that connects their network infrastructure to their customers and allows them to enhance monetisation of their network
infrastructure assets. In a slower growth environment for telcos, the need to extract more revenue from existing assets and improve
operational efficiency are just as important drivers for improving or replacing the enterprise software layer as investment in new 5G and
fibre infrastructure.
“Cerillion’s financial position remains very strong, supported by significant net cash, increasing levels of recurring income and strong
cash generation. Together with a record back-order book and strong new customer sales pipeline, this leaves us confident about
Cerillion’s growth prospects in the new financial year and beyond.”
Notes
Note 1
Note 2
Note 3
Note 4
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 by taking reported profit before tax and adding back amortisation of acquired intangible assets and share-based payment charge.
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 £36.7m of sales contracted but not yet recognised at the end of the reporting period plus £8.7m of annualised support and maintenance
revenue. It is anticipated that c. 45% of the £36.7m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12
months.
Note 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.
Note 8 New Customer Sales Pipeline is the total, unweighted value of all qualified sales prospects.
4
| Cerillion plc Annual Report and Accounts 2023
Chairman and
Chief Executive Officer’s Report
Introduction
Cerillion continues to perform very strongly and financial results for the year have set new record highs on key measures. Revenue
increased by 20% year-on-year to a record £39.2m (2022: £32.7m), and adjusted profit before tax rose by 41% to a new high of
£16.8m (2022: £11.9m), which was meaningfully ahead of the prior consensus market forecast, as reported in our October trading
update. At financial year-end, the total value of our new customer sales pipeline had increased by 16% to a record £243m (2022:
£209m), which reflects the growing demand that we are seeing in the marketplace.
This excellent performance was achieved against slower economic growth globally. We believe that this backdrop is likely to
stimulate market interest in our product-based SaaS solutions as telcos seek to maximise investment returns on critical 5G and fibre
infrastructure, as well as on existing infrastructure assets and comment further on this below.
New orders for the financial year under review increased slightly to £31.6m (2022: £29.4m), and the new financial year has started
strongly with a major new contract worth approximately €12.4m signed with a new Tier-1 customer. It is worth noting that key criteria in
the selection process were the commercial, operational and financial advantages of our ‘out-of-the-box’ product model, and especially
the ease with which our software enables new products and packages to be created and launched by our customers to their end-
customers. Our highly-configurable, ‘out-of-the-box’ product solution enables much lower total cost of ownership and much faster time-
to-market than the traditional best-of-breed or bespoke approaches.
The recent Tier-1 new customer signing continues a trend towards winning larger customers. As we have previously commented,
this has multiple benefits. In addition to providing further proof points of the quality of our product offering, larger customers typically
generate higher income over the long-term since they are generally more active, with broader and deeper requirements and larger
budgets. Larger deals also typically have a higher software licence element and therefore tend to be margin enhancing.
New orders from existing accounts increased by 85% year-on-year to £30.8m (2022: £16.7m). This substantial uplift mainly reflected
the presence of the larger customers that we have signed in recent years, but it was also driven by some large deals with a number of
smaller customers.
In order to support the significant acceleration of the Company’s growth rate, we have continued to increase resources in our main
operations in India and Bulgaria. We also added new sales presence in the USA, Belgium and Singapore over the year.
Looking to the future, demand for billing, charging, customer relationship management (“CRM”) and digital customer experience
solutions in the Company’s core telecommunications market is driven by a very broad range of factors. These include the need to:
realise greater value from existing infrastructure assets; improve operational efficiency; adapt rapidly to changing market conditions; and
maximise value from new infrastructure investments in 5G and fibre rollouts. Cerillion remains well-placed to benefit from these drivers,
and to grow, both in Europe and internationally. We also expect to gain from increasing market acceptance of SaaS-based product
solutions.
The pipeline of potential new business opportunities is very strong, and the Company is well-positioned to make further strong progress
in the new financial year.
Cerillion plc Annual Report and Accounts 2023
|
5
Chairman and
Chief Executive Officer’s Report
Continued
Financial Overview
Total revenue for the year to 30 September 2023 rose by 20% to £39.2m (2022: £32.7m). As is typical, existing customers (classified
as those acquired before the beginning of the reporting period) accounted for a very high proportion of total revenue, generating 99% of
the overall result (2022: 98%).
Recurring revenue, which is derived from support and maintenance and managed service contracts, increased by 23% to £12.9m and
comprised approximately 33% of total revenue (2022: £10.5m, 32%). At 30 September 2023, recurring revenue on an annualised basis
was 19% higher year-on-year at £14.8m (30 September 2022: £12.4m), boosted by a 41% increase in annualised managed service
contract revenue (2022: 67% increase) as more customers contracted for these services.
The Group’s revenue streams are categorised into three segments: software revenue (including Software-as-a-Service); services
revenue; and revenue from other activities. Software revenue principally comprises software licences and related support and
maintenance and managed service sales, while services revenue is generated by software implementations and ongoing account
development work. Revenue from other activities is mainly from the reselling of third-party products.
• Software (including Software-as-a-Service) revenue increased by 64% to £21.1m (2022: £12.9m). This included initial licence
recognition for recent, large new customer wins. Software revenues accounted for 54% of total revenues (2022: 39%).
• Services revenue decreased by 15% to £15.5m (2022: £18.3m). This reduction largely reflected a reduction in concurrent
implementation work on new customer projects. Services revenue comprised 40% of total revenue (2022: 56%).
• Third-party income increased by 62% to £2.6m (2022: £1.6m) and comprised 7% of total revenue (2022: 5%).
Gross margin was slightly ahead of the prior year at 78.6% (2022: 77.9%), reflecting the higher proportion of licence revenue
recognised.
Operating expenses increased by 17.2% to £15.3m (2022: £13.0m). This included an unfavourable year-on-year foreign exchange
impact of £0.6m due to retranslation of balance sheet items at year end. Excluding this, operating expenses increased by 12%,
reflecting strong focus on cost control. Personnel costs were £8.7m (2022: £7.4m) and accounted for 57% (2022: 57%) of operating
expenses.
Adjusted EBITDA for the year increased by 32% to £18.1m (2022: £13.8m), driven mainly by higher revenues, and supported by
favourable foreign exchange rates. The Board considers adjusted EBITDA to be a key performance indicator for Cerillion as it adds back
key non-cash transactions, being share-based payments, depreciation and amortisation.
We continued to invest in our product set, and the charge for amortisation of intangibles was £1.4m (2022: £1.9m). Expenditure on
tangible fixed assets was £0.3m (2022: £0.6m). Operating profit increased by 43% to £15.3m (2022: £10.7m) due to the increase in
revenue, as well as operational leverage.
Adjusted profit before tax rose by 41% to £16.8m (2022: £11.9m) and adjusted earnings per share increased by 31% to 46.2p (2022:
35.2p). On a statutory basis, profit before tax increased by 48% to £16.1m (2022: £10.9m) and earnings per share increased by 38% to
43.8p (2022: 31.7p).
6
| Cerillion plc Annual Report and Accounts 2023
Cash Flow and Banking
The Group continued to generate strong cash flows, and closed the financial year with net cash up by 22% against the same point last
year to £24.7m (30 September 2022: £20.2m). This was after £2.9m of dividend payments (2022: £2.2m). Total debt at the year-end
remained £nil (2022: £nil).
Dividend
The Board is pleased to propose a 23% increase in the final dividend to 8.0p per share (2022: 6.5p). Together with the interim dividend
of 3.3p per share (2022: 2.6p), this brings the total dividend for the year to 11.3p per share (2022: 9.1p), an increase of 24%.
The dividend, which is subject to shareholder approval at the Company’s Annual General Meeting to be held on 1 February 2024, will
become payable on 8 February 2024 to those shareholders on the Company’s register as at the close of business on the record date of
29 December 2023. The ex-dividend date is 28 December 2023.
Operational and Market Overview
High points over the year included the completion of some major implementations. One was for Neos Networks, a leading UK business
telecoms provider, where we replaced three independent systems, and another was for Telesur, the leading telecommunications
provider in Suriname, where we migrated the telco’s mobile services to our platform. Our work for Telesur continues with the digital
transformation of its fixed-line services. In June 2023, we signed a major new six-year contract with an existing telecommunications
customer worth a total of £15.1 million, which just tops our previous largest ever customer win, signed in 2022. The £15.1 million win
followed a £10 million contract signing in the first half of the year with an existing customer.
Our latest major new contract was agreed in November 2023 and is with a Tier-1 telco, based in Europe. Worth an initial €12.4 million,
we expect this engagement to grow significantly in value over time. It also supports our view that the trend towards signing larger deals
with larger customers will continue as our product-based approach gains wider acceptance. As previously emphasised, contracts
with larger customers normally involve higher recurring revenues and have much greater upsell potential, therefore they contribute
significantly to the ongoing growth of the business.
As we grow across the globe, and global labour markets evolve, we continue to expand our operating locations, recruiting the best
talent cost-effectively and supporting our expanding global customer base. We enlarged our teams at our newer locations in Sofia,
Bulgaria and at Ahmedabad and Indore in India and have maintained a mix of remote and office-based working. The competition for
technology professionals remained relatively strong during most of the financial year, but pressures eased significantly from the peaks
reached in the prior year. Nevertheless, we remain focused on potential inflation in people costs and continue to manage carefully the
mix and location of resource.
Our investment in R&D exceeded last year’s levels and we have continued to advance our technology, launching two major new
releases of our product set, as scheduled. The most recent of these releases was Cerillion 23.2, which went live in early November
2023. A key feature of this latest release was the introduction of AI. This will specifically support the ease and agility with which our
customers can create and release new product sets within our Enterprise Product Catalogue, by enabling non-technical telco staff to
use natural language to define complex product bundles. These are then constructed automatically, significantly reducing the time and
complexity of this key task.
Significant telco investment in critical 5G and fibre infrastructure continues and will continue to flow down to the ancillary systems that
connect this infrastructure to customers and revenue. Against this macro backdrop, we anticipate that the current global economic
slowdown will place more pressure on telcos to find efficiencies in their digital real-estate. We believe that this is likely to encourage
further market take-up of the flexible, highly configurable, product-based SaaS solutions that Cerillion offers, rather than the more
bespoke solutions, or best-of-breed platforms, available from traditional vendors. In addition to this, we anticipate that telcos will seek to
improve their digital real-estate in order to save costs, by improving business efficiency and consolidating multiple customer bases onto
a single platform, as well as driving revenue from existing infrastructure assets, by providing the market with more innovative products
based on those assets.
Cerillion plc Annual Report and Accounts 2023
|
7
Chairman and
Chief Executive Officer’s Report
Continued
Cerillion’s ability to address the market through a range of flexible solutions remains compelling. As well as our proven ability to support
end-to-end transformation projects, the Company offers the flexibility to provide individual product modules, or subsets of modules, to
implement point solutions that address specific requirements. The Company’s solutions are also able to support a broad range of CSPs,
from traditional network operators and virtual network operators (“VNOs”) to enterprise connectivity solutions providers.
Outlook
The Company is growing strongly, and its product-based SaaS approach leaves it well placed to continue to benefit from the broad
range of positive market drivers, as discussed above. We are also encouraged by the increasing visibility the brand is gaining in what
remains a huge marketplace. Our recent Tier-1 new customer win reflects this and Cerillion’s inclusion in two Gartner Market Guides*
(which evaluated suppliers based on product portfolio, geographic spread and progress in the last year), published earlier in 2023, also
highlights the Company’s growing reputation and the breadth and completeness of its product portfolio.
Looking ahead, the recent new customer win, ongoing implementation work with existing customers, and the major new deals signed
with existing customers all create a strong platform for further growth. The back-order book, now at a record £52.5m, underpins
revenue visibility, and the new customer sales pipeline, also at a new high, contains large deal opportunities. This leaves Cerillion well-
placed to deliver another strong performance in the new financial year and beyond.
Cerillion’s financial position remains very strong, supported by significant net cash, increasing levels of recurring income and strong cash
flows. We therefore view the future with confidence and will continue to invest across the business to support ongoing growth.
A M Howarth
Non-executive Chairman
17 November 2023
L T Hall
Chief Executive Officer
17 November 2023
*Gartner “Market Guide for CSP Customer Management and Experience Solutions” By Analyst(s): Juha Korhonen, Amresh Nandan, Chris Meering, Susan
Welsh de Grimaldo. Published 10 April 2023, and Gartner “Market Guide for CSP Revenue Management and Monetization Solutions” By Analyst(s):
Amresh Nandan, Chris Meering, Juha Korhonen. Published 9 November 2022.
Gartner Disclaimer:
Gartner does not endorse any vendor, product or service depicted in our research publications, and does not advise technology users to select only
those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization
and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates
in the U.S. and internationally and is used herein with permission. All rights reserved.
8
| Cerillion plc Annual Report and Accounts 2023
Strategic
Report
The Directors present their strategic report for the year ended 30 September 2023.
Financial overview
Revenue for the year totalled £39,170,000 (2022: £32,726,000) and the gross profit was £30,806,000 (2022: £25,505,000). Profit after
taxation for the year was £12,931,000 (2022: £9,344,000). The Group’s net assets were £36,885,000 (2022: £26,732,000).
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 taxation
Add back: - Amortisation of acquired intangibles
- Share-based payment charge
Adjusted profit before taxation***
Average employee numbers: - UK
- India
- Other
Total
2023
£’000
39,170
15,540
21,054
2022
£’000
32,726
18,272
12,860
12,909
10,483
31,584
29,412
45,448
45,381
15,277
2,597
209
18,083
16,114
496
209
16,819
100
198
26
324
10,704
2,986
60
13,750
10,895
993
60
11,948
97
178
20
295
* 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 taxation 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.
Cerillion plc Annual Report and Accounts 2023
|
9
Strategic
Report
Continued
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 2023, 89% (2022: 82%) 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
10
| Cerillion plc Annual Report and Accounts 2023
telecommunications, broadband and TV industries and on fixed line/mobile, broadband and TV volumes and revenues, which may fall
generally in the future.
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
2023
19.7%
59.7%
81.6%
96.2%
2022
14.7%
51.0%
74.5%
95.2%
2021
19.9%
51.6%
75.9%
93.0%
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.
Cerillion plc Annual Report and Accounts 2023
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11
Strategic
Report
Continued
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 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 2023.
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.
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| Cerillion plc Annual Report and Accounts 2023
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 17 November 2023 and signed on its behalf by:
L T Hall
Chief Executive Officer
Cerillion plc Annual Report and Accounts 2023
|
13
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.
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 Accounts 2023
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 Accounts 2023
|
15
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 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 78 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 59 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 42 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.
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| Cerillion plc Annual Report and Accounts 2023
Mike Dee, Non-executive Director (aged 68 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.
Guy Jason O’Connor, Non-executive Director (aged 61 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
Guy O’Connor
Board
10/10
10/10
10/10
10/10
8/10
Audit
2/2
2/2
-
-
-
Nominations
Remuneration
0/0
0/0
-
-
-
1/1
1/1
-
-
-
Cerillion plc Annual Report and Accounts 2023
|
17
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 will be 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:
nil vesting
25% vesting
100% vesting
Between 10% and 18% compound annual growth:
Straight-line vesting between 25% and 100%
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| Cerillion plc Annual Report and Accounts 2023
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.
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.
During the year ended 2023 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 February 2026, with an exercise price of £9.28, which was
a 20% discount to the closing price on the last trading date before the launch of the Plan.
In total up to 27,766 options over Ordinary Shares were awarded under the Plan, representing approximately 0.1% of the current issued
share capital of the Company.
There is a charge recognised in the current year financial statements of £209,000 (2022: £60,000) 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 Accounts 2023
|
19
Report of the
Remuneration Committee
Continued
Directors’ emoluments (audited)
The remuneration of each director during the years ended 30 September 2023 and 30 September 2022 are detailed in the tables
below:
2023
Executive
L T Hall
A R Dickson
Non-executive
A M Howarth
M Dee
G J O’Connor
Total
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
Salary
£’000
346
176
37
31
26
616
Salary
£’000
326
111
72
16
35
30
22
612
Benefits
£’000
8
1
-
-
-
9
Benefits
£’000
7
-
3
3
-
-
-
13
Bonus
£’000
363
95
-
-
-
458
Bonus
£’000
326
55
33
-
-
-
-
414
Pension
contribution
£’000
22
14
-
-
-
36
Pension
contribution
£’000
-
7
8
-
-
-
-
15
Total
2023
£’000
739
286
37
31
26
1,119
Total
2022
£’000
659
173
116
19
35
30
22
1,054
*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
17 November 2023
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| Cerillion plc Annual Report and Accounts 2023
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
17 November 2023
Cerillion plc Annual Report and Accounts 2023
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21
Directors’
Report
The directors present their report and the audited financial statements of the Group for the year ended 30 September 2023.
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
A M Howarth
M Dee
Branches in the EU
The Company has a branch based in Malta and another branch based in Bulgaria.
Statement of directors’ responsibilities in respect of the financial statements
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 Accounts 2023
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.
Cerillion plc Annual Report and Accounts 2023
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23
Directors’
Report
Continued
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.
• 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.
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)
In 2023 Cerillion Technologies Limited met the reporting threshold for Streamlined Energy and Carbon Reporting (SECR) disclosure
for the first time. Under the reporting requirements, companies based in the UK are required to report on their energy usage. Cerillion
Technologies Limited is the only UK subsidiary of Cerillion plc and so its energy usage has been disclosed below. All carbon emissions
result from UK operations.
Our ESG Strategy on page 23 outlines the current policies and practices in place to reduce carbon emissions.
The following data meets the requirements of the SECR regulations. Cerillion Technologies Limited used a total of 323,841 kWh of
energy in 2023, resulting in carbon emissions of 67,282 kgCO2e. The data has been prepared using the GHG Reporting Protocol
– Corporate Standard methodology, taking best available data and estimates where required. The reporting meets the minimum
requirements for SECR and no voluntary emission sources have been stated.
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| Cerillion plc Annual Report and Accounts 2023
The largest source was scope 2 electricity emissions, contributing 97.7% of total carbon emissions, with IT Equipment from four UK
locations accounting for 81.9% of the company’s emissions.
ENERGY INPUTS:
Total Purchased Electricity
Total Purchased Transport Fuels
Total Energy Use
EMISSIONS:
Total Scope 1 emissions
Scope 2 – Purchased Electricity - Office
Scope 2 – Purchased Electricity – IT Equipment
Total Scope 2 emissions
Scope 3 – Combustion of transport fuels in employee owned vehicles
where the company has purchased (or reimbursed) the fuel
Total Scope 3 emissions
Total Emissions
Floor Area
Emissions per floor area
Units
2023
kWh
kWh
kWh
kgCO2e
kgCO2e
kgCO2e
kgCO2e
kgCO2e
kgCO2e
kgCO2e
m2
kgCO2e / m2
317,535
6,306
323,841
-
10,636
55,117
65,753
1,529
1,529
67,282
960.3
70.1
It has been necessary to estimate some of the data shown in the above table, relating to the purchased electricity for IT equipment
that is located in data centres at four separate locations in the UK.
Although some electricity is estimated by apportionment for the purchased electricity of the office space, this has not been included
in the materiality estimate; these estimates are based on ‘actual’ consumption and are likely to have minimal impact on the data.
However, the purchased electricity for the IT equipment is estimated based on estimated average power from sub meters. The
materiality of increasing or decreasing the estimates by 10% for purchased electricity of IT equipment is +/- 8.2% of the total
emissions for the Company.
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.
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.
Cerillion plc Annual Report and Accounts 2023
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25
Directors’
Report
Continued
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 £572,000 (2022: £385,000) through the consolidated statement of comprehensive income during the year
and has capitalised software development costs of £1,146,000 (2022: £965,000).
Dividends
Total dividends paid during the reporting period were £2,892,000 (2022: £2,243,000). Since the year end the directors have proposed
the payment of a dividend in respect of the full financial year of 8.0p per fully paid Ordinary Share (2022: 6.5p). The aggregate amount of
the proposed dividend expected to be paid out of retained earnings at 30 September 2023, but not recognised as a liability at the year
end is £2,361,000 (2022: £1,918,000).
Political donations
There were no political donations made during the year (2022: £nil).
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
In November 2023 a contract worth an initial €12.4m was signed with a new Tier-1 customer.
Independent Auditors
PricewaterhouseCoopers LLP have expressed willingness to continue in office. Their performance has been reviewed annually by the
Audit Committee and, given the completion of the audit partner’s five year term, the Committee have decided to conduct a formal
audit tender process. PricewaterhouseCoopers LLP will be considered for reappointment alongside other audit firms. In accordance
with section 489(4) of the Companies Act 2006, the appointment of next year’s auditors will be put to the members at the forthcoming
Annual General Meeting.
APPROVED ON BEHALF OF THE BOARD
L T Hall
Director
17 November 2023
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| Cerillion plc Annual Report and Accounts 2023
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 2023 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 as applied in accordance with the
provisions of the Companies Act 2006; 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 2023; 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.
Cerillion plc Annual Report and Accounts 2023
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27
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
Our audit approach
Overview
Audit scope
• We performed a full scope audit of Cerillion plc (“the Company”). Full scope audit procedures were
also performed over Cerillion Technologies Limited, its wholly owned subsidiary, due to its financial
significance to the group. Testing of specific account balances was also performed over Cerillion
Technologies (India) Private Limited, a wholly owned subsidiary of Cerillion Technologies Limited.
Key audit matters
• Software licence revenue recognition (group)
• Capitalised development costs (group)
Impairment of investment (parent)
•
Materiality
• Overall group materiality: £391,700 (2022: £327,260) based on 1% of total revenue.
• Overall company materiality: £193,000 (2022: £200,800) based on 1% of total assets.
• Performance materiality: £293,775 (2022: £245,445) (group) and £144,750 (2022: £150,600) (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.
The key audit matters below are consistent with last year.
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| Cerillion plc Annual Report and Accounts 2023
Key audit matter
How our audit addressed the key audit matter
Software licence revenue recognition (group)
Refer to the Principal Accounting Policies, note 1(a) and note
Our audit response included the following:
2 for management disclosures of the relevant judgements and
• Performing revenue transaction sample testing to ensure
estimates.
that revenue has been recorded in accordance with the
Group’s revenue recognition policy and IFRS 15 and has
Software licence revenue includes the licenced product and
been appropriately recorded in the current year income
related services. Software revenue recognition is considered
statement or deferred on the balance sheet as appropriate.
a significant audit risk as there can be significant judgement
required in determining the performance obligations within
This was achieved by testing a sample of contracts and
agreeing licence revenues to signed contracts or software
a contract and whether these performance obligations are
licence agreements. We reviewed the terms and conditions
considered distinct for purposes of revenue recognition. The
of the contract to establish whether all performance
conclusions on whether performance obligations are distinct
obligations have been identified and for any conditions that
impacts whether revenue for core licenced product is recognised
would impact the timing of revenue recognition and in turn
at a point in time or over time based on percentage of completion
the completeness of contract liabilities; ensuring appropriate
method. This method relies on the Group’s internal measure of
allocation of the fair value of contract consideration and
progress compared to total effort to complete the performance
recognition of revenue for other deliverables included within
obligations and involves a high degree of estimation uncertainty.
the contract; and, we recalculated the amount of revenue
recognised in comparison to amounts billed, for a sample of
The judgment and estimates involved in determining distinct
contract liability and contract asset revenue items to ensure
performance obligations and assessing the percentage of
it is in accordance with the revenue recognition principles.
contract completion could materially affect the timing and
• Assessing management’s historical ability to estimate using
quantum of revenue and profit recognised in each period.
the percentage of completion method by performing a
retrospective review of prior year significant contracts.
• 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
materially appropriate.
Capitalised development costs (group)
Refer to the Principal Accounting Policies, note 1(a) and note
Our audit response included the following:
11 for management disclosures of the relevant judgements and
• Considering whether expected revenue to be generated
estimates.
supports the total costs to be capitalised.
• Determining whether projects met the criteria for recognition
The Group capitalises eligible employment costs of its software
of internally developed intangible assets in accordance with
developers, which are incurred on the development of its software
IAS 38.
products. In order to determine the amount of cost that should be
• Performing tests of details on a sample basis, recalculating
capitalised, the Group must assess whether the cost meets the
and agreeing amounts capitalised from the time and
capitalisation criteria set out in the relevant accounting standards.
expenses system to payroll records.
Given the significant judgement involved in determining the
amount to be capitalised and the value of amounts capitalised,
Based on the work performed, as summarised above, we
this financial line item is susceptible to error and has been
have concluded that amounts capitalised by the Group are
identified as a key audit matter.
materiality appropriate.
Cerillion plc Annual Report and Accounts 2023
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29
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
Impairment of investment (parent)
Refer to the Principal Accounting Policies, note 1(b) and note
14 for management disclosures of the relevant judgements and
Our audit responses included the following:
estimates.
• Determining whether there are external or internal indicators
of impairment.
Investment in subsidiary is recorded at cost less any provision
• Considering the financial position of subsidiaries to assess if
for permanent diminution in value. At each reporting date, an
there is any indicator of impairment.
entity is required to assess whether there is any indication that an
•
Inquiring management if they are aware of any indicators of
asset has been impaired (i.e. its carrying amount may be higher
impairment.
than its recoverable amount). If there are any indication that an
asset may be impaired, then asset’s recoverable amount must be
calculated.
Based on the work performed, as summarised above, we
concluded that there are no indicators of impairment.
As at 30 September 2023, the Company holds investment with a
carrying amount of £14,652,000 which is significant to the overall
financial statements of the Company and has been identified as a
key audit matter.
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.
We performed a full scope audit of Cerillion plc (“the Company”). Full scope audit procedures were also performed over Cerillion
Technologies Limited, its wholly owned subsidiary, due to its financial significance to the group. Testing of specific account balances
was also performed over Cerillion Technologies (India) Private Limited, a wholly owned subsidiary of Cerillion Technologies Limited.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the group’s
and company’s financial statements, and we remained alert when performing our audit procedures for any indicators of the impact
of climate risk. Our procedures did not identify any material impact as a result of climate risk on the group’s and company’s financial
statements.
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.
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| Cerillion plc Annual Report and Accounts 2023
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£391,700 (2022: £327,260).
£193,000 (2022: £200,800).
How we determined it
1% of total revenue
1% of total assets
Financial statements - group
Financial statements - company
Rationale for benchmark applied
Based on the benchmarks used in the
annual report and the nature of the
company, 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 £193,000 - £352,530. 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% (2022: 75%) of overall materiality, amounting to £293,775 (2022: £245,445) for
the group financial statements and £144,750 (2022: £150,600) 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
£19,585 (group audit) (2022: £16,363) and £9,650 (company audit) (2022: £10,040) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
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:
• Testing the appropriateness of the underlying cash flow forecasts and performing a retrospective review of actual performance to
the prior year model;
• Agreeing Cash and cash equivalents as at 30 September 2023 to third-party confirmations and considered the Group’s available
liquidity. This supported the Directors’ conclusion that sufficient liquidity headroom remained throughout the assessment period;
• Reviewing management’s base case and severe but plausible downside scenario, ensuring the directors have considered all
appropriate factors, including the cash flows and the liquidity position of the Group; and
• Performing sensitivity analysis to assess the impact of movements in significant assumptions on the overall liquidity headroom.
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
Cerillion plc Annual Report and Accounts 2023
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31
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
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 2023 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.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities in respect of the financial statements, 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.
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| Cerillion plc Annual Report and Accounts 2023
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 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.
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.
Cerillion plc Annual Report and Accounts 2023
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33
Independent Auditors’ Report
to the members of Cerillion plc
Report on the audit of the financial statements
Continued
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
17 November 2023
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| Cerillion plc Annual Report and Accounts 2023
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 2023. 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 Accounts 2023
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35
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 2023 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 2022:
• Property, Plant and Equipment: Proceeds before intended use (Amendments to IAS 16). The amendment prohibits an entity
from deducting from the cost of an item of PP&E any proceeds received from selling items produced while the entity is preparing
the asset for its intended use. It also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses
technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. Entities
must disclose separately the amounts of proceeds and costs relating to items produced that are not an output of the entity’s
ordinary activities.
• Reference to the Conceptual Framework (Amendments to IFRS 3). The amendment updates the references to the Conceptual
Framework for Financial Reporting and to add an exception for the recognition of liabilities and contingent liabilities within the scope
of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Interpretation 21 Levies. The amendments also confirm that
contingent assets should not be recognised at the acquisition date.
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37). The amendments require clarifies that the direct
costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly
related to fulfilling contracts. Before recognising a separate provision for an onerous contract, the entity recognises any impairment
loss that has occurred on assets used in fulfilling the contract.
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.
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| Cerillion plc Annual Report and Accounts 2023
During the years ended 30 September 2023 and 30 September 2022, 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 39 and 40).
• 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 38 and 39).
• 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 38 and 39).
• 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 39).
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
Sterling are translated into Sterling 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 Sterling 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 Sterling at the closing rate. Income and expenses have been translated into Sterling 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.
Cerillion plc Annual Report and Accounts 2023
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37
Principal Accounting
Policies
Continued
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.
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 Accounts 2023
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 is 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 Accounts 2023
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39
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 Accounts 2023
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.
The right-of-use assets and lease liabilities have been disclosed separately on the face of the Statement of Financial Position, within
Cerillion plc Annual Report and Accounts 2023
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41
Principal Accounting
Policies
Continued
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 Accounts 2023
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 Accounts 2023
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43
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 Accounts 2023
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 impairment.
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 Accounts 2023
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45
Consolidated Statement
of Comprehensive Income
For the year ended 30 September 2023
Notes
2
3
22
3
5
6
7
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 (expense) / income
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign operations
Total comprehensive income for the year
Earnings per share
Year to
30 September 2023
£’000
Year to
30 September 2022
£’000
39,170
(8,364)
30,806
(15,273)
(256)
18,083
(2,597)
(209)
15,277
956
(119)
16,114
(3,183)
12,931
(95)
12,836
32,726
(7,221)
25,505
(13,031)
(1,770)
13,750
(2,986)
(60)
10,704
337
(146)
10,895
(1,551)
9,344
70
9,414
Basic earnings per share – continuing and total operations
10
Diluted earnings per share – continuing and total operations
43.8 pence
43.7 pence
31.7 pence
31.6 pence
All transactions are attributable to the owners of the parent.
* Adjusted earnings before interest, tax, depreciation and amortisation (“EBITDA”) is calculated by taking operating profit and adding back depreciation &
amortisation and share-based payment charge.
The accompanying accounting policies and notes form an integral part of these financial statements.
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| Cerillion plc Annual Report and Accounts 2023
Consolidated Statement
of Financial Position
For the year ended 30 September 2023
Notes
11
11
12
13
16
15
16
19
17
13
15
17
13
21
21
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
2023
£’000
2,053
2,374
780
2,352
5,105
268
12,932
15,115
24,738
39,853
52,785
(1,200)
(2,178)
(671)
(4,049)
(10,871)
(980)
(11,851)
(15,900)
36,885
147
13,319
-
346
(192)
23,265
36,885
2022
£’000
2,053
2,653
980
3,057
2,171
260
11,174
11,205
20,249
31,454
42,628
(934)
(3,050)
(719)
(4,703)
(10,217)
(976)
(11,193)
(15,896)
26,732
147
13,319
-
137
(97)
13,226
26,732
The financial statements on pages 35 to 78 were approved and authorised for issue by the Board of Directors on 17 November 2023.
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 Accounts 2023
|
47
Company Statement
of Financial Position
For the year ended 30 September 2023
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
13
14
16
19
13
17
13
21
21
2023
£’000
2,150
14,652
16,802
2,330
186
2,516
19,318
(2,171)
(2,171)
(207)
(731)
(938)
(3,109)
16,209
147
13,319
-
346
2,397
16,209
2022
£’000
2,656
14,652
17,308
2,066
289
2,355
19,663
(2,803)
(2,803)
(236)
(731)
(967)
(3,770)
15,893
147
13,319
-
137
2,290
15,893
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 £2,999,000 (2022:
£2,999,000).
The financial statements on pages 35 to 78 were approved and authorised for issue by the Board of Directors on 17 November 2023.
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.
48
| Cerillion plc Annual Report and Accounts 2023
Consolidated Statement
of Cash Flows
For the year ended 30 September 2023
Notes
7
5
6
22
12,13
11
6
5
11
12
13
9
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 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
Purchase of treasury stock
Receipts from exercise of share options
Principal elements of finance leases
Dividends paid
NET CASH USED IN FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Translation differences
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
2023
£’000
12,931
3,183
(956)
119
209
1,171
1,426
18,083
(6,468)
671
12,286
(119)
580
(2,997)
9,750
(1,147)
(278)
(1,425)
-
-
(868)
(2,892)
(3,760)
4,565
(76)
20,249
24,738
2022
£’000
9,344
1,551
(337)
146
60
1,085
1,901
13,750
(1,182)
1,324
13,892
(146)
337
(1,745)
12,338
(983)
(626)
(1,609)
(827)
122
(807)
(2,243)
(3,755)
6,974
101
13,174
20,249
The accompanying accounting policies and notes form an integral part of these financial statements.
Cerillion plc Annual Report and Accounts 2023
|
49
Company Statement
of Cash Flows
For the year ended 30 September 2023
Cash flows from operating activities
Profit for the year
Adjustments for:
Taxation
Depreciation
Finance costs
Share option recharge to subsidiary
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Finance costs
Tax paid
NET CASH GENERATED FROM OPERATING ACTIVITIES
Cash flows from financing activities
Purchase of treasury stock
Receipts from exercise of share options
Principal elements of finance leases
Dividends paid
NET CASH USED IN FINANCING ACTIVITIES
Notes
13
22
9
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
2023
£’000
2,999
-
506
99
209
3,813
(264)
(28)
3,521
(99)
(1)
3,421
-
-
(632)
(2,892)
(3,524)
(103)
289
186
2022
£’000
2,999
-
506
118
60
3,683
22
36
3,741
(118)
-
3,623
(827)
122
(613)
(2,243)
(3,561)
62
227
289
The accompanying accounting policies and notes form an integral part of these financial statements.
50
| Cerillion plc Annual Report and Accounts 2023
Consolidated Statement
of Changes in Equity
For the year ended 30 September 2023
Ordinary
share
capital
£’000
Share
premium
account
£’000
Treasury
stock
£’000
Share
option
reserve
£’000
Foreign
exchange
reserve
£’000
Retained
earnings
£’000
128
(167)
6,778
Balance at 1 October 2021
147
13,319
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance as at 30 September 2022
147
13,319
-
-
-
-
-
(827)
827
-
-
-
-
-
-
60
-
(51)
-
9
-
-
-
-
-
-
-
(653)
(2,243)
(2,896)
137
(97)
13,226
-
9,344
9,344
70
-
70
70
9,344
9,414
Total
£’000
20,205
60
(827)
123
(2,243)
(2,887)
26,732
Ordinary
share
capital
£’000
Share
premium
account
£’000
Treasury
stock
£’000
Balance at 1 October 2022
147
13,319
Profit for the year
Other comprehensive income:
Exchange differences on translating
foreign operations
Total comprehensive income
Transactions with owners:
Share option charge
Dividends
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
Balance as at 30 September 2023
147
13,319
-
-
-
-
-
-
-
-
Share
option
reserve
£’000
137
Foreign
exchange
reserve
£’000
Retained
earnings
£’000
(97)
13,226
Total
£’000
26,732
-
-
-
209
-
209
346
-
12,931
12,931
(95)
-
(95)
(95)
12,931
12,836
-
-
-
(192)
-
(2,892)
(2,892)
23,265
209
(2,892)
(2,683)
36,885
The accompanying accounting policies and notes form an integral part of these financial statements.
Cerillion plc Annual Report and Accounts 2023
|
51
Company Statement
of Changes in Equity
For the year ended 30 September 2023
Ordinary
share
capital
£’000
Share
premium
£’000
Treasury
Stock
£’000
Share
option
reserve
£’000
Retained
earnings
£’000
Total
£’000
Balance at 1 October 2021
147
13,319
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance as at 30 September 2022
147
13,319
-
-
-
-
(827)
827
-
-
-
128
2,187
15,781
-
-
60
-
(51)
-
9
137
2,999
2,999
2,999
2,999
-
-
(653)
(2,243)
(2,896)
2,290
60
(827)
123
(2,243)
(2,887)
15,893
Ordinary
share
capital
£’000
Share
premium
£’000
Treasury
Stock
£’000
Share
option
reserve
£’000
Retained
earnings
£’000
Total
£’000
Balance at 1 October 2022
147
13,319
Profit for the year
Total comprehensive income
Transactions with owners:
Share option charge
Dividends
Total transactions with owners
-
-
-
-
-
-
-
-
-
-
Balance as at 30 September 2023
147
13,319
-
-
-
-
-
-
-
137
2,290
15,893
-
-
209
-
209
346
2,999
2,999
2,999
2,999
-
(2,892)
(2,892)
2,397
209
(2,892)
(2,683)
16,209
The accompanying accounting policies and notes form an integral part of these financial statements.
52
| Cerillion plc Annual Report and Accounts 2023
Notes to the
Financial Statements
For the year ended 30 September 2023
Critical accounting estimates and judgements and other sources of estimation uncertainty
1
1 (a) Critical accounting estimates and judgements
The preparation of Financial Statements under IFRS requires the use of certain critical accounting assumptions, and requires
management to exercise its judgement and to make estimates in the process of applying Cerillion’s accounting policies.
Judgements
(i) Capitalisation of development costs
Development costs are capitalised only after the technical and commercial feasibility of the asset for sale or use have been
established. This is determined by our intention to complete and/or use the intangible asset. The future economic benefits of the asset
are reviewed using detailed cash flow projections. The key judgement is whether there will be a market for the products once they are
available for sale.
(ii) Revenue recognition
The Group assesses the products and services promised in its contracts with customers and identifies a performance obligation for
each promise to transfer to the customer a product or service (or bundle of products and services) that is distinct. This assessment is
performed on a contract by contract basis and involves significant judgement. The determination of whether performance obligations
are distinct or not affects the timing and quantum of revenue and profit recognised in each period.
Estimates
(i) Revenue recognition
For contracts where goods or services are transferred over time, revenue is recognised in line with the percentage completed in terms
of effort to date as a percentage of total forecast effort. Total forecast effort is prepared by project managers on a monthly basis and
reviewed by the project office and senior management team on a monthly basis. The forecast requires management to be able to
accurately estimate the effort required to complete the project and affects the timing and quantum of revenue and profit recognised on
these contracts in each period.
(ii) Depreciation and amortisation
Depreciation and amortisation rates are based on estimates of the useful economic lives and residual values of the assets involved.
The assessment of these useful economic lives is made by projecting the economic lifecycle of the asset. The key judgement is
estimating the useful economic life of the development costs capitalised, a review is conducted annually by project. Depreciation and
amortisation rates are changed where economic lives are re-assessed and technically obsolete items written off where necessary.
Refer to notes 11 and 12.
Management has considered the above areas of estimation and concluded that there are no deemed material changes arising from
changes in underlying assumptions.
1 (b) Other sources of estimation uncertainty
(i) Recoverability of trade debtors and accrued income
Management use their judgement when determining whether trade debtors and accrued income are considered recoverable or where
a provision for impairment is considered necessary. The assessment of recoverability will include consideration of whether the balance
is with a long-standing client, whether the customer is experiencing financial difficulties, the fact that balances are recognised under
contract and that the products sold are mission-critical to the customer’s business. Refer to notes 16 and 19.
(ii) Calculation of future minimum lease payments
The calculation of lease liabilities requires the Group to determine an incremental borrowing rate (“IBR”) to discount future minimum
lease payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar
security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR
therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available or when they
need to be adjusted to reflect the terms and conditions of the lease.
Cerillion plc Annual Report and Accounts 2023
|
53
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
(iii) 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.
(iv) 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
The Group continues to be organised into four main business segments for revenue purposes.
Segment information
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
2023
£’000
15,540
16,653
4,401
2,576
39,170
2022
£’000
18,272
9,854
3,006
1,594
32,726
The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy as outlined
on pages 37 to 39. Revenue recognised on performance obligations partially satisfied in previous periods was £29,993,000 (2022:
£19,929,000).
54
| Cerillion plc Annual Report and Accounts 2023
Year ended 30 September 2023
Services
implementation fees
ongoing account development work
Software
initial licence fees
sale of additional licences
£’000
15,540
16,653
ongoing maintenance and support fees*
Software-as-a-Service
4,401
8,507
4,401
2,576
-
Third-Party
Total
Accounting policies
(ii)
£’000
(iii)
£’000
(i)
£’000
7,683
-
6,055
-
-
-
-
2,091
-
-
-
-
7,857
-
-
-
-
-
(iv)
£’000
-
-
-
-
-
-
Total
£’000
7,683
7,857
6,055
2,091
8,507
4,401
2,576
2,576
39,170
26,646
2,091
7,857
2,576
39,170
* Includes maintenance and support performed by third parties.
Year ended 30 September 2022
Services
implementation fees
ongoing account development work
Software
initial licence fees
sale of additional licences
£’000
18,272
9,854
ongoing maintenance and support fees*
Software-as-a-Service
3,006
Accounting policies
(ii)
(i)
(iii)
£’000
£’000
£’000
(iv)
£’000
Total
£’000
6,598
-
765
-
7,477
3,006
-
-
-
1,612
-
-
-
-
11,674
-
-
-
-
-
-
-
-
-
-
-
6,598
11,674
765
1,612
7,477
3,006
1,594
1,594
Third-Party
Total
1,594
-
32,726
17,846
1,612
11,674
1,594
32,726
* Includes maintenance and support performed by third parties.
(a) Geographical information
As noted above, the internal reporting of the Group’s performance does not require that the statement of financial position information
is gathered on the basis of the business streams. However, the Group operates within discrete geographical markets such that capital
expenditure, total assets and net assets of the Group are split between these locations as follows:
Cerillion plc Annual Report and Accounts 2023
|
55
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
Year ended/As at 30 September 2023
Revenue – by customer location
Capital expenditure
Non-current assets
Total assets
Trade receivables – by customer location
Accrued income – by customer location
Net assets
Year ended/As at 30 September 2022
Revenue – by customer location
Capital expenditure
Non-current assets
Total assets
Trade receivables – by customer location
Accrued income – by customer location
Net assets
UK & Europe
£’000
MEA
£’000
Americas Asia Pacific
£’000
£’000
19,452
1,402
12,438
51,633
2,247
5,875
36,938
10,722
7,887 1,109
-
-
-
396
6,896
-
-
-
23
494
- 1,152
21
2,770
-
193
2
(53)
UK & Europe
£’000
MEA
£’000
Americas
£’000
Asia Pacific
£’000
20,389
1,548
10,496
41,100
1,129
7,607
26,519
3,166
7,938
-
-
-
1,007
1,405
-
-
-
-
164
813
-
1,233
60
678
1,528
203
28
213
All revenue is contracted within the UK subsidiary Cerillion Technologies Limited and therefore all revenue is domiciled in the Europe
segment.
Cerillion receives greater than 10% of revenue from individual customers in the following geographical regions:
Customer
No. 1
No. 2
No. 3
No. 4
Operating
segment
MEA
Americas
Europe
UK
2023
£’000
7,719
5,693
5,259
2,382
2022
£’000
506
3,418
4,818
3,400
56
| Cerillion plc Annual Report and Accounts 2023
3
Operating profit
Operating profit is stated after (crediting)/charging:
Employee benefits expenses (note 4)
Depreciation
Amortisation of intangibles
Research and development costs
Impairment losses on financial assets
Foreign exchange losses/(gains)
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
2023
£’000
2022
£’000
15,933
1,171
1,426
572
256
251
280
20
110
6
30
9
3,829
23,893
13,943
1,085
1,901
385
1,770
(367)
157
14
80
81
4
9
2,960
22,022
The impairment losses on financial assets relates to the provisions made against the risk of non-recovery of receivables. The write-off
during the prior year was predominantly due to an assessment over certain implementation work that may not be fully recoverable.
Cerillion plc Annual Report and Accounts 2023
|
57
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
4
Directors and employees
Group
Employee costs (including Directors):
Wages and salaries
Social security costs
Share-based payments
Other pensions costs
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
2023
£’000
2022
£’000
14,405
12,596
971
209
348
957
60
330
15,933
13,943
2023
Number
2022
Number
30
19
270
2
3
324
27
18
245
2
3
295
The Company’s employees comprise the five directors only (2022: 5). For details of directors’ remuneration and key management
personnel refer to note 24.
5
Finance income
Finance income:
Bank interest
Unwinding discount of contracts with significant financing component
6
Finance costs
Finance costs:
Interest and finance charges for lease liabilities
Other interest payable
58
| Cerillion plc Annual Report and Accounts 2023
2023
£’000
580
376
956
2023
£’000
(111)
(8)
(119)
2022
£’000
75
262
337
2022
£’000
(134)
(12)
(146)
7
(a) Analysis of tax charge for the year
Taxation
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
(b) Factors affecting total tax for the year
2023
£’000
3,074
(9)
198
3,263
(85)
5
(80)
3,183
2022
£’000
1,525
1
197
1,723
(154)
(18)
(172)
1,551
The tax assessed for the year is lower (2022: lower) than the standard rate of corporation tax in the United Kingdom 22.0% (2022:
19.0%). The differences are explained as follows:
Profit on ordinary activities before tax
16,114
10,895
Profit on ordinary activities multiplied by standard rate of corporation tax in
the United Kingdom of 22.0% (2022: 19.0%)
3,542
2,070
Effect of:
Expenses not deductible for tax purposes
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
287
5
51
13
(9)
5
-
(711)
3,183
258
15
(52)
(8)
1
(18)
(135)
(580)
1,551
There are currently no recognised or unrecognised deferred tax assets or liabilities within the Parent Company financial statements. In
the Spring Budget 2021, the Government announced that from 1 April 2023 the main rate of UK corporation tax rate will increase from
19% to 25%. This new rate was substantively enacted on 24 May 2021 and therefore its impact was reflected in the measurement of
deferred taxes in the prior year financial statements. In the current year ended 30 September 2023, the impact of the increase to 25%
from 1 April 2023 resulted in the standard tax rate of 22.0%.
Cerillion plc Annual Report and Accounts 2023
|
59
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
8
The profit for the financial year of the Parent Company, Cerillion plc was £2,999,000 (2022: £2,999,000). As permitted by section 408
Profit attributable to Cerillion plc
of the Companies Act 2006, no separate income statement is presented in respect of the Parent Company.
9
(a) Dividends paid during the reporting period
Dividends
The Board paid the final dividend in respect of 2022 of 6.5p per share, on 7 February 2023, and declared and paid an interim 2023
dividend of 3.3p (2022: 2.6p) per share on 23 June 2023. Total dividends paid during the reporting period were £2,892,000 (2022:
£2,243,000).
(b) Dividends not recognised at the end of the reporting period
Since the year end the directors have proposed the payment of a dividend in respect of the full financial year of 8.0p per fully paid
Ordinary Share (2022: 6.5p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30
September 2023, but not recognised as a liability at the year end is £2,361,000 (2022: £1,918,000). Since the year end the directors
of Cerillion Technologies Limited have approved a £5.0 million dividend to Cerillion plc.
10
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
Earnings per share
number of Ordinary Shares in issue during the year.
Profit attributable to equity holders of the Company (£’000)
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)
2023
12,931
2022
9,344
29,513,486
29,513,486
(12)
(10,627)
29,513,474
29,502,859
107,894
56,858
29,621,368
29,559,717
43.8
43.7
31.7
31.6
60
| Cerillion plc Annual Report and Accounts 2023
11
Intangible assets
Group
Cost
Goodwill
£’000
Purchased
customer
contracts
£’000
Intellectual
property
rights
£’000
Software
development
costs
£’000
External
software
licences
£’000
At 1 October 2021
2,053
4,383
2,567
Additions
-
-
-
At 30 September 2022
2,053
4,383
2,567
Additions
-
-
-
At 30 September 2023
2,053
4,383
2,567
Amortisation
At 1 October 2021
Provided in the year
-
-
3,444 2,017
626
367
At 30 September 2022
-
4,070 2,384
Provided in the year
At 30 September 2023
-
313
183
-
4,383
2,567
5,254
965
6,219
1,146
7,365
3,203
885
4,088
915
5,003
252
18
270
1
271
221
23
244
15
259
Total
£’000
14,509
983
15,492
1,147
16,639
8,885
1,901
10,786
1,426
12,212
Net book amount at
30 September 2023
Net book amount at
30 September 2022
2,053
- -
2,362
12
4,427
2,053
313 183
2,131
26
4,706
Amortisation has been included in operating expenses in the consolidated statement of comprehensive income.
The carrying value of goodwill included within the Cerillion plc consolidated statement of financial position is £2,053,000 (2022:
£2,053,000), which is allocated to the cash-generating unit (“CGU”) of Cerillion Technologies Limited Group. The CGU’s recoverable
amount has been determined based on its fair value less costs to sell. As Cerillion plc was established to purchase the CTL Group the
fair value less costs to sell has been calculated based on the market capitalisation of Cerillion plc less the estimated costs to sell the
CTL Group.
Using an average market share price of Cerillion plc for the year ended 30 September 2023, less an estimate of costs to sell, there is
significant headroom above the carrying value of the cash-generating unit and therefore no impairment exists. The calculations show
that a reasonably possible change, as assessed by the directors, would not cause the carrying amount of the CGU to exceed its
recoverable amount.
Cerillion plc Annual Report and Accounts 2023
|
61
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
12
Property plant and equipment
Group
Cost
At 1 October 2021
Additions
Disposals
Exchange difference
At 30 September 2022
Additions
Exchange difference
At 30 September 2023
Accumulated Depreciation
At 1 October 2021
Provided in the year
Disposals
Exchange difference
At 30 September 2022
Provided in the year
Exchange difference
At 30 September 2023
Net book amount at 30 September 2023
Net book amount at 30 September 2022
Leasehold
improvements
£’000
Computer
equipment
£’000
Fixtures
and fittings
£’000
Total
£’000
731
-
-
28
759
-
(31)
728
376
72
-
23
471
71
(26)
516
212
288
1,605
294
2,630
623
(59)
24
3
-
10
626
(59)
62
2,193
307
3,259
244
(31)
2,406
1,208
335
(59)
22
1,506
385
(24)
1,867
539
687
34
(12)
329
278
(74)
3,463
287
1,871
5
-
10
412
(59)
55
302
2,279
10
(12)
300
29
5
466
(62)
2,683
780
980
All depreciation charges are included within operating expenses and no impairment has been charged.
There were no property, plant and equipment assets owned by the Parent Company.
62
| Cerillion plc Annual Report and Accounts 2023
Leases
13
Group
This note provides information for leases where the Group is a lessee. The Group leases offices in London and India, along with some
IT equipment.
(i) Amounts recognised in the consolidated and company statements of financial position
The consolidated and company statements of financial position show the following amounts relating to leases:
Right-of-use assets
Properties
IT Equipment
Lease liabilities
Current
Non-current
Group
Company
30 September
2023
£’000
30 September
2022
£’000
30 September
2023
£’000
30 September
2022
£’000
2,343
9
2,352
3,044
13
3,057
2,150
-
2,150
2,656
-
2,656
Group
Company
30 September
2023
£’000
30 September
2022
£’000
30 September
2023
£’000
30 September
2022
£’000
980
2,178
3,158
976
3,050
4,026
731
2,171
2,902
731
2,803
3,534
Additions to the right-of-use assets during the 2023 financial year were £nil (2022: £131,000). There were lease disposals during the
year with net book value totalling £nil (2022: £106,000).
(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)
Expenses relating to low value assets that are not shown above as short-term leases
(included in operating expenses)
The total cash outflow for leases in 2023 was £979,000 (2022: £941,000).
30 September
2023
£’000
30 September
2022
£’000
701
4
705
111
261
19
672
1
673
134
157
-
The property within the Company had a depreciation charge for the year of £506,000 (2022: £506,000).
Cerillion plc Annual Report and Accounts 2023
|
63
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
14
At 30 September 2023 the Company’s subsidiary undertakings, all of which have been included in the Group financial statements,
Investments in subsidiaries
were:
Name
Cerillion Technologies Limited*
Cerillion Inc
Cerillion Technologies EOOD
Cerillion Technologies India Private Limited
Country of
incorporation
Percentage
and class of shares held
Year end
Nature of
Business
UK
USA
Bulgaria
India
100% - ordinary
30 September
Software services
100% - ordinary
30 September
Software services
100% - ordinary
31 December***
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 three
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 2023, management accounts have been drawn up to 30
September 2023.
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. Cerillion Technologies EOOD was
incorporated during the year on 8 September 2023, and its registered office is: 47A Cherni Vrah Blvd, Floor 5, Sofia 1407, Bulgaria.
The Company
Cost and net book value:
As at 1 October 2021
Additions
As at 30 September 2022
Additions
As at 30 September 2023
15
Deferred tax
Deferred tax asset
Group
1 October 2021
Foreign exchange movement on opening deferred tax asset
Credited to statement of comprehensive income
30 September 2022
Investments in subsidiary undertakings
£’000
14,652
-
14,652
-
14,652
Total
£’000
209
22
29
260
Accelerated capital allowances Other temporary differences
£’000
£’000
21
3
2
26
188
19
27
234
64
| Cerillion plc Annual Report and Accounts 2023
Group
1 October 2022
Foreign exchange movement on opening deferred tax asset
Credited to statement of comprehensive income
30 September 2023
Accelerated capital allowances Other temporary differences
£’000
£’000
26
(4)
4
26
234
(20)
28
242
Total
£’000
260
(24)
32
268
Deferred tax liabilities
Group
Part of the deferred tax liability arose in respect of the fair value uplift of intangible assets, with £1,320,000 arising on the acquisition
of Cerillion Technologies Limited in March 2016 and £71,000 relating to the acquisition of “Net Solutions Services” by Cerillion
Technologies Limited in 2015, which has been written down to £nil as at 30 September 2023 (2022: £95,000). The deferred tax
liabilities also include £671,000 (2022: £624,000), which is driven by expected future amortisation on R&D intangibles in Cerillion
Technologies Limited where full relief has been taken in the year the assets were capitalised. This amortisation will be treated as non-
deductible for corporation tax purposes and therefore a deferred tax liability arises.
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
2023
£’000
719
47
(95)
671
2022
£’000
862
46
(189)
719
There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2023 (2022:
£nil).
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
2023
£’000
2,857
15,543
5,039
2022
£’000
2,503
9,853
4,613
Contract assets, which are included in ‘Accrued income’ within trade and other receivables and are composed of the current and non-
current balances. Contract liabilities, which are included in ‘Deferred income’ within trade and other payables.
Payment terms and conditions in customer contracts may vary. In some cases, customers pay in advance of the delivery of solutions
or services; in other cases, payment is due as services are performed or in arrears following the delivery of the solutions or services.
Differences in timing between revenue recognition and invoicing result in trade receivables, contract assets or contract liabilities in the
statement of financial position.
Cerillion plc Annual Report and Accounts 2023
|
65
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
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 £4,195,000 (2022: £4,105,000).
When certain costs to acquire a contract meet defined criteria, those costs are deferred as contract assets. The total amount of
deferred contract assets (commission fees recognised in prepaid assets) are £132,000 (2022: £226,000). The total amount of accrued
costs to acquire a contract are £352,000 (2022: £305,000).
The total amount of revenue allocated to unsatisfied performance obligations is £36,732,000 (2022: £37,420,000). It is estimated that
45% will be recognised over the next 12 months, the remainder over the following years thereafter.
There are no contract balances within the Parent Company (2022: £nil).
Group
Company
Current receivables
Trade receivables
Accrued income
Amounts owed by Group undertakings
Other receivables
Prepayments
Non-current receivables
Accrued income
Other receivables
2023
£’000
2,857
10,507
-
536
1,215
15,115
2023
£’000
5,036
69
5,105
Group
2022
£’000
2,503
7,759
-
311
632
11,205
2022
£’000
2,094
77
2,171
2023
£’000
-
-
2,320
-
10
2,330
2022
£’000
-
-
2,058
-
8
2,066
Company
2023
£’000
2022
£’000
-
-
-
-
-
-
The amounts owed by Group undertakings are unsecured, interest free and repayable on demand.
66
| Cerillion plc Annual Report and Accounts 2023
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
2023
£’000
3,219
(304)
(377)
2,538
2022
£’000
2,744
(193)
(232)
2,319
The ECL Provision above includes an amount relating to accrued income of £319,000 (2022: £184,000).
The Parent Company had no trade receivables in either period. The other classes of assets within trade and other receivables do not
contain impaired assets. The net carrying value is judged to be a reasonable approximation of fair value.
Movements in the provision for the impairment of trade receivables and accrued income were as follows:
Balance at the beginning of the year
Charged for the year
Utilised for the year
Balance at the end of the year
Specific Provision
£’000
ECL provision
£’000
193
111
-
304
232
377
(232)
377
The following is an ageing analysis of those trade receivables that were not past due and those that were past due but not impaired.
These relate to a number of independent customers for whom there is no recent history of default.
Group
Not past due
Up to 3 months
3 to 6 months
Older than 6 months
2023
£’000
1,432
1,318
57
50
2,857
2022
£’000
1,714
735
6
48
2,503
Cerillion plc Annual Report and Accounts 2023
|
67
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
Of the trade debt older than 6 months as at 30 September 2023, being £50,000 (2022: £48,000), cash of £nil (2022: £8,000) has
been received since the year end.
The following is an ageing analysis of those trade receivables that were individually considered to be impaired:
Group
Not past due
Up to 3 months
3 to 6 months
Older than 6 months
17
Trade and other payables
Current trade and other payables
Trade payables
Taxation
Other taxation and social security
Pension contributions
Other payables
Provisions
Accruals
Deferred income
Movements in the provisions were as follows:
Balance at the beginning of the year
Charged/(released) for the year
Balance at the end of the year
2023
£’000
28
28
1
305
362
Group
Company
2023
£’000
858
1,052
453
51
342
141
3,389
4,585
10,871
2022
£’000
1,154
776
495
46
382
118
3,001
4,245
10,217
2023
£’000
77
-
59
-
-
-
71
-
207
2022
£’000
33
14
150
45
242
2022
£’000
97
1
64
-
-
-
74
-
236
Dilapidations Provision
£’000
118
23
141
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
2023
£’000
746
454
1,200
2022
£’000
567
367
934
Company
2023
£’000
2022
£’000
-
-
-
-
-
-
68
| Cerillion plc Annual Report and Accounts 2023
The directors consider that the carrying amount of trade and other payables and provisions approximates to their fair values. The non-
current other payable above relates to provisions for gratuity and long-term bonuses within the Indian subsidiary.
Gratuity - The Indian subsidiary, Cerillion Technologies India Private Limited, provides for gratuity, a defined benefit plan (the “Gratuity
Plan”) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The unfunded plan provides a lump
sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the
respective employee’s salary and the tenure of employment. There is a vesting condition of five years of service for benefit payment.
Long-term bonus - The employees (Band II, III and IV only) are eligible for a loyalty bonus at 20% of annual total fixed pay as at the
end of the third year, 10% of annual total fixed pay as at the end of four and half years and 10% of annual total fixed pay as at the
end of the sixth year provided they are employed with the Indian subsidiary, Cerillion Technologies India Private Limited, for at least
three years/four and half years/six years, as the case maybe, after completion of probationary period. The Group’s liability is actuarially
determined at the end of each year. Actuarial losses/gains are recognised in the Statement of Comprehensive Income in the year in
which they arise. There is an additional scheme in place which pays at up to 25% of annual total fixed pay at the end of eleven years of
service.
The actuarial assumptions relating to the above provisions are outlined below:
Discount rate
Salary increment rate
Withdrawal rate
Gratuity
Long-term bonus
2023
7.40%
13.00%
10.00%
2022
7.50%
15.00%
15.00%
2023
7.40%
13.00%
10.00%
2022
7.50%
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
Group
2023
£’000
2022
£’000
Company
2023
£’000
2022
£’000
980
976
731
731
2,178
3,158
3,050
4,026
2,171
2,902
2,803
3,534
Current liabilities:
Lease liabilities
Non-current liabilities:
Lease liabilities
There are currently no other borrowings within the Group.
Cerillion plc Annual Report and Accounts 2023
|
69
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
Group
1 October 2022
Cash-flows:
Repayment
Accrued interest
Non-cash:
Reclassification
30 September 2023
1 October 2021
Cash-flows:
Repayment
Accrued interest
Non-cash:
Additions
Foreign exchange revaluation
Reclassification
30 September 2022
Company
1 October 2022
Cash-flows:
Repayment
Accrued interest
Non-cash:
Reclassification
30 September 2023
1 October 2021
Cash-flows:
Repayment
Accrued interest
Non-cash:
Reclassification
30 September 2022
70
| Cerillion plc Annual Report and Accounts 2023
Non-current Lease
liabilities
£’000
Current Lease
liabilities
£’000
Total
£’000
3,050
976
4,026
-
-
(872)
2,178
3,866
-
-
-
-
(816)
3,050
(979)
111
872
980
948
(941)
134
125
(106)
816
976
(979)
111
-
3,158
4,814
(941)
134
125
(106)
-
4,026
Non-current Lease
liabilities
£’000
Current Lease
liabilities
£’000
Total
£’000
2,803
731
3,534
-
-
(632)
2,171
3,416
-
-
(613)
2,803
(731)
99
632
731
731
(731)
118
613
731
(731)
99
-
2,902
4,147
(731)
118
-
3,534
19
Financial instruments and risk management
Group - Financial instruments by category
Financial assets – measured at amortised cost
2023
£’000
2022
£’000
Non-current
Accrued income
Other receivables
Current
Trade and other receivables
Accrued income
Cash and cash equivalents
Prepayments are excluded, as this analysis is required only for financial instruments.
Financial liabilities - held at amortised cost
Non-current
Trade and other payables
Lease liabilities
Current
Lease liabilities
Trade and other payables
Pension costs
Accruals & provisions
5,036
69
5,105
3,393
10,507
24,738
38,638
2023
£’000
746
2,178
2,924
980
1,200
51
3,530
5,761
2,094
77
2,171
2,814
7,759
20,249
30,822
2022
£’000
567
3,050
3,617
976
1,536
46
3,119
5,677
Statutory liabilities and deferred income are excluded from the trade payables balance, as this analysis is required only for financial
instruments.
Company - Financial instruments by category
Financial assets – measured at amortised cost
Current
Amounts owed by Group undertakings & other receivables
Cash and cash equivalents
2023
£’000
2022
£’000
2,320
186
2,506
2,058
289
2,347
Cerillion plc Annual Report and Accounts 2023
|
71
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
Financial liabilities - held at amortised cost
Non-current
Lease liabilities
Current
Lease liabilities
Trade and other payables
Accruals
2023
£’000
2,171
2,171
731
77
71
879
2022
£’000
2,803
2,803
731
97
74
902
There is no material difference between the book value and the fair value of the financial assets and financial liabilities disclosed above
for either the Group or Parent Company.
There were no derivative financial instruments in existence as at 30 September 2023 (2022: £nil).
The Group’s multinational operations expose it to financial risks that include market risk, credit risk, foreign currency risk and liquidity
risk. The directors review and agree policies for managing each of these risks and they are summarised below. These policies have
remained unchanged from previous years.
Credit quality of financial assets
The credit quality of financial assets 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
2023
£’000
86
2,766
5
2,857
2022
£’000
26
2,466
11
2,503
Group 1 – new customers (less than 6 months).
Group 2 – existing customers (more than 6 months) with no defaults in the past.
Group 3 – existing customers (more than 6 months) with some defaults in the past.
At the year end there are 7 customers (2022: 4 customers) with trade receivable balances each representing in excess of 5% of the
total trade receivables of £2,857,000 (2022: £2,503,000). Of these customers, none are categorised within Group 1 (2022: none), 7
are within Group 2 representing 90% of total trade receivables (2022: 4 customers), with none in Group 3 (2022: none).
There are no trade receivables within the Parent Company.
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| Cerillion plc Annual Report and Accounts 2023
Cash at bank and short-term deposits
A1
Not rated
2023
£’000
2022
£’000
24,735
3
24,738
20,246
3
20,249
A1 rating means that the risk of default for the investors and the policy holder is deemed to be very low.
Not rated balances relate to petty cash amounts. All cash within the Parent Company is within the A1 category.
Market risk – foreign exchange risk
Exposure to currency exchange rates arise from the Group’s overseas sales and purchases, which are primarily denominated in US
Dollars (USD), Danish Krone (DKK) and Euros (EUR). There is no foreign exchange exposure within the Parent Company.
To mitigate the Group’s exposure to foreign currency risk, non-GBP cash flows are monitored and forward exchange contracts
are entered into in accordance with the Group’s risk management policies. Generally, the Group’s risk management procedures
distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows (due after 6 months). Where
the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is
undertaken. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not
expected to be offset by other same-currency transactions.
As at 30 September 2023 the Group had no forward foreign exchange contracts in place (2022: none) to mitigate exchange rate
exposure.
Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The
amounts shown are those reported to key management translated into GBP at the closing rate:
30 September 2023
Financial assets
Financial liabilities
Total exposure
30 September 2022
Financial assets
Financial liabilities
Total exposure
AUD
£’000
81
-
81
AUD
£’000
339
-
339
USD
£’000
3,062
(103)
2,959
USD
£’000
1,341
(155)
1,186
EUR
£’000
INR
£’000
5,580
(18)
5,562
EUR
£’000
3,553
(3)
3,550
923
(1,109)
(186)
INR
£’000
1,110
(981)
129
DKK
£’000
2,782
-
2,782
DKK
£’000
1,855
-
1,855
BND
£’000
187
-
187
BND
£’000
227
-
227
Cerillion plc Annual Report and Accounts 2023
|
73
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
The following table illustrates the sensitivity of profit and equity in regard to the Group’s financial assets and financial liabilities and the
US Dollar, Australian Dollar, Euro, Indian Rupee, Danish Krone and Brunei Dollar to GBP exchange rate ‘all other things being equal’.
It assumes a +/- 10% change to each of the foreign currency to GBP exchange rates. The sensitivity analysis is based on the Group’s
foreign currency financial instruments held at each reporting date.
If GBP had strengthened against the foreign currencies by 10% then this would have had the following impact:
30 September 2023
Loss for the year
Equity total
30 September 2022
Loss for the year
Equity total
AUD
£’000
(7)
(7)
AUD
£’000
(31)
(31)
USD
£’000
(269)
(269)
USD
£’000
(108)
(108)
EUR
£’000
(506)
(506)
EUR
£’000
(323)
(323)
INR
£’000
17
17
INR
£’000
(12)
(12)
If the GBP had weakened against the foreign currencies by 10% then this would have had the following impact:
30 September 2023
Gain for the year
Equity total
30 September 2022
Gain for the year
Equity total
AUD
£’000
9
9
AUD
£’000
38
38
USD
£’000
329
329
USD
£’000
132
132
EUR
£’000
618
618
EUR
£’000
394
394
INR
£’000
(21)
(21)
INR
£’000
14
14
DKK
£’000
(253)
(253)
DKK
£’000
(169)
(169)
DKK
£’000
309
309
DKK
£’000
206
206
BND
£’000
(17)
(17)
BND
£’000
(21)
(21)
BND
£’000
21
21
BND
£’000
25
25
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the
analysis above is considered to be representative of the Group’s exposure to currency risk.
Market Risk – cash flow interest rate risk
The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore
usually at fixed rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group’s cash at bank and
short-term deposits is considered immaterial.
Liquidity risk
Cerillion actively maintains cash that is designed to ensure Cerillion has sufficient available funds for operations and planned
expansions. The table below analyses Cerillion’s financial liabilities into relevant maturity groupings based on the remaining period at
the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows.
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| Cerillion plc Annual Report and Accounts 2023
Less than 1 year
£’000
Between 1 and 2 years
£’000
Between 2 and 5 years
£’000
Over 5 years
£’000
936
6,286
977
5,971
763
746
958
567
1,645
-
2,224
-
-
-
183
-
30 September 2023
Lease liabilities
Trade and other payables
30 September 2022
Lease liabilities
Trade and other payables
Capital risk management
The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders
through optimising the debt and equity balance. In the short-term this means generating sufficient cash to maintain the dividend policy
and investment in research and development.
The Group monitors cash balances and prepares regular forecasts, which are reviewed by the Board. Since the year end the directors
have proposed the payment of a dividend. In order to maintain or adjust the capital structure, the Group may, in the future, adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Parent Company has the same approach to capital risk management, with the additional focus of monitoring dividends up from
Group companies to ensure that sufficient reserves are in place to maintain the dividend policy.
The capital structure consists of the Group’s equity attributable to equity holders of the parent, comprising issued capital, reserves
and retained earnings. As of the year ended 30 September 2023 the Group’s total managed capital amounted to £36,885,000 (2022:
£26,732,000); Company’s capital as of 30 September 2023 was £16,209,000 (2022: £15,893,000).
20
Financial assets and financial liabilities measured at fair value are required to be grouped into three Levels of a fair value hierarchy. The
Fair value measurement of financial instruments
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 2023 (2022: £nil).
There were no transfers between Level 1 and Level 2 in 2023 or 2022 and no derivative financial instruments within the Group.
Measurement of fair value of financial instruments
Cerillion plc Annual Report and Accounts 2023
|
75
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
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:
2023
£’000
2022
£’000
29,513,486 (2022: 29,513,486) Ordinary Shares of 0.5 pence
147
147
The Ordinary Shares have been classified as Equity. The Ordinary Shares have attached to them full voting and capital distribution
rights. The Company does not have an authorised share capital.
At the year end there were 12 shares (2022: 12 shares remaining in Treasury Stock) at an average cost of £2.10 per share (2022:
£2.10).
22
The Group introduced a Save as You Earn (“SAYE”) share option scheme and a Long-Term Incentive Plan (“LTIP”) in 2017. The Group
Share-based payments
is required to reflect the effects of share-based payment transactions in its statement of comprehensive income and statement of
financial position. For the purposes of calculating the fair value of share options granted, the Black Scholes Pricing Model has been
used by the Group in respect of the SAYE schemes, the LTIP has been fair valued using a Monte-Carlo Simulation Model. Fair values
have been calculated on the date of grant.
A new Save as You Earn (“SAYE”) share option scheme and a new Long-Term Incentive Plan (“LTIP”) were introduced in 2021 and
additional options were granted during the year ended 30 September 2023 under the SAYE scheme. A charge of £209,000 (2022:
£60,000) has been reflected in the consolidated statement of comprehensive income, with the corresponding entry recognised within
the share option reserve.
The fair value of options granted in the current and prior year and the assumptions used in the calculation are shown below:
Year of grant
Scheme
Exercise price (£)
Number of options granted
Vesting period (years)
Option life (years)
Risk free rate
Volatility
Dividend yield
Fair value (£)
2023
SAYE
9.28
27,766
3 years
3.5 years
3.19%
39%
3.00%
3.88
2022
LTIP
0.005
15,000
3 to 4 years
3 to 4 years
1.75%
109%
1% to 2%
9.45
The share option schemes are issued by the Parent Company, therefore the disclosures within this note cover the Group and Parent
Company, the share-based payment expense is recharged to Cerillion Technologies Limited as this is where the option holders are
employed.
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| Cerillion plc Annual Report and Accounts 2023
During the year options were granted as summarised in the table below:
Outstanding at start of year
Granted
Lapsed
Exercised
Outstanding at 30 September
Exercisable at 30 September
2023
Number of options
2023
Weighted average
exercise price
£
2022
Number of options
2022
Weighted average
exercise price
£
154,008
27,766
(1,824)
-
179,950
-
2.46
9.28
(5.92)
-
3.48
-
278,912
15,000
(28,090)
(111,814)
154,008
2.03
0.005
(2.29)
(1.092)
2.46
-
-
For the options outstanding at 30 September 2023, the weighted average fair values and the weighted average remaining contractual
lives (being the time period from 30 September 2023 until the lapse date of each share option) are set out below:
LTIP 2021
SAYE 2021
LTIP 2022
SAYE 2023
Weighted average fair
value of options outstanding
£
4.39
2.03
9.45
3.88
Weighted average
remaining
contractual life
Years
3.49
1.34
4.41
2.84
23
The Group operates a personal contribution pension scheme for the benefit of the employees. The pension cost charge for the
Retirement benefits
year represents contributions payable by the Group to the fund and amounted to £348,000 (2022: £330,000). At the year end the
contributions payable to the scheme were £51,000 (2022: £46,000). 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 2023.
Directors’ remuneration was as follows:
Aggregate remuneration
Pension contributions
2023
£’000
1,083
36
1,119
2022
£’000
1,039
15
1,054
No retirement benefits are accruing to directors under a defined benefit scheme (2022: £nil). Retirement benefits are accruing to two
directors under a defined contribution scheme (2022: 2 Directors).
Cerillion plc Annual Report and Accounts 2023
|
77
Notes to the
Financial Statements
For the year ended 30 September 2023
Continued
Highest paid Director:
Aggregate remuneration
Pension contributions
2023
£’000
717
22
739
2022
£’000
659
-
659
No key personnel other than the directors have been identified in relation to the year ended 30 September 2023 (2022: none).
(ii) Related party transactions
The aggregate dividends paid to directors during the year were £881,000 (2022: £683,000). No other related party transactions took
place during the year (2022: none).
25
In providing the Group with banking, credit card and forward currency facilities, the Group’s bankers HSBC plc hold:
Charge over assets
• 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
From time to time, due to the nature of our business, disputes with customers may arise. We do not currently believe that any potential
Contingent assets / liabilities
claims would either have more than a remote likelihood of resulting in a material exposure to the Group, or would result in a liability that
would not be fully covered by insurance.
27
In November 2023 a contract worth an initial €12.4m was signed with a new Tier-1 customer.
Subsequent events
28
In the opinion of the directors, there was no ultimate controlling party at 30 September 2023 or 30 September 2022.
Ultimate controlling party
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| Cerillion plc Annual Report and Accounts 2023
Notes
Cerillion plc Annual Report and Accounts 2023
|
79
Notes
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| Cerillion plc Annual Report and Accounts 2023
Notes
Cerillion plc Annual Report and Accounts 2023
|
81
Cerillion plc
25 Bedford Street
London
WC2E 9ES
United Kingdom
Tel: +44 20 7927 6000
Email: info@cerillion.com
Web: www.cerillion.com