Final Results

RNS Number : 6807H

Cerillion PLC

28 November 2022

 

28 November 2022

AIM: CER 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Cerillion plc

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

Final results for the year ended 30 September 2022

Record financial performance

Group is well-placed for continued growth

Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2022.

Highlights

Year ended 30 September	2022	2021	Change
Revenue	£32.7m	£26.1m	+26%
Annualised recurring revenue 2	£12.4m	£9.9m	+25%
Adjusted EBITDA4	£13.8m	£10.5m	+31%
Adjusted EBITDA margin	42.0%	40.3%	+170bps
Adjusted profit before tax5	£11.9m	£8.5m	+40%
Statutory profit before tax	£10.9m	£7.4m	+47%
Adjusted basic earnings per share6	35.2p	25.5p	+38%
Statutory basic earnings per share	31.7p	21.8p	+45%
Total dividend per share	9.1p	7.1p	+28%
Net cash	£20.2m	£13.2m	+54%

 

Financial:

· Key financial performance measures reached new highs

· Revenue up 26% to a record £32.7m (2021: £26.1m), driven by major new customer implementations and strong demand from existing customers

· Back-order book³ reached a new high of £45.4m at the year-end (30 September 2021: £42.1m)

· Strong balance sheet with net cash up 54% to £20.2m (2021: £13.2m)

· Final dividend of 6.5p per share proposed (2021: 5.0p), bringing the total dividend for the year to 9.1p per share (2021: 7.1p), an increase of 28%  

· New customer sales pipeline up 43% to a record £209m (30 September 2021: £146m)

Operational:

· Continued expansion of new resource centres in Bulgaria and India

· Largest ever contract won in July 2022 (£15m), with Cable & Wireless Seychelles (CWS), a full-service network operator - continued the trend of winning bigger contracts and/or larger customers 

· Gained Gold-level status for flagship BSS/OSS suite in the TM Forum's Open API Conformance Certification program in early November 2022

· Strong pipeline of new business opportunities

· Cerillion well-positioned for further growth over the new financial year and beyond

Louis Hall, CEO of Cerillion, commented:

"It has been another year of very strong growth and development. Reported revenue, pre-tax profit and back-order book all reached new highs. We have maintained our top-line growth rate of c.25% for the second year running, building on the momentum of the last three to four years. We also secured another record-breaking contract win, and continued to expand the business, enlarging our resources, especially in India and Bulgaria, and enhancing our technology.

"We start the new financial year with a very high degree of visibility over our earnings, based on our very strong back-order book and higher level of recurring income.  The new business pipeline is very strong and includes a number of large potential deals.

"The market backdrop remains extremely favourable. The roll-out of 5G and digitisation, and the need to be able to react rapidly to changing market conditions, means that telecom companies continue to drive investment in enterprise software. These tailwinds should help to support Cerillion's continued expansion over the longer term."

For further information please contact:

Cerillion plc Louis Hall, CEO, Andrew Dickson, CFO		c/o KTZ Communications T: 020 3178 6378
Liberum (Nomad and Broker)		T: 020 3100 2000
Bidhi Bhoma, Cameron Duncan, William Hall Singer Capital Markets (Joint Broker) Rick Thompson, George Tzimas, James Fischer		T: 020 7496 3000
KTZ Communications		T: 020 3178 6378
Katie Tzouliadis, Dan Mahoney

About Cerillion

Cerillion has a 23-year track record in providing mission-critical software for billing, charging and customer relationship management ("CRM"), mainly to the telecommunications sector but also to other markets, including utilities and financial services. The Company has c. 80 customer installations across c. 45 countries.

Headquartered in London, Cerillion has operations in Pune, India, where its Global Solutions Centre is located, as well as operations in Bulgaria, Belgium, Singapore and Australia .

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

Notes

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

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

Note 3  Back order book consists of £37.4m of sales contracted but not yet recognised at the end of the reporting period plus £8.0m of annualised support and maintenance revenue.  It is anticipated that 75% of the £37.4m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 to 18 months.

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

Note 5  Adjusted profit before tax is calculated by taking reported profit before tax and adding back amortisation of acquired intangible assets and share-based payment charge.

Note 6  Adjusted earnings per share is calculated by taking profit after tax and adding back amortisation of acquired intangible assets and share-based payment charge and is divided by the weighted average number of shares in issue during the period.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Introduction

Cerillion performed very strongly over the financial year, with revenue, profit before tax and the back-order book setting new record highs. Revenue increased by 26% to £32.7m year-on-year (2021: £26.1m), slightly ahead of the 25% growth rate achieved in the last financial year.  Adjusted profit before tax rose by 40% to £11.9m (2021: £8.5m), which was significantly better than consensus market expectations, as we reported in our trading update in October. In addition, the back-order book increased by 8% to £45.4m (2021: £42.1m).

New orders over the year stood at £29.4m (2021: £33.3m).  While this is a small year-on-year decrease, the total value of the new customer sales pipeline has increased by 43% to £209.0m (2021: £146.4m) reflecting strong on-going demand for the Company's solutions.  For a second year in a row, we signed the largest initial contract order in the Company's history, securing a major contract worth £15.0m with Cable & Wireless Seychelles.

The trend in recent years towards bigger deal sizes with larger customers has multiple benefits. It evidences the quality of our product offering, adds customers that are typically more active and generate higher income over the long-term, and since larger deals frequently have a higher software licence element, they tend to be margin enhancing.

The Company's performance was also supported by continuing strong demand from existing customers, with orders from existing accounts at £16.7m.  This compared to £19.2m last year, which was a 105% increase on the prior year.  The continuing strong performance mainly reflected the increased presence of larger customers in the customer base, with commensurately broader and deeper requirements as well as larger budgets.

In order to support the significant acceleration of the Company's growth rate, we increased our resource in our main London and Pune operations and expanded our new base in Sofia, Bulgaria, opened in September 2021.  We also established new teams in India at Indore and Ahmedabad.

Looking to the future, demand for billing, charging, customer relationship management ("CRM") and digital customer experience solutions in the Company's core telecommunications market is set to rise further as telecoms businesses continue to invest in 5G and fibre rollouts and in ancillary systems, which are essential to supporting and monetising those investments and to enabling telecoms businesses to adapt to rapidly changing market conditions. Cerillion remains well-placed to benefit from this, and to grow both in Europe and its other international markets. We also expect our growth to benefit from increasing market acceptance of SaaS-based product solutions, which lower total cost of ownership and provide significant commercial and operational benefits.

With the pipeline of potential new business opportunities remaining very strong, we expect the Company to make further strong progress in the new financial year.

Financial Overview

Total revenue for the year to 30 September 2022 rose by 26% to £32.7m (2021: £26.1m). As is typical, existing customers (classified as those acquired before the beginning of the reporting period) accounted for a very high proportion of total revenue, generating 98% of the overall result (2021: 96%).

Recurring revenue, which is derived from support and maintenance and managed service contracts, increased by 21% to £10.5m and comprised approximately 32% of total revenue (2021: £8.6m, 33%). At 30 September 2022, recurring revenue on an annualised basis was 25% higher year-on-year at £12.4m (30 September 2021: £9.9m), boosted by a 67% increase in annualised managed service contract revenue (2021: 36%) as more customers contracted for these services.

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

•	Software (including Software-as-a-Service) revenue decreased by 4% to £12.9m (2021: £13.4m).  This was mainly due to the timing of licence recognition for recent, large new customer wins where recognition will not occur until FY 2023.  Software revenues accounted for 39% of total revenues (2021: 51%).
•	Services revenue increased by 54% to £18.3m (2021: £11.9m). This increase largely reflected concurrent implementation work on new customer projects won in the prior year, as well as a strong flow of services work from live customers. Services revenue comprised 56% of total revenue (2021: 46%).
•	Third-party income doubled to £1.6m (2021: £0.8m) and comprised 5% of total revenue (2021: 3%).

Gross margin was in line with the prior year at 77.9% (2021: 78.3%).

Operating expenses increased by 2.9% to £13.0m (2021: £12.7m). This included a favourable year-on-year foreign exchange impact of £0.9m due to retranslation of balance sheet items at year end.  Excluding this, operating expenses increased by 9.9%, reflecting strong focus on cost control.  Personnel costs were flat at £7.4m (2021: £7.1m), and accounted for 57% (2021: 56%) of operating expenses.

Adjusted EBITDA for the year increased by 31% to £13.8m (2021: £10.5m), driven mainly by higher revenues, and supported by favourable foreign exchange rates and higher resource utilisation.  The Board considers adjusted EBITDA to be a key performance indicator for Cerillion as it adds back exceptional items and key non-cash transactions, being share-based payments, depreciation and amortisation.

We continued to invest in our product set, and the charge for amortisation of intangibles was £1.9m (2021: £1.9m). Expenditure on tangible fixed assets was £0.6m (2021: £0.3m). Operating profit increased by 42% to £10.7m (2021: £7.5m) due to the increase in revenue, as well as operational leverage.

Adjusted profit before tax rose by 40% to £11.9m (2021: £8.5m) and adjusted earnings per share increased by 38% to 35.2p (2021: 25.5p). On a statutory basis, profit before tax increased by 47% to £10.9m (2021: £7.4m) and earnings per share increased by 45% to 31.7p (2021: 21.8p).

Cash Flow and Banking

The Group continued to generate strong cash flows, and closed the financial year with net cash up by 54% against the same point last year to £20.2m (30 September 2021: £13.2m). This was after £2.2m of dividend payments (2021: £1.7m). Total debt at the year-end remained £nil (2021: £nil).

Dividend

The Board is pleased to propose a 30% increase in the final dividend to 6.5p per share (2021: 5.0p). Together with the interim dividend of 2.6p per share (2021: 2.1p), this brings the total dividend for the year to 9.1p per share (2021: 7.1p), an increase of 28%.

The dividend, which is subject to shareholder approval at the Company's Annual General Meeting to be held on 2 February 2023, will become payable on 8 February 2023 to those shareholders on the Company's register as at the close of business on the record date of 30 December 2022.  The ex-dividend date is 29 December 2022.

Operational and Market Overview

Whilst the coronavirus pandemic is no longer directly affecting business operations, the global experience of remote-working - still in place in many economies - has continued to emphasise the dependence of the world economy on state-of-the-art telecoms infrastructure.  Over the year, we continued to see high levels of investment in the sector in general, and an acceleration of investment in 5G and fibre rollouts, with spending trickling down from core network improvements to ancillary system upgrades and replacements.  We expect to see these trends continue. 

In addition, as the global cost of living crisis begins to bite, we anticipate increasing pressure on telcos to find efficiencies in their digital real-estate.  This is likely to encourage further market take-up of product-based SaaS solutions, which Cerillion offers, rather than the more bespoke solutions available from more traditional vendors.  We therefore fully expect demand for billing, charging, CRM and digital customer experience software in our core telecoms market to continue to grow. 

Beyond these broad sector trends, a number of other factors will continue to drive demand for our offerings.  These include:

-  the acceleration of digital investments, initially driven by the pandemic as a necessity to ensure continuity of services, but now increasingly a requirement to improve the customer experience.  This means that Communication Service Providers ("CSPs") are now going beyond their digital front-ends and investing in wider digitalisation and in the transformation of their BSS/OSS systems in order to automate and optimise customer engagement and deliver a seamless experience across all touchpoints;

-  the rollout of 5G and the evolution to 5G "Standalone" networks, which is driving further investment in convergent charging systems and product catalogue solutions, as CSPs aim to maximise their opportunities in the B2B sector;

-  the requirement for agility; with CSPs facing the on-going threat from digital services providers and the hyperscalers, agility is more important than ever.  This is driving further investment in BSS/OSS platforms that will allow CSPs to pivot quickly and change business processes to address new market opportunities, from the complexities of B2B/enterprise use cases to the simplest of digital subscription services;

-  the need for CSPs to be able to respond rapidly to changing conditions in their markets, which fully integrated BSS/OSS product solutions enable, heightened by current inflationary pressures and other macro-economic drivers; and

-  the trend to 'low-code' / 'no-code', with many CSPs now preferring to invest in products with standardised interfaces (Open Application Programming Interfaces ("API") for interoperability with other systems, and moving away from 'customisation' towards 'configuration'.

Cerillion's ability to address the market through a range of flexible solutions remains a key strength. As well as our proven ability to support end-to-end transformation projects, the Company can provide individual product modules, or subsets of modules, to implement point solutions that address more specific requirements. The Company's solutions are also able to support a broad range of CSPs, from traditional network operators and virtual network operators ("VNOs") to enterprise connectivity solutions providers.

In July 2022, the Company announced a major new contract win with Cable & Wireless Seychelles ("CWS"), the main telecoms provider in the Seychelles. This latest win is the Company's largest initial contract agreement to date, and further enhances the Cerillion brand in the marketplace. We expect the general trend towards signing bigger deals with larger new customers to continue. These contracts normally involve higher recurring revenues and there is a much greater upsell opportunity as well. Therefore they contribute significantly to the ongoing growth of the business. As mentioned previously, these larger contracts typically have a longer sales cycle than smaller ones.

The new customer wins, ongoing implementation work with existing customers, and major new deals signed with existing customers, create a strong platform for further growth in the new financial year.  The back-order book at 30 September 2022 was up by 8% to an all-time record of £45.4m (2021: £42.1m). This means that the Company has started the new financial year with far greater visibility of revenues than any previous year.

As we grow across the globe, and global labour markets evolve, we will continue to expand our operating locations, recruiting the best talent cost-effectively and supporting our expanding global customer base. We continued to build our teams at our new locations in Sofia, Bulgaria and at Ahmedabad and Indore in India and maintain a mix of remote and office-based working. The competition for technology professionals remained strong during most of the financial year, however, we believe that we have seen a peak in demand at our main operating locations and consequently expect those pressures to ease a little during the new financial year. Nevertheless, we remain focused on potential inflation in people costs and intend to continue to manage carefully the mix and location of resource.

We continued to invest in R&D over the year, enhancing our technology and providing two major new releases of our product set as scheduled. The most recent of these releases was Cerillion 22.2, which went live in early November 2022.  The focus of this release was a major upgrade of the 'Wholesale Gateway' module. This module supports the automation of the wholesale operations of network operators ("NetCos"), and the upgraded version speeds up the on-boarding process of new service provider partners ("ServCos"). It also simplifies the integration of business support systems between NetCos and ServCos, whilst providing a high level of security for NetCos through a dedicated authorisation layer and comprehensive API (application programming interfaces) management policies.

In early November 2022, we were delighted to gain Gold-level status for the Company's BSS/OSS suite in the TM Forum's Open API Conformance Certification program. Achieving this level underlines Cerillion's commitment to delivering open and standards-based products in accordance with the TM Forum's Open API & Open Digital Architecture Manifesto, and puts Cerillion at the forefront of adoption.

Outlook

The Company continues to grow strongly, and the Cerillion brand is gaining visibility in what is a huge marketplace.

Looking ahead, we are well-placed to deliver another strong performance in the new financial year, supported by a record order book. The new customer sales pipeline is also at a record high and contains large deal opportunities. 

Cerillion's financial position is very robust. The Company continues to generate strong cash flows, maintains significant net cash, and recurring income is rising. We are therefore well-placed to support ongoing growth, including taking advantage of any suitable acquisitions opportunities as they arise.

The long-term trend of telecoms companies increasing investment in their networks and in digital transformation remains entrenched. This should continue to benefit Cerillion's own long-term growth prospects.

A M Howarth	L T Hall
Non-executive Chairman	Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2022

			Year to 30 September 2022		Year to 30 September 2021
	Notes		£		£
Revenue	2		32,726,049		26,070,815
Cost of sales			(7,221,383)		(5,662,228)
Gross profit			25,504,666		20,408,587
Operating expenses			(13,030,714)		(12,657,720)
Impairment losses on financial assets	3		(1,770,011)		(226,852)
Adjusted EBITDA*			13,750,055		10,515,283
Depreciation and amortisation			(2,985,649)		(2,880,927)
Share-based payment charge	18		(60,465)		(110,341)
Operating profit	3		10,703,941		7,524,015
Finance income	4		336,986		66,810
Finance costs	5		(145,623)		(163,982)
Profit before taxation			10,895,304		7,426,843
Taxation	6		(1,551,125)		(999,748)
Profit for the year			9,344,179		6,427,095
Other comprehensive income/(expense)
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign			70,238		(120,093)
operations
Total comprehensive income for the year			9,414,417		6,307,002
Earnings per share
Basic earnings per share - continuing and total operations	8		31.7 pence		21.8 pence
Diluted earnings per share - continuing and total operations			31.6 pence		21.7 pence

All transactions are attributable to the owners of the parent.

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

* Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") is calculated by taking operating profit and adding back depreciation & amortisation and share-based payment charge.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2022

			2022			2021
	Notes		£			£
ASSETS
Non-current assets
Goodwill	9		2,053,141			2,053,141
Other intangible assets	9		2,653,225			3,571,787
Property, plant and equipment	10		979,880			758,670
Right-of-use assets	11		3,056,997			3,705,723
Trade and other receivables	13		2,171,377			2,015,422
Deferred tax assets	12		259,625			209,211
			11,174,245			12,313,954
Current assets
Trade and other receivables	13		11,204,221			10,178,628
Cash and cash equivalents	16		20,249,100			13,174,471
			31,453,321			23,353,099
TOTAL ASSETS			42,627,566			35,667,053
LIABILITIES
Non-current liabilities
Trade and other payables	14		(934,439)			(394,850)
Lease liabilities	11		(3,049,538)			(3,866,352)
Deferred tax liabilities	12		(718,671)			(861,765)
			(4,702,648)			(5,122,967)
Current liabilities
Trade and other payables	14		(10,216,453)			(9,390,933)
Lease liabilities	11		(976,486)			(947,710)
			(11,192,939)			(10,338,643)
TOTAL LIABILITIES			(15,895,587)			(15,461,610)
NET ASSETS			26,731,979			20,205,443
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Ordinary share capital	17		147,567			147,567
Share premium account			13,318,725			13,318,725
Treasury stock	17		(25)			(25)
Share option reserve			136,958			128,130
Foreign exchange reserve			(96,836)			(167,074)
Retained earnings			13,225,590			6,778,120
TOTAL EQUITY			26,731,979			20,205,443

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 September 2022

						2022						2021
				Notes		£						£
Cash flows from operating activities
Profit for the year						9,344,179						6,427,095
Adjustments for:
Taxation				6		1,551,125						999,748
Finance income				4		(336,986)						(66,810)
Finance costs				5		145,623						163,982
Share option charge				18		60,465						110,341
Depreciation				10,11		1,084,581						1,007,265
Amortisation				9		1,901,068						1,873,661
						13,750,055						10,515,282
Increase in trade and other receivables						(1,181,548)						(238,364)
Increase/(decrease) in trade and other payables						1,323,530						(84,435)
Cash generated from operations						13,892,037						10,192,483
Finance costs				5		(145,623)						(163,982)
Finance income				4		336,986						66,810
Tax paid						(1,745,872)						(293,076)
NET CASH GENERATED FROM OPERATING ACTIVITIES						12,337,528						9,802,235
Cash flows from investing activities
Capitalisation of intangible assets				9		(982,506)						(970,212)
Purchase of property, plant and equipment				10		(626,206)						(301,686)
NET CASH USED IN INVESTING ACTIVITIES						(1,608,712)						(1,271,898)
Cash flows from financing activities
Borrowings repaid						-						(609,359)
Purchase of treasury stock						(827,424)						(512,500)
Receipts from exercise of share options						122,102						1,249
Principal elements of finance leases				11		(806,706)						(764,416)
Dividends paid				7		(2,243,024)						(1,726,538)
NET CASH USED IN FINANCING ACTIVITIES						(3,755,052)						(3,611,564)
NET INCREASE IN CASH AND CASH EQUIVALENTS						6,973,764						4,918,773
Translation differences						100,865						(56,169)
Cash and cash equivalents at beginning of year						13,174,471						8,311,867
CASH AND CASH EQUIVALENTS AT END OF YEAR						20,249,100						13,174,471

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2022

	Ordinary share capital		Share premium account		Treasury stock		Share option reserve		Foreign exchange reserve		Retained earnings		Total
	£		£		£		£		£		£		£
Balance at 1 October 2020	147,567		13,318,725		(375,025)		151,619		(46,981)		2,829,984		16,025,889
Profit for the year	-		-		-		-		-		6,427,095		6,427,095
Other comprehensive income:
Exchange differences on translating foreign operations	-		-		-		-		(120,093)		-		(120,093)
Total comprehensive income	-		-		-		-		(120,093)		6,427,095		6,307,002
Transactions with owners:
Share option charge	-		-		-		110,341		-		-		110,341
Purchase of treasury stock	-		-		(512,500)		-		-		-		(512,500)
Exercise of share options	-		-		887,500		(133,830)		-		(752,421)		1,249
Dividends	-		-		-		-		-		(1,726,538)		(1,726,538)
Total transactions with owners	-		-		375,000		(23,489)		-		(2,478,959)		(2,127,448)
Balance as at 30 September 2021	147,567		13,318,725		(25)		128,130		(167,074)		6,778,120		20,205,443
	Ordinary share capital		Share premium account		Treasury stock		Share option reserve		Foreign exchange reserve		Retained earnings		Total
	£		£		£		£		£		£		£
Balance at 1 October 2021	147,567		13,318,725		(25)		128,130		(167,074)		6,778,120		20,205,443
Profit for the year	-		-		-		-		-		9,344,179		9,344,179
Other comprehensive income:
Exchange differences on translating foreign operations	-		-		-		-		70,238		-		70,238
Total comprehensive income	-		-		-		-		70,238		9,344,179		9,414,417
Transactions with owners:
Share option charge	-		-		-		60,465		-		-		60,465
Purchase of treasury stock	-		-		(827,424)		-		-		-		(827,424)
Exercise of share options	-		-		827,424		(51,637)		-		(653,685)		122,102
Dividends	-		-		-		-		-		(2,243,024)		(2,243,024)
Total transactions with owners	-		-		-		8,828		-		(2,896,709)		(2,887,881)
Balance as at 30 September 2022	147,567		13,318,725		(25)		136,958		(96,836)		13,225,590		26,731,979

NOTES TO THE ACCOUNTS

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

1 (a) Critical accounting estimates and judgements

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

Judgements

(i) Capitalisation of development costs

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

(ii) Revenue recognition

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

Estimates

(i) Revenue recognition

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

(ii) Impairment of non-financial assets

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

(iii) Depreciation and amortisation

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

(iv) Calculation of future minimum lease payments

The calculation of lease liabilities requires the Group to determine an incremental borrowing rate ("IBR") to discount future minimum lease payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.

Management has considered the above areas of estimation and concluded that there are no deemed material changes arising from changes in underlying assumptions.

1 (b) Other sources of estimation uncertainty

(i) Recoverability of trade debtors and accrued income

Management use their judgement when determining whether trade debtors and accrued income are considered recoverable or where a provision for impairment is considered necessary. The assessment of recoverability will include consideration of whether the balance is with a long-standing client, whether the customer is experiencing financial difficulties, the fact that balances are recognised under contract and that the products sold are mission-critical to the customer's business. Refer to notes 13 and 16.

2  Segment information

The Group continues to be organised into four main business segments for revenue purposes.

Under IFRS 8 there is a requirement to show the profit or loss for each reportable segment and the total assets and total liabilities for each reportable segment if such amounts are regularly provided to the chief operating decision-maker. There are no other material items that are separately presented to the chief operating decision-maker.

In respect of the profit or loss for each reportable segment the expenses are not reported by segment and cannot be allocated on a reasonable basis and, as a result, the analysis is limited to the Group revenue.

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

	2022			2021
	£			£
Revenue
Services	18,271,756			11,863,628
Software	9,853,954			11,340,625
Software-as-a-Service	3,005,913			2,057,655
Third-party	1,594,426			808,907
Total revenue	32,726,049			26,070,815

The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy. Revenue recognised on performance obligations partially satisfied in previous periods was £19,928,729 (2021: £12,703,901).

				Accounting policies
	Year ended 30 September 2022			(i)	(ii)	(iii)	(iv)		Total
		£		£	£	£	£		£
Services		18,271,756
	implementation fees			6,597,495	-	-	-		6,597,495
	ongoing account development work			-	-	11,674,261	-		11,674,261
Software		9,853,954
	initial licence fees			764,858	-	-	-		764,858
	sale of additional licences			-	1,611,694	-	-		1,611,694
	ongoing maintenance and support fees			7,477,402	-	-	-		7,477,402
Software-as-a-Service		3,005,913		3,005,913	-	-	-		3,005,913
Third-Party		1,594,426		-	-	-	1,594,426		1,594,426
Total		32,726,049		17,845,668	1,611,694	11,674,261	1,594,426		32,726,049

					Accounting policies
Year ended 30 September 2021					(i)			(ii)		(iii)		(iv)			Total
		£			£			£		£		£			£
Services		11,863,628
	implementation fees				5,386,613			-		-		-			5,386,613
	ongoing account development work				-			-		6,477,015		-			6,477,015
Software		11,340,625
	initial licence fees				3,839,508			-		-		-			3,839,508
	sale of additional licences				-			910,787		-		-			910,787
	ongoing maintenance and support fees				6,590,330			-		-		-			6,590,330
Software-as-a-Service		2,057,655			2,057,655			-		-		-			2,057,655
Third-Party		808,907			-			-		-		808,907			808,907
Total		26,070,815			17,874,106			910,787		6,477,015		808,907			26,070,815

(a) Geographical information

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

	UK & Europe		MEA		Americas		Asia Pacific
	£		£		£		£
Year ended/As at 30 September 2022
Revenue - by customer location	20,389,431		3,165,818		7,937,599		1,233,201
Capital expenditure	1,548,273		-		-		60,439
Non-current assets	10,496,433		-		-		677,812
Total assets	41,099,603		-		-		1,527,963
Net assets	26,519,367		-		-		212,612

	UK & Europe		MEA		Americas		Asia Pacific
	£		£		£		£
Year ended/As at 30 September 2021
Revenue - by customer location	18,729,415		2,052,625		3,478,079		1,810,696
Capital expenditure	1,218,040		-		-		53,858
Non-current assets	11,371,807		-		-		942,147
Total assets	34,104,087		-		-		1,562,966
Net assets	20,250,312		-		-		(44,869)

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

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

			Operating		2022		2021
			segment		£		£
Customer
No. 1			Europe		4,817,806		2,708,264
No. 2			Americas		3,417,612		555,716
No. 3			UK		3,400,054		5,195,842

3  Operating profit

		2022			2021
		£			£
Operating profit is stated after (crediting)/charging:
Employee benefits expenses		13,943,441			12,602,628
Depreciation		1,084,581			1,007,265
Amortisation of intangibles		1,901,068			1,873,662
Research and development costs		385,449			395,731
Bad debt expense		1,770,011			226,852
Foreign exchange (gains)/losses		(366,693)			494,903
Operating leases		157,089			125,834
Fees payable to Cerillion's principal auditors:
- Audit of Cerillion plc's annual financial statements		14,300			13,000
- Audit of subsidiaries		80,300			73,000
- Non-audit services - tax services		81,474			38,430
- Non-audit services - other services		4,278			-
Fees payable to associates of principal auditors:
- Audit of subsidiaries		9,000			7,500
Other costs		2,957,810			1,687,995
Total cost of sales, operating expenses and impairment losses on financial assets		22,022,108			18,546,800

The bad debt expense relates to the provisions made against the risk of non-recovery of receivables. The increase during the year is predominantly due to an assessment over certain implementation work that may not be fully recoverable.

4  Finance income

	2022		2021
	£		£
Finance income:
Bank interest receivable	74,922		1,855
Unwinding discount of contracts with significant financing component	262,064		64,955
	336,986		66,810

5  Finance costs

	2022		2021
	£		£
Finance costs:
Interest payable in respect of loans	-		(5,347)
Interest and finance charges for lease liabilities	(133,944)		(158,341)
Other interest payable	(11,679)		(294)
	(145,623)		(163,982)

6  Taxation

a) Analysis of tax charge for the year

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

	2022	2021
	£	£
Current tax expense - UK	1,524,372	799,160
Current tax - adjustment in respect of prior year	1,159	-
Current tax expense - overseas	197,158	293,076
Current tax expense - total	1,722,689	1,092,236
Deferred tax credit	(153,541)	(92,336)
Deferred tax - adjustment in respect of prior year	(18,023)	(152)
Deferred tax credit - total	(171,564)	(92,488)
Total tax charge	1,551,125	999,748
(b) Factors affecting total tax for the year
The tax assessed for the year is lower (2021: lower) than the standard rate of corporation tax in the United Kingdom 19.0% (2021: 19.0%). The differences are explained as follows:
Profit on ordinary activities before tax	10,895,304	7,426,843
Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.0% (2021: 19.0%)	2,070,108	1,411,100
Effect of:
Expenses not deductible for tax purposes	257,001	219,344
Non-taxable income for tax purposes	-	(180,158)
Difference in tax rates	15,256	64,625
Other temporary differences	(51,606)	28,310
Foreign tax - other	(8,434)	78,760
Prior year tax adjustment	1,159	-
Prior year tax adjustment - deferred tax	(18,023)	(152)
Other permanent differences - relating to share options	(134,604)	(168,464)
Enhanced relief for research and development	(579,732)	(453,617)
Total tax charge	1,551,125	999,748

There are currently no recognised or unrecognised deferred tax assets or liabilities within the Parent Company financial statements. In the Spring Budget 2021, the Government announced that from 1 April 2023 the main rate of UK corporation tax rate will increase from 19% to 25%. This new rate was substantively enacted on 24 May 2021 and therefore its impact has been reflected in the measurement of deferred taxes in the financial statements.

7  Dividends

(a)  Dividends paid during the reporting period

The Board paid the final dividend in respect of 2021 of 5.0p per share, on 8 February 2022, and declared and paid an interim 2022 dividend of 2.6p (2021: 2.1p) per share on 17 June 2022. Total dividends paid during the reporting period were £2,243,024 (2021: £1,726,538).

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

Since the year end the Directors have proposed the payment of a dividend in respect of the full financial year of 6.50p per fully paid Ordinary Share (2021: 5.00p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2022, but not recognised as a liability at the year end is £1,918,377 (2021: £1,475,674). Since the year end the Directors of Cerillion Technologies Limited have approved a £3.0 million dividend to Cerillion plc.

8  Earnings per share

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

		2022		2021
Profit attributable to equity holders of the Company (£)		9,344,179		6,427,095
Weighted average number of Ordinary Shares in issue (number)		29,513,486		29,513,486
Less weighted average number of shares held in Treasury		(10,627)		(30,149)
Weighted average number of Ordinary Shares in issue (number)		29,502,859		29,483,337
Effect of share options in issue		56,858		105,886
Weighted average shares for diluted earnings per share		29,559,717		29,589,223
Basic earnings per share (pence per share)		31.7		21.8
Diluted earnings per share (pence per share)		31.6		21.7

9  Intangible assets

Group		Goodwill		Purchased customer contracts		Intellectual property rights		Software development costs		External software licences		Total
		£		£		£		£		£		£
Cost
At 1 October 2020		2,053,141		4,382,654		2,567,160		4,305,792		230,453		13,539,200
Additions		-		-		-		948,198		22,014		970,212
At 30 September 2021		2,053,141		4,382,654		2,567,160		5,253,990		252,467		14,509,412
Additions		-		-		-		965,427		17,079		982,506
At 30 September 2022		2,053,141		4,382,654		2,567,160		6,219,417		269,546		15,491,918
Amortisation
At 1 October 2020		-		2,817,419		1,650,317		2,346,529		196,558		7,010,823
Provided in the year		-		626,093		366,737		856,530		24,301		1,873,661
At 30 September 2021		-		3,443,512		2,017,054		3,203,059		220,859		8,884,484
Provided in the year		-		626,093		366,737		884,620		23,618		1,901,068
At 30 September 2022		-		4,069,605		2,383,791		4,087,679		244,477		10,785,552
Net book amount at 30 September 2022		2,053,141		313,049		183,369		2,131,738		25,069		4,706,366
Net book amount at 30 September 2021		2,053,141		939,142		550,106		2,050,931		31,608		5,624,928

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

The carrying value of goodwill included within the Cerillion plc consolidated statement of financial position is £2,053,141 (2021: £2,053,141), which is allocated to the cash-generating unit ("CGU") of Cerillion Technologies Limited Group. The CGU's recoverable amount has been determined based on its fair value less costs to sell. As Cerillion plc was established to purchase the CTL Group the fair value less costs to sell has been calculated based on the market capitalisation of Cerillion plc less the estimated costs to sell the CTL Group.

Using an average market share price of Cerillion plc for the year ended 30 September 2022, less an estimate of costs to sell, there is significant headroom above the carrying value of the cash-generating unit and therefore no impairment exists. The calculations show that a reasonably possible change, as assessed by the Directors, would not cause the carrying amount of the CGU to exceed its recoverable amount.

10  Property plant and equipment

Group		Leasehold  improvements				Computer  equipment		Fixtures  and fittings		Total
		£				£		£		£
Cost
At 1 October 2020		712,748				1,456,378		294,651		2,463,777
Additions		33,040				263,611		5,035		301,686
Disposals		-				(105,325)		-		(105,325)
Exchange difference		(14,932)				(9,944)		(5,558)		(30,434)
At 30 September 2021		730,856				1,604,720		294,128		2,629,704
Additions		-				623,708		2,498		626,206
Disposals		-				(58,724)		-		(58,724)
Exchange difference		27,628				23,795		10,283		61,706
At 30 September 2022		758,484				2,193,499		306,909		3,258,892
Accumulated Depreciation
At 1 October 2020		318,543				1,089,257		268,092		1,675,892
Provided in the year		67,344				232,232		24,237		323,813
Disposals		-				(105,325)		-		(105,325)
Exchange difference		(10,058)				(7,999)		(5,289)		(23,346)
At 30 September 2021		375,829				1,208,165		287,040		1,871,034
Provided in the year		71,653				335,121		5,003		411,777
Disposals		-				(58,724)		-		(58,724)
Exchange difference		23,430				21,252		10,243		54,925
At 30 September 2022		470,912				1,505,814		302,286		2,279,012
Net book amount at 30 September 2022		287,572				687,685		4,623		979,880
Net book amount at 30 September 2021		355,027				396,555		7,088		758,670

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

There were no property, plant and equipment assets owned by the Parent Company.

11  Leases

Group

This note provides information for leases where the Group is a lessee. The Group leases offices in London and India, along with some IT equipment.

(i) Amounts recognised in the consolidated and company statements of financial position

The consolidated and company statements of financial position shows the following amounts relating to leases:

		Group				Company
Right-of-use assets		30 September 2022 £		30 September 2021 £		30 September 2022 £		30 September 2021 £
Properties		3,043,937		3,705,723		2,656,147		3,162,079
IT Equipment		13,060		-		-		-
		3,056,997		3,705,723		2,656,147		3,162,079

		Group				Company
Lease liabilities		30 September 2022 £		30 September 2021 £		30 September 2022 £		30 September 2021 £
Current		976,486		947,710		731,000		731,000
Non-current		3,049,538		3,866,352		2,803,234		3,416,663
		4,026,024		4,814,062		3,534,234		4,147,663

Additions to the right-of-use assets during the 2022 financial year were £130,538 (2021: £nil). There were lease disposals during the year with net book value totalling £106,460 (2021: £nil).

(ii) Amounts recognised in the consolidated statement of comprehensive income

The consolidated statement of comprehensive income shows the following amounts relating to leases:

Depreciation charge of right-of-use assets		30 September 2022 £	30 September 2021 £
Properties		672,431	677,604
IT Equipment		373	5,848
		672,804	683,452
Interest expense (included in finance cost)		133,944	158,341
Expense relating to short-term leases (included in operating expenses)		156,681	120,674
Expenses relating to low value assets that are not shown above as short-term leases (included in operating expenses)		408	5,160

The total cash outflow for leases in 2022 was £ 940,650 (2021: £ 922,757 ).

The property within the Company had a depreciation charge for the year of £505,932 (2021: £505,932).

12  Deferred tax

Deferred tax asset

Group	Accelerated capital allowances	Other temporary differences	Total
	£	£	£
1 October 2020	18,402	126,658	145,060
Foreign exchange movement on opening deferred tax asset	833	(7,112)	(6,279)
Credited to statement of comprehensive income	1,755	68,675	70,430
30 September 2021	20,990	188,221	209,211

Group	Accelerated capital allowances	Other temporary differences	Total
	£	£	£
1 October 2021	20,990	188,221	209,211
Foreign exchange movement on opening deferred tax asset	2,683	19,261	21,944
Credited to statement of comprehensive income	1,742	26,728	28,470
30 September 2022	25,415	234,210	259,625

Deferred tax liability

Group

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

	2022		2021
	£		£
At 1 October	861,765		883,823
Debited to statement of comprehensive income in respect of net ACAs & other temporary differences	45,544		166,580
Credited to statement of comprehensive income in respect of acquisitions	(188,638)		(188,638)
As at 30 September	718,671		861,765

There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2022 (2021: £nil).

13  Trade and other receivables and other contract balances

Contract balances

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

	Group
	2022	2021
	£	£
Trade receivables	2,502,608	1,697,958
Contract assets	9,853,285	9,709,419
Contract liabilities	4,612,511	4,775,174

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

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

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

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

Significant changes in the contract assets and contract liabilities balances during the period are driven by the timing of income recognition and when associated invoices are raised. Specifically, revenue recognised in the year in relation to deferred income brought forward from prior years of £4,104,520 (2021: £4,700,894).

When certain costs to acquire a contract meet defined criteria, those costs are deferred as contract assets. The total amount of deferred contract assets (commission fees recognised in prepaid assets) are £225,869 (2021: £209,762). The total amount of accrued costs to acquire a contract are £304,597 (2021: £242,916).

The total amount of revenue allocated to unsatisfied performance obligations is £37,420,003 (2021: £34,853,478). It is estimated that 75% will be recognised over the next 18 months, the remainder over the following years thereafter.

There are no contract balances within the Parent Company (2021: £nil).

Current receivables	Group		Company
	2022	2021	2022	2021
	£	£	£	£
Trade receivables	2,502,608	1,697,958	-	-
Accrued income	7,758,649	7,763,748	-	-
Amounts owed by Group undertakings	-	-	2,058,502	2,079,936
Other receivables	311,229	235,981	-	-
Prepayments	631,735	480,941	7,726	7,811
	11,204,221	10,178,628	2,066,228	2,087,747
Non-current receivables	Group		Company
	2022	2021	2022	2021
	£	£	£	£
Accrued income	2,094,636	1,945,671	-	-
Other receivables	76,741	69,751	-	-
	2,171,377	2,015,422	-	-

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

Credit quality of receivables

A detailed review of the credit quality of each client is completed before an engagement commences. The credit risk relating to trade receivables is analysed as follows:

		2022			2021
		£			£
Group
Trade receivables		2,744,317			2,121,287
Specific provision		(193,501)			(201,827)
ECL reserve		(231,841)			(221,502)
		2,318,975			1,697,958

The ECL Provision above includes an amount relating to accrued income of £183,633 (2021: nil).

The Parent Company had no trade receivables in either period. The other classes of assets within trade and other receivables do not contain impaired assets. The net carrying value is judged to be a reasonable approximation of fair value.

Movements in the provision for the impairment of trade receivables were as follows:

	Specific Provision	ECL provision
	£	£
Balance at the beginning of the year	201,827	221,502
Charged/(released) for the year	149,165	48,208
Utilised for the year	(157,491)	(221,502)
Balance at the end of the year	193,501	48,208

The following is an ageing analysis of those trade receivables that were not past due and those that were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

		2022			2021
		£			£
Group
Not past due		1,713,716			1,104,013
Up to 3 months		734,637			463,995
3 to 6 months		5,994			102,174
Older than 6 months		48,261			27,776
		2,502,608			1,697,958

Of the trade debt older than 6 months as at 30 September 2022, being £48,261 (2021: £27,776), cash of £7,689 (2021: £nil) has been received since the year end.

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

	2022		2021
	£		£
Group
Not past due	33,011		141,696
Up to 3 months	14,152		219,203
3 to 6 months	150,259		29,574
Older than 6 months	44,287		32,856
	241,709		423,329

1 

14  Trade and other payables

Current trade and other payables	Group		Company
	2022	2021	2022	2021
	£	£	£	£
Trade payables	1,154,204	490,055	96,657	59,081
Taxation	775,977	799,160	919	446
Other taxation and social security	494,638	421,847	64,254	74,227
Pension contributions	46,263	46,383	-	-
Other payables	381,669	519,171	-	-
Accruals	3,118,656	2,339,143	74,340	65,951
Deferred income	4,245,046	4,775,174	-	-
	10,216,453	9,390,933	236,170	199,705

Movements in the provisions, which are included within accruals above, were as follows:

	Dilapidations Provision
	£
Balance at the beginning of the year	94,310
Charged/(released) for the year	23,579
Balance at the end of the year	117,889

The dilapidations provision relates to the full expected cost of dilapidations across the Group's properties.

Non-current trade and other payables	Group				Company
	2022		2021		2022		2021
	£		£		£		£
Other payables		566,974		394,850		-		-
Deferred income		367,465		-		-		-
		934,439		394,850		-		-

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

The non-current other payable above relates to provisions for gratuity and long-term bonuses within the Indian subsidiary.

Gratuity  - The Indian subsidiary, Cerillion Technologies India Private Limited, provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972 . The unfunded plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment. There is a vesting condition of five years of service for benefit payment.

Long-term bonus  - The employees (Band II, III and IV only) are eligible for a loyalty bonus at 20% of annual total fixed pay as at the end of the third year, 10% of annual total fixed pay as at the end of four and half years and 10% of annual total fixed pay as at the end of the sixth year provided they are employed with the Indian subsidiary, Cerillion Technologies India Private Limited, for at least three years/four and half years/six years, as the case maybe, after completion of probationary period. The Group's liability is actuarially determined at the end of each year. Actuarial losses/gains are recognised in the Statement of Comprehensive Income in the year in which they arise.

The actuarial assumptions relating to the above provisions are outlined below:

	Gratuity		Long-term bonus
	2022	2021	2022	2021
Discount rate	7.50%	6.20%	7.50%	5.10%
Salary increment rate	15.00%	15.00%	15.00%	15.00%
Withdrawal rate	15.00%	15.00%	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.

15  Borrowings and financial liabilities

	Group		Company
	2022	2021	2022	2021
	£	£	£	£
Current liabilities:
Secured loans	-	-	-	-
Lease liabilities	976,486	947,710	731,000	731,000
Non-current liabilities:
Lease liabilities	3,049,538	3,866,352	2,803,234	3,416,663
	4,026,024	4,814,062	3,534,234	4,147,663

Terms and repayment schedule

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

Group and Company	Non-current Borrowings			Current Borrowings						Total
	£			£						£
1 October 2021	-			-						-
Cash-flows:
Repayment	-			-						-
30 September 2022	-			-						-
	Non-current Borrowings			Current Borrowings						Total
Group and Company	£			£						£
1 October 2020	-			609,359						609,359
Cash-flows:
Repayment	-			(609,359)						(609,359)
30 September 2021	-			-						-
Group	Non-current Lease liabilities			Current Lease liabilities						Total
	£			£						£
1 October 2021	3,866,352			947,710						4,814,062
Cash-flows:
Repayment	-			(940,650)						(940,650)
Accrued interest	-			133,944						133,944
Non-cash:
Additions	-			125,128						125,128
Foreign exchange revaluation	-			(106,460)						(106,460)
Reclassification	(816,814)			816,814						-
30 September 2022	3,049,538			976,486						4,026,024
1 October 2020	4,655,772			922,706						5,578,478
Cash-flows:
Repayment	-			(922,757)						(922,757)
Accrued interest	-			158,341						158,341
Non-cash:
Reclassification	(789,420)			789,420						-
30 September 2021	3,866,352			947,710						4,814,062
Company	Non-current Lease liabilities			Current Lease liabilities						Total
	£			£						£
1 October 2021	3,416,663			731,000						4,147,663
Cash-flows:
Repayment	-			(731,002)						(731,002)
Accrued interest	-			117,573						117,573
Non-cash:
Reclassification	(613,429)			613,429						-
30 September 2022	2,803,234			731,000						3,534,234
1 October 2020	4,012,028			731,000						4,743,028
Cash-flows:
Repayment	-			(731,004)						(731,004)
Accrued interest	-			135,639						135,639
Non-cash:
Reclassification	(595,365)			595,365						-
30 September 2021	3,416,663			731,000						4,147,663

16  Financial instruments and risk management

	Group - Financial instruments by category			2022 £			2021 £
	Financial assets - measured at amortised cost
		Non-current
		Accrued income			2,094,636			1,945,671
		Other receivables			76,741			69,751
					2,171,377			2,015,422
		Current
		Trade and other receivables			2,813,837			1,933,939
		Accrued income			7,758,649			7,763,748
		Cash and cash equivalents			20,249,100			13,174,471
					30,821,586			22,872,158

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

Financial liabilities - held at amortised cost		2022 £			2021   £
Non-current
Trade and other payables		566,974		394,850
Lease liabilities		3,049,538		3,866,352
		3,616,512		4,261,202
Current
Lease liabilities		976,486		947,710
Trade and other payables		1,535,873		1,009,226
Pension costs		46,263		46,383
Accruals		3,118,656		2,339,143
		5,677,278		4,342,462

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

Company

	Financial instruments by category				2022 £			2021 £
	Financial assets - measured at amortised cost
		Current
		Amounts owed by Group undertakings & other receivables				2,058,502			2,079,936
		Cash and cash equivalents				289,141			227,008
						2,347,643			2,306,944

Financial liabilities - held at amortised cost		2022 £	2021   £
Non-current
Lease liabilities		2,803,234		3,416,663
		2,803,234		3,416,663
Current
Lease liabilities		731,000		731,000
Trade and other payables		96,657		59,081
Accruals		74,340		65,951
		901,997		856,032

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

There were no derivative financial instruments in existence as at 30 September 2022 (2021: £nil).

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

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:

		2022				2021
		£				£
Trade receivables
Group 1		25,838				838
Group 2		2,466,259				1,628,518
Group 3		10,511				68,602
		2,502,608				1,697,958

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

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

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

At the year end there are 4 customers (2021: 5 customers) with trade receivable balances each representing in excess of 5% of the total trade receivables of £2,502,608 (2021: £1,697,958). Of these customers, none are categorised within Group 1 (2021: none), 4 are within Group 2 representing 86% of total trade receivables (2021: 5 customers), with none in Group 3 (2021: none).

There are no trade receivables within the Parent Company.

		2022			2021
		£			£
Cash at bank and short-term deposits
A1		20,245,806			13,172,172
Not rated		3,294			2,299
		20,249,100			13,174,471

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

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

Market risk - foreign exchange risk

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

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

As at 30 September 2022 the Group had no forward foreign exchange contracts in place (2021: none) to mitigate exchange rate exposure.

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

		AUD		USD		EUR		INR		DKK		BND
30 September 2022
Financial assets		338,844		1,341,281		3,552,826		1,109,776		1,855,143		227,480
Financial liabilities		-		(154,998)		(3,167)		(980,546)		-		-
Total exposure		338,844		1,186,283		3,549,659		129,230		1,855,143		227,480
		AUD		USD		EUR		INR		DKK		BND
30 September 2021
Financial assets		361,918		2,395,709		1,355,140		898,789		2,151,192		413,787
Financial liabilities		-		(87,411)		(5,389)		(546,586)		-		-
Total exposure		361,918		2,308,298		1,349,751		352,203		2,151,192		413,787

The following table illustrates the sensitivity of profit and equity in regards to the Group's financial assets and financial liabilities and the US Dollar, Australian Dollar, Euro, Indian Rupee, Danish Krone and Brunei Dollar to GBP exchange rate 'all other things being equal'. It assumes a +/- 10% change to each of the foreign currency to GBP exchange rates. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each reporting date.

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

30 September 2022		AUD		USD		EUR		INR		DKK		BND
Loss for the year		(30,804)		(107,844)		(322,696)		(11,748)		(168,649)		(20,680)
Equity total		(30,804)		(107,844)		(322,696)		(11,748)		(168,649)		(20,680)
30 September 2021		AUD		USD		EUR		INR		DKK		BND
Loss for the year		(32,902)		(209,845)		(122,705)		(32,018)		(195,563)		(37,617)
Equity total		(32,902)		(209,845)		(122,705)		(32,018)		(195,563)		(37,617)

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

30 September 2022		AUD		USD		EUR		INR		DKK		BND
Gain for the year		37,649		131,809		394,407		14,359		206,127		25,276
Equity total		37,649		131,809		394,407		14,359		206,127		25,276
30 September 2021		AUD		USD		EUR		INR		DKK		BND
Gain for the year		40,213		256,478		149,972		39,134		239,021		45,976
Equity total		40,213		256,478		149,972		39,134		239,021		45,976

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

Market Risk - cash flow interest rate risk

The loans taken out with HSBC to facilitate the purchase of shares prior to the Admission on AIM and have now been repaid, as disclosed in note 18.

The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group's cash at bank and short-term deposits is considered immaterial.

Liquidity risk

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

				Less than 1 year			Between 1 and 2 years			Between 2 and 5 years			Over 5 years
30 September 2022
Lease liabilities				977,375			958,275			2,223,696			182,750
Trade and other payables				5,971,407			566,974			-			-
30 September 2021
Lease liabilities				926,303			931,919			2,427,264			913,750
Trade and other payables				4,615,759			394,850			-			-

Capital risk management

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

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

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

The capital structure consists of the Group's equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings. As of the year ended 30 September 2022 the Group's total managed capital amounted to £26,731,979 (2021: £20,205,443); Company's capital as of 30 September 2022 was £15,892,683 (2021: £15,781,037).

17  Share capital

		2022		2021
		£		£
Issued, allotted, called up and fully paid:
29,513,486 (2021: 29,513,486) Ordinary Shares of 0.5 pence		147,567		147,567

The Ordinary Shares have been classified as Equity. The Ordinary Shares have attached to them full voting and capital distribution rights. The Company does not have an authorised share capital.

At the beginning of the year the Group held 12 shares in Treasury Stock. In February 2022, the Company acquired 111,814 of its own shares in the market, at £7.40 per share, to be held as Treasury Stock to be used to satisfy the exercise of share options. In March to August 2022 111,814 of these shares were issued on the exercise of share options. At the year end there were 12 shares (2021: 12 shares remaining in Treasury Stock) at an average cost of £2.10 per share (2021: £2.10).

18  Share-based payments

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

A new Save as You Earn ("SAYE") share option scheme and a new Long-Term Incentive Plan ("LTIP") were introduced in 2021 and additional options were granted during the year ended 30 September 2022 under the LTIP. A charge of £60,465 (2021: £110,341) has been reflected in the consolidated statement of comprehensive income, with the corresponding entry recognised within the share option reserve.

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

Year of grant		2022	2021	2021
Scheme		LTIP	SAYE	LTIP
Exercise price (£)		0.005	5.92	0.005
Number of options granted		15,000	71,000	75,000
Vesting period (years)		3 to 4 years	3 years	3 to 6 years
Option life (years)		3 to 4 years	3.5 years	3 to 6 years
Risk free rate		1.75%	0.16%	1.00%
Volatility		109%	35%	83%
Dividend yield		1% to 2%	3.00%	1.00%
Fair value (£)		9.45	2.03	4.39

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

The SAYE 2019 scheme matured during the year and 111,814 share options were exercised, with Treasury Shares being used to settle all of the options exercised. In the prior year share options relating to the LTIP 2017 were exercised, with Treasury Shares being used to settle the options exercised.

During the year options were granted as summarised in the table below:

	2022 Number of  Options	2022 Weighted  average  exercise  price	2021 Number of  Options	2021 Weighted  average  exercise  price
		£		£
Outstanding at start of year	278,912	2.03	382,912	0.38
Granted	15,000	0.005	146,000	2.88
Lapsed	(28,090)	(2.29)	-	-
Exercised	(111,814)	(1.092)	(250,000)	(0.005)
Outstanding at 30 September	154,008	2.46	278,912	2.03
Exercisable at 30 September	-	-	-	-

For the options outstanding at 30 September 2022, the weighted average fair values and the weighted average remaining contractual lives (being the time period from 30 September 2022 until the lapse date of each share option) are set out below:

	Weighted average fair value of options outstanding	Weighted average remaining contractual life
	£	Years
LTIP 2021	4.39	4.49
SAYE 2021	2.03	2.34
LTIP 2022	9.45	5.41

19  Retirement benefits

The Group operates a personal contribution pension scheme for the benefit of the employees. The pension cost charge for the year represents contributions payable by the Group to the fund and amounted to £329,901 (2021: £320,358). At the year end the contributions payable to the scheme were £46,263 (2021: £46,383).

20  Annual General Meeting

The Annual General Meeting is to be held on 2 February 2023.  Notice of the AGM will be despatched to shareholders with Cerillion's report and accounts.

21  Preliminary Announcement

The financial information set out in the announcement does not constitute the Company's full statutory accounts for the years ended 30 September 2022 or 2021, which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified, it did not draw attention to any matters by way of emphasis without qualifying their report and it did not contain a statement under s498(2) or (3) Companies Act 2006. The audit of the statutory accounts for the year ended 30 September 2022 has been completed and the accounts will be delivered to the Registrar of Companies before the Company's Annual General Meeting and will be available on the Company's website at www.cerillion.com.  This announcement is derived from the statutory accounts for that year.

 

END

 

 

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