Final Results

RNS Number : 4238U

Cerillion PLC

25 November 2019

 

25 November 2019

AIM: CER                                                    

Cerillion plc

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

Final results for the year ended 30 September 2019

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

Highlights

Financial:

·	All key financial performance measures reached record highs
·	Revenue1 rose by 8% to £18.8 m (2018: £17.4m)
	-	recurring revenue2 contributed £5.1m (2018: £5.0m), 27% of total revenue
	-	at the year end, on an annualised basis, recurring revenue was up 17% year-on-year to £5.0m (2018: £4.3m)
·	New orders rose by 78% to £23.3m (2018: £13.0m)
	-	strong second half weighting to major contract signings
·	Back-order book3 increased by 69% to £22.0m at the year-end (2018: £13.0m)
·	Adjusted EBITDA4 increased by 16% to £4.6m (2018: £3.9m)
·	adjusted EBITDA margin rose to 24.3% (2018: 22.7%)
·	Profit before tax up by 36.0% to £2.4m (2018: £1.8m)
·	Adjusted profit before tax5 up by 12% to £3.5m (2018: £3.1m)
·	Adjusted earnings per share6 increased by 3.3% to 11.3p (2018: 10.9p)
·	Proposed final dividend of 3.3p per share, bringing the total dividend for the year to 4.9p per share (2018: 4.5p), an increase of 9%
·	Net cash doubled to £5.0m (2018: £2.5m)

Operational:

·	Four major new enterprise customers were signed, with contract values ranging from £3.7m to £5.3m, reflecting the continuing trend towards winning larger contracts with larger customers
	-	three of the four major new contracts were signed in H2
·	A further major new contract worth £2.9m was signed in the first quarter of the new financial year
·	Strong pipeline of new business opportunities
·	The Board believes that Cerillion remains well-positioned for further progress over the new financial year

Louis Hall, CEO of Cerillion, commented:

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

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

For further information please contact:

Cerillion plc Louis Hall, CEO Oliver Gilchrist, CFO		c/o KTZ Communications T: 020 3178 6378
Shore Capital (Nomad and Broker)		T: 020 7408 4090
Toby Gibbs / Mark Percy / Sarah Mather (Corporate Advisory) Henry Willcocks (Corporate Broking)
KTZ Communications		T: 020 3178 6378
Katie Tzouliadis Dan Mahoney

About Cerillion

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

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

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

Notes

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

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

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

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

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

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

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

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Introduction

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

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

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

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

Financial Overview

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

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

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

•	Software (including Software-as-a-Service) revenue increased by 40% to £9.1m (2018: £6.5m).  The increase reflected the major new deals signed with new customers as well as licence extensions with existing customers. Software revenues accounted for 48% of total revenues (2018: 37%).
•	Services revenue decreased by 14% to £7.9m (2018: £9.2m) and comprised 42% of total revenue (2018: 53%). The dip between 2018 and 2019 mainly reflected the timing of the commencement of the major new customer implementations. Work on all but one of the major new contracts signed in the year started in the fourth quarter. By contrast, in 2018, there was a concurrence of work on three major new customer implementation projects throughout most of the year.
•	Third party income increased to £1.8m (2018: £1.7m) and comprised 10% of total revenue (2018: 10%).

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

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

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

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

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

Cash Flow and Banking

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

Dividend

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

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

Operational Overview

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

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

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

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

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

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

Our charging module ("CCS") remains an important component of our solutions set, enabling communications service providers ("CSPs") to converge prepaid and postpaid charging and billing on the same software platform. This drives significant cost savings as well as performance-related benefits, including the ability to support multiple service types. We provide CCS in many ways - as a standalone charging engine, as a replacement for legacy prepaid systems, or as an integral part of Cerillion's core end-to-end billing and CRM solution. 

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

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

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

Outlook

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

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

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2019

			Year to 30 September 2019		Year to 30 September 2018
	Notes		£		£
Revenue	2		18,751,781		17,352,597
Cost of sales			(4,698,282)		(4,775,585)
Gross profit			14,053,499		12,577,012
Operating expenses			(11,531,711)		(10,686,351)
Adjusted EBITDA			4,557,915		3,931,798
Depreciation and amortisation			(2,013,012)		(1,744,076)
Share based payment charge	17		(23,115)		(135,400)
Exceptional items	3		-		(161,661)
Operating profit	3		2,521,788		1,890,661
Finance income	4		6,375		9,556
Finance costs	5		(79,506)		(100,287)
Profit before taxation			2,448,657		1,799,930
Taxation	6		(135,890)		131,144
Profit for the year			2,312,767		1,931,074
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Exchange difference on translating foreign			130,807		(120,600)
operations
Total comprehensive profit for the year			2,443,574		1,810,474
Earnings per share
Basic earnings per share - continuing and total operations	8		7.8 pence		6.5 pence
Diluted earnings per share - continuing and total operations			7.8 pence		6.4 pence

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

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2019

			2019		2018		2017
	Notes		£		£		£
ASSETS					(Restated)		(Restated)
Non-current assets
Goodwill	9		2,053,141		2,053,141		2,053,141
Other intangible assets	9		5,210,766		6,078,634		6,571,158
Property, plant and equipment	10		853,206		768,453		359,939
Trade and other receivables	12		2,376,478		577,288		768,240
Deferred tax assets	11		133,578		169,093		270,123
			10,627,169		9,646,609		10,022,601
Current assets
Trade and other receivables	12		8,166,271		8,359,423		7,740,586
Cash and cash equivalents			6,771,406		5,254,302		5,338,935
			14,937,677		13,613,725		13,079,521
TOTAL ASSETS			25,564,846		23,260,334		23,102,122
LIABILITIES
Non-current liabilities
Borrowings	14		(570,946)		(1,793,070)		(2,693,139)
Deferred tax liabilities	11		(955,569)		(979,501)		(1,275,880)
			(1,526,515)		(2,772,571)		(3,969,019)
Current liabilities
Trade and other payables	13		(7,293,357)		(5,051,858)		(4,336,883)
Current tax liabilities			-		-		(37,109)
Borrowings	13		(1,200,000)		(1,000,000)		(1,000,000)
			(8,493,357)		(6,051,858)		(5,373,992)
TOTAL LIABILITIES			(10,019,872)		(8,824,429)		(9,343,011)
NET ASSETS			15,544,974		14,435,905		13,759,111
EQUITY ATTRIBUTABLE TO SHAREHOLDERS
Share capital	16		147,567		147,567		147,567
Share premium account			13,318,725		13,318,725		13,318,725
Share option reserve			158,515		135,400		-
Foreign exchange reserve			118,094		(12,713)		107,887
Retained profit			1,802,073		846,926		184,932
TOTAL EQUITY			15,544,974		14,435,905		13,759,111

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 September 2019

		2019		2018
		£		£
Cash flows from operating activities
Profit for the year		2,312,767		1,931,074
Adjustments for:
Taxation		135,890		(131,144)
Finance income		(6,375)		(9,556)
Finance costs		79,506		100,287
Share option charge		23,115		135,400
Depreciation		311,363		319,017
Amortisation		1,701,649		1,425,059
		4,557,915		3,770,137
Increase in trade and other receivables		(1,606,038)		(427,885)
Increase in trade and other payables		2,333,695		587,066
Cash generated from operations		5,285,572		3,929,318
Finance costs		(79,506)		(100,287)
Finance income		6,375		9,556
Tax paid		(112,879)		(101,314)
NET CASH GENERATED FROM OPERATING ACTIVITIES		5,099,562		3,737,273
Cash flows from investing activities
Capitalisation of development costs		(833,781)		(932,535)
Purchase of property, plant and equipment		(394,789)		(729,988)
NET CASH USED IN INVESTING ACTIVITIES		(1,228,570)		(1,662,523)
Cash flows from financing activities
Borrowings repaid		(1,022,124)		(900,069)
Dividends paid		(1,357,620)		(1,269,080)
NET CASH USED IN FINANCING ACTIVITIES		(2,379,744)		(2,169,149)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		1,491,248		(94,399)
Translation differences		25,856		9,766
Cash and cash equivalents at beginning of year		5,254,302		5,338,935
CASH AND CASH EQUIVALENTS AT END OF YEAR		6,771,406		5,254,302

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2019

	Ordinary share capital		Share premium		Share option reserve		Foreign exchange reserve		Retained earnings		Total
	£		£		£		£		£		£
Balance at 1 October 2017	147,567		13,318,725		-		107,887		184,932		13,759,111
Profit for the year	-		-		-		-		1,931,074		1,931,074
Other comprehensive income:
Exchange differences on translating foreign operations	-		-		-		(120,600)		-		(120,600)
Total comprehensive income	-		-		-		(120,600)		1,931,074		1,810,474
Transactions with owners:
Share option charge	-		-		135,400		-		-		135,400
Dividends	-		-		-		-		(1,269,080)		(1,269,080)
Total transactions with owners	-		-		135,400		-		(1,269,080)		(1,133,680)
Balance as at 30 September 2018	147,567		13,318,725		135,400		(12,713)		846,926		14,435,905
	Ordinary share capital		Share premium		Share option reserve		Foreign exchange reserve		Retained earnings		Total
	£		£		£		£		£		£
Balance at 1 October 2018	147,567		13,318,725		135,400		(12,713)		846,926		14,435,905
Profit for the year	-		-		-		-		2,312,767		2,312,767
Other comprehensive income:
Exchange differences on translating foreign operations	-		-		-		130,807		-		130,807
Total comprehensive income	-		-		-		130,807		2,312,767		2,443,574
Transactions with owners:
Share option charge	-		-		23,115		-		-		23,115
Dividends	-		-		-		-		(1,357,620)		(1,357,620)
Total transactions with owners	-		-		23,115		-		(1,357,620)		(1,334,505)
Balance as at 30 September 2019	147,567		13,318,725		158,515		118,094		1,802,073		15,544,974

 

NOTES TO THE ACCOUNTS

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

1 (a) Critical accounting estimates and judgements

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

Judgements

(i) Capitalisation of development costs

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

(ii) Revenue recognition

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

Estimates

(i) Revenue recognition

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

(ii) Impairment of non-financial assets

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

(iii) Depreciation and amortisation

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

1 (b) Other sources of estimation uncertainty

(i) Recoverability of trade debtors and accrued income

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

 

2        Segment information

During the year ended 30 September 2019, the Group was organised into four main business segments for revenue purposes.

Under IFRS 8 there is a requirement to show the profit or loss for each reportable segment and the total assets and total liabilities for each reportable segment if such amounts are regularly provided to the chief operating decision-maker.

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

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

	2019			2018
	£			£
Revenue
Services	7,891,085			9,197,735
Software	8,161,818			5,588,087
Software-as-a-Service	905,175			898,529
Third party	1,793,703			1,668,246
Total revenue	18,751,781			17,352,597

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

				Accounting policies
	Year ended 30 September 2019			(i)	(ii)	(iii)	(iv)		Total
		£		£	£	£	£		£
Services		7,891,085
	implementation fees			5,071,013	-	-	-		5,071,013
	ongoing account development work			-	-	2,820,072	-		2,820,072
Software		8,161,818
	initial licence fees			2,978,091	-	-	-		2,978,091
	sale of additional licences			-	969,478	-	-		969,478
	ongoing maintenance and support fees			4,214,249	-	-	-		4,214,249
Software-as-a-Service		905,175		905,175	-	-	-		905,175
Third Party		1,793,703		-	-	-	1,793,703		1,793,703
Total		18,751,781		13,168,528	969,478	2,820,072	1,793,703		18,751,781

 

				Accounting policies
	Year ended 30 September 2018			(i)	(ii)	(iii)	(iv)		Total
		£		£	£	£	£		£
Services		9,197,735
	implementation fees			4,104,532	-	-	-		4,104,532
	ongoing account development work			-	-	5,093,203	-		5,093,203
Software		5,588,087
	initial licence fees			964,647	-	-	-		964,647
	sale of additional licences			-	497,947	-	-		497,947
	ongoing maintenance and support fees			4,125,493	-	-	-		4,125,493
Software-as-a-Service		898,529		898,529	-	-	-		898,529
Third Party		1,668,246		-	-	-	1,668,246		1,668,246
Total		17,352,597		10,093,201	497,947	5,093,203	1,668,246		17,352,597

(a) Geographical information

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

	Europe		MEA		Americas		Asia Pacific
	£		£		£		£
Year ended 30 September 2019
Revenue - by customer location	10,369,113		29,667		6,059,644		2,293,357
Capital expenditure	1,049,536		-		-		179,034
Non-current assets	10,324,666		-		-		302,503
Total assets	24,729,262		-		-		835,584
Net assets	15,243,658		-		-		301,316

	Europe		MEA		Americas		Asia Pacific
	£		£		£		£
Year ended 30 September 2018
Revenue - by customer location	12,376,044		463,960		3,459,507		1,053,086
Capital expenditure	1,651,735		-		-		10,788
Non-current assets	9,488,303		-		-		158,306
Total assets	22,738,507		-		-		521,827
Net assets	14,357,599		-		-		78,306

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

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

			Operating		2019		2018
			segment		£		£
Customer
No. 1			Americas		3,674,824		121,179
No. 2			Europe		2,214,981		3,700,187
No. 3			Europe		613,112		2,317,726
No. 4			Europe		833,301		1,795,246

3        Operating profit

		2019			2018
		£			£
Operating profit is stated after (crediting)/charging:
Depreciation		311,363			319,017
Amortisation of intangibles		1,701,649			1,425,059
Research and development costs		465,920			68,132
Bad debt (credit) / expense		(32,941)			174,540
Foreign exchange losses / (gains)		40,169			(208,324)
Operating leases		846,187			919,914
Exceptional items		-			161,661
Fees payable to Cerillion's principal auditor:
- Audit of Cerillion plc's annual accounts		8,000			6,000
- Audit of subsidiaries		59,500			44,000
- Non-audit services - tax services		9,400			10,950
- Non-audit services - other		-			18,031
Fees payable to associates of principal auditor:
- Audit of subsidiaries		-			10,008
- Non-audit services - tax services		-			21,115

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

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

4        Finance income

	2019		2018
	£		£
Finance income:
Bank interest receivable	6,375		9,556

5        Finance costs

	2019		2018
	£		£
Finance costs:
Interest payable in respect of loans	(77,973)		(99,931)
Other interest payable	(1,533)		(356)
	(79,506)		(100,287)

6        Taxation

(a) Analysis of tax charge for the year

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

	2019	2018
	£	£
Current tax credit - UK	-	(37,108)
Current tax expense - overseas	112,879	111,246
Current tax expense - total	112,879	74,138
Deferred tax charge / (credit)	23,011	(205,282)
Total tax charge/(credit)	135,890	(131,144)
(b) Factors affecting total tax for the year
The tax assessed for the year differs from the standard rate of corporation tax in the United Kingdom 19.0% (2018: 19.0%). The differences are explained as follows:

Profit on ordinary activities before tax	2,448,657	1,799,930
Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.0% (2018: 19.0%)	465,245	341,987
Effect of:
Expenses not deductible/income not taxable for tax purposes	(9,033)	118,005
Difference in tax rates	60,217	(68,502)
Other temporary differences	3,876	-
Prior year tax adjustment	39,768	(37,108)
Losses carried forward	-	(1,692)
Enhanced relief for research and development	(424,183)	(483,834)
Total tax charge / (credit)	135,890	(131,144)

There are currently no deferred tax assets or liabilities recognised within the Parent Company accounts. Taxable losses within the Parent Company totalling £nil (2018: £134,591) have been carried forward, but no deferred tax asset has been recognised in relation to these losses due to the uncertainty surrounding the timing of their recovery.

7        Dividends

(a)   Dividends paid during the reporting period

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

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

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

 

8        Earnings per share

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

		2019		2018
Profit attributable to equity holders of the Company (£)		2,312,767		1,931,074
Weighted average number of Ordinary Shares in issue (number)		29,513,486		29,513,486
Effect of share options in issue		267,700		436,696
Weighted average shares for diluted earnings per share		29,781,186		29,950,182
Basic earnings per share (pence per share)		7.8		6.5
Diluted earnings per share (pence per share)		7.8		6.4

9        Intangible assets

Group		Goodwill		Purchased customer contracts		Intellectual property rights		Software development costs		Total
		£		£		£		£		£
Cost
At 1 October 2017		2,053,141		4,382,654		2,567,160		1,451,111		10,454,066
Additions		-		-		-		932,535		932,535
At 30 September 2018		2,053,141		4,382,654		2,567,160		2,383,646		11,386,601
Additions		-		-		-		833,781		833,781
At 30 September 2019		2,053,141		4,382,654		2,567,160		3,217,427		12,220,382
Amortisation
At 1 October 2017		-		939,140		550,106		340,521		1,829,767
Provided in the year		-		626,093		366,737		432,229		1,425,059
At 30 September 2018		-		1,565,233		916,843		772,750		3,254,826
Provided in the year		-		626,093		366,737		708,819		1,701,649
At 30 September 2019		-		2,191,326		1,283,580		1,481,569		4,956,475
Net book amount at 30 September 2019		2,053,141		2,191,328		1,283,580		1,735,858		7,263,907
Net book amount at 30 September 2018		2,053,141		2,817,421		1,650,317		1,610,896		8,131,775

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

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

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

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

10      Property plant and equipment

Group		Leasehold  improvements			Computer  equipment		Fixtures  and fittings		Total
		£			£		£		£
Cost
At 1 October 2017		602,580			3,527,713		803,422		4,933,715
Additions		421,789			166,741		141,458		729,988
Disposals		(425,162)			(2,481,828)		(666,223)		(3,573,213)
Exchange difference		(13,462)			(11,479)		(8,104)		(33,045)
At 30 September 2018		585,745			1,201,147		270,553		2,057,445
Additions		138,062			232,284		24,443		394,789
Exchange difference		15,056			12,887		9,336		37,279
At 30 September 2019		738,863			1,446,318		304,332		2,489,513
Depreciation
At 1 October 2017		598,781			3,200,241		774,754		4,573,776
Provided in the year		38,326			232,869		47,822		319,017
Disposals		(425,162)			(2,481,828)		(666,223)		(3,573,213)
Exchange difference		(13,461)			(9,503)		(7,624)		(30,588)
At 30 September 2018		198,484			941,779		148,729		1,288,992
Provided in the year		53,085			193,602		64,676		311,363
Exchange difference		15,476			11,603		8,873		35,952
At 30 September 2019		267,045			1,146,984		222,278		1,636,307
Net book amount at 30 September 2019		471,818			299,334		82,054		853,206
Net book amount at 30 September 2018		387,261			259,368		121,824		768,453

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

The Group's loan is secured over all the assets of the Group.

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

11       Deferred tax

Deferred tax asset

Group	Accelerated capital allowances	Other temporary differences	Total
	£	£	£
1 October 2017	118,328	151,795	270,123
Foreign exchange movement on opening deferred tax asset	-	(9,933)	(9,933)
Debited to statement of comprehensive income	(71,486)	(19,611)	(91,097)
30 September 2018	46,842	122,251	169,093

Group	Accelerated capital allowances	Other temporary differences	Total
	£	£	£
1 October 2018	46,842	122,251	169,093
Foreign exchange movement on opening deferred tax asset	-	11,428	11,428
Debited to statement of comprehensive income	(25,789)	(21,154)	(46,943)
30 September 2019	21,053	112,525	133,578

Deferred tax liability

Group

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

	2019		2018
	£		£
At 1 October as previously stated	779,787		1,076,166
Prior year adjustment - reclassification from current tax liability	199,714		199,714
At 1 October restated	979,501		1,275,880
Debited to statement of comprehensive income in respect of net ACAs & other temporary differences	159,166		-
Credited to statement of comprehensive income in respect of acquisitions	(183,098)		(296,379)
As at 30 September	955,569		979,501

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

12      Trade and other receivables and other contract balances

Contract balances

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

	The Group
	2019	2018
	£	£
Trade receivables	2,805,864	2,136,147
Contract assets	7,107,393	6,327,831
Contract liabilities	3,557,283	1,898,651

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

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

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

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

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

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

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

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

 

Current receivables	The Group		The Company
	2019	2018	2019	2018
	£	£	£	£
Trade receivables	2,805,864	2,136,147	-	-
Accrued income	4,730,915	5,750,543	-	-
Amounts owed by group undertakings	-	-	1,719,497	4,099,176
Other receivables	390,524	287,666	-	-
Prepayments	238,968	185,067	3,626	6,009
	8,166,271	8,359,423	1,723,123	4,105,185
Non-current receivables	The Group		The Company
	2019	2018	2019	2018
	£	£	£	£
Accrued income	2,376,478	577,288	-	-

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

Credit quality of receivables

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

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

		2019			2018
		£			£
Group
Trade receivables		2,951,383			2,776,026
ECL reserve		(145,519)			(639,879)
		2,805,864			2,136,147

The Parent Company had no trade receivables in either period.

The other classes of assets within trade and other receivables do not contain impaired assets.

The net carrying value is judged to be a reasonable approximation of fair value.

 

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

		2019			2018
		£			£
Group
Not past due		2,660,707			1,391,620
Up to 3 months		132,681			192,367
3 to 6 months		-			366,615
Older than 6 months		12,476			185,545
		2,805,864			2,136,147

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

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

		2019			2018
		£			£
Group
Not past due		-			-
Up to 3 months		390			425,451
3 to 6 months		-			14,417
Older than 6 months		145,129			200,011
		145,519			639,879

13      Trade and other payables

	The Group		The Company
	2019	2018	2019	2018
	£	£	£	£
		(Restated)		(Restated)
Trade payables	505,559	960,034	46,777	126,741
Taxation	-	-	-	-
Other taxation and social security	181,508	91,249	10,961	72,373
Pension contributions	42,188	39,322	-	-
Other payables	555,556	465,645	-	-
Accruals	2,451,263	1,596,957	842,427	582,986
Deferred income	3,557,283	1,898,651	-	-
Loans (note 14)	1,200,000	1,000,000	1,200,000	1,000,000
	8,493,357	6,051,858	2,100,165	1,782,100

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

14      Borrowings and financial liabilities

	The Group		The Company
	2019	2018	2019	2018
	£	£	£	£
Current liabilities:
Secured loans	1,200,000	1,000,000	1,200,000	1,000,000
Non-current liabilities:
Secured loans	570,946	1,793,070	570,946	1,793,070
	1,770,946	2,793,070	1,770,946	2,793,070

14a Terms and repayment schedule

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

The Loan is secured over the assets of the Group and was drawn down in full in March 2016. The terms and conditions of outstanding loans are as follows:

(a) it bears interest at the rate of 2.5 per cent. per annum over the Bank of England Base Rate as published from time to time;

(b) is repayable by the Company by quarterly repayments in the amount of £250,000 inclusive of interest, for the first three years of the term, and thereafter in an amount of £300,000 inclusive of interest, in accordance with an agreed repayment schedule;

(c) is terminable on a change of control of the Company and repayable following an event of default; and

(d) is for a term of five years from the date of first drawdown.

 

	Non-current Borrowings			Current Borrowings						Total
	£			£						£
1 October 2018	1,793,070			1,000,000						2,793,070
Cash-flows:
Repayment	-			(1,022,124)						(1,022,124)
Non-cash:
Reclassification	(1,222,124)			1,222,124						-
30 September 2019	570,946			1,200,000						1,770,946

	Non-current Borrowings			Current Borrowings						Total
	£			£						£
1 October 2017	2,693,139			1,000,000						3,693,139
Cash-flows:
Repayment	-			(900,069)						(900,069)
Non-cash:
Reclassification	(900,069)			900,069						-
30 September 2018	1,793,070			1,000,000						2,793,070

15      Financial instruments and risk management

Group

	Financial instruments by category				2019 £			2018 £
	Financial assets - loans and receivables
		Non-current -
		Accrued income				2,376,478			577,288
		Current
		Trade and other receivables				3,196,388			2,423,813
		Accrued income				4,730,915			5,750,543
		Cash and cash equivalents				6,771,406			5,254,302
						14,698,709			13,428,658

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

 

Financial liabilities - held at amortised cost		2019 £			2018              £
Non-current
Borrowings		570,946		1,793,070
		570,946		1,793,070
Current
Current borrowings		1,200,000		1,000,000
Trade and other payables		1,061,115		1,425,679
Pension costs		42,188		39,322
Accruals		2,451,263		1,596,956
		4,754,566		4,061,957

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

Company

	Financial instruments by category				2019 £			2018 £
	Financial assets - loans and receivables
		Current
		Amounts owed by group undertakings				1,719,497			4,099,176
		Cash and cash equivalents				169,163			25,665
						1,888,660			4,124,841

Financial liabilities - held at amortised cost		2019 £	2018              £
Non-current
Borrowings		570,946		1,793,070
		570,946		1,793,070
Current
Current borrowings		1,200,000		1,000,000
Trade and other payables		46,777		126,741
Accruals		842,427		582,986
		2,089,204		1,709,727

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

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

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

 

Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (S&P) (if available) or to historical information about counterparty default rates:

		2019				2018
		£				£
Trade receivables
Group 1		1,849,871				55,215
Group 2		707,722				1,668,857
Group 3		248,271				412,075
		2,805,864				2,136,147

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

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

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

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

There are no trade receivables within the Parent Company.

		2019			2018
		£			£
Cash at bank and short-term deposits
A1		6,768,218			5,251,059
Not rated		3,188			3,243
		6,771,406			5,254,302

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

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

Market risk - foreign exchange risk

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

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

 

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

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

		AUD		USD		EUR		INR		DKR		BND
30 September 2019
Financial assets		298,452		5,025,829		2,697,106		665,743		229,560		2,232,614
Financial liabilities		-		(148,032)		(23,227)		(535,533)		-		-
Total exposure		298,452		4,877,797		2,673,879		130,210		229,560		2,232,614
		AUD		USD		EUR		INR		DKR		BND
30 September 2018
Financial assets		72,921		2,741,242		2,857,232		366,443		-		-
Financial liabilities		-		(92,676)		(11,161)		(443,522)		-		-
Total exposure		72,921		2,648,566		2,846,071		(77,079)		-		-

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

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

30 September 2019		AUD		USD		EUR		INR		DKR		BND
Loss for the year		(27,132)		(443,436)		(243,080)		(11,837)		(20,869)		(202,965)
Equity total		(27,132)		(443,436)		(243,080)		(11,837)		(20,869)		(202,965)
30 September 2018		AUD		USD		EUR		INR		DKR		BND
(Loss)/gain for the year		(6,629)		(240,779)		(258,734)		7,007		-		-
Equity total		(6,629)		(240,779)		(258,734)		7,007		-		-

 

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

30 September 2019		AUD		USD		EUR		INR		DKR		BND
Gain for the year		33,161		541,977		297,098		14,468		25,507		248,068
Equity total		33,161		541,977		297,098		14,468		25,507		248,068
30 September 2018		AUD		USD		EUR		INR		DKR		BND
Gain/(loss) for the year		8,102		294,285		316,230		(8,564)		-		-
Equity total		8,102		294,285		316,230		(8,564)		-		-

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

Market Risk - cash flow interest rate risk

Cerillion had outstanding borrowing within the Group and Company.

These were loans taken out with HSBC to facilitate the purchase of shares prior to the Admission on AIM.

The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. At 30 September 2019, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group's cash at bank and short-term deposits is considered immaterial.

The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1%. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.

		Profit for the year				Equity
		+1%		-1%		+1%		-1%
30 September 2019		(21,928)		21,761		(21,928)		21,761
30 September 2018		(33,050)		32,759		(33,050)		32,759

 

Liquidity risk

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

				Less than 1 year			Between 1 and 2 years			Between 2 and 5 years			Over 5 years
30 September 2019
Borrowings				1,242,252			626,914			-			-
Trade and other payables				7,534,229			-			-			-
30 September 2018
Borrowings				1,178,065			1,242,257			627,112			-
Trade and other payables				5,251,572			-			-			-

Capital risk management

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

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

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

16      Share capital

		2019		2018
		£		£
Issued, allotted, called up and fully paid:
29,513,486 (2018: 29,513,486) Ordinary Shares of 0.5 pence		147,567		147,567

The Ordinary Shares have been classified as Equity. The Ordinary Shares have attached to them full voting and capital distribution rights.

The Company does not have an authorised share capital.

 

17      Share based payments

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

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

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

Year of grant		2017	2017	2019
Scheme		SAYE	LTIP	SAYE
Exercise price (£)		1.132	0.05	1.092
Number of options granted		189,845	300,000	132,917
Vesting period (years)		3 years	3 to 3.5 years	3 years
Option life (years)		3.5 years	5 to 5.5 years	3.5 years
Risk free rate		0.50%	0.49%	0.50%
Volatility		41%	41%	41%
Dividend yield		3.00%	3.33%	3.00%
Fair value (£)		0.44	0.53	0.43

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

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

	2019 Number of  Options	2019 Weighted  average  exercise  price	2018 Number of  Options	2018 Weighted  average  exercise  price
		£		£
Outstanding at start of year	439,845	0.49	489,845	0.44
Granted	132,912	1.09	-	-
Expired	(17,235)	1.13	(50,000)	0.005
Outstanding at 30 September	555,522	0.62	439,845	0.49
Exercisable at 30 September	-	-	-	-

18      Retirement benefits

The Group operates a group personal contribution pension scheme for the benefit of the employees. The pension cost charge for the year represents contributions payable by the Group to the fund and amounted to £322,658 (2018: £331,133). At the year end the contributions payable to the scheme were £42,188 (2018: 39,322).

19      Future lease payments

The Group had commitments under non-cancellable operating leases in respect of land and buildings and plant and machinery. The Group's future minimum operating lease payments are as follows:

		2019		2018
Group		£		£
Within one year		570,839		399,658
Between one and five years		3,152,777		2,568,252
After five years		2,375,750		3,106,750
		6,099,366		6,074,660

There are no lease commitments within the Parent Company.

On 16 October 2017 the Group entered into a 10 year lease for a new London Office, through to 31 December 2027. The lease is rent free for the first year, at £365,500 for years two and three and £731,000 per annum for the remaining years.

20      Annual General Meeting

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

21      Preliminary Announcement

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

22      Re-presentation of the 2018 Statement of Financial Position

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

 

END

 

 

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