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CERILLION PLC — Earnings Release 2018
Nov 26, 2018
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Earnings Release
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RNS Number : 4001I
Cerillion PLC
26 November 2018
26 November 2018
AIM: CER
Cerillion plc
("Cerillion" or "the Company" or "the Group")
Final results for the year ended 30 September 2018
Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2018.
Highlights
Financial:
| · | Revenue1 up by 8.2% to £17.4m (2017: £16.0m) | |
| · | Recurring revenue2 up by 13.0% to £5.0m (2017: £4.4m) | |
| - | c. 29% of total revenues (2017: 28%) | |
| · | Back order book3 at £13.0m at 30 September 2018 (2017: £13.1m) | |
| · | Adjusted EBITDA4 up by 8.7% to £3.9m (2017: £3.6m) | |
| - | adjusted EBITDA margin up to 22.7% (2017: 22.6%) | |
| · | Adjusted profit before tax5 up by 3.4% to £3.1m (2017: £3.0m) | |
| · | Adjusted earnings per share6 up by 6.8% to 10.9p (2017: 10.2p) | |
| · | Proposed final dividend of 3.0p per share, bringing the total dividend for the year to 4.5p per share (2017: 4.2p), an increase of 7.1% |
Operational:
| · | Three large, new, enterprise implementations underway - due for completion in 2019 |
| · | Initial work for a fourth, new enterprise implementation commenced in Q4 |
| · | New customers were signed for Skyline, Cerillion's cloud billing solution, across a number of industry verticals |
| · | New mobile app and self-service modules launched |
| · | Cerillion remains well-positioned for continuing growth, with an encouraging pipeline of near-term opportunities |
Louis Hall, CEO of Cerillion, commented:
"Cerillion has continued to make good progress, with revenues and profits for the year growing in line with market expectations.
"Three large enterprise customer implementations for our core product remain underway, with completion scheduled in 2019. We also started pilot work for a potential fourth, new enterprise customer in the final quarter of the financial year, and there are two further potential large orders, which are likely to be decided over the coming months.
"With a strong new customer pipeline, the ability to continue to rollout new and enhanced product modules, and continuing recognition by industry analysts, we believe the Company is well placed for continuing positive 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 |
||
| KTZ Communications | T: 020 3178 6378 | |
| Katie Tzouliadis Emma Pearson |
||
About Cerillion
Cerillion has a 19-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 approximately 90 customer installations across 44 countries.
Headquartered in London, Cerillion has operations in Pune, India, where its Global Solutions Centre is located, 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 £8.9m of sales contracted but not yet recognised at the end of the reporting period plus £4.1m of annualised support and maintenance revenue. It is anticipated that 75% of the £8.9m 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. |
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
We are pleased to report the Group's results for its third year as a publicly quoted company, following its admission to AIM.
The business has a 19-year track record of providing mission-critical software for billing, charging and customer relationship management ("CRM"), predominantly to the telecommunications market, but also to the utilities and financial services sectors. We are continuing to grow steadily in our core market, where demand for CRM, billing and charging solutions is rising. This reflects 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); |
| · | 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; |
| · | demand for more agile systems to enable the more rapid introduction of new products. |
We are also expanding into new market sectors, primarily through Cerillion Skyline, which facilitates the billing and the collection of payments from any type of subscription or usage-based service, and is delivered via the cloud.
Results for the year are in line with market expectations, with revenue up year-on-year by 8.2%* to £17.4m (2017: £16.0m), adjusted EBITDA up by 8.7%* to £3.9m (2017: £3.6m) and adjusted earnings per share up by 6.8% to 10.9p (2017: 10.2p). Our financial performance continued to be supported by strong demand from our established customer base, as well as implementations for new customers.
Financial Overview
Total revenue for the year to 30 September 2018 rose by 8.2% (2017: 8.3%) to £17.4m (2017: £16.0m). Existing customers (classified as those acquired at least 12 months before the beginning of the reporting period) typically drive a very high proportion of total annual income and they generated 75% of the overall revenue for the financial year (2017: 81%, which was exceptionally high).
Recurring income, which is derived from support and maintenance and managed service contracts, accounts for a significant proportion of overall revenues. It made up 29% of the Group's total income for the year (2017: 28%), having risen by 13% to £5.0m (2017: £4.4m, up 10%).
The Group's revenue streams are broadly divided into three segments: software revenue (including Software-as-a-service), which principally comprises software licences and related support and maintenance sales; services revenue, which is generated by software implementations and ongoing account development work; and revenues from other activities, mainly the reselling of third party products.
| · | Software and Software-as-a-Service revenue decreased to £6.5m (2017: £7.9m), mainly reflecting significant licence extensions with existing customers in the 2017 results. Software revenues accounted for 37% of total revenues (2017: 49%). |
| · | Services revenue increased by 26%* to £9.2m (2017: £7.3m) and constituted 53% of total revenue (2017: 45%). The increase was due to the concurrence of three major new customer implementation projects during the year, as well as strong demand for services work from existing customers. |
| · | Third party income increased to £1.7m (2017: £0.8m) and comprised 10% of total revenue (2017: 5%). |
Administrative expenses increased by 5.7%* to £10.7m (2017: £10.1m) and included one-off costs from the relocation of the London office, where £0.4m of fit-out costs were included within total expenditure on tangible fixed assets of £0.7m, and a further £162,000 from over-lapping rental periods. Personnel costs of £4.8m (2017: £4.7m) accounted for close to 45% of administrative expenses.
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. Adjusted EBITDA for the year increased by 8.7%* to £3.9m (2017: £3.6m), mainly driven by the increase in total revenue.
We continue to invest in our product sets, including our cloud billing platform, Cerillion Skyline, and the charge for amortisation of intangibles was £1.4m (2017: £1.3m). Expenditure on tangible fixed assets was £0.7m (2017: £0.2m). Operating profit was £1.9m (2017: £2.1m).
Adjusted profit before tax rose by 3.4%* to £3.1m (2017: £3.0m) and adjusted earnings per share increased by 6.8% to 10.9p (2017: 10.2p). On a statutory basis, profit before tax was £1.8m (2017: £2.0m), with the one-off costs of property and the first year of share option charges accounting for the £0.3m reduction, year-on-year, and earnings per share was 6.9p (2017: 6.9p).
* Comparative movement from 2016 to 2017 has not been provided as it is not comparable given that the Group only existed from 18 March 2016.
Cash Flow and Banking
Net cash increased by 50% against the same point last year to stand at £2.5m as at 30 September 2018 (2017: £1.6m). This net position is after the payment of £900,000 of debt (2017: £879,000) and after the payment of dividends during the reporting period of £1,269,080 (2017: £1,180,539). Total Group cash at the year end was at £5.3m (2017: £5.3m) and total debt stood at £2.8m (2017: £3.7m).
Dividend
The Board is pleased to propose an increased final dividend of 3.0p per share (2017: 2.8p). Together with the interim dividend of 1.5p per share (2017: 1.4p), this brings the total dividend for the year to 4.5p per share (2017: 4.2p), an increase of 7.1%.
The dividend, which is subject to shareholder approval at the Company's Annual General Meeting to be held on 8 February 2019, will become payable on 12 February 2019 to those shareholders on the Company's register as at the close of business on the record date of 4 January 2019. The ex-dividend date is 3 January 2019.
Operational Overview
We have continued to work on three major new enterprise customer implementations for the Group's core product, our pre-integrated Enterprise BSS/OSS suite, which includes our real-time, Convergent Charging System ("CCS"). The addition of these further, substantial, new enterprise customers will strengthen recurring managed service, support and maintenance revenues, as well as ad-hoc services revenues. All three of these new implementations are in Europe.
In the final quarter of the financial year, we also began some pilot work for a potential new enterprise customer implementation. A key factor in securing this work was the Group's ability to provide an end-to-end, modular CRM and billing solution, which could be readily demonstrated, and which included a sophisticated, carrier-grade, "real-time" charging module.
At the financial year end, new orders stood at £13.0m (2017: £13.5m), most of which are in progress. The small decrease compared with 2017 is due to the timing of signature of major new contracts with new customers, with two potential, large new customer implementation orders likely to be decided over the coming months.
At the year end, the combined value of annualised support revenue and the back order book - which consists of unperformed, contracted work under purchase orders and contracted work that is still subject to the receipt of purchase order - was steady at £13.0m (2017: £13.1m).
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.
We also won a number of new customers for Cerillion Skyline, our Software-as-a-Service billing solution that enables businesses to bill and collect recurring revenue from subscription and usage-based services. Its cloud (SaaS) delivery model provides many advantages for our customers, including faster and lower cost implementation, easier integration, continuous product updates, and greater flexibility in launching new services. New customers signed up this year include a market-leading medical products supplier, a supplier of services to the global cinema industry and a market-leading messaging service. Revenues from Skyline make up a relatively modest proportion of the Group's overall total currently, especially given the SaaS model, but we expect them to continue to grow, with take-up across a broad number of industry verticals.
We continue to invest in R&D to further improve both our enterprise platform and Cerillion Skyline. During the year, we commenced projects to deliver the new Enterprise Product Catalogue, which we brought to market last financial year, to new and existing customers. We also launched a new mobile app and self-service modules, which have been well-received by customers.
Outlook
Prospects for continuing growth remain positive. We have a strong new customer pipeline, including two potential large near-term orders, where we anticipate a decision being made over the coming months, and our pilot work for another new enterprise customer is also very encouraging.
| A M Howarth | L T Hall |
| Non-executive Chairman | Chief Executive Officer |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2018
| Year to 30 September 2018 |
Year to 30 September 2017 |
||||
| Notes | £ | £ | |||
| Revenue | 2 | 17,352,597 | 16,032,976 | ||
| Cost of sales | (4,775,585) | (3,814,488) | |||
| Gross profit | 12,577,012 | 12,218,488 | |||
| Operating expenses | (10,686,351) | (10,110,179) | |||
| Adjusted EBITDA | 3,931,798 | 3,616,536 | |||
| Depreciation and amortisation | (1,744,076) | (1,508,227) | |||
| Share based payment charge | (135,400) | - | |||
| Exceptional items | 3 | (161,661) | - | ||
| Operating profit | 3 | 1,890,661 | 2,108,309 | ||
| Finance income | 4 | 9,556 | 4,611 | ||
| Finance costs | 5 | (100,287) | (117,569) | ||
| Profit before taxation | 1,799,930 | 1,995,351 | |||
| Taxation | 6 | 131,144 | 27,328 | ||
| Profit for the year | 1,931,074 | 2,022,679 | |||
| Other comprehensive income | |||||
| Items that will or may be reclassified to profit or loss: | |||||
| Exchange difference on translating foreign | (120,600) | (38,026) | |||
| operations | |||||
| Total comprehensive profit for the year | 1,810,474 | 1,984,653 | |||
| Earnings per share | |||||
| Basic earnings per share - continuing and total operations | 8 | 6.5 pence | 6.9 pence | ||
| Diluted earnings per share - continuing and total operations | 6.4 pence | 6.8 pence |
The group has no other recognised gains or losses for the current year.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2018
| 2018 | 2017 | ||||
| Notes | £ | £ | |||
| ASSETS | (Restated) | ||||
| Non-current assets | |||||
| Goodwill | 9 | 2,053,141 | 2,053,141 | ||
| Intangible assets | 9 | 6,078,634 | 6,571,158 | ||
| Property, plant and equipment | 10 | 768,453 | 359,939 | ||
| Trade and other receivables | 12 | 577,288 | 768,240 | ||
| Deferred tax assets | 11 | 169,093 | 270,123 | ||
| 9,646,609 | 10,022,601 | ||||
| Current assets | |||||
| Trade and other receivables | 12 | 8,359,423 | 7,740,586 | ||
| Cash and cash equivalents | 5,254,302 | 5,338,935 | |||
| 13,613,725 | 13,079,521 | ||||
| TOTAL ASSETS | 23,260,334 | 23,102,122 | |||
| LIABILITIES | |||||
| Non-current liabilities | |||||
| Borrowings | 14 | (1,793,070) | (2,693,139) | ||
| Deferred tax liabilities | 11 | (779,787) | (1,076,166) | ||
| (2,572,857) | (3,769,305) | ||||
| Current liabilities | |||||
| Trade and other payables | 13 | (5,051,858) | (4,336,883) | ||
| Current tax liabilities | 13 | (199,714) | (236,822) | ||
| Borrowings | 13 | (1,000,000) | (1,000,000) | ||
| (6,251,572) | (5,573,705) | ||||
| TOTAL LIABILITIES | (8,824,429) | (9,343,010) | |||
| NET ASSETS | 14,435,905 | 13,759,112 | |||
| EQUITY ATTRIBUTABLE TO SHAREHOLDERS | |||||
| Share capital | 16 | 147,567 | 147,567 | ||
| Share premium account | 13,318,725 | 13,318,725 | |||
| Share option reserve | 135,400 | - | |||
| Foreign exchange reserve | (12,713) | 107,887 | |||
| Retained profit | 846,926 | 184,933 | |||
| TOTAL EQUITY | 14,435,905 | 13,759,112 |
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2018
| 2018 | 2017 | |||
| Notes | £ | £ | ||
| Cash flows from operating activities | ||||
| Profit for the year | 1,931,074 | 2,022,679 | ||
| Adjustments for: | ||||
| Taxation | (131,144) | (27,328) | ||
| Finance income | (9,556) | (4,611) | ||
| Finance costs | 100,287 | 117,569 | ||
| Share option charge | 135,400 | - | ||
| Depreciation | 319,017 | 249,715 | ||
| Amortisation | 1,425,059 | 1,258,212 | ||
| 3,770,137 | 3,616,236 | |||
| (Increase)/decrease in trade and other receivables | (427,885) | 656,046 | ||
| Increase/(decrease) in trade and other payables | 587,066 | (724,060) | ||
| Cash generated from operations | 3,929,318 | 3,548,222 | ||
| Finance costs | (100,287) | (117,569) | ||
| Finance income | 9,556 | 4,611 | ||
| Tax (paid)/received | (101,314) | 7,845 | ||
| NET CASH GENERATED FROMOPERATING ACTIVITIES | 3,737,273 | 3,443,109 | ||
| Cash flows from investing activities | ||||
| Capitalisation of development costs | (932,535) | (850,000) | ||
| Purchase of property, plant and equipment | (729,988) | (197,808) | ||
| NET CASH USED IN INVESTING ACTIVITIES | (1,662,523) | (1,047,808) | ||
| Cash flows from financing activities | ||||
| Borrowings repaid | (900,069) | (879,463) | ||
| Dividends paid | (1,269,080) | (1,180,539) | ||
| NET CASH (USED IN) FINANCING ACTIVITIES | (2,169,149) | (2,060,002) | ||
| NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (94,399) | 335,299 | ||
| Translation differences | 9,766 | (2,549) | ||
| Cash and cash equivalents at beginning of year | 5,338,935 | 5,006,185 | ||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | 5,254,302 | 5,338,935 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2018
| Ordinary share capital | Share premium | Share option reserve | Foreign exchange reserve | Retained earnings | Total | ||||||
| £ | £ | £ | £ | £ | £ | ||||||
| Balance at 1 October 2016 | 147,567 | 13,318,725 | - | 145,913 | (657,207) | 12,954,998 | |||||
| Profit for the year | - | - | - | - | 2,022,679 | 2,022,679 | |||||
| Other comprehensive income: | |||||||||||
| Exchange differences on translating foreign operations | - | - | - | (38,026) | - | (38,026) | |||||
| Total comprehensive income | - | - | - | (38,026) | 2,022,679 | 1,984,653 | |||||
| Transactions with owners: | |||||||||||
| Dividends | - | - | - | - | (1,180,539) | (1,180,539) | |||||
| Total transactions with owners | - | - | - | - | (1,180,539) | (1,180,539) | |||||
| Balance as at 30 September 2017 | 147,567 | 13,318,725 | - | 107,887 | 184,933 | 13,759,112 | |||||
| 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 | 184,933 | 13,759,112 | |||||
| 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 | 14,435,906 |
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
Revenue is recognised on the basis of implementation of the project. In respect of long term contracts, the revenue is in line with 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 key judgement is accurately forecasting the effort required to complete the project.
Estimates
(i) Business combinations
Management uses valuation techniques in determining the fair values of various elements of a business combination.
On initial recognition, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their provisional fair values. In measuring fair value, management uses estimates about future cash flows and discount rates, however, actual results may vary.
(ii) Depreciation and amortisation
Depreciation and amortisation rates are based on estimates of the useful economic lives and residual values of the assets involved. The assessment of these useful economic lives is made by projecting the economic lifecycle of the asset. The key judgement is estimating the useful economic life of the development costs capitalised, a review is conducted annually by project. Depreciation and amortisation rates are changed where economic lives are re-assessed and technically obsolete items written off where necessary.
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 2018, 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.
| 2018 | 2017 | |||||
| £ | £ | |||||
| Revenue | ||||||
| Services | 9,197,735 | 7,283,678 | ||||
| Software | 5,588,087 | 7,594,346 | ||||
| Software-as-a-Service | 898,529 | 306,834 | ||||
| Third party | 1,668,246 | 848,118 | ||||
| Total revenue | 17,352,597 | 16,032,976 | ||||
The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy.
| 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 | |||
| Accounting policies | |||||||||||||||||
| Year ended 30 September 2017 | (i) | (ii) | (iii) | (iv) | Total | ||||||||||||
| £ | £ | £ | £ | £ | £ | ||||||||||||
| Services | 7,283,678 | ||||||||||||||||
| implementation fees | 2,634,108 | 2,634,108 | |||||||||||||||
| ongoing account development work | 4,649,570 | 4,649,570 | |||||||||||||||
| Software | 7,594,346 | - | |||||||||||||||
| initial licence fees | 2,118,155 | 2,118,155 | |||||||||||||||
| sale of additional licences | 1,335,091 | 1,335,091 | |||||||||||||||
| ongoing maintenance and support fees | 4,141,100 | 4,141,100 | |||||||||||||||
| Software-as-a-Service | 306,834 | 306,834 | 306,834 | ||||||||||||||
| Third Party | 848,118 | 848,118 | 848,118 | ||||||||||||||
| Total | 16,032,976 | 9,200,197 | 1,335,091 | 4,649,570 | 848,118 | 16,032,976 | |||||||||||
(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 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 |
| Europe | MEA | Americas | Asia Pacific | ||||
| £ | £ | £ | £ | ||||
| Year ended 30 September 2017 | |||||||
| Revenue - by customer location | 7,425,865 | 1,040,313 | 6,206,583 | 1,360,215 | |||
| Capital expenditure | 1,030,452 | - | - | 17,613 | |||
| Non-current assets | 9,849,278 | - | - | 173,323 | |||
| Total assets | 22,567,238 | - | - | 534,884 | |||
| Net assets | 13,587,658 | - | - | 171,454 |
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 | 2018 | 2017 | |||||
| segment | £ | £ | |||||
| Customer | |||||||
| No. 1 | Europe | 3,700,187 | - | ||||
| No. 2 | Europe | 2,317,726 | 2,046,630 | ||||
| No. 3 | Europe | 1,795,246 | 860,220 | ||||
| No. 4 | Americas | 1,322,895 | 3,637,472 | ||||
| No. 5 | Americas | 913,547 | 1,770,640 |
3 Operating profit
| 2018 | 2017 | |||||
| £ | £ | |||||
| Operating profit is stated after (crediting)/charging: | ||||||
| Depreciation | 319,017 | 249,715 | ||||
| Amortisation of intangibles | 1,425,059 | 1,258,212 | ||||
| Research and development costs | 68,132 | 303,849 | ||||
| Bad debt expense | 174,540 | 174,551 | ||||
| Foreign exchange (gains) / losses | (208,324) | 464,858 | ||||
| Operating leases | 919,914 | 614,906 | ||||
| Exceptional items | 161,661 | - | ||||
| Fees payable to Cerillion's principal auditor: | ||||||
| - Audit of Cerillion plc's annual accounts | 6,000 | 6,000 | ||||
| - Audit of subsidiaries | 44,000 | 44,000 | ||||
| - Non-audit services - tax services | 10,950 | 11,000 | ||||
| - Non-audit services - other | 18,031 | 5,500 | ||||
| Fees payable to associates of principal auditor: | ||||||
| - Audit of subsidiaries | 10,008 | 10,182 | ||||
| - Non-audit services - tax services | 21,115 | 24,048 | ||||
The exceptional items represent one-off costs incurred from the relocation of the London office caused by over-lapping rental periods.
4 Finance income
| 2018 | 2017 | ||
| £ | £ | ||
| Finance income: | |||
| Bank interest receivable | 9,556 | 4,611 |
5 Finance costs
| 2018 | 2017 | ||
| £ | £ | ||
| Finance costs: | |||
| Interest payable in respect of loans | (99,931) | (116,772) | |
| Other interest payable | (356) | (797) | |
| (100,287) | (117,569) |
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:
| 2018 | 2017 | ||
| £ | £ | ||
| Current tax expense | 74,138 | 229,263 | |
| Deferred tax credit | (205,282) | (256,591) | |
| Total tax credit | (131,144) | (27,328) | |
| (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% (2017: 19.5%). The differences are explained as follows: |
| Profit on ordinary activities before tax | 1,799,930 | 1,995,351 |
| Profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.0% (2017: 19.5%) | 341,987 | 389,093 |
| Effect of: | ||
| Expenses not deductible/income not taxable for tax purposes | 118,005 | 8,529 |
| Difference in tax rates | (68,502) | 20,123 |
| Other temporary differences | - | 3,477 |
| Prior year tax adjustment | (37,108) | - |
| Losses carried forward | (1,692) | - |
| Enhanced relief for research and development | (483,834) | (448,550) |
| Total tax (credit) | (131,144) | (27,328) |
There are currently no deferred tax assets or liabilities recognised within the Parent Company accounts. Taxable losses within the Parent Company totalling £134,591 (2017: £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 2017 of 2.8p per share and declared and paid an interim 2018 dividend of 1.5p (2017: 1.4p) per share. Total dividends paid during the reporting period were £1,269,080 (2017: £1,180,539).
(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 3.0p per fully paid Ordinary Share (2017: 2.8p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2018, but not recognised as a liability at the year end is £885,405 (2017: £826,378).
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.
| 2018 | 2017 | |||
| Profit attributable to equity holders of the Company (£) | 1,931,074 | 2,022,679 | ||
| Weighted average number of Ordinary Shares in issue (number) | 29,513,486 | 29,513,486 | ||
| Effect of share options in issue | 436,696 | 33,492 | ||
| Weighted average shares for diluted earnings per share | 29,950,182 | 29,546,978 | ||
| Basic earnings per share (pence per share) | 6.5 | 6.9 | ||
| Diluted earnings per share (pence per share) | 6.4 | 6.8 |
9 Intangible assets
| Group | Goodwill | Purchased customer contracts | Intellectual property rights | Software development costs | Total | |||||
| £ | £ | £ | £ | £ | ||||||
| Cost | ||||||||||
| At 1 October 2016 | 2,053,141 | 4,382,654 | 2,567,160 | 601,111 | 9,604,066 | |||||
| Additions | - | - | - | 850,000 | 850,000 | |||||
| At 30 September 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 | |||||
| Amortisation | ||||||||||
| At 1 October 2016 | - | 313,047 | 183,369 | 75,139 | 571,555 | |||||
| Provided in the year | - | 626,093 | 366,737 | 265,382 | 1,258,212 | |||||
| At 30 September 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 | |||||
| Net book amount at 30 September 2018 | 2,053,141 | 2,871,421 | 1,650,317 | 1,610,896 | 8,131,775 | |||||
| Net book amount at 30 September 2017 |
2,053,141 | 3,443,514 | 2,017,054 | 1,110,590 | 8,624,299 | |||||
Amortisation has been included in administrative expenses in the statement of comprehensive income.
The carrying value of goodwill included within the Cerillion plc balance sheet 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 2018, 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 | Furniture and fittings | Total | ||||
| £ | £ | £ | £ | |||||
| Cost | ||||||||
| At 1 October 2016 | 605,213 | 3,361,266 | 779,163 | 4,745,642 | ||||
| Additions | - | 170,519 | 27,289 | 197,808 | ||||
| Disposals | - | (2,000) | (1,500) | (3,500) | ||||
| Exchange difference | (2,633) | (2,073) | (1,529) | (6,235) | ||||
| At 30 September 2017 | 602,580 | 3,527,712 | 803,423 | 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 | ||||
| Depreciation | ||||||||
| At 1 October 2016 | 594,393 | 2,979,383 | 760,361 | 4,334,137 | ||||
| Provided in the year | 7,057 | 225,529 | 17,129 | 249,715 | ||||
| Disposals | - | (2,000) | (1,000) | (3,000) | ||||
| Exchange difference | (2,669) | (2,671) | (1,736) | (7,076) | ||||
| At 30 September 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 | ||||
| Net book amount at 30 September 2018 | 387,261 | 259,368 | 121,824 | 768,453 | ||||
| Net book amount at 30 September 2017 |
3,799 | 327,471 | 28,669 | 359,939 | ||||
All depreciation charges are included within admin 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 2016 | 113,646 | 206,900 | 320,546 |
| Foreign exchange movement on opening deferred tax asset | - | (2,375) | (2,375) |
| Repayment of tax deposit | - | (100,000) | (100,000) |
| Credited to profit or loss | 4,682 | 47,270 | 51,952 |
| 30 September 2017 | 118,328 | 151,795 | 270,123 |
| 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) |
| Credited to profit or loss | (71,486) | (19,611) | (91,097) |
| 30 September 2018 | 46,842 | 122,251 | 169,093 |
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.
| 2018 | 2017 | ||
| £ | £ | ||
| At 1 October 2017 | 1,076,166 | 1,280,805 | |
| Credited to profit or loss | (296,379) | (204,639) | |
| As at 30 September 2018 | 779,787 | 1,076,166 |
There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2018 (2017: £nil).
12 Trade and other receivables
| Current receivables | The Group | The Company | ||
| 2018 | 2017 | 2018 | 2017 | |
| £ | £ | £ | £ | |
| (restated) | ||||
| Trade receivables | 2,136,147 | 1,956,936 | - | - |
| Accrued income | 5,750,543 | 5,097,784 | - | - |
| Amounts owed by group undertakings | - | - | 4,099,176 | 2,967,584 |
| Other receivables | 287,666 | 492,662 | - | - |
| Prepayments | 185,067 | 193,204 | 6,009 | 6,250 |
| 8,359,423 | 7,740,586 | 4,105,185 | 2,973,834 | |
| Non-current receivables | The Group | The Company | ||
| 2018 | 2017 | 2018 | 2017 | |
| £ | £ | £ | £ | |
| (restated) | ||||
| Accrued income | 577,288 | 768,240 | - | - |
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:
| 2018 | 2017 | |||||
| £ | £ | |||||
| Group | ||||||
| Trade receivables | 2,776,026 | 2,301,586 | ||||
| Bad debt provision | (639,879) | (344,650) | ||||
| 2,136,147 | 1,956,936 | |||||
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.
| 2018 | 2017 | |||||
| £ | £ | |||||
| Group | ||||||
| Not past due | 1,391,620 | 1,598,807 | ||||
| Up to 3 months | 192,367 | 80,898 | ||||
| 3 to 6 months | 366,615 | 154,139 | ||||
| Older than 6 months | 185,545 | 123,092 | ||||
| 2,136,147 | 1,956,936 | |||||
Of the trade debt older than 6 months as at 30 September 2018, being £185,545 (2017: £123,092), cash of £nil (2017: £93,693) has been received since the year end.
The following is an ageing analysis of those trade receivables that were individually considered to be impaired:
| 2018 | 2017 | |||||
| £ | £ | |||||
| Group | ||||||
| Not past due | - | 16,982 | ||||
| Up to 3 months | 425,451 | 25,926 | ||||
| 3 to 6 months | 14,417 | 101,347 | ||||
| Older than 6 months | 200,011 | 200,395 | ||||
| 639,879 | 344,650 | |||||
13 Trade and other payables
| The Group | The Company | |||
| 2018 | 2017 | 2018 | 2017 | |
| £ | £ | £ | £ | |
| Trade payables | 960,034 | 732,185 | 126,741 | 34,162 |
| Taxation | 199,714 | 236,822 | 100,000 | 100,000 |
| Other taxation and social security | 91,249 | 170,854 | 72,373 | 49,133 |
| Pension contributions | 39,322 | 40,413 | - | - |
| Other payables | 465,645 | 427,940 | - | - |
| Accruals | 1,596,957 | 1,221,442 | 582,986 | 18,820 |
| Deferred income | 1,898,651 | 1,744,049 | - | - |
| Loans (note 14) | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 |
| 6,251,572 | 5,573,705 | 1,882,100 | 1,202,115 |
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 | |||
| 2018 | 2017 | 2018 | 2017 | |
| £ | £ | £ | £ | |
| Current liabilities: | ||||
| Secured loans | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 |
| Non-current liabilities: | ||||
| Secured loans | 1,793,070 | 2,693,139 | 1,793,070 | 2,693,139 |
| 2,793,070 | 3,693,139 | 2,793,070 | 3,693,139 |
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 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 | ||||||||
| Non-current Borrowings | Current Borrowings | Total | |||||||||
| £ | £ | £ | |||||||||
| 1 October 2016 | 3,572,602 | 1,000,000 | 4,572,602 | ||||||||
| Cash-flows: | |||||||||||
| Repayment | - | (879,463) | (879,463) | ||||||||
| Non-cash: | |||||||||||
| Reclassification | (879,463) | 879,463 | - | ||||||||
| 30 September 2017 | 2,693,139 | 1,000,000 | 3,693,139 | ||||||||
15 Financial instruments and risk management
Group
| Financial instruments by category | 2018 £ |
2017 £ |
|||||||
| Financial assets - loans and receivables | (restated) | ||||||||
| Non-current - | |||||||||
| Accrued income | 577,288 | 768,240 | |||||||
| Current | |||||||||
| Trade and other receivables | 2,423,813 | 2,449,598 | |||||||
| Accrued income | 5,750,543 | 5,866,024 | |||||||
| Cash and cash equivalents | 5,254,302 | 5,338,935 | |||||||
| 13,428,658 | 13,654,557 | ||||||||
Prepayments are excluded, as this analysis is required only for financial instruments.
| Financial liabilities - held at amortised cost | 2018 £ |
2017 £ |
|||
| Non-current | |||||
| Borrowings | 1,793,070 | 2,693,139 | |||
| 1,793,070 | 2,693,139 | ||||
| Current | |||||
| Current borrowings | 1,000,000 | 1,000,000 | |||
| Trade and other payables | 1,425,679 | 1,330,979 | |||
| Pension costs | 39,322 | 40,413 | |||
| Accruals | 1,596,956 | 1,221,442 | |||
| 4,061,957 | 3,592,834 | ||||
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 | 2018 £ |
2017 £ |
|||||||
| Financial assets - loans and receivables | |||||||||
| Current | |||||||||
| Amounts owed by group undertakings | 4,099,176 | 2,967,584 | |||||||
| Cash and cash equivalents | 25,665 | 10,780 | |||||||
| 4,124,841 | 2,978,364 | ||||||||
| Financial liabilities - held at amortised cost | 2018 £ |
2017 £ |
||
| Non-current | ||||
| Borrowings | 1,793,070 | 2,693,139 | ||
| 1,793,070 | 2,693,139 | |||
| Current | ||||
| Current borrowings | 1,000,000 | 1,000,000 | ||
| Trade and other payables | 126,741 | 34,162 | ||
| Accruals | 582,986 | 18,820 | ||
| 1,709,727 | 1,052,982 | |||
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 2018 (2017: £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:
| 2018 | 2017 | ||||||
| £ | £ | ||||||
| Trade receivables | |||||||
| Group 1 | 55,215 | 1,900 | |||||
| Group 2 | 1,668,857 | 1,939,473 | |||||
| Group 3 | 412,075 | 15,563 | |||||
| 2,136,147 | 1,956,936 | ||||||
Group 1 - new customers (less than 6 months).
Group 2 - existing customers (more than 6 months) with no defaults in the past.
Group 3 - existing customers (more than 6 months) with some defaults in the past.
At the year end there are 7 customers (2017: 6 customers) with trade receivable balances each representing in excess of 5% of the total trade receivables of £2,136,147. Of these customers, 2 are categorised within Group 3 above (2017: nil), representing 16% of total trade receivables, with the remainder within Group 2.
There are no trade receivables within the Parent Company.
| 2018 | ||||
| £ | ||||
| Cash at bank and short-term deposits | ||||
| A1 | 5,251,059 | |||
| Not rated | 3,243 | |||
| 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 with 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 2018 the Group had no forward foreign exchange contracts in place (2017: none) to mitigate exchange rate exposure arising from forecast income in US Dollars, Australian Dollars and Euros. The contracts are considered by management to be part of economic hedge arrangements but have not been formally designated as hedging instruments, so are treated as held for trading in accordance with IAS 39.
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 | |||||
| 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) | ||||
| AUD | USD | EUR | INR | |||||
| 30 September 2017 | ||||||||
| Financial assets | 269,699 | 7,662,036 | 1,376,700 | 365,994 | ||||
| Financial liabilities | - | (141,917) | (15,395) | (378,943) | ||||
| Total exposure | 269,699 | 7,520,119 | 1,361,305 | (12,949) |
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 and Indian Rupee 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 2018 | AUD | USD | EUR | INR | ||||
| Loss for the year | (6,629) | (240,779) | (258,734) | 7,007 | ||||
| Equity total | (6,629) | (240,779) | (258,734) | 7,007 | ||||
| 30 September 2017 | AUD | USD | EUR | INR | ||||
| Loss for the year | (24,518) | (683,647) | (123,755) | 1,177 | ||||
| Equity total | (24,518) | (683,647) | (123,755) | 1,177 |
If the GBP had weakened against the foreign currencies by 10% then this would have had the following impact:
| 30 September 2018 | AUD | USD | EUR | INR | ||||
| Profit for the year | 8,102 | 294,285 | 316,230 | (8,564) | ||||
| Equity total | 8,102 | 294,285 | 316,230 | (8,564) | ||||
| 30 September 2017 | AUD | USD | EUR | INR | ||||
| Profit for the year | 29,967 | 835,569 | 151,256 | (1,439) | ||||
| Equity total | 29,967 | 835,569 | 151,256 | (1,439) |
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 2018, 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 2018 | (33,050) | 32,759 | (33,050) | 32,759 | ||||
| 30 September 2017 | (38,643) | 38,354 | (38,643) | 38,354 | ||||
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 2018 | ||||||||||||||
| Borrowings | 1,178,065 | 1,242,257 | 627,112 | - | ||||||||||
| Trade and other payables | 5,251,572 | - | - | - | ||||||||||
| 30 September 2017 | ||||||||||||||
| Borrowings | 1,099,932 | 1,178,065 | 1,869,369 | - | ||||||||||
| Trade and other payables | 4,573,705 | - | - | - | ||||||||||
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
| 2018 | 2017 | |||
| £ | £ | |||
| Issued, allotted, called up and fully paid: | ||||
| 29,513,486 (2017: 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 profit or loss and 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. Fair values have been calculated on the date of grant.
There were no new share options granted in 2018, but the impact in 2017 was immaterial and therefore no charge was recognised. A charge of £135,400 (2017: £nil) 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 prior year and the assumptions used in the calculation are shown below:
| Year of grant | 2017 | 2017 |
| Scheme | SAYE | LTIP |
| Exercise price (£) | 1.132 | 0.05 |
| Number of options granted | 189,845 | 300,000 |
| Vesting period (years) | 3 years | 3 to 3.5 years |
| Option life (years) | 3.5 years | 5 to 5.5 years |
| Risk free rate | 0.5% | 1.0% |
| Volatility | 41% | 41% |
| Dividend yield | 3% | 3% |
| Fair value (£) | 0.44 | 1.20 |
The share option schemes are issued by the Parent Company, therefore the disclosures within this note cover the Group and Parent Company. During the period no options were granted as summarised in the table below:
| 2018 Number of Options |
2018 Weighted average exercise price |
2017 Number of Options |
2017 Weighted average exercise price |
|
| £ | £ | |||
| Outstanding at start of period | 489,845 | 0.44 | - | - |
| Granted | - | - | 489,845 | 0.44 |
| Expired | (50,000) | 0.05 | - | - |
| Outstanding at 30 September | 439,845 | 0.49 | 489,845 | 0.44 |
| 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 £331,133 (2017: £336,465).
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:
| 2018 | 2017 | |||
| Group | £ | £ | ||
| Within one year | 399,658 | 251,440 | ||
| Between one and five years | 1,471,752 | 41,902 | ||
| After five years | 1,553,375 | - | ||
| 3,424,785 | 293,342 | |||
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 8 February 2019. 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 2018 or 2017. The financial information for the year ended 30 September 2017 is derived from the statutory accounts for that year 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 2018 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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
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