Cerillion Regulatory News (CER)

28 November 2016

AIM: CER

Cerillion plc

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

Final results for the year ended 30 September 2016

Cerillion plc, the billing, charging and customer relationship management software solutions provider, today issues its maiden annual results for the 12 months ended 30 September 2016. 

Highlights1

Financial:

· Encouraging results - in line with management expectations

· Annualised revenue up by 6% to £14.8m (2015: £14.0m)

- software revenue2 up by 21% to £5.3m

- services revenue up by 1% to £8.7m

· Annualised recurring revenue3 up by 6% to £4.1m - c. 27% of total revenue

· Back order book4 stood at £9.3m (2015: £11.0m)

· Annualised EBITDA up by 7% to £3.1m (2015: £2.9m)

· Annualised adjusted profit before tax up by 4% to £2.3m (2015: £2.2m)

· Adjusted earnings per share of 6.8p5

· Proposed final dividend of 2.6p per share, bringing the total dividend for the year to 3.9p per share (2015: nil)

· IFRS reported financial information for Cerillion plc is highlighted in the table below

Operational:

· Successful admission to trading on AIM on 18 March 2016 and acquisition of Cerillion Technologies Limited.

· Continued progress in core enterprise software business:

- a further three customers went live with the real-time Convergent Charging System (CCS)

- a further five new customers were signed for Skyline, Cerillion's new cloud billing solution

· Senior Vice President Asia Pacific appointed in Australia in August

· Board continues to view prospects very positively

Louis Hall, CEO of Cerillion, commented:

"I am pleased to present our maiden full year results following the Company's successful admission to AIM in March 2016. Cerillion made pleasing progress over the period, delivering encouraging profit growth, in line with management expectations. We secured significant new orders in the period and a further three customers went live with our new Convergent Charging System, which continues to drive our pipeline. We also made encouraging progress with our new Software-as-a-Service billing product, Skyline, which is opening up new markets to us. Today, we are pleased to announce a $2.8m follow-on contract with an existing customer in the Americas. This represents the second phase of a $4.1m licence expansion and services contract, the first $1.3m of which relates to services and was closed prior to year-end. Looking ahead, the Board continues to view prospects very positively."

For further information please contact:

About Cerillion

Cerillion is a leading provider of mission critical software for billing, charging and CRM, with a 17 year track record in providing comprehensive revenue and customer management solutions. The Company has 79 customer installations across 42 countries, principally serving the telecommunications market but also utilities and financial services.

Led by a highly experienced management team, the Company is headquartered in London and also has operations in Pune, India, where its Global Solutions Centre is located. Cerillion's CEO, Louis Hall, led the management buyout from Logica plc in 1999.

Cerillion plc

Cerillion plc acquired Cerillion Technologies Limited on 18 March 2016 in conjunction with the completion of its IPO on AIM. The table below shows the highlights for Cerillion plc, reflecting trading from 18 March 2016 to 30 September 2016. Prior to 18 March 2016, Cerillion plc had no trading activity. In addition, the full year trading highlights for Cerillion Technologies Limited, Cerillion India (Pvt) and Cerillion Inc ("CTL Group") are detailed to give a clearer picture of the year on year trading activity of the underlying Group.

Notes

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Introduction

Cerillion plc was admitted to trading on AIM on 18 March 2016, towards the end of the first half of its financial year, and we are now very pleased to report the Group's first full year's results as a publicly quoted company. 

The CTL Group business is well established, with a 17 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. Our decision to join AIM and acquire Cerillion Technologies Limited was taken with the intention of using this platform to support the next phase of the Group's growth. 

As we have previously reported, we intend to continue to drive our growth in our core telecoms market, where demand for billing and charging solutions is growing, driven by technological and regulatory change. We are also seeking to develop in new market sectors, supported by our new Software-as-a-Service ("SaaS") billing product, Cerillion Skyline, which facilitates billing and the collection of payments from any type of subscription or usage-based service.

We are pleased to report that Cerillion has continued to make good progress over the second half of its financial year and that results are in line with market expectations. Revenue has increased year-on-year by 6% to £14.8m and adjusted profit before tax is up by 4% to £2.3m. 

These encouraging results have been supported by good demand from our established customer base and include a major, multi-site project implementation in the Americas. In addition, we won a significant contract for our core enterprise billing, charging and CRM solution with a new telecommunications customer, in the EMEA region, after a global tender process. 

Financial Overview

CTL Group proforma consolidated results are included in the table below. The following commentary is based on these results as they are considered to provide a clearer picture of the year on year trading activity of the underlying Group. Total CTL Group revenue for the year to 30 September 2016 rose by 6% to £14.8m (2015: £14.0m). Our existing customer base typically drives a very high proportion of total annual income and established customers (those acquired at least 12 months before the beginning of the reporting period) generated 93% of total revenue in the year (2015: 73%). Our major implementation in the Americas, commissioned by an existing customer, is a major component of revenues in this reporting period.

A significant proportion of the Group's revenues continues to be underpinned by recurring income, which is derived from support and maintenance and managed service contracts. Recurring revenues accounted for 27% of the Group's income (2015: 27%), having risen by 6% year-on-year to £4.1m (2015: £3.8m). 

Our income streams are broadly divided into three segments: software revenue (which principally comprises software licence sales and support and maintenance sales); services revenue, which is generated by software implementations and other services work, and revenues from other activities, mainly the reselling of third party products.

· Software revenue rose by 21% to £5.3m (2015: £4.4m), helped by strong licence sales, and accounted for 36% of total revenues (2015: 31%). 

· Services revenue rose slightly to £8.7m (2015: £8.6m) and continues to constitute the largest element of total revenue at 59% (2015: 61%).

· Third party income decreased to £0.8m (2015: £1.0m) and comprised 5% of total revenue (2015: 7%).

Administrative expenses increased slightly to £7.7m (2015: £7.5m) and included personnel costs at £4.5m (2015: £4.4m).

Adjusted operating profit increased by 4% to £2.3m (2015: £2.2m) mainly driven by the increase in total revenue. The charge for amortisation of R&D costs was £0.5m (2015: £0.4m). The increase was due to additional investment in our convergent charging platform, a new module which went into service with three additional customers during the period. Expenditure on fixed assets was £0.3m (2015: £0.3m).

Adjusted profit before tax rose by 4% to £2.28m (2015: £2.19m) and adjusted earnings per share was 6.8p5.

Cash Flow and Banking

Net cash as at 30 September 2016 stood at £0.4m, with total Group cash at £5.0m and total debt at £4.6m (2015: nil), reflecting the £5m term loan taken up by Cerillion plc in conjunction with the AIM IPO and repayments made over the period.

Dividend

In line with the Company's dividend policy of paying out between a third to half of the Group's free cash flow each year, subject to the Group's performance, the Board is pleased to propose a maiden final dividend of 2.6p per share. Together with the interim dividend of 1.3p per share, this brings the total dividend for the year to 3.9p per share.

The dividend will become payable on 10 January 2017 to those shareholders on the Company's register as at the close of business on the record date of 9 December 2016. The ex-dividend date is 8 December 2016.

Operational Overview

We continued to make good progress with our core solution, the Group's pre-integrated Enterprise BSS/OSS suite, which now includes our new, real-time, Convergent Charging System ("CCS"). Across our product suite, we secured new orders totalling £10.8m over the year (2015: £11.1m) and all of these new projects are now under way. These new orders will help to build visibility of work as we progress through the new financial year and beyond. 

Typically, because our implementation projects are governed by long term and high value contracts, the business enjoys a high level of revenue visibility through both its back order book and its annualised support revenue. 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 - stood at £9.3m (2015: £11.0m).

We completed a number of customer installation projects over the year. These included a new 4G/LTE launch for rapidly developing telecoms service provider SWAN, a.s.. SWAN, a.s. is using our solution, including CCS, to underpin its new services, which are sold through the Slovakian Post Office's 1,600 plus branch offices. Our system is supporting SWAN's online and offline charging and the project's successful completion represents a further important proof point for our new CCS architecture. In another important proof point, CCS was also rolled out across all of Manx Telecom plc's prepaid and postpaid, mobile, fixed and data services. 

CCS continues to be a key driver for new sales as it enables communications service providers (CSPs) to converge prepaid and postpaid charging and billing on the same software platform. This provides significant cost savings and performance-related benefits to customers, as well as the flexibility to support multiple service types, such as fixed, mobile, data and IPTV. CCS can be deployed in many ways too, including 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. 

Four customers are now live on the CCS platform while a fifth customer is in implementation and we expect that CCS will to continue to be important in enabling us to capture new wins in prepaid mobile and "quad-play" (the term used to describe combined broadband internet access, television, telephone and mobile services in the same product bundle) convergent billing.

We also completed a new 4G/LTE launch in the US, using a full managed service delivery model, and completed the implementation of a replacement billing system for a European TETRA operator, supporting a national emergency services network.

We have won five new customers for Cerillion Skyline, our completely new cloud billing solution. Skyline can bill and collect recurring revenue for any type of service and so is helping us break into new industry verticals. It offers customers significant business benefits, including faster time to implement compared with a traditional solution, lower cost with a 'pay-as-you-grow' model, no infrastructure requirement, secure data storage, and the ability to support customers' B2B and B2C service offerings. The new customers we have signed include a digital marketing company, an online services business and two publishers. In October, we appointed a Head of Cloud and SaaS to help drive increased market traction for our Skyline solution now that the product's market testing is fully completed.

We made good progress in our targeted global expansion plans during the period. Having opened an office in Miami during the first half of the year, we are now in the process of building our team at that location. We also made significant progress in expanding our presence in Asia Pacific and in August appointed a Senior Vice President Asia Pacific for this region. 

We continue to invest across our solutions, making further improvements to Cerillion Skyline, CCS and our other modules. In addition to this, in FY2017 we will bring a new Enterprise Product Catalogue module to the market.

On 17 October 2016 we were delighted to be designated in the "Visionaries" quadrant of Gartner's newly published report, "Magic Quadrant for Integrated Revenue and Customer Management ("IRCM") for CSPs". Cerillion has moved from Niche Players designation in 2015 and this is the third consecutive year that Cerillion has been included in this annual review of IRCM vendors. Gartner's Magic Quadrant report evaluates vendors across a broad range of criteria including product strategy, sales & marketing strategies, innovation and client references, and companies are positioned according to "completeness of vision" and "ability to execute". Gartner evaluated both Cerillion Enterprise and Cerillion Skyline, and we believe our new designation reflects the Company's growing stature and reputation as a leading IRCM vendor8.

Outlook

We continue to remain very positive about prospects for the Group and our sales team is pursuing a strong pipeline of prospects. We are delighted to report today that Cerillion has signed a major follow-on contract worth $2.8m with an existing customer in the Americas. This represents the second phase of a $4.1m licence expansion and services contract, the first $1.3m of which relates to services and was closed prior to year-end.

Notes

Note 8 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.

The Gartner Report(s) described herein, (the "Gartner Report(s)") represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Each Gartner Report speaks as of its original publication date (and not as of the date of these Accounts) and the opinions expressed in the Gartner Report(s) are subject to change without notice.

CTL Group Proforma Consolidated Income Statement - for the year ended 30 September 2016

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CERILLION PLC

We have audited the financial statements of Cerillion PLC for the year ended 30 September 2016 which comprise the principal accounting policies, consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union (IFRSs) and as regards the parent company financial statements as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement set out on page 19, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion:

· the financial statements give a true and fair view of the state of the Group's and Parent Company's affairs as at 30 September 2016 and of the Group's profit for the year then ended;

· the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

· the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

· adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

· the Parent Company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

Marc Summers, FCA

Senior Statutory Auditor

for and on behalf of Grant Thornton UK LLP,

Statutory Auditor, Chartered Accountants

London

25 November 2016

PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below.

Basis of preparation

The Company is a public limited company, which was incorporated in England and Wales on 5 March 2015. The address of its registered office is 125 Shaftesbury Avenue, London, WC2H 8AD. The principal activity of the Group is a supplier and developer of telecommunication software solutions and equipment. In the prior year the principal activity was to act as a platform to acquire the entire issued share capital of Cerillion Technologies Limited for the purpose of admission to AIM. These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and IFRIC interpretations endorsed by the European Union (EU). The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are held at fair value.

The Company's directors are responsible for the preparation of the financial statements.

The preparation of the financial statements in conformity with IFRSs requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Further details regarding areas requiring significant assumptions and estimates are provided in Note 1 to the financial statements.

There is no material difference between the fair value of financial assets and liabilities and their carrying amount.

The functional and presentational currency is UK Sterling. Amounts in the financial statements have been rounded to the nearest pound.

Going concern

The Directors have assessed the current financial position of the Group, along with future cash flow requirements for a period in excess of 12 months from the date of signing the financial statements, to determine if the Group has the financial resources to continue as a going concern for the foreseeable future.

The conclusion of this assessment is that it is appropriate that the Group be considered a going concern, based on forecast profitability and positive cash inflows. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements.

Basis of consolidation

The Group financial statements consolidate those of the parent company and all of its subsidiaries as of 30 September 2016. All subsidiaries have a reporting date of 30 September with the exception of the Indian subsidiary, which has a mandatory reporting date of 31 March. The Indian subsidiary is consolidated using its management accounts through to 30 September.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary or a business is the fair values of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity interests issued to the Group. The consideration transferred includes the fair values of any asset or liability resulting from a contingent consideration arrangement.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date.

Acquisition-related costs are expensed as incurred.

Intercompany transactions, unrealised gains and losses on intragroup transactions and balances between group companies are eliminated on consolidation.

New and Revised Standards

IFRS in issue but not applied in the current financial statements

The following IFRS and IFRIC Interpretations have been issued but have not been applied by the Company in preparing these financial statements as they are not as yet effective. The Company intends to adopt these Standards and Interpretations when they become effective, rather than adopt them early.

· IFRS 9, 'Financial instruments', effective date 1 January 2018 (not yet adopted by the EU, as at 30 September 2016)

· IFRS 15, 'Revenue from Contracts with Customers', effective date 1 January 2018 (not yet adopted by the EU, as at 30 September 2016)

· IFRS 16, 'Leases', effective date 1 January 2019 (not yet adopted by the EU, as at 30 September 2016).

The above standards are yet to be subject to a detailed review. IFRS 9 will impact both the measurement and disclosure of financial instruments, IFRS 15 may have an impact on revenue recognition and related disclosures and IFRS 16 will impact the treatment of leases currently treated as operating leases. Beyond this, it is not practicable to provide a reasonable estimate of the effect of IFRS 9, IFRS 15 and IFRS 16 until a detailed review has been completed.

A number of IFRS and IFRIC interpretations are also currently in issue which are not relevant for the Company's activities and which have not therefore been adopted in preparing these financial statements:

· IFRS 14 "Regulatory Deferral Accounts" (effective: 1 January 2016)

· Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations (IASB effective date: 1 January 2016)

· Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 (IASB effective date: 1 January 2016)

· Annual Improvements to IFRSs 2012-2014 Cycle (effective: 1 January 2016)

· Amendments to IAS 16 and IAS 41: Bearer Plants (effective: 1 January 2016)

· Amendments to IAS 27: Equity Method in Separate Financial Statements (effective: 1 January 2016)

· Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception (effective: 1 January 2016)

· Disclosure Initiative: Amendments to IAS 1: Presentation of Financial Statements (effective: 1 January 2016) 

· Disclosure Initiative: Amendments to IAS 7: Statement of Cash Flows (effective: 1 January 2017)

· Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (effective: 1 January 2016)

· Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective: 1 January 2017).

Segmental reporting

In accordance with IFRS 8, segmental information is presented based on the way in which financial information is reported internally to the chief operating decision maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board who makes strategic decisions.

During the year ended 30 September 2016, since the acquisition of Cerillion Technologies Limited, the Group was organised into four main business segments for revenue purposes:

· Services: relates to revenue from providing services to customers on new implementation projects and enhancements.

· Software: relates to support and maintenance revenue derived from people using the software as well as the licences to use the software.

· Software as a Service: relates to monthly subscriptions for a managed service or to use products on a pay as you go service.

· 3rd Party: relates to revenue derived from 3rd party services or licences, re-billable expenses and pass through of selling on hardware.

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

Foreign currency translation

(i) Functional and presentation currency

Items included in the Financial Statements are measured using the currency of the primary economic environment in which entities operate ('the functional currency'). The Financial Statements are presented in sterling, which is the Parent Company's functional and presentation currency. There has been no change in the functional currency during the current or preceding period.

(ii) Transactions and balances

Transactions in foreign currencies are translated into sterling using monthly average exchange rates. This is permissible in this case as there are no significant fluctuations between the currencies with which the entity operates. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the balance sheet date and any exchange differences arising are taken to profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. 

 (iii) Foreign operations

In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than the GBP are translated into GBP upon consolidation. The functional currency of the entities in the Group has remained unchanged during the reporting period.

On consolidation, assets and liabilities have been translated into GBP at the closing rate at the reporting date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into GBP at the closing rate. Income and expenses have been translated into GBP at the average rate over the reporting period. Exchange differences arising from significant foreign subsidiaries are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable net of sales related taxes.

The Group follows the principals of IAS 18 "Revenue" in determining appropriate revenue recognition policies. In principle revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group.

Revenue is derived from sales of standard licensed products (including installation, implementation, maintenance and support fees), additional licences, on-going account development work, third party time and material works.

The excess of amounts invoiced over revenue recognised are included in deferred income. If the amount of revenue recognised exceeds the amount invoiced the excess is included within accrued income.

In applying the income recognition policies below where there is a requirement for a contract to be signed, income is recognised in accordance with the policy when the contract has been signed or persuasive evidence of an arrangement exists.

(i) Sale of standard licenced products

Revenue from standard licensed products comprises two elements, being:

• Initial licence and implementation fees ("inception fees")

• Ongoing maintenance and support fees

With the contract detailing separately the contract value and payment milestones for each element.

When each element operates independently of the other, the Group will recognise inception fees and ongoing maintenance and support fees on the following basis.

Revenue for initial licence and implementation fees in relation to products which are not modified to meet the specific requirements of each customer and follow a straightforward implementation profile is recognised at the point at which the customer has the ability and right to use all prepaid licences on the installed solution.

Revenue from ongoing maintenance and support fees are recognised on a pro-rated basis over the duration of the contract.

Where a licenced product requires significant customer modifications and implementation is complex, revenue is recognised on applying the percentage of completion method to total contract value with estimates based on the total number of hours performed on the project compared to the total number of hours expected to complete the project. Provision is made for any losses on the contract as soon as they are foreseen.

(ii) Sale of additional licences

Revenue from the sale of additional licences is recognised when the additional licences are delivered to the customer.

(iii) Ongoing account development work

Ongoing account development work is generally provided on a fixed price basis and as such revenue is recognised based on the percentage completion or delivery of the relevant project, whichever is most appropriate for the transaction. Where percentage completion is used it is estimated based on the total number of hours performed on the project compared to the total number of hours expected to complete the project. Provision is made for any losses as soon as they are foreseen.

(iv) Third party time, material works and re-billable expenses

Revenue on contracted third party time and material works is recognised on a time basis using pre agreed day rates.

Revenue on re-billable expenses is recognised as incurred. In the case of third party time, material works and re-billable expenses the Group is considered to be acting as principal as it is the primary obligor in the sales transaction, the Group can select the supplier of the service and the Group holds the credit risk in the transaction.

Cost of sales

Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads, including indirect overheads that can reasonably be allocated, have been classified as cost of sales.

Taxation and deferred taxation

The income tax expense or income for the period is the tax payable on the current period's taxable income. This is based on the national income tax rate enacted or substantively enacted for each jurisdiction with any adjustment relating to tax payable in previous years and changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. 

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of temporary differences can be deducted. The carrying amount of deferred tax assets are reviewed at each reporting date.

Deferred tax liabilities are generally recognised in full, although IAS 12 'Income Taxes' specifies limited exemptions. As a result of these exemptions the Group does not recognise deferred tax on temporary differences relating to goodwill, or to its investments in subsidiaries. Temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the

Group as lessee are classified as operating leases. These are the only types of lease utilised by the

entity. Operating lease payments for assets leased from third parties are charged to profit or loss on

a straight line basis over the period of the lease, on an accrued basis.

Impairment

Goodwill and assets that are subject to amortisation are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and other short term highly liquid deposits with original maturities of three months or less.

Financial instruments

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs. Subsequent measurement of financial assets and financial liabilities is described below.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement financial assets are classified into the following categories upon initial recognition:

Derivative financial instruments

Derivative financial instruments held by the Group comprise forward foreign currency contracts and are recognised at fair value. The Group has not applied hedge accounting and the gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Company's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that Cerillion will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade and other receivables may be impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit or loss within 'cost of sales'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'cost of sales' in the profit or loss.

Classification and subsequent measurement of financial liabilities

The Group's financial liabilities include trade and certain other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest.

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to Cerillion prior to the end of the financial period which are unpaid.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Equity

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The ordinary share capital account represents the amount subscribed for shares at nominal value.

Retained earnings include all results as disclosed in the statement of comprehensive income.

Foreign exchange reserve - comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into Sterling.

Provisions

Provisions are recognised when Cerillion has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are the best estimate of the expenditure required to settle the obligation at the current reporting date.

Property, plant and equipment (PPE)

PPE is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Cerillion and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation on plant and machinery and fixtures and fittings is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

· Leasehold Improvements Life of lease

· Fixtures and fittings 3 - 4 years

· Computer Equipment 3 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting

date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss.

Intangible assets and amortisation

(i) Software

Expenditure on research is written off in the period in which it is incurred. Development expenditure incurred on specific projects are capitalised where the Board is satisfied that the following criteria have been met:

• it is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

• the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives, which does not exceed 5 years.

(ii) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets and liabilities assumed at the date of acquisition. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment testing is carried out by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.

(iii) Purchased customer contracts

Purchased customer contracts acquired as part of a business combination are recognised at fair value if they are project specific and there is a level of certainty that there will be future recovery. Customer contracts are amortised over the perceived period that they will generate economic benefits. This is calculated using in depth analysis of future revenue from cash flow forecasts.

The customer contracts acquired as part of the acquisition of Cerillion Technologies Limited are to be amortised over a period of 7 years.

(iv) Intellectual property rights

Intellectual property rights acquired as part of a business combination are recognised at fair value based on an estimate of future profits. Intellectual property rights are amortised over the perceived period that they will generate economic benefits. This is calculated using in depth analysis of future revenue from cash flow forecasts.

The intellectual property rights acquired as part of the acquisition of Cerillion Technologies Limited are to be amortised over a period of 7 years.

Interest

Interest income and expense are recognised using the effective interest method and comprise

amounts receivable and payable on bank deposits and bank borrowings respectively.

Post retirement benefits

Defined contribution schemes

The defined contribution schemes provide benefits based on the value of contributions made. The

amounts charged as expenditure for the defined contribution scheme represents the contributions

payable by Cerillion for the accounting years in respect of the schemes.

Exceptional items

Exceptional items are those significant items, and are one off items, that are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance. Transactions that were recorded as exceptional items during the current and prior year were the costs associated with the IPO of Cerillion PLC.

Consolidated Statement of Comprehensive Income

All transactions are attributable to the owners of the parent.

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

* Comprises the plc Parent Company only, as the Group came into existence on 18 March 2016.

Consolidated Statement of Financial Position

The financial statements were approved and authorised for issue by the Board of Directors on 25 November 2016. Signed on behalf of the Board of Directors by:

L T Hall - Director

Company Number 09472870

The accompanying accounting policies and notes form an integral part of these financial statements.

* Comprises the plc Parent Company only, as the Group came into existence on 18 March 2016.

Company Statement for Financial Position

The financial statements were approved and authorised for issue by the Board of Directors on 25 November 2016. Signed on behalf of the Board of Directors by:

L T Hall - Director

Company Number 09472870

The accompanying accounting policies and notes form an integral part of these financial statements.

Consolidated Statement of Cashflows 

The accompanying accounting policies and notes form an integral part of these financial statements.* Comprises the plc Parent Company only, as the Group came into existence on 18 March 2016.

Company Statement of Cash Flows

Consolidated Statement of changes in Equity

Company Statement of Changes in Equity

Notes to the Financial Statements

1 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 judgment 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.

(iii) Business combinations

The legal and accounting acquirer is Cerillion plc. Cerillion plc acquired Cerillion Technologies Limited on 18 March 2016 for £14.6m, which was funded by a new fund raise and bank debt. The acquisition was to facilitate an exit for Cerillion's previous venture capital majority shareholders who were bought out in full for cash.

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. See note 2.

 (ii) Depreciation and amortisation

Depreciation and amortisation rates are based on estimates of the useful economic lives and residual values of the assets involved. The assessment of these useful economic lives is made by projecting the economic lifecycle of the asset. The key judgement is estimating the useful economic life of the development costs capitalised, a review is conducted annually by project. Depreciation and amortisation rates are changed where economic lives are re-assessed and technically obsolete items written off where necessary. Refer to notes 12 and 13.

2 Acquisitions

The Company's controlling interest in its directly held subsidiary, Cerillion Technologies Limited, was acquired through a business combination as defined in IFRS 3 Business Combinations. As such the acquisition method of accounting for this transaction has been followed.

The details of the business combination are as follows:

The legal and accounting acquirer is Cerillion plc. Cerillion plc acquired Cerillion Technologies Limited on 18 March 2016 for £14.6m, which was funded by a new fund raise and bank debt. The acquisition was to facilitate an exit for Cerillion's previous venture capital majority shareholders who were bought out in full for cash.

Consideration transferred

Cerillion plc paid £14,651,571 cash on 18 March 2016 for 100% of the share capital and voting rights of Cerillion Technologies Limited.

IPO costs amounting to £746,055 (2015: £580,500) are not included as part of consideration transferred and have been recognised as an expense in the consolidated statement of profit or loss and are disclosed as exceptional items on the face of the income statement.

Identifiable net assets

Net assets excluding intangibles of £5,648,616 and separately identified intangible net assets of £7,029,814 were acquired.

The separately identified intangible net assets were made up of the current fair value of existing support and maintenance contracts (£4.38m) and IPR (£2.57m). The current fair value was calculated based on an estimate of future profits from these sources using a Weighted Average Cost of Capital (WACC) of 12.7%.

Goodwill

Goodwill arising on this transaction amounted to £1,973,141, of which £1,320,465 related to deferred tax arising on the provisional intangible assets recognised on the acquisition. The remaining goodwill of £652,676 is primarily related to growth expectations, expected future profitability, the substantial skill and expertise of Cerillion Technologies' workforce and expected cost synergies.

Goodwill has not been allocated to a particular segment and is not expected to be deductible for tax purposes.

Cerillion Technologies Limited's contribution to the Group results

In consequence, the consolidated financial statements for Cerillion plc report the result of operations for the period from date of acquisition being 18 March 2016 to 30 September 2016. Similarly, the consolidated balance sheet and other financial information have been presented as though the assets and liabilities were acquired on 18 March 2016.

Cerillion Technologies Limited group generated revenues of £8,364,774 and a profit of £1,578,822 for the period from 18 March 2016 to 30 September 2016. If Cerillion Technologies Limited group had been acquired on 1 October 2015, revenue of the Group for 2015 would have been £14,809,939, and profit for the year would have been £2,154,308.

3 Segment information

During the year ended 30 September 2016, 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 segments 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.

(a) Geographical informationAs 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:

* Comprises the plc Parent Company only, as the Group came into existence on 18 March 2016.

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

The group had no revenue or capital expenditure for the year ended 30 September 2015 and all the assets and liabilities were within the UK based Parent Company (Europe segment).

4 Operating profit/(loss)

The Company did not generate revenue during the period to 30 September 2015. Expenses in that period related to professional fees in relation to the admission of the Company to AIM.

* Comprises the plc Parent Company only, as the Group came into existence on 18 March 2016.

5 Directors and employees

For details of Directors' remuneration, refer to the Remuneration report on pages 16 and 17. Key management personnel is covered in note 24. None of the Company's directors received or were entitled to receive any remuneration from the Company for their services during the period from incorporation to 30 September 2015. 

There were no employees during the period ended 30 September 2015.

6 Finance income

7 Finance costs

8 Taxation

(a) Analysis of tax charge for the year/period

The tax charge for the group is based on the profit/(loss) for the year/period and represents:

There are currently no deferred tax assets or liabilities recognised within the parent company accounts. Taxable losses within the parent company totalling £134,591 (2015: £nil) 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.

9 Profit/(loss) attributable to Cerillion plc

The profit/(loss) for the financial year/period of the Parent Company, Cerillion plc was £1,019,353 (2015: loss £580,500). As permitted by section 408 of the Companies Act 2006, no separate income statement is presented in respect of the Parent Company.

10 Dividends

(a) Dividends paid during the reporting period

The Board declared a maiden interim dividend of 1.3p (2015: nil pence) per share totalling £383,675 (2015: £nil) in line with the Company's dividend policy, which was paid on 23 June 2016.

(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 2.6p per fully paid Ordinary share (2015: £nil). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2016, but not recognised as a liability at the year end is £767,351 (2015: £nil).

11 Earnings/(loss) per share

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year/period. The A Ordinary Shares in existence as at 30 September 2015 have been classified as a liability and are therefore excluded from the earnings per share calculation.

There were no potentially dilutive equity instruments in issue during the year/period.

12 Intangible assets

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 period from Listing to 30 September 2016, 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.

13 Property plant and equipment