Final Results

Strong platform for continued growth

Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2023.

Highlights

Financial:

• A record year across key financial performance measures
• Revenue up 20% to a record £39.2m (2022: £32.7m), driven by major new customer implementations, significant licence revenue and strong demand from existing customers
• Annualised recurring revenue up 19% to £14.8m (2022: £12.4m)
• Back-order book3 at £45.4m at the financial year-end (30 September 2022: £45.4m); now at a record £52.5m following the recent €12.4m contract win with a new European Tier-1 customer
• New customer sales pipeline7 up 16% to a record £243m at 30 September 2023 (30 September 2022: £209m)
• Strong balance sheet with net cash up 22% to £24.7m (30 September 2022: £20.2m)
• Final dividend of 8.0p per share proposed (2022: 6.5p), bringing the total dividend for the year to 11.3p per share (2022: 9.1p), an increase of 24%

Operational:

• Major new implementation covering mobile services completed for Telesur in H2; second phase covering its fixed-line network is now under way
• Record orders of £30.8m to existing customers, up by 85% year-on-year
• reflects the benefits of recent larger customer wins and includes major new contract worth £15.1m signed in H2
• Continued expansion of newer resource centres in Bulgaria and India, and sales team presence added in the USA
• AI-based functionality introduced in latest product release, issued in November 2023
• Pipeline of new business opportunities stands at a record high and includes larger potential contracts
• Cerillion well-positioned for further growth in FY24 and beyond

Louis Hall, CEO of Cerillion plc, commented:

"It has been another year of strong growth and development. Revenue, pre-tax profit, and the new customer sales pipeline all reached new highs. Record orders to existing customers - some 79% of total revenue for the year - shows the importance of our existing customer base, and the recent closure of a €12.4m deal with a Tier-1 telco is another demonstration of our widening market appeal.

"We continued to invest in our product set, introducing AI for the first time, and also expanded our resource base, particularly at our newer centres in Ahmedabad, Indore and Sofia.

"The market backdrop remains extremely favourable. Numerous factors continue to drive telco investment in the enterprise software layer that connects their network infrastructure to their customers and allows them to enhance monetisation of their network infrastructure assets. In a slower growth environment for telcos, the need to extract more revenue from existing assets and improve operational efficiency are just as important drivers for improving or replacing the enterprise software layer as investment in new 5G and fibre infrastructure.

"Cerillion's financial position remains very strong, supported by significant net cash, increasing levels of recurring income and strong cash generation. Together with a record back-order book and strong new customer sales pipeline, this leaves us confident about Cerillion's growth prospects in the new financial year and beyond."

Notes

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

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

Note 3 Back order book consists of £36.7m of sales contracted but not yet recognised at the end of the reporting period plus £8.7m of annualised support and maintenance revenue. It is anticipated that c. 45% of the £36.7m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 months.

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

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

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

Note 7 New Customer Sales Pipeline is the total, unweighted value of all qualified sales prospects.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Introduction

Cerillion continues to perform very strongly and financial results for the year have set new record highs on key measures. Revenue increased by 20% year-on-year to a record £39.2m (2022: £32.7m), and adjusted profit before tax rose by 41% to a new high of £16.8m (2022: £11.9m), which was meaningfully ahead of the prior consensus market forecast, as reported in our October trading update. At financial year-end, the total value of our new customer sales pipeline had increased by 16% to a record £243m (2022: £209m), which reflects the growing demand that we are seeing in the marketplace.

This excellent performance was achieved against slower economic growth globally. We believe that this backdrop is likely to stimulate market interest in our product-based SaaS solutions as telcos seek to maximise investment returns on critical 5G and fibre infrastructure, as well as on existing infrastructure assets and comment further on this below.

New orders for the financial year under review increased slightly to £31.6m (2022: £29.4m), and the new financial year has started strongly with a major new contract worth approximately €12.4m signed with a new Tier-1 customer. It is worth noting that key criteria in the selection process were the commercial, operational and financial advantages of our 'out-of-the-box' product model, and especially the ease with which our software enables new products and packages to be created and launched by our customers to their end-customers. Our highly-configurable, 'out-of-the-box' product solution enables much lower total cost of ownership and much faster time-to-market than the traditional best-of-breed or bespoke approaches.

The recent Tier-1 new customer signing continues a trend towards winning larger customers. As we have previously commented, this has multiple benefits. In addition to providing further proof points of the quality of our product offering, larger customers typically generate higher income over the long-term since they are generally more active, with broader and deeper requirements and larger budgets. Larger deals also typically have a higher software licence element and therefore tend to be margin enhancing.

New orders from existing accounts increased by 85% year-on-year to £30.8m (2022: £16.7m). This substantial uplift mainly reflected the presence of the larger customers that we have signed in recent years, but it was also driven by some large deals with a number of smaller customers.

In order to support the significant acceleration of the Company's growth rate, we have continued to increase resources in our main operations in India and Bulgaria. We also added new sales presence in the USA, Belgium and Singapore over the year.

Looking to the future, demand for billing, charging, customer relationship management ("CRM") and digital customer experience solutions in the Company's core telecommunications market is driven by a very broad range of factors. These include the need to: realise greater value from existing infrastructure assets; improve operational efficiency; adapt rapidly to changing market conditions; and maximise value from new infrastructure investments in 5G and fibre rollouts. Cerillion remains well-placed to benefit from these drivers, and to grow, both in Europe and internationally. We also expect to gain from increasing market acceptance of SaaS-based product solutions.

The pipeline of potential new business opportunities is very strong, and the Company is well-positioned to make further strong progress in the new financial year.

Financial Overview

Total revenue for the year to 30 September 2023 rose by 20% to £39.2m (2022: £32.7m). As is typical, existing customers (classified as those acquired before the beginning of the reporting period) accounted for a very high proportion of total revenue, generating 99% of the overall result (2022: 98%).

Recurring revenue, which is derived from support and maintenance, and managed service contracts, increased by 23% to £12.9m and comprised approximately 33% of total revenue (2022: £10.5m, 32%). At 30 September 2023, recurring revenue on an annualised basis was 19% higher year-on-year at £14.8m (30 September 2022: £12.4m), boosted by a 41% increase in annualised managed service contract revenue (2022: 67% increase) as more customers contracted for these services.

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

Gross margin was slightly ahead of the prior year at 78.6% (2022: 77.9%), reflecting the higher proportion of licence revenue recognised.

Operating expenses increased by 17.2% to £15.3m (2022: £13.0m). This included an unfavourable year-on-year foreign exchange impact of £0.6m due to retranslation of balance sheet items at year end. Excluding this, operating expenses increased by 12%, reflecting strong focus on cost control. Personnel costs were £8.7m (2022: £7.4m) and accounted for 57% (2022: 57%) of operating expenses.

Adjusted EBITDA for the year increased by 32% to £18.1m (2022: £13.8m), driven mainly by higher revenues, and supported by favourable foreign exchange rates. The Board considers adjusted EBITDA to be a key performance indicator for Cerillion as it adds back key non-cash transactions, being share-based payments, depreciation and amortisation.

We continued to invest in our product set, and the charge for amortisation of intangibles was £1.4m (2022: £1.9m). Expenditure on tangible fixed assets was £0.3m (2022: £0.6m). Operating profit increased by 43% to £15.3m (2022: £10.7m) due to the increase in revenue, as well as operational leverage.

Adjusted profit before tax rose by 41% to £16.8m (2022: £11.9m) and adjusted earnings per share increased by 31% to 46.2p (2022: 35.2p). On a statutory basis, profit before tax increased by 48% to £16.1m (2022: £10.9m) and earnings per share increased by 38% to 43.8p (2022: 31.7p).

Cash Flow and Banking

The Group continued to generate strong cash flows, and closed the financial year with net cash up by 22% against the same point last year to £24.7m (30 September 2022: £20.2m). This was after £2.9m of dividend payments (2022: £2.2m). Total debt at the year-end remained £nil (2022: £nil).

Dividend

The Board is pleased to propose a 23% increase in the final dividend to 8.0p per share (2022: 6.5p). Together with the interim dividend of 3.3p per share (2021: 2.6p), this brings the total dividend for the year to 11.3p per share (2022: 9.1p), an increase of 24%.

The dividend, which is subject to shareholder approval at the Company's Annual General Meeting to be held on 1 February 2024, will be payable on 8 February 2024 to those shareholders on the Company's register as at the close of business on the record date of 29 December 2023. The ex-dividend date is 28 December 2023.

Operational and Market Overview

High points over the year included the completion of some major implementations. One was for Neos Networks, a leading UK business telecoms provider, where we replaced three independent systems, and another was for Telesur, the leading telecommunications provider in Suriname, where we migrated the telco's mobile services to our platform. Our work for Telesur continues with the digital transformation of its fixed-line services. In June 2023, we signed a major new six-year contract with an existing telecommunications customer, worth a total of £15.1 million, which just tops our previous largest ever customer win, signed in 2022. The £15.1 million win followed a £10 million contract signing in the first half of the year with an existing customer.

Our latest major new contract was agreed in November 2023 and is with a Tier-1 telco, based in Europe. Worth an initial €12.4 million, we expect this engagement to grow significantly in value over time. It also supports our view that the trend towards signing larger deals with larger customers will continue as our product-based approach gains wider acceptance. As previously emphasised, contracts with larger customers normally involve higher recurring revenues and have much greater upsell potential, therefore they contribute significantly to the ongoing growth of the business.

As we grow across the globe, and global labour markets evolve, we continue to expand our operating locations, recruiting the best talent cost-effectively and supporting our expanding global customer base. We enlarged our teams at our newer locations in Sofia, Bulgaria and at Ahmedabad and Indore in India and have maintained a mix of remote and office-based working. The competition for technology professionals remained relatively strong during most of the financial year, but pressures eased significantly from the peaks reached in the prior year. Nevertheless, we remain focused on potential inflation in people costs and continue to manage carefully the mix and location of resource.

Our investment in R&D exceeded last year's levels and we have continued to advance our technology, launching two major new releases of our product set, as scheduled. The most recent of these releases was Cerillion 23.2, which went live in early November 2023. A key feature of this latest release was the introduction of AI. This will specifically support the ease and agility with which our customers can create and release new product sets within our Enterprise Product Catalogue, by enabling non-technical telco staff to use natural language to define complex product bundles. These are then constructed automatically, significantly reducing the time and complexity of this key task.

Significant telco investment in critical 5G and fibre infrastructure continues and will continue to flow down to the ancillary systems that connect this infrastructure to customers and revenue. Against this macro backdrop, we anticipate that the current global economic slowdown will place more pressure on telcos to find efficiencies in their digital real-estate. We believe that this is likely to encourage further market take-up of the flexible, highly configurable, product-based SaaS solutions that Cerillion offers, rather than the more bespoke solutions, or best-of-breed platforms, available from traditional vendors. In addition to this, we anticipate that telcos will seek to improve their digital real-estate in order to save costs, by improving business efficiency and consolidating multiple customer bases onto a single platform, as well as driving revenue from existing infrastructure assets, by providing the market with more innovative products based on those assets.

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

Outlook

The Company is growing strongly, and its product-based SaaS approach leaves it well placed to continue to benefit from the broad range of positive market drivers, as discussed above. We are also encouraged by the increasing visibility the brand is gaining in what remains a huge marketplace. Our recent Tier-1 new customer win reflects this and Cerillion's inclusion in two Gartner Market Guides* (which evaluated suppliers based on product portfolio, geographic spread and progress in the last year), published earlier in 2023, also highlights the Company's growing reputation and the breadth and completeness of its product portfolio.

Looking ahead, the recent new customer win, ongoing implementation work with existing customers, and the major new deals signed with existing customers all create a strong platform for further growth. The back-order book, now at a record £52.5m, underpins revenue visibility, and the new customer sales pipeline, also at a new high, contains large deal opportunities. This leaves Cerillion well-placed to deliver another strong performance in the new financial year and beyond.

Cerillion's financial position remains very strong, supported by significant net cash, increasing levels of recurring income and strong cash flows. We therefore view the future with confidence and will continue to invest across the business to support ongoing growth.

*Gartner "Market Guide for CSP Customer Management and Experience Solutions" By Analyst(s): Juha Korhonen, Amresh Nandan, Chris Meering, Susan Welsh de Grimaldo. Published 10 April 2023, and Gartner "Market Guide for CSP Revenue Management and Monetization Solutions" By Analyst(s): Amresh Nandan, Chris Meering, Juha Korhonen. Published 9 November 2022.

Gartner Disclaimer:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2023

Other comprehensive (expense) / income

Items that will or may be reclassified to profit or loss:

All transactions are attributable to the owners of the parent.

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2023

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

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.

Revenue recognition

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

Estimates

Revenue recognition

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

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.

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

1 (b) Other sources of estimation uncertainty

Recoverability of trade debtors and accrued income

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

Calculation of future minimum lease payments

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

2 Segment information

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

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

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

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

The following table provides a reconciliation of the revenue by segment to the revenue recognition accounting policy. Revenue recognised on performance obligations partially satisfied in previous periods was £29,993,000 (2022: £19,929,000).

Accounting policies

* Includes maintenance and support performed by third parties.

Accounting policies

* Includes maintenance and support performed by third parties.

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:

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:

The impairment losses on financial assets relates to the provisions made against the risk of non-recovery of receivables. The write-off during the prior year was predominantly due to an assessment over certain implementation work that may not be fully recoverable.

4 Finance income

6 Taxation

Analysis of tax charge for the year

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

Factors affecting total tax for the year

The tax assessed for the year is lower (2022: lower) than the standard rate of corporation tax in the United Kingdom 22.0% (2022: 19.0%). The differences are explained as follows:

There are currently no recognised or unrecognised deferred tax assets or liabilities within the Parent Company financial statements. In the Spring Budget 2021, the Government announced that from 1 April 2023 the main rate of UK corporation tax rate will increase from 19% to 25%. This new rate was substantively enacted on 24 May 2021 and therefore its impact was reflected in the measurement of deferred taxes in the prior year financial statements. In the current year ended 30 September 2023, the impact of the increase to 25% from 1 April 2023 resulted in the standard tax rate of 22.0%.

7 Dividends

Dividends paid during the reporting period

The Board paid the final dividend in respect of 2022 of 6.5p per share, on 7 February 2023, and declared and paid an interim 2023 dividend of 3.3p (2022: 2.6p) per share on 23 June 2023. Total dividends paid during the reporting period were £2,892,000 (2022: £2,243,000).

Dividends not recognised at the end of the reporting period

Since the year end the Directors have proposed the payment of a dividend in respect of the full financial year of 8.0p per fully paid Ordinary Share (2022: 6.5p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2023, but not recognised as a liability at the year end is £2,361,000 (2022: £1,918,000). Since the year end the Directors of Cerillion Technologies Limited have approved a £5.0 million dividend to Cerillion plc.

8 Earnings per share

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

The carrying value of goodwill included within the Cerillion plc consolidated statement of financial position is £2,053,000 (2022: £2,053,000), which is allocated to the cash-generating unit ("CGU") of Cerillion Technologies Limited Group. The CGU's recoverable amount has been determined based on its fair value less costs to sell. As Cerillion plc was established to purchase the CTL Group the fair value less costs to sell has been calculated based on the market capitalisation of Cerillion plc less the estimated costs to sell the CTL Group.

Using an average market share price of Cerillion plc for the year ended 30 September 2023, less an estimate of costs to sell, there is significant headroom above the carrying value of the cash-generating unit and therefore no impairment exists. The calculations show that a reasonably possible change, as assessed by the Directors, would not cause the carrying amount of the CGU to exceed its recoverable amount.

10 Property plant and equipment

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

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

11 Leases

Group

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

• Amounts recognised in the consolidated and company statements of financial position

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

Additions to the right-of-use assets during the 2023 financial year were £nil (2022: £131,000). There were lease disposals during the year with net book value totalling £nil (2022: £106,000).

• Amounts recognised in the consolidated statement of comprehensive income

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

The total cash outflow for leases in 2023 was £979,000 (2022: £941,000).

The property within the Company had a depreciation charge for the year of £506,000 (2022: £506,000).

12 Deferred tax

Deferred tax asset

Deferred tax liabilities

Group

Part of the deferred tax liability arose in respect of the fair value uplift of intangible assets, with £1,320,000 arising on the acquisition of Cerillion Technologies Limited in March 2016 and £71,000 relating to the acquisition of "Net Solutions Services" by Cerillion Technologies Limited in 2015, which has been written down to £nil as at 30 September 2023 (2022: £95,000). The deferred tax liabilities also include £671,000 (2022: £624,000), which is driven by expected future amortisation on R&D intangibles in Cerillion Technologies Limited where full relief has been taken in the year the assets were capitalised. This amortisation will be treated as non-deductible for corporation tax purposes and therefore a deferred tax liability arises.

There are no deferred tax assets or deferred tax liabilities recognised within the Parent Company as at 30 September 2023 (2022: £nil).

13 Trade and other receivables and other contract balances

Contract balances

Group

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

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

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

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

Significant changes in the contract assets and contract liabilities balances during the period are driven by the timing of income recognition and when associated invoices are raised. Specifically, revenue recognised in the year in relation to deferred income brought forward from prior years of £4,195,000 (2022: £4,105,000).

When certain costs to acquire a contract meet defined criteria, those costs are deferred as contract assets. The total amount of deferred contract assets (commission fees recognised in prepaid assets) are £132,000 (2022: £226,000). The total amount of accrued costs to acquire a contract are £352,000 (2022: £305,000).

The total amount of revenue allocated to unsatisfied performance obligations is £36,732,000 (2022: £37,420,000). It is estimated that 45% will be recognised over the next 12 months, the remainder over the following years thereafter.

There are no contract balances within the Parent Company (2022: £nil).

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

Credit quality of receivables

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

The ECL Provision above includes an amount relating to accrued income of £319,000 (2022: £184,000).

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

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

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.

Of the trade debt older than 6 months as at 30 September 2023, being £50,000 (2022: £48,000), cash of £nil (2022: £8,000) has been received since the year end.

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

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

The Directors consider that the carrying amount of trade and other payables and provisions approximates to their fair values. The non-current other payable above relates to provisions for gratuity and long-term bonuses within the Indian subsidiary.

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

Long-term bonus - The employees (Band II, III and IV only) are eligible for a loyalty bonus at 20% of annual total fixed pay as at the end of the third year, 10% of annual total fixed pay as at the end of four and half years and 10% of annual total fixed pay as at the end of the sixth year provided they are employed with the Indian subsidiary, Cerillion Technologies India Private Limited, for at least three years/four and half years/six years, as the case maybe, after completion of probationary period. The Group's liability is actuarially determined at the end of each year. Actuarial losses/gains are recognised in the Statement of Comprehensive Income in the year in which they arise. There is an additional scheme in place which pays at up to 25% of annual total fixed pay at the end of eleven years of service.

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

The mortality rates assumed in the calculation for the Gratuity and Long-term bonus are based on the Indian Assured Lives Mortality (2012-14) ultimate ("IALM ult).

Management have considered sensitivities to changes in the key assumptions above and concluded that there are unlikely to be any material impacts arising from reasonable changes in these assumptions.

15 Borrowings and financial liabilities

There are currently no other borrowings within the Group.

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

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

Company

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

There were no derivative financial instruments in existence as at 30 September 2023 (2022: £nil).

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

Credit quality of financial assets

The credit quality of financial assets can be assessed by reference to external credit ratings (S&P) (if available) or to historical information about counterparty default rates:

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

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

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

At the year end there are 7 customers (2022: 4 customers) with trade receivable balances each representing in excess of 5% of the total trade receivables of £2,857,000 (2022: £2,503,000). Of these customers, none are categorised within Group 1 (2022: none), 7 are within Group 2 representing 90% of total trade receivables (2022: 4 customers), with none in Group 3 (2022: none).

There are no trade receivables within the Parent Company.

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

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

Market risk - foreign exchange risk

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

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

As at 30 September 2023 the Group had no forward foreign exchange contracts in place (2022: none) to mitigate exchange rate exposure.

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

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

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

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

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

Market Risk - cash flow interest rate risk

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

Liquidity risk

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

Capital risk management

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

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

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

The capital structure consists of the Group's equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings. As of the year ended 30 September 2023 the Group's total managed capital amounted to £36,885,000 (2022: £26,732,000); Company's capital as of 30 September 2023 was £16,209,000 (2022: £15,893,000).

17 Share capital

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

At the year end there were 12 shares (2022: 12 shares remaining in Treasury Stock) at an average cost of £2.10 per share (2022: £2.10).

18 Share-based payments

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

A new Save as You Earn ("SAYE") share option scheme and a new Long-Term Incentive Plan ("LTIP") were introduced in 2021 and additional options were granted during the year ended 30 September 2023 under the SAYE scheme. A charge of £209,000 (2022: £60,000) has been reflected in the consolidated statement of comprehensive income, with the corresponding entry recognised within the share option reserve.

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

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

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

For the options outstanding at 30 September 2023, the weighted average fair values and the weighted average remaining contractual lives (being the time period from 30 September 2023 until the lapse date of each share option) are set out below:

19 Retirement benefits

The Group operates a personal contribution pension scheme for the benefit of the employees. The pension cost charge for the year represents contributions payable by the Group to the fund and amounted to £348,000 (2022: £330,000). At the year end the contributions payable to the scheme were £51,000 (2022: £46,000). In addition to this there are retirement benefits relating to the India subsidiary which are disclosed in note 14.

20 Annual General Meeting

The Annual General Meeting is to be held on 1 February 2024. 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 2023 or 2022, 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 2023 has been completed and the accounts will be delivered to the Registrar of Companies before the Company's Annual General Meeting and will be available on the Company's website at www.cerillion.com. This announcement is derived from the statutory accounts for that year.