Final Results

Growth prospects remain very strong

Cerillion plc, the billing, charging and customer relationship management software solutions provider, presents its annual results for the 12 months ended 30 September 2024.

Highlights

Louis Hall, CEO of Cerillion plc, commented:

"Revenue, pre-tax profit, and the new customer sales pipeline all reached new highs. Two major new customer wins in the year as well as orders from the existing customer base also helped to drive total new orders to a record level of £38.1m.

"Trading conditions remain favourable for us. While total global telco capital investment may have slowed, investment in the enterprise software layer connecting telcos' network infrastructure to their customers remains essential. This is because it enables telcos to monetise their network infrastructure assets, driving more revenue from their existing assets, and to improve operational efficiency and the customer experience.

"The Company remains well-positioned to make further progress over the new financial year, with a healthy back-order book and strong new customer sales pipeline. We will continue to invest across the business, supported by our strong balance sheet, rising levels of recurring income and good cash flows. We view the future with confidence."

Notes

Note 1 Recurring revenue includes support and maintenance, managed service, Skyline and third-party hardware and hosting revenue reported in the year. In the prior year, the recurring revenue metric excluded third-party hardware and hosting revenue. Since this is deemed to be recurring in nature as it is typically recognised on a straight-line basis over time, the metric has been amended to include this. The prior year comparative has been updated to reflect this change.

Note 2 Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") is calculated by taking operating profit and adding back depreciation & amortisation and share-based payment charges.

Note 3 Adjusted profit before tax is calculated by taking reported profit before tax and adding back amortisation of acquired intangible assets and share-based payment charges.

Note 4 Adjusted earnings per share is calculated by taking profit after tax and adding back amortisation of acquired intangible assets and share-based payment charges and is divided by the weighted average number of shares in issue during the period.

Note 5 Net cash is made up of cash and cash equivalents.

Note 6 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 make very strong progress and financial results for the year have achieved record levels. Revenue was up 12% year-on-year to £43.8m (2023: £39.2m), and adjusted profit before tax was up by 18% to £19.8m (2023: £16.8m), both new highs.

The Group has seen a material step up in new orders. New orders for the financial year under review increased by 21% to £38.1m (2023: £31.6m), a new record level. Two major new logo wins were signed, one with Virgin Media Ireland in early November 2023, which is worth €12.4m. The second major win was signed in May 2024 with a leading provider of connectivity solutions across Southern Africa and is worth $11.1m. Both contracts have the potential to expand further.

The pipeline of potential new customer sales remains strong and at the financial year-end stood at £262m (2023: £243m). This reflects the continuing strength of the market for our technology and includes some large opportunities.

While total global telecom capital spending may have softened, demand for billing, charging, customer relationship management ("CRM") and digital customer experience solutions continues to be driven by the need for telecom companies to realise greater value from their existing infrastructure assets and to maximise value from new infrastructure investments in 5G and fibre rollouts. In addition, they are looking to drive operational efficiencies and greater flexibility. Cerillion continues to remain well-placed to benefit from these secular market drivers, and market acceptance of SaaS-based product solutions continues to increase. Cerillion's platform solution with a modular approach compares favourably to the more bespoke, services-heavy systems provided by the traditional vendors, our SaaS-based product offers telecom companies significant financial and operational benefits, lowering the total cost of ownership and providing them with the ability to launch new products with greater agility.

To support the Company's ongoing growth, we invested further in our main operations in India and Bulgaria over the financial year. In Bulgaria, the team moved to new offices, providing increased capacity and a dedicated environment that will enable the growing team to build a stronger sense of identity.

With a very strong pipeline of potential new business opportunities, the Company is well-positioned to make further progress in the new financial year and we remain confident about prospects.

Financial Overview

Total revenue for the year to 30 September 2024 rose by 12% to £43.8m (2023: £39.2m). 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 85% of the overall result (2023: 99%).

Recurring revenue1, which includes support and maintenance, managed service, Skyline and third-party hardware and hosting revenue, increased by 11% to £15.5m and comprised approximately 35% of total revenue (2023: £13.9m, 36%).

The Group's revenue streams are categorised into three segments: software revenue; services revenue; and revenue from other activities. Software revenue principally comprises software licences, related support and maintenance and managed service fees, while services revenue is generated by software implementations and ongoing account development work. Revenue from other activities includes the reselling of third-party hardware, hosting fees and rebillable expenses.

Gross margin was slightly ahead of the prior year at 80.5% (2023: 78.6%), mainly reflecting improved operational efficiency leading to an increase in day rates achieved on key implementation projects, partly offset by unfavourable foreign exchange.

Operating expenses increased by 7.7% to £16.5m (2023: £15.3m). This included non-repeat of the £0.5m amortisation charge for acquired intangibles from the prior year, which was partly offset by unfavourable foreign exchange year-on-year. Personnel costs were 9% higher at £9.5m (2023: £8.7m) and accounted for 58% (2023: 57%) of operating expenses.

Adjusted EBITDA for the year increased by 15% to £20.7m (2023: £18.1m), driven mainly by higher revenues and an improvement in operational efficiency, partly offset by unfavourable 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 £1.1m (2023: £1.4m). The prior year included £0.5m from amortisation of acquired intangibles; this balance was fully amortised in the prior year and hence this charge was not repeated. Expenditure on tangible fixed assets was £0.2m (2023: £0.3m). Operating profit increased by 21% to £18.4m (2023: £15.3m).

Adjusted profit before tax rose by 18% to £19.8m (2023: £16.8m) and adjusted earnings per share increased by 13% to 52.2p (2023: 46.2p). On a statutory basis, profit before tax increased by 22% to £19.7m (2023: £16.1m) and earnings per share increased by 18% to 51.7p (2023: 43.8p).

Cash Flow and Banking

The Group continued to generate strong cash flows and closed the financial year with net cash up by 21% to £29.9m (2023: £24.7m). This was after £3.5m of dividend payments (2023: £2.9m). Total debt at the year-end remained £nil (2023: £nil).

Dividend

The Board is pleased to propose a 15% increase in the final dividend to 9.2p per share (2023: 8.0p). Together with the interim dividend of 4.0p per share (2023: 3.3p), this brings the total dividend for the year to 13.2p per share (2023: 11.3p), an increase of 17%.

The dividend, which is subject to shareholder approval at the Company's Annual General Meeting on 13 February 2025, is payable on 20 February 2025 to those shareholders on the Company's register as at the close of business on the record date of 29 December 2024. The ex-dividend date is 28 December 2024.

Operational and Market Overview

We completed two major implementations during the financial year. The first of these was for Telesur, the largest telecommunications provider in Suriname. Having completed the initial stage of delivery in 2023, moving Telesur's mobile services to our platform, we completed full delivery of our solution in this financial year, with the migration of the telco's fixed-wire services. The second implementation that we completed was for CWS, the largest telecommunications provider in the Seychelles. This project migrated all of CWS' fixed-wire and mobile services in a single phase, with final cutover taking place over a single weekend. Both these implementations involved the full range of Cerillion's core product modules, from product catalogue, charging and billing, to digital customer experience.

Delivery of our solution to Virgin Media Ireland, one of our major new logos wins this year, is well-advanced. Virgin Media Ireland is taking the core elements of the Cerillion solution, including billing, charging fulfilment and product catalogue and we anticipate that full integration with Virgin Media's network elements and other systems will be completed in the first quarter of 2025. Following this, we are optimistic that there will be opportunities to expand the relationship. The implementation of our solution for the other major customer win this year is also progressing well. This new customer, a leading provider of connectivity solutions in Southern Africa, serves both the B2B and B2C markets in the region and its offering spans a wide range of technologies, including fibre, satellite, microwave and 5G stand alone. A key driver of the decision to move to our solution was the customer's need to support the rollout of a new 5G mobile network and to be able to support its broadened range of service offerings on a single platform. This customer has further ambitious expansion plans and we anticipate the relationship growing as these plans unfold.

The back-order book at the financial year-end stood at £46.9m (2023: £45.4m), made up of £37.7m of sales contracted but not yet recognised (2023: £36.7m) together with £9.2m of annualised support and maintenance revenue (2023: £8.7m). We expect about 45% of the £37.7m contracted-but-not-yet-recognised sales will be recognised within 12 months.

During the year, we continued to enhance our teams of resources across all our key locations, adding graduate entrants at each location, as well as more experienced new staff members. Competition for technology professionals continued to ease over the year, as several technology businesses, including some of our competitors, trimmed their headcounts, which has been to our advantage.

We increased our investment in R&D over and above last year's level and, as scheduled, launched two major new releases of our product set. The most recent of these releases was Cerillion 24.2, which went live in early November 2024. A key feature of this latest release was the introduction of a new composable Self Service Module. Built on a completely new architecture and with user-centric design, the new Self Service Module enables frictionless sales journeys and intuitive service management. It is based on an adaptable user interface framework, which includes robust digital experience composition, one-click deployment content management and comprehensive user behaviour analytics. Communication service providers ("CSP") no longer need to choose between self-service products that are fast to implement but difficult to change and fully bespoke solutions that can be built-to-order yet are expensive to build and maintain. We believe that the new Module provides the best of both worlds being:

• a commercial off-the-shelf product, with a roadmap and on-going support and maintenance from an established and reputable BSS/OSS3 vendor, as well as
• a modern digital engagement solution, developed with cutting edge technologies, which combines inexpensive and fast initial rollout, with full flexibility to adapt and evolve whilst staying on the product path.

The new Self Service Module follows Cerillion's key design principle of delivering flexibility through configuration, not customisation. This means that the core product is the same for all customers, with adaptation and differentiation delivered via a design system and no-code configuration. Furthermore, with Self Service Pro, this flexibility is augmented with a visual content management system, which gives CSPs complete control of the digital experience and streamlines integration with external data sources and applications.

In an increasingly uncertain macro-economic and geopolitical environment, we believe that telcos will continue to be under pressure to improve the efficiency of both their operations and their enterprise software. Improving operational efficiency will mean:

• increasing focus on improving the digital customer experience to: attract more end-customers to sign up for services; reduce customer churn; and decrease customer service and sales department headcount;
• consolidating multiple legacy BSS/OSS platforms into single solutions that can support all service types on a single or multi-tenanted basis; and
• moving to BSS/OSS platforms that provide flexible, fully integrated, GUI and AI driven product and service catalogues that enable telcos to rapidly implement new product offerings and update existing ones themselves, without vendor intervention.

Improving platform efficiency will mean:

• using BSS/OSS solutions that can support the whole range of a telco's offerings within a single, SaaS-based platform, to save the substantial additional third-party and internal staff costs related to running multiple BSS/OSS platforms from multiple vendors;
• using BSS/OSS solutions that enable seamless upgrades on a regular basis, such that new features to support new market and technology developments become available without costly, ad-hoc upgrades to tailored solutions or migration to a different platform; and
• using BSS/OSS solutions that are provided on a SaaS basis, such that it is no longer necessary to maintain large teams of IT staff to manage those systems in-house.

We believe that all these factors play to the strengths of our solutions and that we are very well positioned to capitalise on these trends.

Outlook

The size of the market opportunity for Cerillion remains significant and our unrivalled product-based SaaS solution remains well placed to continue to grow, benefiting from a broad range of market drivers, including greater market acceptance of product solutions and SaaS. Our Tier-1 new customer win, in the first half of the financial year, reflected this and provides a further reference point to compete for future Tier-1 opportunities.

The back-order book continues to underpin revenue visibility, and the new customer sales pipeline, which closed the financial year at a new high, includes some large deal opportunities at varying stages of the discussion process. These factors together with the Company's strong balance sheet, significant net cash and strong cash flows all support our continued confidence in Cerillion's prospects. We expect to make further good progress over the new financial year and will continue to invest in the business to support future growth.

Notes

Note 1 Recurring revenue includes support and maintenance, managed service, Skyline and third-party hardware and hosting revenue reported in the year. In the prior year, the recurring revenue metric excluded third-party hardware and hosting revenue. Since this is deemed to be recurring in nature as it is typically recognised on a straight-line basis over time, the metric has been amended to include this. The prior year comparative has been updated to reflect this change.

Note 2 In the prior year, Software-as-a-Service revenue was disclosed as a separate segment, being made up of Managed Service and Skyline fees. In addition, third-party licence revenue was disclosed within the Third-party revenue segment. In order to give a clearer view on the Group's performance, Managed Service and Skyline revenue are now reported within Software revenue, and third-party licence revenue is now reported within Software revenue, with the Third-party segment being renamed as Other revenue. The prior year comparatives have been updated to reflect these changes.

Note 3 "BSS/OSS" refers to business support systems and operations support systems.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2024

Other comprehensive expense

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 2024

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. Refer to notes 9 and 10.

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 three 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.

In the prior year, Software-as-a-Service revenue was disclosed as a separate segment, being made up of Managed service and Skyline fees. In addition, third-party licence revenue was disclosed within the Third-party revenue segment. In order to give a clearer view on the Group's performance, Managed Service and Skyline fees are now reported within Software revenue, and third-party licence revenue is now reported within Software revenue, with the Third-party segment being renamed as Other revenue. The prior year comparatives have been restated to reflect these changes

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 £25,079,000 (2023: £29,993,000).

Accounting policies

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.

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 (2023: lower) than the standard rate of corporation tax in the United Kingdom 25.0% (2023: 22.0%). 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 prior 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%.

Periodically, the Group is subject to inquiries from tax authorities. There is currently ongoing discussion with the India tax authority in relation to the period 2021 to 2022. We firmly consider all Group submissions made to be valid and fully supportable and accordingly no provision has been made. If necessary, the Group will record the outcome of any discussion in the period to which such resolution occurs.

7 Dividends

Dividends paid during the reporting period

The Board paid the final dividend in respect of 2023 of 8.0p per share, on 8 February 2024, and declared and paid an interim 2024 dividend of 4.0p (2023: 3.3p) per share on 21 June 2024. Total dividends paid during the reporting period were £3,542,000 (2023: £2,892,000).

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 9.2p per fully paid Ordinary Share (2023: 8.0p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 September 2024, but not recognised as a liability at the year end is £2,717,000 (2023: £2,361,000).

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 (2023: £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 2024, 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 2024 financial year were £535,000 (2023: £nil). There were lease disposals during the year with net book value totalling £nil (2023: £nil).

• 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 2024 was £982,000 (2023: £979,000).

The property within the Company had a depreciation charge for the year of £506,000 (2023: £506,000).

12 Deferred tax

Deferred tax asset

Deferred tax liabilities

Group

The deferred tax liabilities include £604,000 (2023: £671,000), 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 2024 (2023: £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 £4,439,000 (2023: £4,195,000).

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 £242,000 (2023: £132,000). The total amount of accrued costs to acquire a contract are £481,000 (2023: £352,000).

The total amount of revenue allocated to unsatisfied performance obligations is £37,662,000 (2023: £36,732,000). It is estimated that circa.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 (2023: £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 £471,000 (2023: £319,000).

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 2024, being £nil (2023: £50,000), cash of £nil (2023: £nil) has been received since the year end.

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

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 2024 (2023: £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 (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 3 customers (2023: 7 customers) with trade receivable balances each representing in excess of 5% of the total trade receivables of £4,196,000 (2023: £2,857,000). Of these customers, 1 is categorised within Group 1 (2023: none), 2 are within Group 2 representing 72% of total trade receivables (2023: 7 customers), with none in Group 3 (2023: 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 2024 the Group had no forward foreign exchange contracts in place (2023: 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 Group does not currently have any borrowings.

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 2024 the Group's total managed capital amounted to £48,508,000 (2023: £36,885,000); Company's capital as of 30 September 2024 was £21,722,000 (2023: £16,209,000).

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 any authorised share capital. In August 2024 the Company issued 22,128 new Ordinary Shares of 0.5 pence into Treasury Stock to be used to satisfy the exercises of options under the SAYE Scheme.

At the year end there were no shares (2023: 12 shares remaining in Treasury Stock) at an average cost of £nil per share (2023: £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 £153,000 (2023: £209,000) 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 2024, the weighted average fair values and the weighted average remaining contractual lives (being the time period from 30 September 2024 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 £452,000 (2023: £348,000). At the year end the contributions payable to the scheme were £61,000 (2023: £51,000). 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 13 February 2025. 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 2024 or 2023, 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 2024 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.