# Cerillion plc CEO and CFO on order book, outlook and costs (LON:CER)

- Link: https://www.directorstalkinterviews.com/cerillion-plc-ceo-and-cfo-on-order-book-outlook-and-costs-loncer/4121067758
- Published: 2022-06-07T11:07:42+01:00
- Author: Amilia Stone

**[Cerillion plc](https://www.directorstalkinterviews.com/company/cerillion-plc/cer.l)(
[LON:CER](https://www.directorstalkinterviews.com/company/cerillion-plc/cer.l)) **
Chief Executive Officer Louis Hall and Chief Financial Officer Andrew Dickson caught****
up with Liberum for an exclusive interview to discuss how the market backdrop and
pipeline evolved in H1, cost inflation and managing the cost base, back-order and
forward visibility and the outlook for the company for FY22.

**Q1: Louis, how has the market backdrop evolved in H1 and what are the key dynamics?**

**A1**: We continue to see strong investment from our telco customer base in more
broadband, particularly in 5G mobile and more fibre. That is driving telcos to look
at the ancillary systems that support that infrastructure and enable telcos to monetise
those assets and to get a return on that investment and that infrastructure.

So, that is driving digital transformation so looking at the products that enable
our telco customers to sell to their end customers and get those products to market
so we are seeing that as a very positive driver in our world.

**Q2: How has Cerillion’s pipeline evolved and what is the outlook for new orders
with both prospective and existing customers?**

**A2**: We’ve seen very strong growth in our pipeline in the six month to 31^(st)
March 2022 so our new customer business pipeline grew by 31% to £172 million at 
the end of March ’22. I think that growth is largely driven by the factors I’ve 
just been speaking about and we would expect a significant proportion of that bulge
in the pipeline, if not all of it, in H2 and successive quarters. So, very strong
on the new customer side.

On the existing customer side, also seeing growth in pipeline and I think that’s
being helped by the trend we have in our business towards signing larger deals with
larger customers. That has helped significantly in terms of boosting the sales that
we’re winning with existing customers.

**Q3: Andrew, are you seeing cost inflation? What’s your ability to pass through
this inflation to customers and are you pulling any levers to manage the cost base?**

**A3**: In terms of our cost base, the biggest cost that we face is our people and
we’ve definitely been seeing inflationary pressures in terms of payroll in the first
half of the year.

If you look at our geographic footprint, we’ve got offices in the UK and India and
back in September last year, we opened a new office in Bulgaria which offers a very
good source of high quality software engineers.

Whilst we recruited people in all offices during the first half of the year, we 
really focussed our recruitment efforts in India and the new office in Bulgaria.
By doing so, we managed to reduce the average cost per head in the first half of
this year versus the first half of last year, despite significant inflationary pressures,
particularly in India.

I think looking forward to the second half of the year, we expect these inflationary
pressures to continue as well as potentially higher travel costs as we get back 
to business as usual following the COVID restrictions. We also expect a slight increase
due to higher employers NI costs as well which we’ll do the best we can to mitigate.

Another lever we’ve been pulling as well as trying to recruit people in India and
Bulgaria, we’ve also been passing on these cost increases to customers  through 
pricing so that’s another initiative that we’ve done in order to mitigate the impact
of inflation that we’ve been facing.

**Q4: Louis, how has the back-order book evolved and how much forward visibility
does this provide?**

**A4**: Our back-order was very strong at the end of the financial year and has 
only come off very slightly, despite having a lower total new orders number for 
the first half of ’22 than we had for the first half of ’21. We obviously expect
the new order number to catch up by the end of the year so we’re not concerned about
this being low at the half-year.

We have a situation where last year we had a very large new customer deal get closed
in the first half of ’21, this year we think the larger customer deals will close
in the second half so we think that’ll work itself out.

The backlog is only very slightly down compared with the end of the financial ’21
and at £39 million of backlog in terms of the target we have for the second half
to meet consensus forecasts. We think that gives us very strong visibility looking
into the rest of ’22 and certainly a very good start for ’23, coupled of course 
with the increase in recurring revenue that we now have.

**Q5: What is the outlook for Cerillion for FY22?**

**A5**: I think the outlook is very strong. As I said, we have very strong backlog
going into the second half so I think in terms of meeting consensus forecasts, if
we were concerned about that we would be saying something. We’re not so one would
assume that we’re confident but we do have a lot of visibility because of that strong
backlog.

I think we’re also very confident about the sales pipeline which has, as I said 
earlier, grown 31% half on half and we would expect some of that bulge – the new
customer pipeline – to fall out into H2. Plus, we also expect strong sales to existing
customers to continue as well so that’s obviously very important in terms of looking
towards the rest of ’23 and ’24.

So, all in all, I think the outlook is really positive.

Share on: