Cerillion Plc (LON:CER), a leading provider of billing, charging, and customer relationship management software, has reported significant growth and strong financial performance in the first half of the fiscal year 2024. This positive trajectory is bolstered by robust order growth, a series of major contract wins, and a record pipeline, according to a recent research note by Singer Capital Markets analysts Harold Evans and Tom Like.
Strong Order Growth and New Contracts
Cerillion has achieved a remarkable 32% growth in orders, reaching £20.2 million in H1 2024. This surge is primarily driven by a major €12.4 million contract secured in November and an additional $11.1 million contract with a leading communications service provider (CSP) in Southern Africa. These wins underscore the company’s expanding market presence and the increasing adoption of its Software as a Service (SaaS) solutions.
Financial Performance Highlights
The company’s sales and EBITDA both grew by 10% year-on-year to £22.5 million and £11.0 million, respectively. This growth is notable given the exceptional base period, which saw sales and EBITDA increases of 27% and 38% respectively. The analysts highlighted the 18% year-on-year growth in recurring software revenue to £12.4 million, which now constitutes 55% of total sales. Cerillion’s efficient cost management, with adjusted cash operating expenses growing only 6%, contributed to excellent gross and EBITDA margins of 80% and 49%.
Strategic Wins and Future Outlook
The November win of a Tier-1 European contract and the recent Southern Africa CSP deal reflect Cerillion’s strong sales execution and service delivery capabilities. These contracts highlight the increasing demand for Cerillion’s full-suite Business and Operations Support Systems (B/OSS) provided on a SaaS basis. The company’s record pipeline indicates a promising future, supported by resilient demand drivers and effective resource allocation.
Upgraded Target Price
Given the strong visibility over FY24, Singer Capital Markets has revised its target price for Cerillion shares from £15.80 to £17.00, indicating a 6% upside. The analysts also noted the potential for even higher valuations if the company achieves its forecasted top-line growth of 10% per year from FY23 to FY25. Achieving 15% or 20% growth could raise the share value to £19.65 or £21.60, respectively.
Investment Considerations
With a current market capitalisation of £472.2 million and an enterprise value of £444.2 million, Cerillion is positioned well for sustained growth. The company’s robust financial health, including a net cash position expected to grow from £16.2 million in 2022 to £39.8 million in 2025, further supports its strategic initiatives and market expansion plans.
Harold Evans and Tom Like from Singer Capital Markets reaffirm their ‘Buy’ recommendation, citing Cerillion’s strong track record of outperformance and the promising growth outlook driven by digital transformation and SaaS adoption in the telecommunications industry.
Disclaimer: This article based on a report by Singer Capital Markets is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence before making any investment decisions.
