Cerillion shares climb after software business upgrades profit outlook

Cerillion shares soared after the group told investors annual earnings will significantly surpass prior anticipations on the back of sustained strong trading.

The software provider now believes its adjusted pre-tax profits for the 2022 financial year will be ‘materially ahead’ of market forecasts of £10.1million, while revenues will be just ‘marginally ahead’ of expectations.

Having reported record interim results earlier this year, the London-based business noted demand had remained very healthy since early April, partly because of a robust back-order book.

Cerillion gained its largest contract ever during the fourth quarter, a decade-long deal with an unnamed telecommunications customer worth an estimated £15million.

It said its performance benefited from a more favourable foreign exchange rate, declining net finance costs, as well as lower depreciation and amortisation than previously expected.

Cerillion shares leapt by 7.7 per cent to £11.20 by late Monday morning, making them one of the top risers on the junior AIM market.

Over the past 12 months, their value has climbed by 40 per cent but soared more than fifteenfold since listing on the London Stock Exchange six years ago at a modest placing price of 76p.

‘The pipeline of new business opportunities, from both existing and prospective new customers, remains buoyant, and the company is well-positioned as it enters the new financial year,’ the London-based firm remarked.

Brokers Liberum and Singer Capital Markets have both lifted their target prices and upheld their buy recommendations for Cerillion.

Founded in 1999 as a spin-off of the defunct IT consultancy Logica, Cerillion offers billing, charging and customer management systems software to companies across a variety of sectors and dozens of countries.

Prominent clients have ranged from private security giant G4S, mobile service provider Three, and New Delhi-based Bharti Airtel, the world’s second-biggest mobile network operator.

In the six months to 31 March, the group reported revenue surged by 26 per cent year-on-year to £16.1million, while its statutory pre-tax earnings rocketed by 72 per cent to £5.7million.

Even though the value of major new orders fell significantly, its new customer sales pipeline increased by nearly a third to £172million.

Gross margins were also kept high by Cerillion’s decision to open a new office in Sofia, Bulgaria, and expand operations in India, two countries with lower average staff costs.

When the results were released, Louis Hall, the firm’s founder and chief executive, said: ‘We see excellent opportunities for continuing growth, and the new customer sales pipeline has grown significantly. 

‘Given the company’s progress and its strong financial and operational position, we continue to view prospects very positively.’