AIM: CER

Cerillion plc

("Cerillion", the "Company" or the "Group")

Interim results

for the six months ended 31 March 2024

Record Six-month Period and Continuing Strong Prospects

Cerillion plc, the billing, charging and customer relationship management software solutions provider, today issues its interim results for the six months ended 31 March 2024.

Financial

Operational

Louis Hall, CEO of Cerillion plc, commented:

"Cerillion's interim results again set new records for our key performance indicators in any six-month period and demonstrate the strong momentum in the business and the significant growth opportunities available. 

"With an ever-growing sales pipeline, increasingly strong demand amongst telcos for digital transformation via SaaS solutions, and some exciting innovation in our product suite, we expect to continue to grow strongly. Given the Company's progress - including the major new contract announced today - and prospects, we believe it is well-placed to deliver market expectations for the full year and beyond, and we view the future with confidence."

¹ Annualised recurring revenue includes annualised support and maintenance, managed services and Cerillion Skyline revenue.

² Adjusted EBITDA is a non-GAAP, Company-specific measure, which is earnings excluding finance income, finance costs, taxes, depreciation, amortisation and share-based payments charges.

³ Adjusted profit before tax is a non-GAAP, Company-specific measure, which is earnings excluding taxes, amortisation of acquired intangible assets and share-based payments charges. 

⁴ Adjusted earnings per share is a non-GAAP, Company-specific measure, which is earnings after taxes, excluding amortisation of acquired intangible assets and share-based payments charges divided by the average weighted number of shares in the period.

⁵ Back-order book of £47.1m consists of £37.6m of sales contracted but not yet recognised at the end of the reporting period plus £9.5m of annualised support and maintenance revenue. It is anticipated that 40% of the £37.6m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 months.

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About Cerillion

Cerillion is a leading provider of mission critical software for billing, charging and customer relationship management, with a 23-year track record in providing comprehensive revenue and customer management solutions. The Company has around 80 customers across 45 countries, principally serving the telecommunications market.

The Company is headquartered in London and also has operations in India (in Pune, Ahmedabad, and Indore), Bulgaria (in Sofia), Singapore, USA (in Boston) and Australia (in Sydney).

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Overview

The Company has delivered another set of record highs for any six-month period, including new highs for revenue, profit and cash.

Revenue increased to £22.5m (H1 2023: £20.5m), up 10% year-on-year, helped by the major implementation projects under way with new customers, activity with existing customers, and the Group's rising level of recurring income, which is generated by support and maintenance and managed services revenues. This growth was also against a period when full year revenues were more weighted towards the first half of the financial year. Annualised recurring revenue continued to grow, up by 14% to £15.0m at the period end (31 March 2023: £13.1m). Adjusted profit before tax increased by 14% to £10.5m (H1 2023: £9.2m) and the Company continued to generate strong cash flows, with net cash at 31 March 2024 up by 13% at £26.6m (31 March 2023: £23.6m).

Total new orders were 32% up on the prior period at £20.2m (31 March 2023: £15.3m) and the new customer sales pipeline continued to increase, growing by 20% to £254m (31 March 2023: £212m). In addition to this, we are pleased to announce today another major new customer contract worth an initial $11.1m. The contract has been secured with a leading provider of connectivity solutions in Southern Africa and we expect further new customer contracts to come through in the second half and beyond. 

We continue to develop our resource bases across all regions, especially in the UK, Bulgaria and India, and are also now recruiting graduate entrants at all locations. This strategy provides us with a solid platform from which to continue to grow and propel the Company's on-going expansion and development.

The trading backdrop remains favourable and we continue to see strong market demand for our unrivalled software. The telecommunication industry is investing heavily in digital transformation and increasingly transitioning to Software-as-a-Service solutions. Investment in enterprise software delivers significant revenue, operational and efficiency benefits and our 'out-of-the-box' product offering in the marketplace stands out since it can deliver these advantages much more cost effectively and flexibly than traditional solutions. As a result, we believe the Company's prospects for growth remain extremely encouraging.  

Looking ahead over the balance of the current financial year, our back-order book is strong and has been enhanced by our new win. Our new customer sales pipeline is also very healthy. We therefore remain confident of continuing progress and of delivering market expectations for the financial year and beyond.

Financial Overview

Revenue for the six months ended 31 March 2024 increased by 10% to £22.5m (H1 2023: £20.5m). This reflected the strong opening back-order book, which comprised major implementation projects, for both new and existing customers, as well as smaller projects for existing customers.

The mix of revenue was slightly more weighted towards Software¹ compared to the prior period, with Software revenue of £12.4m accounting for 55% of total revenue (H1 2023: £10.5m and 51% of total revenue). The 18% rise in Software revenue period-on-period mainly reflected the timing of software licence recognition. Services revenue¹ of £8.3m made up 37% of total revenue (H1 2023: £8.9m and 44% of total revenue). Other revenue of £1.8m accounted for 8% of total revenue (H1 2023: £1.0m and 5% of total revenue).

Gross margin was 80.4% (H1 2023: 81.5%), with the slight movement mainly the result of payroll inflation. As previously stated, headcount was increased in all regions, including in India and Bulgaria, which helped to mitigate costs across the Group.

Existing customers (those customers acquired at least 12 months before the end of the reporting period) continue to make up a high proportion of the Group's revenue and generated 89% of total revenue in the period (H1 2023: 89%).

Recurring revenue², from support and maintenance and managed service contracts, grew by 16% to £7.6m (H1 2023: £6.5m) and accounted for 34% of the Group's revenue (H1 2023: 32%). The rise reflected increased uptake by existing customers as well as fee increments. Annualised recurring revenue at the end of March 2024 increased by 14% period-on-period to £15.0m (31 March 2023: £13.1m).

Operating expenses decreased to £8.1m (H1 2023: £8.3m). However, after stripping out the £0.5m amortisation charge for acquired intangibles from the prior period which was not repeated, operating expenses increased by 4%, largely reflecting headcount costs.

Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA"), which excludes share based payments charges, rose by 10% to £11.0m (H1 2023: £10.0m). Statutory EBITDA increased by 11% to £10.9m (H1 2023: £9.9m).

Adjusted profit before tax³ rose by 14% to £10.5m (H1 2023: £9.2m) and adjusted earnings per share⁴ was 8% higher at 27.6p (H1 2023: 25.5p). Statutory profit before tax increased by 21% to £10.4m (H1 2023: £8.6m), and statutory earnings per share increased by 16% to 27.3p (H1 2023: 23.5p).

The balance sheet remains strong. Net assets rose by 34% to £42.5m as at 31 March 2024 (31 March 2023: £31.8m).

Cash Flow and Banking

Net cash at 31 March 2024 increased by 13% to £26.6m (31 March 2023: £23.6m), with no debt in either period. Net cash generated from operations in the period was £5.3m (H1 2023: £6.6m).

Development costs of £0.6m were capitalised in the period (H1 2023: £0.6m) after investment to further enhance the Company's intellectual property.

Free cash generation in the period was £4.7m (H1 2023: £5.8m) principally reflecting both higher profit and interest income, offset by an increase in working capital due to the higher software licence revenue recognised and increased tax payments. Cash generated in the period was partly utilised to pay the final dividend of £2.4m (H1 2023: £1.9m) in respect of the year ended 30 September 2023.

Dividend

The Board is pleased to declare an increased interim dividend of 4.0p per share (H1 2023: 3.3p), a 21% rise year-on-year. The interim dividend will become payable on 21 June 2024 to shareholders on the Company's register as at the close of business on the record date of 31 May 2024. The ex-dividend date is 30 May 2024. 

As previously stated, the Board aims to distribute between a third to a half of the Group's free cash flow as dividends each year, subject to the Group's performance and the Board's assessment of the trading environment.

Operational Overview

New orders were boosted early in the half by a major contract win, worth €12.4m over its initial five-year term, with a new Tier-1 customer, based in Europe. There was a rigorous selection process for the contract, and Cerillion's software is replacing a number of separate legacy products to create a single, integrated solution. Key criteria in the selection process were the commercial, operational and financial advantages of Cerillion's 'out-of-the-box' product model, which brings all the major benefits of a customised solution without the significant cost and integration risks associated with a bespoke approach. The ease with which Cerillion's software enables new products and packages to be brought rapidly to market was a particular factor in the decision-making process for this new customer.

In total, new orders for the half were up 32% to £20.2m (H1 2023: £15.3m), with the existing customer base contributing over half of this result at £11.3m (H1 2023: £15.3m). The new customer sales pipeline also grew strongly, up 20%, to £254m as at 31 March 2024 (31 March 2023: £212m). We expect to close additional major new customer orders in the second half and beyond. 

The back-order book stood at a very healthy £47.1m at 31 March 2024 (31 March 2023: £43.0m), buoyed by new orders. These contracted (but not yet recognised) orders will drive revenues over the coming quarters.

It is also very encouraging to see the Group's base of recurring revenue increase as the business grows, with both new and existing customers taking up managed services and support and maintenance contracts. We expect this trend to continue.

In order to enhance our product offering and competitive positioning, we continue to invest in R&D and to issue two major product releases a year. These provide new features and improvements to existing functionality. Alongside this, so that customers remain up to date with the latest product features, we continue to promote our Evergreen programme. It provides continuous testing on customer data sets, enabling updates to be implemented on a regular basis as soon as new product releases become available. The Evergreen programme is proving increasingly popular as more customers embrace the full Software-as-a-Service model, and we expect this additional stream of on-going revenue to increase.

AI has continued to be a particular focus for our R&D programme during the half, with AI technology being used to enable customers to use both natural language and image recognition-based user interfaces to fast-track the creation of complex new products and workflows. In addition to this, a major overhaul of our digital experience offering has been carried out. A new architecture, featuring user-centric design and a composable digital experience, now enables our customers to have all the benefits of a product solution, whilst being able to augment the core offering with a visual content management system.

As stated, we added further resource across all our centres, although mainly concentrating on building our teams in Sofia and in India.

Outlook

Prospects remain very promising and the business is well-placed for continuing progress. Our profile in the market is growing and the market opportunity remains significant. There are clear commercial and operational advantages to our 'productised' and 'as-a-service' approach, and the quality and completeness of our solutions provide us with strong competitive differentiation.

Cerillion has started the second half of the year strongly, with a major new customer signed, as reported in a separate announcement issued today. This, together with our existing implementation projects, healthy back-order book, and strong new business pipeline, supports our confidence in delivering market forecasts for the full year and beyond.

The Company's robust balance sheet, with healthy net cash and increasing recurring income, provide a strong underpinning as we continue to grow and develop the business. The Board therefore views near and mid-term growth prospects very positively.

Notes:

¹ Software revenue is made up of software licence, support and maintenance, managed service and Cerillion Skyline revenue.

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

³ Adjusted profit before tax is a non-GAAP, Company-specific measure which is earnings excluding taxes, amortisation of acquired intangible assets and share-based payments charges.

⁴ Adjusted earnings per share is a non-GAAP, Company-specific measure which is earnings after taxes, excluding share-based payments charges and amortisation of acquired intangible assets divided by the average weighted number of shares in the period.

⁵ BSS/OSS; in telecommunications, this refers respectively to business support systems and operating support systems.

INTERIM FINANCIAL INFORMATION

Unaudited Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2024

All transactions are attributable to the owners of the parent.

Unaudited Condensed Consolidated Statement of Changes in Equity

as at 31 March 2024

Unaudited Condensed Consolidated Balance Sheet

as at 31 March 2024

Unaudited Condensed Consolidated Cash Flow Statement

for the six months ended 31 March 2024

Unaudited Notes

1.    Basis of Preparation and Accounting Policies

The condensed financial information is unaudited and was approved by the Board of Directors on 10 May 2024.

The Company is a public limited company, which was incorporated in England and Wales on 5 March 2015. The address of its registered office is 25 Bedford Street, London, WC2E 9ES. The interim financial information for the six months ended 31 March 2024 has been prepared in accordance with UK-adopted International Accounting Standards. The interim financial information for the six months ended 31 March 2024 has been prepared under the historical cost convention.

The interim financial information for the six months ended 31 March 2024 does not constitute statutory accounts within the meaning of section 434 of the Companies Act. Statutory accounts for the year ended 30 September 2023 have been delivered to the Registrar of Companies. These accounts contain an unqualified audit report and did not contain a statement under the Companies Act 2006 regarding matters which are required to be noted by exception.

The preparation of the interim financial information for the six months ended 31 March 2024 in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Statements and the reported amounts of revenues and expenses during the period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards which have no material impact on the accounting policies, financial position or performance of the Group.

There is no material difference between the fair value of financial assets and liabilities and their carrying amount.

The functional and presentational currency is UK Sterling.

2.    Going concern

The Directors have assessed the current financial position of the Group, along with future cash flow requirements, to determine if the Group has the financial resources to continue as a going concern for the foreseeable future. The conclusion of this assessment is that it is appropriate that the Group be considered a going concern. For this reason the Directors continue to adopt the going concern basis in preparing the interim financial information for the six months ended 31 March 2024. The interim financial information does not include any adjustments that would result in the going concern basis of preparation being inappropriate.

3.    Basis of consolidation

The consolidated financial information incorporates the financial information of the Company and entities controlled by the Company (its subsidiaries) at 31 March 2024. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefit from its activities.

Except as noted below, the financial information of subsidiaries is included in the consolidated financial statements using the acquisition method of accounting. On the date of acquisition the assets and liabilities of the relevant subsidiaries are measured at their fair values.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

4.    Adjusted earnings

EBITDA, profit before tax, profit for the period and earnings per share have been adjusted to take account of £80,367 (six months to 31 March 2023 £116,558) relating to P&L charges in respect of the Company's share based payments charges. The profit before tax, profit for the period and earnings per share have also been adjusted to take account of the amortisation of acquired intangibles of £nil (six months to 31 March 2023 £496,416).

5.    Other receivables and other payables

6.    Availability of this announcement

This announcement together with the financial statements herein and a presentation in respect of the interim financial results are available on the Group's website, www.cerillion.com.