Bumper year for Cerillion

Telecoms enterprise software provider Cerillion (LON:CER) grew strongly last year, while the rate of growth might slow this year it is still likely to make good progress given the recent €12.4m contract win. Further contract wins would add to the growth rate.

In the year to September 2023, AIM-quoted Cerillion’s revenues were one-fifth higher at £39.2m, while underlying pre-tax profit was two-fifths ahead at £16.8m, helped by a reduction in impairment charges from £1.77m to £256,000. The growth has come from software with a dip in services revenues.

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Net cash reached £24.7m at the end of September 2023. The dividend has been raised from 9.1p/share to 11.3p/share.

The order book is worth £52.5m and that includes £37m of contracted sales and £9m of support and maintenance level. This underpins more than two-thirds of this year’s forecast revenues. There is a strong sales pipeline.

The 5G investment is continuing but the momentum has not picked up. Demand for Cerillion’s software also comes from companies improving the use and efficiency of their existing assets.

Liberum forecasts a 2023-24 pre-tax profit of £18.2m with net cash of £30m at the end of September 2024. Singer is more conservative with a £17.3m pre-tax profit estimate. A higher tax rate reduces the growth rate of earnings in comparison with profit.

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The share price slipped 25p to 1280p, which is 28 times the more conservative estimate. A further large contract win is likely to be the thing that propels the share price upwards.

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