Cerillion Regulatory News (CER)

AIM: CER

Cerillion plc

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

First Day of Dealings on AIM

Cerillion plc, the billing, charging and customer relationship management ("CRM") software solutions provider, is pleased to announce that admission and trading of its Ordinary Shares commences today on AIM, with the ticker CER.

The Company's market capitalisation, based on a Placing Price of 76p per share at Admission, is approximately £22.4 million. Shore Capital is the Company's Nominated Advisor and sole broker.

Established in 1999 following a management buyout from Logica plc, Cerillion develops, installs and supports billing, charging and CRM solutions, predominantly to the telecommunications market. The business has a global customer base, across 40 countries and its customers include Cable & Wireless, KDDI and MTN.

KEY POINTS

Cerillion is a leading provider of mission critical software for billing, charging and CRM

· 16 year track record in providing comprehensive billing and customer management solutions

· Product suite is advanced, functionally rich and fully integrated

· Principally serves the telecoms market but also utilities and financial services

· 75 customer installations across 40 countries

Highly experienced management team

· CEO, Louis Hall, led MBO from Logica plc in 1999

· Headquartered in London, with 164 staff in total, including 79 in Pune, India

Track record of profitable growth and strong cash generation

· FY 30 Sept 2015: revenues of £14.0m, EBITDA of £2.9m and PBT of £2.1m

· £8.5m cash generated over the last seven years

· Company intends to declare a maiden interim dividend and pay out between a third to half of the Group's free cash flow as dividends each year

Clear growth strategy in markets which are expanding

· Continued expansion within core telecoms market

· Planned expansion in new geographies, initially US and Australia

· Leverage new products:

o Real-time convergent charging solution

o SaaS-based billing solution, Cerillion Skyline

Overview of the Flotation

· Placing price of 76p per share

· Market capitalisation of £22.4m at Admission to AIM

· Total fundraising of £10m (gross) (via a subscription for and placing of 13,157,895 new ordinary shares at a price of 76p per share) to facilitate flotation

Louis Hall, Chief Executive Officer of Cerillion, commented:

"I am delighted that Cerillion is joining AIM today. It marks an important milestone for the Company and we will use this as a platform to continue to grow the business, both organically and inorganically.

Cerillion is already a well-established provider of billing, charging and CRM solutions to the telecommunications sector and, as well as increasing our presence in this core market, we are now seeking to grow in new market sectors.

We are particularly focussed on driving more growth in the telecoms market with our recently launched convergent charging solution, and on building our presence across a range of other sectors with our SaaS-based billing platform. We look forward with confidence to capitalising on the opportunities ahead."

For further information please contact:

Placing & Subscription Statistics

Introduction and Business Overview

Cerillion has a 16 year track record in providing comprehensive billing, charging and CRM software solutions, predominantly to the telecommunications sector but also to other industry sectors, including financial services and utilities. Its solutions are now used in more than 75 customer installations across 40 countries and customers include Cable & Wireless, KDDI and MTN.

Headquartered in London, Cerillion employs 164 staff in total, with 79 operating in Pune, India where its Global Solutions Centre is located.

The business's product offering is based on its Cerillion Enterprise BSS/OSS* Suite, an advanced, functionally rich and fully integrated suite of BSS/OSS modules, which can provide a full end-to-end billing solution or be used on a standalone basis for specific needs. Cerillion provides a wide range of professional services to support its products, from initial implementation and system migration, to comprehensive support and maintenance. It also offers a suite of training and consultancy services to support the deployment of its solutions and offers a complete managed service which can provide a charging and billing solution in a much shorter time frame than is required for the deployment of a traditional enterprise solution and for a much lower start-up cost.

In the last three years, Cerillion has further developed its product offering. In 2013, Cerillion released its real-time Convergent Charging System (CCS), which enables the billing of pre-paid mobile and convergent services. The Directors see the solution as a key differentiator of the Group's core offering, as compared with its competitors, since they believe that, to date, telecoms operators have struggled to properly converge fixed and mobile services, with pre-paid and post-paid payment methods. The solution is particularly relevant to the faster growing mobile and mobile data sectors. 

In 2014, Cerillion soft-launched its cloud (SaaS) billing product, Cerillion Skyline. Built specifically for the cloud, Skyline is scalable and capable of supporting many millions of subscriptions. It will enable service providers of all sizes to access the same powerful billing capabilities that could previously only be afforded by large companies with significant resources. The Directors believe that the new product offers the Company the opportunity to expand into new sectors outside its existing core market of telecommunications.

In March 2015, Cerillion acquired netSolutions, a geospatial location network inventory business, from AIM quoted Ubisense Group plc. The acquisition has enhanced Cerillion's BSS/OSS portfolio. It has also extended Cerillion's reach into other industry verticals and facilitates channel partner relationships with other large corporates such as General Electric Company.

*Business Support System/ Operational Support System 

Customer base

Cerillion's customers predominantly comprise telecommunications providers, with Cerillion's product suite being suitable for mobile, broadband and TV services as well as convergent multi-play offerings. In addition, Cerillion has customers outside the telecommunications sector including in financial services and utilities. As of September 2015, the geographic customer spread was: 22 in Europe, 35 in the Americas, 12 in Asia Pacific and 6 in the Middle East and Africa.

Cerillion revenue model

Cerillion generates revenues from software license sales, implementation services, and support and maintenance

Implementation services

Cerillion generates a significant proportion of its revenues from software implementation. A full system implementation takes on average six to 12 months, with initial workshops undertaken to establish a detailed understanding of customers' requirements and to analyse the existing infrastructure. The key elements of an implementation project include establishing business processes, providing staff training, integrating systems and data migration.

Support and maintenance

Cerillion offers a range of support and maintenance services to its customers. Support staff are based in three different time zones around the world, in India, Malta and the UK, with customers able to subscribe to a 24 x 7 support service.

Cerillion's support and maintenance services are based on standardised offerings which can be tailored to the individual needs of customers. Depending on the support level required, Cerillion can provide individual service level agreements with options including enhanced response times, onsite support and specific time period support.

Software Licences

Cerillion generates revenue from licence fees for its software systems. Software licences may be sold for a fixed period (typically five years) or in perpetuity. Licence revenue may also be generated from upgrades to a more advanced system or from customers increasing the number of their subscribers.

Market statistics

The Directors believe that the market for Cerillion's software and services is worldwide, growing and characterised by technological and regulatory change. Cerillion's Enterprise BSS/OSS Suite has been designed specifically for the telecommunications sector whilst the new cloud (SaaS) based billing application, Cerillion Skyline, is aimed at all industries that may want to bill for subscription and usage based services.

The global BSS/OSS market was worth $21.86bn in 2013 and, according to Transparency Market Research, will be worth $49.78bn by 2020, growing at a CAGR of 12.7 per cent. Cerillion believes that its directly addressable market within this is currently worth approximately $7.43bn.

Infonetics Research, the telecom market research firm (now part of IHS), estimates that the global convergent charging market totalled $3.1bn in 2014 and forecasts that it will grow at a Compound Annual Growth Rate (CAGR) of 16 per cent. from 2014 to 2019. The demand for convergent charging is also being driven by the move by telecommunications operators and content providers towards offering so called "quad-play" offerings. (Quad-play is the combination of broadband internet access, television, telephone and mobile.) With such offerings traditionally supported on different BSS and OSS software suites there is a clear opportunity to replace them with an integrated convergent solution.

MarketsandMarkets, the market research organisation, forecasts the cloud billing market to grow from $2.4 billion in 2013 to $9.58 billion in 2018, at a CAGR of 31.9 per cent. during the forecast period.

Summary financial information

The table below provides summary financial information on Cerillion:

*Cerillion achieved certain non-recurring revenues in FY2014, including one-off gains totalling £324,000 from the release of a dilapidation provision and a premium on a new lease, and a one-off gain of £150,000 on foreign exchange adjustments.

Current trading and prospects

Since 30 September 2015, trading in the Group's core businesses has been in line with management's expectations.

The implementation projects that Cerillion undertakes are typically governed by long term and high value contracts. As a result the business typically enjoys a high level of forward visibility of revenues through its back order book and annualised support revenue. The Directors estimate that the aggregate value of Cerillion's back order book, as at 29 February 2016, stood at approximately £12.7 million, £3.8 million of which was annualised support revenue. The projects within Cerillion's back order book are typically performed over a period of up to two years. For these purposes, Cerillion calculates its "back order book" as including unperformed, contracted work under purchase orders and contracted work that is still subject to the receipt of purchase orders.

The Group is currently in discussion with a large, multi-country operator in the Americas, which is an existing customer, with respect to rolling out the Cerillion platform for new services and additional country operations as well as upgrading existing installations.

The Group is also in contract negotiations with certain other potential customers, including being selected as the preferred bidder by a telecoms operator in the Middle East, for the provision of the Cerillion platform to support a 4G rollout and subsequent migration of the existing customer base.

Dividend Policy

Dividend payments will depend on the results of the Group's operations, its financial condition, cash requirements, future prospects, profits available for distribution and other factors deemed to be relevant at the time. The Board intends to declare a maiden interim dividend in respect of the half year ending 31 March 2016 and, subject to the above, intends to pay out between a third to half of the Group's free cash flow as dividends.

Key strengths

The Directors believe that Cerillion benefits from a number of key strengths that differentiate it from its competitors and which they believe will enable it to take advantage of current and future growth opportunities. In the view of the Directors, Cerillion's strengths include:

· a record of profitability and strong cash generation over the last seven years;

· a highly experienced management team;

· an established track record in the telecoms billing, charging and CRM market;

· a diverse and growing customer base with a record of customer retention over multiple years, typically over five years - reflecting the mission critical nature of its solutions and its customer support;

· a record of ongoing revenue generation from existing customers:

o approximately 60 - 70 per cent. of annual income in each of the last three years has been generated by existing customers;

· an advanced, fully integrated and functionally rich product suite which provides:

o a comprehensive solution, and

o attractive commercial benefits;

· new products, namely Cerillion's convergent charging platform and SaaS billing platform, which offer additional growth opportunities:

o the convergent charging platform expands Cerillion's addressable market into the growing pre-paid mobile and convergent billing domains and unlocks additional enterprise software opportunities; and

o the SaaS billing platform expands Cerillion's addressable market into multiple verticals outside telecoms and builds recurring revenues. It has a rapidly scalable growth model, which is less constrained by services resource recruiting than the on premises deployment of traditional enterprise software; and

· presence in a market displaying structural growth.

Growth strategy and reasons for Admission

The Directors believe that Cerillion's comprehensive billing, charging and CRM solutions and products are well positioned to take advantage of the structural trends surrounding telecommunications.

Cerillion's strategy for growth is built on:

· further exploiting its pre-integrated end to end billing and CRM solution;

· winning new customers in pre-paid mobile and "quad-play" convergent billing through its real time convergent charging platform;

· winning new customers in market verticals outside telecoms through sales of Cerillion Skyline, which also offers a highly scalable business model, with high levels of recurring revenues;

· expanding its geographic footprint through local presence and offices, initially in the USA and Australia; and

· identifying acquisition targets which will enhance its existing BSS/OSS product suite, team and service offering.

The key reasons why the Company is seeking Admission are:

· to enhance its public profile and market positioning;

· to allow Cerillion to capitalise on growth opportunities through the use of its shares to fund

potential mergers and acquisitions;

· in due course to provide long term equity incentives to motivate and act as a retention tool for key staff; and

· to diversify the shareholder base and facilitate an exit for Cerillion's existing venture capital shareholders.

Board of Directors

Alan Howarth, Non-executive Chairman (aged 70 years)

Alan Howarth has extensive senior executive experience in a range of national and international organisations in both the public and private sector. At Ernst & Young he was one of the founding partners of the UK Management Consulting practice. For the last 15 years he has managed a portfolio of non-executive appointments, as Chairman of both public and private companies primarily in the UK and US Technology and Health sectors. He is Chairman of Essentia Ltd and MPL Systems Limited as well as a Non-executive Director of Premier Technical Services Group plc (AIM:PTSG).

Louis Hall, Chief Executive Officer (aged 51 years)

Louis Hall is the CEO and founder of Cerillion, having led the management buyout of the original business from Logica in 1999. Louis has worked in the enterprise software industry for over 25 years and prior to forming Cerillion held a number of product, sales and management positions at Logica.

Oliver Gilchrist, Chief Financial Officer (aged 51 years)

Oliver joined Cerillion in 2001 as CFO. He has over 26 years' experience in finance, training as a chartered accountant at Coopers & Lybrand (now part of PWC). He left Coopers & Lybrand for industry in 1995 joining Parallax PLC as CFO, prior to its sale to Keane Inc in 1999 for $25m. Following this he acted as interim CFO for Apama Inc, managing a second round interim fundraise of $10m in 2001. The company was subsequently sold to the Carlyle Group.

Guy O'Connor, Business Development Director (aged 52 years)

Guy is a co-founder of Cerillion and has led business development at Cerillion since the management buy-out. Prior to joining Cerillion, Guy was Group Director for Matheson Investment International, a subsidiary of Jardine Matheson Group.

Mike Dee, Non-executive Director (aged 60 years) 

Mike Dee is a qualified accountant (CIMA). Until July 2015, he was CEO of Manx Telecom plc and led its successful AIM IPO in February 2014. Before becoming CEO in April 2011, he was Director of Finance and had been part of the British Telecom plc team which set up Manx Telecom plc in 1987. Prior to his 29 years at Manx Telecom plc, he spent four years at British Telecom plc. Before that, Mike held accounting and company secretary positions with the Dowty Group, Iloman Engineering and Castle Industries. Mike holds a BA (Hons) degree in Business Studies and CIMA qualification.