Cerillion Regulatory News (CER)

17 May 2021

AIM: CER

Cerillion plc

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

Interim results 

for the six months ended 31 March 2021

Cerillion plc, the billing, charging and customer relationship management software solutions provider, today issues its interim results for the six months ended 31 March 2021.

Record Six-month Period and Continuing Strong Prospects

Highlights

Louis Hall, CEO of Cerillion plc, commented:

"These record interim results, with all major performance measures moving to new highs, demonstrate Cerillion's continued upward momentum.

"Over the last three quarters, we have signed two of the largest contracts in the Company's history. This reflects the strength of our solutions and services capability, our increasing market profile, and the significant investments being made by telecommunication providers in infrastructure and systems.

"Recent new contract wins have lifted our back order book to a new record level, and we therefore remain very confident of continuing revenue and earnings progression. The strong sales pipeline also provides further opportunities to accelerate Cerillion's growth."

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

2 Back order book consists of £35.6m of sales contracted but not yet recognised at the end of the reporting period plus £6.5m of annualised support and maintenance revenue. It is anticipated that 75% of the £35.6m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 to 24 months.

3 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.

4 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.

5 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.

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About Cerillion

Cerillion is a leading provider of mission critical software for billing, charging and customer relationship management, with a 21-year track record in providing comprehensive revenue and customer management solutions. The Company has 90 customers across 44 countries, principally serving the telecommunications market.

The Company is headquartered in London and also has operations in Pune, Miami and Sydney.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT

Overview

We are delighted to report record interim results, which reflect major implementation and upgrade projects under way with new and existing customers, as well as an increased baseline of recurring income. The Company has recorded new highs across all key performance indicators.

Revenue for the first six months of the financial year was the highest in a six-month period, up by 26% year-on-year to £12.8m (H1 2020: £10.2m), and annualised recurring revenue at 31 March 2021 was 43% higher than a year ago at £9.0m (H1 2020: £6.3m). Adjusted profit before tax for the period rose by 124% to £3.8m (H1 2020: £1.7m). Net cash at the end of March 2021 was up by 60% at £7.7m (31 March 2020: £4.8m).

We are very pleased in particular with the size and values of the new orders won in the period, continuing the pattern of increasingly large contracts. Over recent months, we have signed some of the Company's largest ever orders, with an $18.4m contract win with Telesur in late March 2021 following September's record-setting £11.2m win.

Equally significantly, a key channel partner relationship yielded its first contract in early March 2021, worth £5m, for a publicly-owned network operator in the Middle East. We expect to see further contracts come through in due course from this important channel partner relationship. These high profile orders continue to demonstrate the quality of both our product offering and support capability and will help to drive new business in the future. 

With two major new customer wins during the first half and strong demand from existing customers, the back order book at 31 March 2021 moved to a new high of £42.1m (31 March 2020: £24.2m), up 74% year-on-year. 

Even after our recent major new wins in the first half, the new business pipeline of opportunities had increased at the end of the period. The total unweighted value of current opportunities at 31 March 2021 was up by 9% to £130.8m compared with the same date last year (31 March 2020: £120.3m).

From a trading perspective, while the coronavirus pandemic has continued to cause disruption on a global scale, our core telecommunications marketplace has seen rising data traffic levels, reflecting the move to home working. The importance of broadband infrastructure has never been more obvious and the current health emergency has served to support significant on-going investment in 5G and broadband infrastructure by providers, flowing down to the support systems that we provide.

Looking ahead over the balance of the current financial year, we are very confident of continuing progress, supported by our strong back order book. We are also in a good position with potential major new orders.

Financial Overview

For the six months to 31 March 2021, the Group's revenue totalled £12.8m (H1 2020: £10.2m), a rise of 26% against the same period last year.

Services income was up 7% to £6.5m, accounting for 51% of Group revenue (H1 2020: £6.1m and 59%). Software income increased by 77% to £5.8m (from software licence, support and maintenance sales) making up 46% of revenue (H1 2020: £3.3m and 32%), and third party income decreased to £0.5m, approximately 4% of revenues (H1 2020: £0.8m and 8%).

Our existing customer base (those customers acquired at least 12 months before the end of the reporting period) accounted for a high proportion of the Group's income, as is typical, and generated 71% of the Group's revenue in the first half (H1 2020: 82%). This was a lower percentage than the same period last year, reflecting recent new customer wins.

Recurring revenue1, from support and maintenance and managed service contracts, grew by 59% to £4.4m (H1 2020: £2.8m) and accounted for 35% of the Group's income (H1 2020: 27%). As a result of new customer 'go-lives' over the preceding 12 months, and an increased uptake of managed services, annualised recurring revenue at the end of March increased by 43% year-on-year to £9.0m (31 March 2020: £6.3m).

Reflecting the growth in the business, overheads in the first half rose 5% to £5.3m (H1 2020: £5.0m), with personnel costs rising 1% to £3.0m (H1 2020: £3.0m). 

Adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA"), which excludes share-based payments charges, rose to £4.8m (H1 2020: £2.7m). EBITDA increased by 79% to £4.8m (H1 2020: £2.7m).

The adjusted profit before tax3 rose by 124% to £3.8m (H1 2020: £1.7m) and the adjusted earnings per share4 was 105% higher at 11.5p (H1 2020: 5.6p). On a reported basis, profit before tax was £3.3m (2020: £1.2m), up 183% and earnings per share was 9.7p (2020: 3.8p), a rise of 158%.

Net assets rose by 11% to £17.2m as at 31 March 2021 (31 March 2020: £15.4m). This includes £7.7m of cash balances (H1 2020: £6.0m).

Cash Flow and Banking

Net cash as at 31 March 2021 increased by 60% to £7.7m (31 March 2020: £4.8m), reflecting cash of £7.7m (H1 2020: £6.0m) and no debt (H1 2020: £1.2m). Net cash generated from operations in the period rose by 47% to £2.7m (H1 2020: £1.8m).

Expenditure on capitalised R&D for the period was £0.5m (H1 2020: £0.4m) after investment in product development to further enhance our intellectual property.

Expenditure on fixed assets was £0.1m (H1 2020: £0.2m). 

Free cash generation in the period increased by 75% to £2.1m (H1 2020: £1.2m). This was utilised to pay the final dividend of £1.1m (H1 2020: £1.0m), in respect of the year ended 30 September 2020, and to repay £0.6m (H1 2020: £0.6m) of the £5.0m term loan taken up in conjunction with the AIM IPO in March 2016, which has now been completely repaid. 

Dividend

The Board is pleased to declare an increased interim dividend of 2.10p per share (H1 2020: 1.75p), a 20% rise year-on-year. The interim dividend will become payable on 18 June 2021 to those shareholders on the Company's register as at the close of business on the record date of 28 May 2021. The ex-dividend date is 27 May 2021. As previously stated, the Board intends 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

We continued to operate home working worldwide in order to protect our staff during the ongoing coronavirus emergency. Staff and customers are now well adapted to the new environment, and the Company will consider the preservation of some of the efficiencies deriving from home working once the pandemic is over, through some form of hybrid operating model.

Demand from the existing customer base was strong over the first half, with both newer and older customers generating significant new orders. Typically, our larger customers have greater demand for additional software licences, modules or other services. For example, a significant three-year managed service contract was agreed in the period with Scarlet, part of Belgium's largest telecommunications company Proximus Group and a customer since 2017. We also started a major upgrade project for Go, the leading telecommunications provider in Malta and a long standing customer.

New customer wins during the period were excellent, and we continued the upward trend of bidding for and winning larger contracts. In March 2021, we won an $18.4m contract with Telesur, the leading telecommunications provider in Suriname, Latin America. Our largest ever contract, it is to provide a common, convergent platform to support product catalogue, charging, billing and customer experience for all of Telesur's fixed and mobile services. 

An important channel partner delivered its first contract in March 2021, with a £5.0m deal with a publicly-owned network operator in the Middle East. Our solution is being packaged with the channel partner's wider overall solution, and we believe there is scope for further expansion of the contract in the future. As this is the first contract with this channel partner, we will be closely involved its implementation. We expect larger contracts to come through from this channel in due course, which should further drive Cerillion's revenues and earnings.

These successes helped to increase new orders at the end of the first half by 148% to £23.6m year-on-year (H1 2020: £9.5m). In turn, this has driven a 74% rise in the back order book to £42.1m at 31 March 2021 (31 March 2020: £24.2m). These contracted (but not yet recognised) sales will drive revenues over the coming quarters. Reflecting the growth in the business, specifically in managed services, support and maintenance and Cerillion Skyline revenue, the base of recurring revenue has increased by 43% year-on-year to £9.0m (H1 2020: £6.3m).

Revenues remain internationally orientated, and we continued to make progress in Continental Europe, as well as in Asia Pacific and the Americas. We also believe that our recent major new customer win in the Middle East is likely to enable us to further develop business in that important region. 

The BSS/OSS solutions that we provide remain a core requirement for telecommunications operators and service providers. Their mobile and broadband infrastructure is currently more essential than ever in supporting remote interaction for businesses, communities and public services. To ensure that we remain competitive in providing these solutions, it is important that we continue to invest in R&D to renew and improve our product set, providing new features and enhancing existing functionality. We are in the process of investing approximately 10,000 man days in R&D over FY 2021 to provide two major software releases. We completed the first, Cerillion 21.1, in the period releasing it in April. As the latest version of our Enterprise OSS/BSS suite for fixed, mobile, cable and multi-service operators, it provides customers with enhanced B2B functionality, with a particular focus on lead and opportunity management. The second release is well under way.

In order to support business growth, we have also continued to build the team, bringing on new and experienced talent, and have expanded our staff numbers in both India and London. 

We are currently tendering for a range of new business opportunities, and our pipeline of new business opportunities has increased by 9% year-on-year to a total value of £131m (31 March 2020: £120m).

Outlook

The business has made tremendous progress and remains very well placed operationally and financially. The robust balance sheet, which now carries no debt, and the significant increase in recurring income provide a strong underpinning and platform for future growth.

Existing major implementation projects and the strong back order book leave Cerillion very well-positioned to achieve its full year targets. The expanded pipeline of new business will also support continuing revenue and earnings growth. The Board therefore remains confident of future prospects this year and beyond.

Notes:

1 Recurring revenue includes annualised support and maintenance, managed service and Skyline revenue.

2 Back order book consists of £35.6m of sales contracted but not yet recognised at the end of the reporting period plus £6.5m of annualised support and maintenance revenue. It is anticipated that 75% of the £35.6m of sales contracted but not yet recognised as at the end of the reporting period will be recognised within the next 12 to 24 months.

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.

Cerillion plc Interim Financial Information

Unaudited Consolidated Statement of Comprehensive Income

for the six months ended 31 March 2021

All transactions are attributable to the owners of the parent.

Unaudited Condensed Consolidated Statement of Changes in Equity

as at 31 March 2021

Unaudited Condensed Consolidated Balance Sheet

as at 31 March 2021

Unaudited Condensed Consolidated Cash Flow Statement

for the six months ended 31 March 2021

Unaudited Notes

1. Basis of Preparation and Accounting Policies

The condensed financial information is unaudited and was approved by the Board of Directors on 14 May 2021.

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 2021 has been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU). The interim financial information for the six months ended 31 March 2021 has been prepared under the historical cost convention.

The interim financial information for the six months ended 31 March 2021 does not constitute statutory accounts within the meaning of section 434 of the Companies Act. Statutory accounts for the year ended 30 September 2020 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 2021 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 2021. 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 2021. 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 £18,070 (6 months to 31 March 2020 £39,615) relating to P&L charges in respect of the Company's share based long term incentive plan. 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 £496,416 (6 months to 31 March 2020 £496,415).

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.