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New IPO gets top billing Shares in billing software provider Cerillion plc have rocketed since its March 18th IPO. The company’s customers predominantly operate in the telecoms sector, with some additional sales to the financial services and utility industries. Reliable and accurate billing is vital to a telecom provider’s success. Changing software comprises a huge risk to such a company and thus Cerillion’s sales are frequently expected to be longstanding. Headquartered in London, Cerillion employed a total of 164 staff at IPO, with around half of these based in Pune, India. The company was formed over 16 years ago and management still owns more than 50% of the equity, with CEO Louis Hall retaining 41%.

sales are frequently expected to be longstanding Pre-IPO documentation shows a high margin business that has delivered a similar level of sales and profits for the last three financial years. For the year ending September 2015, Cerillion reported a posttax profit of £2.1m on revenues of £14.0m. Cerillion has a commendable cash flow history, with £8.5m of cash being generated over the last seven years. The admission document showed bank loans totalling £0.4m. It is unsurprising that such a track record attracted a surge of buyers following IPO. The opportunity was

sweetened by the promise that Cerillion will pay out between one third and one half of annual free cash flow to shareholders as a dividend. AIM Prospector expects the full year dividend payout to be around 3.5p.

bank loans totalling £0.4m Two weeks after IPO, Cerillion confirmed a new $2.4m contract with an existing customer. The same deal had been highlighted as a prospect in the IPO documentation. Cerillion’s lack of profit and sales growth over the last three years will have weighed on the IPO price. However, the company’s ability to quickly deliver on its IPO promises has forced the market to reappraise the shares significantly higher. As a provider of such vital functionality to its customers, Cerillion is the type of share that is typically rated higher than its growth prospects might suggest. A share price in three figures is easily justified in my view. Cerillion bases expectations of future growth on both its own product innovation and underlying market advances. Cerillion Skyline is an online software-as-a-service billing platform that the company hopes to sell into markets beyond Cerillion’s

telecom mainstay. The product is hailed by Cerillion as empowering service providers of all sizes through the delivery of functionality that was previously only affordable to blue chips. Cerillion is already successfully selling Skyline, with the service priced on a transactional basis.

forced the market to reappraise Cerillion has attracted the attentions of some of the UK’s most celebrated investors. ‘Naked Trader’ Robbie Burns has been buying the shares, as has Lord John Lee. Further gloss is provided by independent forecasts of 15% annual growth in the convergent (multiple services on one network) market from here until 2020. Cerillion (LON:CER) FOR Modest valuation Good earnings visibility AGAINST Low historic growth Small scale Market cap Bid:offer

£37m 123p:125p

P/E (forecast)


Yield (forecast)


52week low:high



May 2016 AIM Prospector  
May 2016 AIM Prospector  

Featuring *NINE* AIM companies: Cerillion, Conviviality, Epwin, K3 Business Technology Group, idox, Mattioli Woods, Mulberry, Nichols and Yo...