Cerillion Plc (LON:CER), the UK-based software company, continues to demonstrate why it stands out in the competitive world of Business and Operations Support Systems (BSS/OSS). With a track record of winning against industry giants like Amdocs, an expanding pipeline, and best-in-class margins, Cerillion is proving itself as a key player in the technology sector.

Strong Market Position and Expansion

Cerillion operates in a vast and fragmented market, estimated to grow at a compound annual growth rate (CAGR) of 2%–5% until 2027. The company’s ability to win contracts against larger competitors highlights its growing reputation and credibility. Notably, Cerillion recently secured a US$11.4m five-year contract with a telecom operator in the Caucasus region, further reinforcing its global expansion.

Andrew Ripper, Research Analyst at Panmure Liberum, emphasises, “Cerillion has a track record of winning work v market leader Amdocs and smaller ISVs, is gaining credibility as it delivers software to larger clients over time and has announced another new US$11.4m contract today.”

With its commercial-off-the-shelf (COTS) software solutions, Cerillion provides quick-to-deploy, cost-effective alternatives to the more complex, customised systems offered by bigger industry players. This efficiency has made it an attractive choice for telecom operators worldwide.

Financial Strength and Growth Potential

Despite a recent 17% decline in its share price, Cerillion remains a compelling investment opportunity. Panmure Liberum reiterates its Buy recommendation with a target price of 2000p, citing strong fundamentals and growth potential.

Key financial highlights include:

• Record Sales Pipeline: £262m as of September 2024, with a 21% CAGR since 2019.
• Strong Margins: EBITDA margin reached 47.4% in FY24, well above industry peers.
• Consistent Growth: 18% five-year revenue CAGR, with an 11% forecasted CAGR until FY27.
• Robust Balance Sheet: Net cash expected to grow to £37m in FY25E.

Andrew Ripper notes, “Cerillion stands out as the only listed UK software company to have a combined prospective organic sales growth rate and margin that exceeds 50%.”

Long-Term Outlook and Potential M&A Target

Cerillion’s efficient operations, high customer retention, and strong financials make it a potential target for acquisition in the BSS/OSS sector. With a growing list of Tier 1 clients and a strategic presence in India, where 60% of its workforce is based, the company is well-positioned for sustained growth.

Panmure Liberum’s valuation suggests that Cerillion should trade at a premium compared to UK software peers due to its superior growth potential and profitability.

On a Final Note

Cerillion plc is a prime example of a UK technology company that has successfully built a strong, scalable business with high margins and consistent revenue growth. Its ability to compete with larger rivals, secure Tier 1 clients, and maintain best-in-class financial metrics sets it apart from many of its peers.

For growth-focused investors, Cerillion presents an intriguing opportunity—especially given the recent share price decline, which offers an attractive entry point.

With a robust sales pipeline, a strong balance sheet, and the potential for further market share gains, Cerillion is well-positioned to continue delivering value to shareholders in the years to come.

Panmure Liberum’s Buy recommendation and 2000p target price reaffirm the view that Cerillion is a UK tech stock worth watching.