Telecom solutions provider, Cerillion plc (LON:CER) – Chief Executive Officer Louis Hall caught up with DirectorsTalk to discuss what market forces are driving demand, market opportunity, the outlook for 2023 and the increased dividend.
Q1: You provided your annual results for the 12 months ended 30th of September, you’ve obviously had a good year, but could you just explain for us what the market forces are that are driving demand for your solutions and has there been any change?
A1: We are very pleased to see revenue grow by 26%, on top of a 25% increase last year so we’re very pleased to be seeing this shift to a company that’s growing at 25% a year compared to a company that previously growing around 9/10% a year. Very pleased to see that being sustained. Also, a big jump in earnings, a 40% increase in PBT, which was which was very pleasing.
But I think, in relation to your question, the market forces that are driving demand are that we’re in the midst of these big investment waves in telecoms businesses investing in 5G mobile, which is a huge investment cycle and also continuing investment in more fibre. The telcos are then looking at those network improvements and thinking about how do we monetize those? How do we enable these service enhancements to be delivered to our customers at some sort of premium? Very often, that will involve changing the ancillary software systems, the enterprise software systems that we provide that sit around the network that connects network to customers say through CRM, network provisioning, product bundling, charging, billing, receivables and so on. Often, telcos are finding that perhaps those systems they currently have don’t provide enough flexibility and don’t enable them to capitalise on those network investments.
Also, I think that, looking at the macro environment, telcos are thinking, how do I become more reactive? How can we pivot more easily to changing market conditions? Again, looking at the systems they have that enable them to connect to their customers, they’re not always as flexible as they could be, and hence the drive for more modern, more flexible solutions to address that need.
Q2: You mentioned a strong pipeline with an increase of around 43%. What can you tell us about the market opportunity and the outlook for 2023?
A2: We’ve had a big jump in our new customer sales pipeline by about 43%, and that’s driven off of demand I’ve been speaking about, but I think particularly what we’re seeing is two main factors in pushing that pipeline.
One is that the newer opportunities we’re looking at are pretty much all Software as a Service opportunities where we’re being asked to provide the solution as a service over typically a five-year term, that is just essentially more things in the bag so the deal sizes are hence significantly larger. Also, as we’ve sold to larger customers and we’ve brought onboard larger customers, we gain credibility with doing larger customer implementations, we’re gradually seeing that more larger customers are looking at Cerillion and that of course means larger deal sizes, again, in the pipeline.
So, those two factors are both driving up pipeline value, which I think bodes very well for the new financial year.
Q3: I also see that Cerillion increased the dividend by 30%, what was the thinking behind the increase?
A3: Well, we have a commitment to investors to generally pay-outs between a third and a half of free cash in dividends and with the acceleration in cash production, we have fallen a bit behind the curve on that. So, we’re trying to catch up with that state of position, albeit in a number of steps so we thought it appropriate to get ahead of the curve this year with that dividend increase.
Cerillion plc (LON:CER) is a leading provider of billing, charging and customer management systems with more than 20 years’ experience delivering solutions across a broad range of industries including the telecom, finance, utilities and transport sectors. Cerillion has established a reputation as a leading provider of Telcom software solutions supporting fixed wire, mobile, broadband and TV communications service providers (CSPs). Cerillion is attractive for both capital growth and dividend income investing having consistently paid a dividend every year since its IPO in 2016.
