A year that fell short

Cerillion (LSE:CER), the London-based billing software group, is due to report final results for the year to 30 September 2026, and the focus is on the September statement, in which the company said results would be below market forecasts.

Revenue was expected to be £46m to £48m, compared with £45.4m a year earlier, while the adjusted EBITDA Margin was expected to be 43% to 45%, down from 50.9%. The company attributed the shortfall to customer orders being delayed or deferred, including software licence expansions and upgrades, and said major implementations were progressing.

What Cerillion sells

Cerillion, based in London, supplies billing, charging and customer relationship management software to telecoms operators and other subscription businesses, through a combination of licences, implementation services and recurring support or hosted subscriptions. Licence sales carry high margins and are recognised when delivered, so a delay in a handful of orders can move annual profits noticeably even when underlying Demand holds up.

How the year unfolded

The year included a significant win. On 8 January LSE:CER announced a five-year £42.5m hosted subscription contract with Omantel, the largest in its history, which it said underpinned forecasts for the year and beyond. Chief executive Louis Hall said Omantel was transforming itself into a regional technology powerhouse.

The first half was weaker. Interim results showed Revenue down 14% to £18m and adjusted EBITDA down 38%, which the company linked to the timing of software licence recognition. New orders more than doubled to £39.6m, the back-order book reached £82.1m, the new customer pipeline stood at a record £271m, and the Interim Dividend rose 15%. Management said it expected material licence revenue in the second half. The September update indicates that some of that expected licence income did not arrive in the year.

Why it matters

LSE:CER's Investment case has rested on a growing back-order book converting into revenue at high margins. A margin falling by around six to eight percentage points, on the company's guided range, shows how sensitive profits are to licence timing. The September statement described the Backlog as solid, the pipeline as healthy and the Balance Sheet as sound, suggesting management sees the shortfall as deferral rather than lost business, though that will only be clear once the delayed orders are signed.

One board member has since added to his personal shareholding. Non-executive director Guy O'Connor bought 20,000 shares at an average of £6.90 on 21 October, about £138,000 in total, according to the company's notice.

What the margin guidance implies

Guidance for an adjusted EBITDA margin of 43% to 45%, against 50.9% a year earlier, translates into adjusted EBITDA of roughly £19.8m to £21.6m on revenue of £46m to £48m. The prior-year figure on £45.4m of revenue was about £23.1m, so even at the top of the range profit would be lower than a year ago despite higher sales. That illustrates the Operating Leverage of a software Business with a high proportion of fixed costs: a shortfall in high-margin licence revenue reduces profit by more than it reduces revenue.

The role of the Omantel contract

The five-year £42.5m hosted subscription contract with Omantel equates to an average of £8.5m a year, a sizeable amount relative to group revenue of £46m to £48m. Hosted subscriptions are recognised over the contract term rather than at delivery, so the contract adds steady revenue instead of the one-off licence income that was delayed. Implementation of such a project is complex, and the company said major implementations were progressing, which is the part of the business that converts a signed contract into revenue.

Backlog, pipeline and the question of timing

The back-order book of £82.1m and a pipeline of £271m at the half-year stage give a picture of demand that is larger than recent revenue. New orders more than doubled to £39.6m in the first half. A company with that pipeline can still miss a year's expectations if a few orders move from one period to the next, and the guidance statement shows that happening. The key question for the final results is how much of the delayed licence income has now been signed and how much remains in the pipeline, since that will set the starting point for the following year.

Director buying and the register

The purchase of 20,000 shares at an average of £6.90 by a non-executive director, about £138,000 in total, is a small transaction relative to the group's scale, but directors' dealings are public and are often read as a signal of confidence. They are not a forecast, and a single purchase says nothing about the timing of delayed orders. The final results, with their detail on orders and the dividend, will be a more reliable guide than any single filing.

What investors will look for

When the company reports, the main points will be the size of recurring revenue, the progress of new contracts and the margin on services. Software businesses of this kind often have long sales cycles, so revenue recognised in one year can reflect decisions taken the year before. The order book and the number of live projects give a view of how much work is already contracted.

Currency is another factor, since a share of revenue comes from customers outside the UK. A stronger pound reduces the sterling value of overseas sales, while a weaker one raises it, which means reported growth can differ from growth in constant currency. Cash conversion, which compares Operating Cash Flow with profit, also helps show how much of reported Earnings turns into money.

Risks and next steps

The main risks are further slippage in customer decisions, concentration among a relatively small number of large telecoms contracts, and execution on long implementations such as Omantel. Telecoms operators' Capital budgets and regulatory pressures can delay procurement, and currency movements affect overseas earnings. Licence timing also makes half-year comparisons volatile, so a few late orders can reshape the outcome for a full year.

The company had not announced a date for its final results although it has typically reported full-year figures in late November or December. Those results should quantify the delayed orders, show whether any have since been signed, update the back-order book and pipeline, and set out the dividend. Investors will also look for commentary on how quickly licence revenue may recover in the current year.