Shares in Cerillion (LON:CER) have been under pressure in 2026 after management warned that first-half revenue and profits would be lower than last year. However, the underlying picture appears stronger than the headline numbers suggest, with a record order book and growing demand for telecom software modernisation helping support expectations for a much stronger second half.
| Cerillion (LON:CER) | Price: £13.75 (-1.8%) | Market cap: ~£400m |
📊 Interim Results: Weak headline numbers, strong backlog
Ahead of its interim results, Cerillion guided for first-half revenue of approximately £18 million, down 14% year-on-year, while EBITDA was expected to fall 37% to around £6.2 million. That’s what happened.
Management attributed the decline largely to contract timing and the absence of high-margin software licence revenue recognition during the period.
| Metric | H1 FY2026 | H1 FY2025 |
| Revenue | £18.0m | £20.9m |
| EBITDA | £6.2m | £9.9m |
| Revenue Growth | -14% | -7% |
| EBITDA Growth | -37% | -9% |
Despite weaker earnings, investors should focus on order intake and future revenue visibility.
| Growth Indicator | H12026 Update |
| New Orders | £39.6m |
| Prior Year Orders | £19.6m |
| Growth | +102% |
| Major Contract | Omantel (£42.5m 5-year term, Jan ‘26) |
Cerillion described its order book as ‘very strong’ and said it remains positioned to meet full-year market expectations.
🟢 What management is saying
Management highlighted that first-half performance was heavily influenced by revenue phasing rather than deteriorating demand.
The company stated that ‘very little high-margin software licence revenue was recognised in the first half’ and expects a stronger second half as contracts move into implementation and revenue recognition.
This distinction matters because Cerillion’s software licence revenues carry significantly higher margins than implementation work, meaning earnings can fluctuate materially depending on contract timing.
🧠 AI opportunity could become a growth driver
Cerillion’s core business centres on billing, charging, customer management and digital transformation software for telecom operators.
As telecom companies increasingly deploy AI-driven customer service, automated billing operations and real-time network monetisation tools, Cerillion has been integrating AI capabilities into customer experience and operational support systems. The broader telecom industry is investing heavily in automation to reduce costs and improve customer retention, creating a potentially attractive long-term demand backdrop.
For investors, the key attraction is that Cerillion already serves large telecom customers (such as Virgin Media and Liberty Global) and can potentially cross-sell AI-enhanced functionality through its existing platform rather than building an entirely new business line.
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The relative scale of new clients also matters. The telco industry has always been conservative and slow to adopt new opportunities, which makes the timing of revenue a bit unpredictable. This, the company firmly believes, will become less of an issue as Cerillion scales, allowing for smoother and more predictable revenue in the years ahead.
And as the Omantel contract suggests, there may be scope to expand across new sites and brands not included in the current contract. Such opportunities should be lower hanging fruit revenue opportunities that are not recognised in market expectations.
🧩 Valuation: Premium rating but backed by profits and cashflow
Cerillion remains one of the higher-quality software companies on AIM, supported by exceptional margins, strong cash generation and a net cash balance sheet.
| Valuation Metric | Current Level |
| Market Cap | £387m |
| Forward PE | 22.5x |
| EV/EBITDA | 16.8x |
| Net Cash | £32.5m |
| ROE | 30.7% |
| Operating Margin | ~45% |
A forward earnings multiple ~ 22x is not cheap for a company guiding to lower first-half profits. However, it looks more reasonable if investors believe the order book converts into renewed double-digit earnings growth over the next couple of years.
⚖️Analyst and market view
Market reaction to the April trading update was negative, with shares falling more than 5% after the company warned on first-half revenue and earnings. That the stock has already fallen from January highs of £17.50 explains why today’s reaction was muted.
Nevertheless, analysts are generally focusing on the record order intake, doubling of new orders and management’s confidence in meeting full-year expectations.
A growing number of UK private investors have also highlighted Cerillion’s long-term record of high-margin recurring revenue growth and significant outperformance versus the wider UK market.
📈 Investment verdict
For UK retail investors, Cerillion remains an interesting small-cap software growth story. The interim results are likely to look disappointing on traditional revenue and profit measures, but the much larger order book and strong second-half weighting suggest the market should focus on future revenue conversion rather than short-term earnings weakness.
The main risk is valuation. At more than 22x forward earnings, investors are already paying a premium for execution. If large contracts are delayed again, the shares could remain volatile.
However, if management delivers on its second-half expectations and successfully expands AI-related functionality across its telecom customer base, the current valuation still leaves room for attractive long-term returns. Cerillion sees itself doubling revenue over the coming 3-5 years. Depending on how profitably it can do that (sustainble margins of 45% are targeted), it could imply a market cap of ~£600m, and create a platform to push on to even bigger and better things.
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