16th Oct 2023 13:05
(Alliance News) - Berenberg upgraded its forecast for Cerillion on Monday after the company said it expects its full-year profit to be "meaningfully ahead" of market forecasts due to a strong order book and sales pipeline in the second half.
The London-based billing, charging and customer relationship management software solutions provider said it will beat adjusted pretax profit market expectations of GBP14.3 million in the financial year ended September 30, and expects revenue of around GBP39.0 million.
This would be an increase from the adjusted pretax profit GBP11.9 million and GBP32.7 million revenue achieved in financial 2022.
Berenberg upgraded its financial 2023 adjusted pretax profit for Cerillion by 17% to GBP16.0 million. It also made a "minor" change to its financial 2023 revenue forecast, lifting it to GBP39 million.
"The upgrade is predominantly driven by a higher proportion of licence revenue and an increase in our net finance income. We update our net cash forecast to GBP24.7 million. This is lower relative to our GBP28.1 million prior forecast and reflective of the build-up in accrued income," the bank said.
Berenberg noted that Cerillion's new customer pipeline has grown in the second half of the year, from what it acknowledged was already a "record level" in the first half of the year.
"Any significant new contract wins will lead to upside risk to [financial 2024/2025] consensus," Berenberg said.
Berenberg explained that Cerillion's shares are currently trading on a 24.4 times financial 2024 price-to-earnings ratio but added that it sees a 33% upside to its price target for the firm of 1,400 pence.
Cerillion shares were up 11% at 1,174.00 pence on Monday afternoon in London, they have fallen 6.1% in the past month and are down 2.2% in the year to date.
Berenberg said this move downwards is "unwarranted" and highlighted the recent share price weakness as a "significant buying opportunity" to obtain exposure to "one of the highest-quality organic growth stories in the UK listed market."
Berenberg rates Cerillion at 'buy'.
By Heather Rydings, Alliance News senior economics reporter
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