Cerillion was founded in October 1999 following a Management Buyout (MBO) of the in-house Customer Care and Billing product division of Logica PLC. The company was led then, as it is now, by CEO Louis Hall. After growing as a private entity for 16 years, Cerillion admitted its shares to trading on the AIM market of the London Stock Exchange on 18 March 2016. This IPO marked a strategic pivot, providing the capital and credibility needed to target larger Tier-1 customers.  

Cerillion specializes in the design, development, and implementation of mission-critical enterprise software solutions for the telecommunications industry, with a secondary but strategic footprint in the financial services and utilities sectors.

Cerillion stands as a distinguished outlier within the UK small-cap technology landscape, characterized by a potent combination of high-margin proprietary intellectual property, mission-critical workflow entrenchment, and a financial profile that exhibits the hallmarks of a "Quality" compounder. Having transitioned from its origins as a management buyout from Logica in 1999 to its current status as a leading provider of Billing, Charging, and Customer Relationship Management (CRM) software, the group has cultivated a niche dominance that insulates it from the commoditization pressures often observed in broader SaaS markets.

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Cerillion PLC specializes in the design, development, and implementation of mission-critical enterprise software solutions for the telecommunications industry, with a secondary but strategic footprint in the financial services and utilities sectors. At its core, the company provides a pre-integrated Business Support Systems (BSS) and Operations Support Systems (OSS) suite. The distinction between BSS and OSS is fundamental to understanding the company's operational domain. BSS refers to the customer-facing aspects of a telecommunications operator's business—billing, charging, customer relationship management (CRM), and order handling. Conversely, OSS deals with the technical backend—network inventory, service provisioning, and activation. Cerillion’s value proposition lies in its ability to offer these typically disparate functions as a unified, pre-integrated platform, thereby reducing the integration headaches that have historically plagued the telecom software market.   

The product portfolio is extensive and modular. Key components include the Convergent Charging System (CCS), which handles real-time rating and charging for voice and data services, allowing operators to bill for prepaid and postpaid services on a single platform. CRM Plus manages the entire customer lifecycle from lead generation to customer support, while Revenue Manager serves as the billing engine capable of handling complex hierarchies and multi-country operations. Beyond the traditional on-premise solutions, Cerillion has aggressively pivoted towards cloud-native architectures with Cerillion Skyline, a SaaS billing application designed for the broader subscription economy, and Cerillion Metro, a solution tailored for the emerging Smart City infrastructure market.   

Business Model and Mechanics Cerillion operates a "product-based" business model that is progressively transitioning towards a recurring revenue model characterized by Software-as-a-Service (SaaS) and managed services. Unlike systems integrators who build bespoke software from scratch for each client, Cerillion maintains a single product code base. This code base is configured—not customized—to meet individual client needs. This distinction is critical: it allows Cerillion to benefit from R&D economies of scale, as an upgrade developed for one client can theoretically be rolled out to the entire installed base.   

The business works by securing long-term contracts with Communication Service Providers (CSPs), which can range from mobile network operators to wholesale fiber providers. The engagement typically begins with a significant implementation phase, often lasting 12 to 18 months for large Tier-1 clients, during which Cerillion’s professional services team migrates the client’s legacy data and configures the system. Once the system is live, the relationship shifts to a long-term operational phase, generating high-margin recurring revenue through support, maintenance, and license fees.   

Revenue Generation The company generates revenue through three primary channels, each with distinct margin profiles and strategic importance:

Complexity and Understandability To a layperson, the business is conceptually simple: Cerillion provides the "cash register" and "customer database" for phone and internet companies. Every time a consumer makes a call, downloads a gigabyte of data, or pays a monthly broadband bill, software like Cerillion's is responsible for calculating the cost, applying the correct tariff, and processing the transaction. However, the underlying mechanics are highly complex. The software must handle real-time "convergent" charging (e.g., stopping a data stream the millisecond a prepaid balance runs out) and manage intricate B2B2X hierarchies. This technical nuance creates a high barrier to entry and makes the business difficult to replicate without deep industry domain expertise.   

Evolution of the Business The most notable shift in recent years has been the successful penetration of the Tier-1 market—large national operators like Virgin Media Ireland and Cable & Wireless. Furthermore, the technological architecture has shifted from on-premise installations to cloud-native SaaS deployments, aligning with the broader industry trend towards digital transformation.   

To understand Cerillion’s value proposition, one must first appreciate the technological crisis facing modern telecommunications operators. For decades, CSPs have built their IT stacks in silos: one system for mobile billing, another for fixed-line broadband, a third for enterprise data, and a fourth for customer support. These disparate systems were often stitched together using custom code and middleware, resulting in what the industry pejoratively terms "spaghetti architecture." This complexity makes launching new products slow, expensive, and prone to error.

Cerillion solves this problem with its Enterprise BSS/OSS Suite. Unlike competitors who offer "best-of-breed" components that require extensive integration, Cerillion provides a pre-integrated, product-based suite. This means the software is designed from the ground up to work as a unified whole, covering the entire lifecycle of a customer interaction—from the moment a customer orders a service (CRM/Ordering) to the moment they are billed (Billing/Charging) and the service is activated on the network (Provisioning).

Cerillion’s client base spans approximately 80 installations across 45 countries. The customer demographic has historically skewed towards Tier-2 and Tier-3 operators—agile challengers who value Cerillion’s speed of deployment over the heavy, customized solutions offered by giants like Amdocs or Netcracker.

However, FY2025 marked a definitive breakout into the Tier-1 ecosystem. The Group signed a landmark £25.3 million deal with an existing European customer to migrate a newly acquired Tier-1 mobile base onto the Cerillion platform. This deal is significant for three reasons:

The geographic footprint is diversifying. Significant wins in FY2025 included a $11.4 million (£8.5 million) contract with Ucom, a leading provider in Armenia, and major implementations for Virgin Media Ireland and Paratus in Southern Africa. This global spread hedges against regional economic downturns, although it introduces currency exposure (USD/EUR) which the Group manages effectively, as evidenced by favorable FX movements contributing to FY25 margins.

Competitive Advantages

Cerillion enjoys a Wide Moat, primarily derived from High Switching Costs. In the hierarchy of enterprise software stickiness, core BSS/OSS systems sit at the very top. Replacing a billing system is comparable to performing a heart transplant on a runner while they are running a marathon. It involves migrating millions of sensitive customer records, billing histories, and active service configurations. The risk of failure involves revenue leakage, service outages, and massive reputational damage. Consequently, once a telco installs Cerillion, they are extremely unlikely to switch. This is evidenced by customer relationships that typically last over 10 years.   

A secondary source of advantage is Product Complexity. The ability to handle "convergent" charging—billing for voice, data, content, and IoT services in real-time on a single invoice—is technically demanding. Cerillion’s pre-integrated suite offers this capability out-of-the-box, creating a barrier against generic ERP or CRM vendors trying to enter the telecom vertical.   

Sustainability and Threats

The moat is highly sustainable. The trend towards more complex service bundles (e.g., 5G slicing, IoT) increases the reliance on sophisticated billing engines, deepening the lock-in. However, threats exist. The primary threat is technological disruption from "open architecture" standards. If the industry moves entirely to plug-and-play microservices where billing engines can be swapped out easily (a goal of the TM Forum's Open Digital Architecture), Cerillion’s switching cost advantage could erode. Additionally, immense competitors like Amdocs possess the balance sheet to engage in price wars or bundle services to squeeze out smaller players like Cerillion.   

Strengthening the Advantage: R&D

Cerillion aggressively reinvests to widen its moat. In 2025, the company increased its R&D effort by 34%. This investment is targeted at keeping the product suite at the bleeding edge of technology, ensuring clients have no feature-based reason to leave. A key focus has been the integration of Generative AI (GenAI) into the platform, launched as "Cerillion 25.2" in October 2025. This allows users to create new products and packages using natural language, significantly reducing time-to-market for telcos and increasing the software's stickiness. The company capitalizes a portion of this spend (£1.8m in 2025), but the total gross spend is higher, reflecting a commitment to innovation.   

Value Proposition: 

Cerillion’s product is unequivocally a pain-killer. It alleviates the specific pains of revenue leakage (failing to bill for services provided) and operational rigidity (being unable to launch new tariff plans quickly). Customers are wholly dependent on the business; without it, they cannot monetize their networks. If Cerillion disappeared, its customers would face an operational crisis of the highest order.

Pricing Power

The company acts as a price-maker for its installed base. The high switching costs allow Cerillion to pass on inflationary costs (e.g., wage increases) through increased day rates for services and annual maintenance fee adjustments. Gross margins expanding to 81.5% in 2025 are a testament to this pricing power. For new business, it acts as a disruptor, often winning on value (lower TCO) against pricier incumbents.   

Brand and IP

While not a consumer household name, Cerillion has a strong B2B brand, recognized as a "Visionary" by Gartner. Its intellectual property portfolio consists of the proprietary source code of its pre-integrated suite. While specific patent numbers are not disclosed in detail, the complexity of the 20+ years of code development serves as a formidable trade secret and barrier to replication.   

Cerillion Plc's revenue grew from £14.8 million in FY2016 (pre-IPO year) to £45.4 million in FY2025, delivering a 15% CAGR since listing on AIM in March 2016.

The fiscal year ended 30 September 2025 (FY2025) represents a pivotal inflection point in the Company’s operational narrative. While headline revenue growth appeared modest at 4% year-on-year, reaching £45.4 million, this figure masks a profound underlying acceleration in commercial momentum. The Group secured a record order intake of £47.6 million, a substantial 25% increase over the prior year, driving the back-order book to an unprecedented £56.9 million. This divergence between recognized revenue and order intake is a classic leading indicator in enterprise software, suggesting a coiling spring of future revenue recognition that provides exceptional visibility into FY2026 and beyond.

Cerillion Plc's statutory Profit Before Tax (PBT), serving as the primary EBIT proxy in its AIM reporting, expanded from £2.2 million in FY2016 to £21.7 million in FY2025, compounding at 34% annually since its March 2016 IPO.

EBIT margins tripled from 15% to 48% via SaaS scaling and efficiency, with acceleration post-FY2020 from Tier-1 contracts. FY2025 moderation precedes backlog conversion from the £56.9 million order book.​%. This margin profile is rare. It indicates that the company has reached a scale where the installed base covers all fixed costs, and new wins are immensely accretive. The CEO explicitly states that "the model naturally drives profitability" because the same software core is used for every customer, with no incremental cost of production for additional licenses.  

Return on Invested Capital (ROIC). The company exhibits exceptional capital efficiency. Cerillion boasts an average ROIC of approximately 49% over the last four years (2022–2025), a massive step-change from its historical average of roughly 13-15% prior to 2021. The latest ROIC for September 2025 remains elite at 49.9%. Such high and sustained returns on capital are uncommon even in the software industry and serve as a strong indicator that the company possesses significant, durable competitive advantages. This implies that for every pound of capital invested in its core operations, Cerillion generates roughly 50 pence of operating profit, far exceeding its cost of capital. This exceptional capital efficiency is a direct quantitative validation of Cerillion’s qualitative competitive advantage, stemming from its high switching costs, mission-critical intellectual property, and the operational leverage of its SaaS platform. It means the company can self-fund its growth without debt or shareholder dilution, while simultaneously accumulating a large cash pile (£34.4m), leading to powerful compounding of intrinsic value over time.

Return on Capital Employed (ROCE). Cerillion reported a ROCE of 35.8% for September 2025. While this is lower than its ROIC, it remains well above the market average and indicates a highly profitable use of shareholder equity and long-term liabilities. The discrepancy between the higher ROIC (49.9%) and the lower ROCE (35.8%) is actually a positive signal: it reveals that the company holds a significant amount of excess cash on its balance sheet which is not required for daily operations. This "lazy capital" dilutes the headline ROCE figure but provides the company with immense optionality for future dividends, buybacks, or strategic M&A. This characteristic is a prime target for long-term investors seeking businesses with "fortress balance sheets" that protect the downside while the core engine generates superior returns.

Greenblatt’s Return on Capital (ROC). The company exhibits the "infinite return" characteristics sought by the Magic Formula. Although not explicitly listed in the table, the underlying components—specifically the negative working capital dynamic typical of Cerillion’s prepaid software model—suggest an astronomical Greenblatt ROC. Because customers pay upfront for licenses and support (creating Deferred Revenue), Cerillion operates with very little, if any, tangible capital tied up in the business. Combined with a low fixed-asset base (Fixed Asset Turnover of 14.9x), the capital actually required to run the business is minimal. This implies that Cerillion is effectively funded by its customers rather than its shareholders. This exceptional efficiency is a direct quantitative validation of the company's superior business model, where growth requires almost no incremental capital investment, allowing nearly 100% of profits to be converted into Free Cash Flow.

Balance Sheet Strength

Net Cash: £34.4 million.   

Debt: Zero.

Implication: In a high-interest-rate environment, this balance sheet is a strategic asset. It generates interest income (offsetting finance costs) and provides a safety net that highly leveraged competitors (often PE-backed) lack. It effectively removes bankruptcy risk from the investment thesis.

Louis Hall is the founder and has served as CEO since the 1999 MBO. He is a classic "owner-operator" with deep industry knowledge. Ownership & Sales: Historically, Hall held a massive stake (>30%). However, in June 2025, he executed a significant secondary share sale, disposing of 3 million shares (~10% of the company) for £45.6 million. Post-sale, he retains a 20.1% stake (5.9 million shares). While diversification after 25 years is rational, such a large sale can be interpreted as a signal that the founder believes the valuation is full or that he is preparing for an eventual exit. Compensation: In 2024, the CEO's total compensation was £767,000 (Salary £363k). This is modest relative to the £21.7m profit the company generates, indicating he is paid primarily through his equity stake rather than salary extraction.   

Soul in the Game

Despite the sale, Louis Hall’s remaining 20% stake and 26-year tenure evidence deep "soul in the game." The company's mission—to deliver "certainty of outcome"—reflects a culture of reliability and engineering excellence rather than promotional hype. The board comprises experienced industry veterans, including Non-Executive Chairman Alan Howarth and CFO Andrew Dickson.   

Operations

The management style appears conservative and decentralized regarding project delivery but centralized in strategy. Decisions on capital allocation have been disciplined—avoiding flashy, destructive M&A in favor of organic compounding and dividends. The long tenure of the leadership team suggests a long-range outlook, prioritizing the stability of the platform over quarterly beat-and-raise dynamics.   

Valuing Cerillion requires balancing its current "quality" premium against the temporary lag in top-line growth.

Based on the current market capitalization of ~£375m and Enterprise Value (EV) of ~£341m (£375m - £34.4m cash):

Peer Comparison:

In SaaS investing, the "Rule of 40" (Revenue Growth % + EBITDA Margin %) is a standard benchmark.

Despite the bullish thesis, several risks warrant careful monitoring.

However, the downside is elevated binary risk. With nearly one-third of revenue tied to a single entity, the company’s fortunes are increasingly correlated with the strategic stability of just a few clients. If a top customer were to be acquired by a global giant standardized on a rival stack (e.g., Amdocs or Netcracker), Cerillion could face displacement risk driven by corporate mandates rather than product performance.

Cerillion plc concludes FY2025 as a company in robust health. The divergence between its modest headline revenue growth (+4%) and its surging commercial momentum (New Orders +25%, Backlog +21%) creates a compelling opportunity for the discerning investor. The market is currently pricing Cerillion based on its trailing growth, potentially overlooking the inevitable acceleration secured by its record order book.

Key Takeaways:

Investment Verdict:

For investors seeking exposure to the digital transformation of telecommunications infrastructure—without the heavy capital expenditure risks of owning the towers or fiber—Cerillion represents a high-quality, lower-risk vehicle. While the valuation (22.7x P/E) demands continued execution, the quality of earnings and the predictability of the recurring revenue stream justify the premium. The stock remains a core holding for "Quality Growth" portfolios.