Cerillion (AIM: CER) shares fall 12% as delayed software orders leave FY26 revenue up to £6.8m below forecast

Cerillion plc (AIM: CER) fell sharply on September 14 after the telecom billing and customer-management software provider acknowledged that the heavily second-half-weighted recovery anticipated earlier this year will not be enough to meet market expectations. Revenue for the year ending September 30 is now expected at £46 million to £48 million compared with prior consensus of £52.8 million, while adjusted EBITDA margin is forecast at 43% to 45% versus earlier consensus of 45.2%. Delayed London data showed Cerillion shares around 780p during the session, down approximately 11.9% and valuing the company at about £230 million.

The warning is particularly notable because Cerillion entered H2 with a record order book and had repeatedly told investors that licence revenue phasing would make the second half substantially stronger. H2 will indeed be significantly ahead of H1, according to the company, but delayed and deferred customer decisions mean some anticipated software licence expansions and upgrades will no longer land early enough to deliver the original FY26 forecast.

How large is Cerillion’s revenue miss compared with previous market expectations?

At the bottom of the new £46 million to £48 million range, revenue would be £6.8 million below the previous £52.8 million consensus, a shortfall of almost 13%. Even the top of the range implies a miss of approximately £4.8 million, or 9%. The midpoint of £47 million is roughly 11% below the previous market expectation.

The comparison with FY25 is more nuanced. Cerillion generated £45.4 million of revenue and an adjusted EBITDA margin of 50.9% in the previous financial year, meaning the latest range still implies modest annual revenue growth. However, the projected 43% to 45% FY26 margin would be materially lower than last year’s 50.9%, signalling that the issue extends beyond timing into an unfavourable revenue mix.

High-margin software licences are particularly important to Cerillion’s profitability. When those orders move between periods, the financial impact can be disproportionate because the associated licence revenue carries considerably more margin than implementation and service work. That explains why a roughly 10% revenue miss can provoke a much more serious investor reassessment of earnings quality.

Why did Cerillion’s record £82.1 million backlog not protect FY26 guidance?

At March 31, Cerillion’s back-order book stood at a record £82.1 million, up 64% year on year, while new orders had more than doubled to £39.6 million. Net cash was £32.5 million, annualised recurring revenue reached £19.1 million and the new-business pipeline stood at a record £271 million even after securing its £42.5 million Omantel contract.

Those numbers remain substantial, but backlog is not the same as revenue recognised in a particular accounting period. Only around 39% of the £72.6 million of contracted orders excluding annualised support and maintenance was expected to be recognised within 12 months of March 31. Customer timing, licence activation and project milestones therefore determine how quickly signed business appears in the income statement.

September 14 is a reminder that strong contracted demand can coexist with earnings volatility. Cerillion has not said customers cancelled the major projects; instead, some licence expansions and upgrades were delayed or deferred. That potentially preserves future revenue but provides little comfort to investors whose valuation assumptions were based on those earnings arriving during FY26.

Do Omantel and UCom still support Cerillion’s longer-term growth story?

Operational progress on Cerillion’s largest projects continues. The company said software installation at Omantel has been completed, while the transformation project at UCom is nearing completion. Management also said the back-order book remains strong, the new-customer pipeline remains healthy and the balance sheet remains very robust.

The £42.5 million five-year Omantel contract, announced in January, remains particularly significant because it was Cerillion’s largest ever contract and provides a high-profile reference customer in the Middle East. The question is no longer whether the company can win large contracts, but whether it can translate the expanding order book into predictable recognised revenue quarter after quarter.

That distinction is important for valuation. Businesses with high recurring income and predictable licence recognition generally command higher earnings multiples than companies whose annual results can change materially because a few customer approvals move between September and October.

Has the 12% CER share-price fall created an opportunity or exposed a forecasting problem?

Cerillion’s balance sheet provides considerable protection. The £32.5 million net-cash position reported at March 31 means the company is not facing the type of liquidity problem that often accompanies AIM profit warnings, and the warning appears rooted in revenue timing rather than customer solvency or project failure.

However, forecasting credibility becomes more important after management repeatedly highlighted a significant H2 weighting and then failed to deliver the expected full-year outcome. Investors will want the November final results to provide clarity on which orders slipped, when they are now expected to be recognised and whether FY27 begins with an unusually strong carryover.

The September 14 sell-off therefore reflects more than one missed annual number. Cerillion still has a large backlog, cash-rich balance sheet and major customer implementations, but the market is applying a discount for reduced earnings visibility. If deferred licences simply move into FY27, some of today’s value may eventually reappear; if delays signal slower customer decision-making more broadly, the reset could prove more durable.