Canaccord Genuity cuts target price for Cerillion but stays bullish

(Sharecast News) - Shares in Cerillion dropped on Monday on the back of weaker first-half results, though broker Canaccord Genuity maintained a positive view on the stock, predicting a strong second half from the the billing, charging and customer relationship management software provider.

As previously flagged, muted recognition of high-margin software licence revenue (down 19% over last year) coupled with 12% decline in services revenues meant that first-half sales softened 14% to �18.0m for the six months ended 31 March.

As a result, adjusted EBITDA fell 38% to �6.2m, while adjusted profit before tax declined 41% to �5.5m.

The company said the drop reflected the timing of new orders from both new and existing customers, but material software licence revenue was expected to be recognised in the second half.

"Cerillion's trading update telegraphed another 2H-weighted year in the making and today's interims provide us with further comfort that its record Omantel win can drive a strong second half and double-digit organic growth for the year," Canaccord Genuity said.

The broker kept a 'buy' rating, but lowered its target price from 2,250p to 2,060p, saying that while there is "a lot to do in the second half", visibility remains good.

"Assuming the company delivers on our FY26 forecasts, the implied mid-teens % yoy growth is materially better than industry peers that have been seeing mostly flat-ish sales. We view this as evidence that Cerillion's long-term secular market share gainer story is intact with its deep vertical expertise protecting it well from potential future AI risks," Canaccord Genuity said.

The stock was down 3.6% at 1,350p by 1325 BST.