Canaccord Genuity stays at 'buy' on Cerillion
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16:55 08/12/23
Analysts at Canaccord Genuity reiterated their 'buy' rating on software and services firm Cerillion on Monday after the group's trading update revealed that full-year consensus expectations had been "conservative".
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Cerillion has now pointed to full-year revenues being slightly ahead of consensus estimates of £32.0m and Canaccord Genuity's £30.8m prediction.
The Canadian bank estimates implied organic growth of roughly 20%, while adjusted pre-tax profits were guided to be "materially ahead of consensus" estimates of approximately £10.0m - benefiting mainly from higher staff utilisation rates lifting gross margins on the back of a "hot" demand environment and aided further by foreign exchange tailwinds.
"Overall, we estimate a 10-20% beat of consensus profit expectations, with adj. operating margins likely relatively stable yoy in the low 30s%," said Canaccord.
"The company closed the year with net cash of ~£20m, equivalent to 7% of the market cap and ahead of our £18m forecast. We estimate this implies free cash flow of almost £10m for the year, suggesting an impressive near-100% conversion of adj. net profit."
Canaccord opted to leave its forecasts unchanged for now and said it will review them with the group's 2022 full-year results, expected to be published in late November.
Reporting by Iain Gilbert at Sharecast.com