Last close As at 05/08/2026
NOK99.00
▲ −1.50 (−1.49%)
Market capitalisation
NOK2,192m
Research: TMT
Zalaris reported its ninth consecutive quarter of year-on-year revenue growth in Q124, up to a record NOK318m. New contract momentum has continued, while the net retention rate of existing clients within Managed Services was 109%, driven by an increase in upselling of additional services. Profitability is improving as the benefits from its EBIT improvement programme are bearing fruit alongside operational leverage. Zalaris’s strong contract momentum has led us to upgrade our revenue estimates by 1.9% to NOK1,275m for the year at an improved adjusted EBIT margin of 10.9%, more closely reflecting the Q124 exit-margin. These results underpin management’s confidence in achieving its FY26 revenue target of NOK1.5bn at an adjusted EBIT margin of 12–15%. The company continues to undertake the strategic review that was announced in early-April, with management expecting to announce a conclusion in Q224.
Written by
Zalaris |
Continuing contract momentum in FY24 |
Q124 results |
Software and comp services |
9 May 2024 |
Share price performance
Business description
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Analysts
Zalaris is a research client of Edison Investment Research Limited |
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Zalaris reported its ninth consecutive quarter of year-on-year revenue growth in Q124, up to a record NOK318m. New contract momentum has continued, while the net retention rate of existing clients within Managed Services was 109%, driven by an increase in upselling of additional services. Profitability is improving as the benefits from its EBIT improvement programme are bearing fruit alongside operational leverage. Zalaris’s strong contract momentum has led us to upgrade our revenue estimates by 1.9% to NOK1,275m for the year at an improved adjusted EBIT margin of 10.9%, more closely reflecting the Q124 exit-margin. These results underpin management’s confidence in achieving its FY26 revenue target of NOK1.5bn at an adjusted EBIT margin of 12–15%. The company continues to undertake the strategic review that was announced in early-April, with management expecting to announce a conclusion in Q224.
Year end |
Revenue (NOKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/22 |
892.7 |
6.1 |
0.07 |
0.50 |
1,085.0 |
0.7 |
12/23 |
1,131.2 |
21.5 |
1.49 |
0.00 |
48.7 |
N/A |
12/24e |
1,275.4 |
104.3 |
3.86 |
0.95 |
18.8 |
1.3 |
12/25e |
1,410.1 |
131.7 |
4.98 |
1.10 |
14.6 |
1.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Positive Q124 results
Zalaris delivered another quarter of record revenue in Q124, up 22% y-o-y to NOK318.3m (Q123: NOK260.8m). The company continues to win new business and has a high net retention rate within Managed Services of 109%. EBIT improvement initiatives, mainly a greater use of nearshore and offshore locations, resulted in an 88% increase in adjusted EBIT to NOK34.8m (Q123: NOK18.5m), at an improved margin of 10.9% (Q123: 7.1%). Strong free cash flow benefited from the NOK42m sale of its Leipzig office, which helped to lower the net debt position (excluding leases) to NOK297.9m, with leverage reducing to 1.7x (FY23: 2.1x).
Contract pipeline remains buoyant
Zalaris won several significant new contracts in the quarter, including a four-year project implementing SAP HCM for the City of Berlin and a four-year application maintenance agreement with the state of North Rhine-Westphalia, which together have a total contract value of c NOK290m. Management noted that the pipeline for potential new contracts remains strong and that Zalaris is receiving more inbound interest from companies seeking to digitise their human capital management (HCM) systems.
Valuation: Substantial upside potential
Zalaris’ share price has risen substantially since the strategic review announcement on 2 April. Driven by our estimate changes, our DCF-based valuation has nudged up to NOK88.8 per share, from NOK87.1 in our initiation, 22% above the current share price. We believe this is relatively conservative given Zalaris’s strong contract momentum and margin improvements.
Q124 shows robust progress
Zalaris saw continued strong momentum in Q124, delivering its ninth consecutive quarter of revenue growth. Revenue came in at a record NOK318.3m (Q123: NOK260.8m), driven by strong growth in both of Zalaris’s business segments, Managed Services (+25%) and Professional Services (+15%). Notable contract wins in the quarter include those with the City of Berlin, the state of North Rhine-Westphalia and Vår Energi, a Norwegian energy company. These new wins, two of which are within Professional Services, showcase Zalaris’s position as a regional leader in human capital management solutions and services. Additionally, it continued its strong growth in Asia-Pacific, with 25 contracts signed in Q124. Management noted that the pipeline for potential new contracts remains strong and that Zalaris is receiving more inbound interest from companies seeking to digitise their HCM systems.
Profitability continued to progress due to the benefits realised through the EBIT improvement programme. The use of nearshore and offshore locations within the headcount mix improved in Q124, accounting for 41.6% of the headcount, up from 38.3% in Q123 and 40.4% in Q423. Alongside other operational efficiencies and leverage, Zalaris delivered a year-on-year 3.8pp expansion in the adjusted EBIT margin to 10.9% (Q123: 7.1%).
The company completed the sale of its Leipzig office for NOK42m, receiving net proceeds of NOK31m following the repayment of debt. With the improvement in profitability, partially offset by an increase in working capital due to the timing of public Easter holidays, free cash flow (including the proceeds from the sale of the Leipzig office for NOK41.9m) was much improved at NOK52.3m (Q123: outflow of NOK2.5m). Consequently, the net debt position (excluding leases) reduced to NOK297.9m (FY23: NOK314.8m), reflecting 1.7x adjusted EBITDA.
Exhibit 1: Q124 results summary
NOKm |
Q123 |
Q124 |
Revenue |
260.8 |
318.3 |
Y-o-y growth (%) |
22% |
|
Adjusted EBITDA |
29.6 |
50.9 |
Y-o-y growth (%) |
72% |
|
Adjusted EBIT |
18.5 |
34.8 |
Y-o-y growth (%) |
88% |
|
Operating cash flow |
(4.1) |
7.2 |
Investing cash flow |
(4.8) |
35.4 |
Financing cash flow |
36.1 |
(16.9) |
Net change in cash |
27.1 |
25.7 |
Net debt |
332.9 |
297.9 |
Y-o-y growth (%) |
-10% |
|
Net debt/adjusted EBITDA (LTM) |
3.32 |
1.73 |
Source: Zalaris
Updated forecasts
We have updated our revenue forecasts to reflect the good momentum shown in Zalaris’s contract wins as well as the commentary around the robust levels of demand within its pipeline. We now anticipate revenue growth in FY24 of 12.7% to NOK1,275.4m (previously NOK1,252.1m), driven by good progress made in Managed Services, robustness within Professional Services and the continued rapid growth of APAC. We anticipate a slightly improvement in the adjusted EBIT margin to 10.9% (previously 10.7%) to reflect the Q124 exit margin as Zalaris realises the benefits to its EBIT improvement programme. Our updated forecasts also include the confirmed numbers for the sale of the group’s Leipzig office that completed in the quarter.
We have maintained our FY25 revenue growth rate expectations, leading to an increase in our forecasts in line with FY24e of 1.9% to NOK1,410.1m (previously NOK1,384.3m). The expected adjusted EBIT margin has improved by 0.1pp given Zalaris’s operational leverage to 11.3% (previously 11.2%).
The changes to our estimates improve the expected net debt position in both years, resulting in an improved net debt (excluding leases) to adjusted EBITDA leverage ratio of 1.11x in FY24e and 0.80x in FY25e.
Exhibit 2: Summary forecast changes
NOKm |
FY24e |
FY24e |
FY25e |
FY25e |
|||
Old |
New |
Change |
Old |
New |
Change |
||
Revenues |
1,252.1 |
1,275.4 |
1.9% |
1,384.3 |
1,410.1 |
1.9% |
|
Adjusted EBIT |
134.5 |
138.6 |
3.0% |
155.4 |
159.7 |
2.8% |
|
Adjusted EBIT margin |
10.7% |
10.9% |
0.1ppt |
11.2% |
11.3% |
0.1ppt |
|
Reported operating profit |
122.5 |
137.1 |
11.9% |
143.4 |
147.7 |
3.0% |
|
Reported operating margin |
9.8% |
10.7% |
1.0ppt |
10.4% |
10.5% |
0.1ppt |
|
Normalised PBT |
103.2 |
104.3 |
1.1% |
130.3 |
131.7 |
1.1% |
|
Normalised basic EPS (NOK) |
3.81 |
3.86 |
1.2% |
4.93 |
4.98 |
1.1% |
|
Normalised diluted EPS (NOK) |
3.81 |
3.86 |
1.2% |
4.93 |
4.98 |
1.1% |
|
Net debt (ex leases) |
239.6 |
234.2 |
-2.3% |
194.3 |
191.4 |
-1.5% |
|
Net debt/adjusted EBITDA |
1.23 |
1.11 |
0.87 |
0.80 |
Source: Edison Investment Research
Exhibit 3: Financial summary
NOK'm |
2021 |
2022 |
2023 |
2024e |
2025e |
|
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
INCOME STATEMENT |
||||||
Revenue |
|
775.3 |
892.7 |
1,131.2 |
1,275.4 |
1,410.1 |
Costs |
(673.3) |
(786.6) |
(968.6) |
(1,052.2) |
(1,156.2) |
|
EBITDA |
|
101.9 |
106.2 |
162.6 |
223.2 |
253.8 |
Normalised operating profit |
|
39.8 |
46.2 |
95.8 |
138.6 |
159.7 |
Amortisation of acquired intangibles |
11.5 |
11.9 |
13.7 |
0.0 |
0.0 |
|
Exceptionals |
0.0 |
1.9 |
0.0 |
0.0 |
0.0 |
|
Share-based payments |
5.7 |
8.7 |
11.6 |
12.0 |
12.0 |
|
Reported operating profit |
22.6 |
23.7 |
70.5 |
126.6 |
147.7 |
|
Net Interest |
(7.6) |
(40.1) |
(74.2) |
(34.3) |
(28.0) |
|
JVS and associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Profit Before Tax (norm) |
|
32.2 |
6.1 |
21.5 |
104.3 |
131.7 |
Profit Before Tax (reported) |
|
15.0 |
(16.4) |
(3.7) |
102.8 |
119.7 |
Reported tax |
(2.2) |
(6.3) |
9.2 |
(22.6) |
(26.3) |
|
Profit After Tax (norm) |
30.0 |
(0.2) |
30.7 |
81.7 |
105.4 |
|
Profit After Tax (reported) |
12.8 |
(22.7) |
5.5 |
80.2 |
93.4 |
|
Minority interests |
0.0 |
1.6 |
0.8 |
0.0 |
0.0 |
|
Discontinued operations |
0.0 |
(16.0) |
(8.4) |
0.0 |
0.0 |
|
Net income (normalised) |
30.0 |
1.4 |
31.6 |
81.7 |
105.4 |
|
Net income (reported) |
12.8 |
(37.1) |
(2.1) |
80.2 |
93.4 |
|
Basic average number of shares outstanding (m) |
21 |
22 |
21 |
21 |
21 |
|
EPS - normalised (NOK) |
|
1.41 |
0.07 |
1.49 |
3.86 |
4.98 |
EPS - normalised fully diluted (NOK) |
|
1.32 |
0.07 |
1.29 |
3.86 |
4.98 |
EPS - basic reported (NOK) |
|
0.60 |
(1.72) |
(0.10) |
3.79 |
4.41 |
Dividend (NOK) |
0.35 |
0.50 |
0.00 |
0.95 |
1.10 |
|
Revenue growth (%) |
(-2.2) |
15.2 |
26.7 |
12.7 |
10.6 |
|
EBITDA Margin (%) |
13.2 |
11.9 |
14.4 |
17.5 |
18.0 |
|
Normalised Operating Margin (%) |
5.1 |
5.2 |
8.5 |
10.9 |
11.3 |
|
BALANCE SHEET |
||||||
Fixed Assets |
|
394.6 |
438.6 |
469.9 |
427.3 |
422.5 |
Intangible Assets |
308.0 |
315.0 |
327.6 |
294.7 |
291.0 |
|
Tangible Assets |
59.6 |
81.5 |
80.0 |
70.2 |
69.1 |
|
Investments & other |
27.0 |
42.2 |
62.3 |
62.3 |
62.3 |
|
Current Assets |
|
432.0 |
467.1 |
641.6 |
793.9 |
910.3 |
Stocks |
94.8 |
135.4 |
197.1 |
234.2 |
272.0 |
|
Debtors |
141.4 |
191.7 |
262.7 |
293.3 |
324.3 |
|
Cash & cash equivalents |
176.2 |
91.8 |
135.7 |
216.3 |
259.0 |
|
Other |
19.6 |
48.2 |
46.1 |
50.1 |
55.0 |
|
Current Liabilities |
|
(213.3) |
(669.6) |
(407.9) |
(437.4) |
(455.6) |
Creditors |
(84.7) |
(149.2) |
(220.7) |
(250.2) |
(268.4) |
|
Tax and social security |
(38.7) |
(41.0) |
(49.2) |
(49.2) |
(49.2) |
|
Short term borrowings |
(1.4) |
(369.7) |
(10.8) |
(10.8) |
(10.8) |
|
Other |
(88.6) |
(109.8) |
(127.3) |
(127.3) |
(127.3) |
|
Long Term Liabilities |
|
(404.3) |
(72.6) |
(500.6) |
(500.6) |
(500.6) |
Long term borrowings |
(374.3) |
(43.2) |
(468.5) |
(468.6) |
(468.6) |
|
Other long term liabilities |
(30.0) |
(29.3) |
(32.1) |
(32.1) |
(32.1) |
|
Net Assets |
|
209.0 |
163.6 |
203.0 |
283.1 |
376.5 |
Minority interests |
0.0 |
(1.6) |
(2.4) |
(2.4) |
(2.4) |
|
Shareholders' equity |
|
209.0 |
162.0 |
200.5 |
280.7 |
374.1 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
43.0 |
(22.2) |
(11.7) |
123.4 |
131.9 |
|
Working capital |
(18.6) |
(33.2) |
(43.1) |
(30.7) |
(31.8) |
|
Exceptional & other |
(6.2) |
28.9 |
50.1 |
(7.9) |
2.6 |
|
Net revenue deferred/(recognised) |
19.7 |
41.3 |
74.7 |
25.5 |
14.1 |
|
Tax |
(4.8) |
(14.4) |
(11.5) |
(22.6) |
(26.3) |
|
Net operating cash flow |
|
33.0 |
0.4 |
58.6 |
87.7 |
90.5 |
Capex |
(20.6) |
(27.8) |
(33.9) |
(22.0) |
(20.0) |
|
Acquisitions/disposals |
(43.3) |
(11.3) |
0.0 |
0.0 |
0.0 |
|
Net interest |
(11.9) |
20.2 |
38.5 |
2.6 |
2.6 |
|
Equity financing |
6.3 |
(17.8) |
0.9 |
0.0 |
0.0 |
|
Dividends |
(19.6) |
(7.6) |
0.0 |
0.0 |
0.0 |
|
Other |
109.7 |
(38.7) |
(20.7) |
12.3 |
(30.4) |
|
Net Cash Flow |
53.5 |
(82.6) |
43.3 |
80.6 |
42.7 |
|
Opening net debt/(cash) including leases |
|
275.1 |
213.9 |
338.9 |
362.1 |
281.5 |
FX |
(2.2) |
(0.1) |
(0.8) |
0.0 |
0.0 |
|
Other non-cash movements |
(112.6) |
207.8 |
(19.4) |
(161.2) |
(85.5) |
|
Closing net debt/(cash) including leases |
|
213.9 |
338.9 |
362.1 |
281.5 |
238.7 |
Source: Zalaris accounts, Edison Investment Research
|
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