Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
CREALOGIX continues to pursue its goal of becoming a leading global SaaS digital banking software provider. It reported a 5% fall in H120 revenues to CHF48.6m (H119: CHF51.0m) (c 2% fall on a constant currency basis) and H120 EBITDA of CHF0.4m (H119: CHF3.3m). Recurring revenues now represent 47% of total sales (up from 42% in FY19) and the group reported positive free cash flow of CHF4.9m (H119: CHF2.1m loss). The SaaS transition will continue to drag on results in FY20/21 but with CHF34m of cash (CHF3.8m net cash), the group is well placed to weather any short-term impact from COVID-19 on its business (no impact yet, too early to quantify) and complete its SaaS transformation.
Written by
CREALOGIX Group |
Well-funded, transformation progressing |
Interim results |
Software & comp services |
24 March 2020 |
Share price performance
Business description
Next events
Analysts
CREALOGIX Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||
CREALOGIX continues to pursue its goal of becoming a leading global SaaS digital banking software provider. It reported a 5% fall in H120 revenues to CHF48.6m (H119: CHF51.0m) (c 2% fall on a constant currency basis) and H120 EBITDA of CHF0.4m (H119: CHF3.3m). Recurring revenues now represent 47% of total sales (up from 42% in FY19) and the group reported positive free cash flow of CHF4.9m (H119: CHF2.1m loss). The SaaS transition will continue to drag on results in FY20/21 but with CHF34m of cash (CHF3.8m net cash), the group is well placed to weather any short-term impact from COVID-19 on its business (no impact yet, too early to quantify) and complete its SaaS transformation.
Year end |
Revenue (CHFm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/18 |
87.1 |
5.0 |
2.39 |
0.25 |
34.6 |
0.3 |
06/19 |
101.9 |
(1.7) |
(0.94) |
0.00 |
N/A |
0.0 |
06/20e |
105.5 |
(0.5) |
(0.27) |
0.00 |
N/A |
0.0 |
06/21e |
111.1 |
1.6 |
0.83 |
0.25 |
99.5 |
0.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Interim results
CREALOGIX continues to progress its transformation programme (acceleration of its change to a SaaS model, investment in modularising its Digital Banking Hub and broadening its international implementation partnerships), which will continue to drag on its FY20/FY21 results. H120 revenues decreased by 5% to CHF48.6m (H119: CHF51.0m), a 2% drop on a constant currency (CC) basis. SaaS/Hosting revenues grew by 6% (10% CC) to CHF8.0m (H119: CHF7.6m), with recurring revenue business representing 47% of H120 group sales, from 42% in FY19. International sales, outside Switzerland, constituted 66% of total revenue, up from 64% in H119. The EBITDA margin for H120 fell to 0.8% (H119: 6.4%) but free cash flow improved by CHF7.0m to CHF4.9m in H120, from a CHF2.1m loss in H119.
COVID-19: Strong cash position
To date, CREALOGIX has not yet seen any adverse impact on its business from COVID-19. As a technology business, its staff are well prepared to work remotely; however, management recognises there may be an impact on client banking teams and their ability to execute new technology implementations. Although it is too early to quantify the risk, management anticipates this could lead to short-term project delays but expects no impact on the medium-term prospects for the group. Following its convertible bond refinancing in November, CREALOGIX had gross cash at 31 December 2019 of CHF34m, net cash of CHF3.8m.
Valuation: Upside potential post-transition
With management confident of its medium-term targets, based on our unchanged FY22e estimates (revenues CHF116m, EBITDA CHF13m), peer group multiples would suggest an EV of CHF200m+ is achievable (a 100% premium to today’s share price). For investors willing to take a medium-term view, CREALOGIX remains a defensive play, with an attractive valuation, particularly when compared to its closest peers, of 1.1x FY20e sales.
Interim results
H120 revenues decreased by 5% to CHF48.6m (H119: CHF51.0m), a 2% drop on a CC basis. SaaS/Hosting revenues grew by 6% (10% CC) to CHF8.0m (H119: CHF7.6m), with recurring revenue business representing 47% of H120 group sales, from 42% in FY19. International sales, outside Switzerland, represented 66% of total revenue, up from 64% in H119. The EBITDA margin for H120 fell to 0.8% from 6.4% for H119 but free cash flow rose by CHF7.0m to CHF4.9m in H120 from a CHF2.1m loss in H119.
CREALOGIX continues to make progress on its transformation programme (acceleration of its change to a SaaS model, investment in modularising its Digital Banking Hub and broadening its international implementation partnerships) but, as previously announced, this will continue to drag on results in FY20 and FY21. As well as the SaaS transition, the relative strength of the Swiss franc has also been a headwind in H120. However, management remains confident the group’s investment in the consolidation and standardisation of its product portfolio will deliver economies of scale and efficiency gains, with demand for its SaaS offering increasing steadily.
SaaS transformation: Revenue dynamics
As management has highlighted, the move to SaaS impacts organic revenue growth and margins – management estimated that H120 revenue and EBITDA were CHF4.8m lower as a result. This is because, in its first year, a CHF1m traditional (one-off) perpetual licence deal would typically generate CHF1m, together with an additional 20% of maintenance revenues. However, on a SaaS basis this might be only c CHF0.45m pa (ie CHF1.8m/four years). Additionally, SaaS revenues are recognised pro-rata, so if the contract above was signed in the last month of the period, it would only generate CHF38k of revenue in that period. However, the SaaS model is more lucrative over the long term, breaking even after four years and generating significant revenue upside thereafter (ie CHF0.45m vs CHF0.2m annually for the perpetual licence model).
Product development: Enhancing the hub
In H120, CREALOGIX has continued modularising and consolidating its Digital Banking Hub, including ‘sunsetting’ certain product features and investing in new product development. New developments to be launched later in CY20 include a Conversational Engagement App, a cloud-based offering that allows banks to communicate securely with their customer base, enabling delivery of, for example, chat or video-based investment advice. Management also introduced an enhanced multi-banking solution to support open banking, particularly targeted at the Swiss and German markets. This solution offers a one-stop shop to both corporate and retail customers, allowing them to monitor and manage their liquidity across banks and bank accounts.
Internationalisation: New client wins
International sales, outside Switzerland, represented 66% of total revenue in H120, up from 64% in H119. In addition to smaller contracts and projects, notable new contract wins in H120 included a Swiss SME bank, Valiant, which licensed the new multibanking module from CREALOGIX and Killik & Co, a UK wealth manager that has licensed CREALOGIX’s Digital Engagement Platform. CREALOGIX also acquired two new Tier 1 clients: a leading Southeast Asian bank (representative of increasing demand for digital banking solutions for an increasingly affluent middle-class in the region) and Raiffeisenverband Südtirol. CREALOGIX also won a comprehensive digital transformation project for a major Saudi Arabian customer, with the opening of a CREALOGIX branch in Riyadh.
Financials: H2 weighted, before any COVID-19 impact
We have updated our forecasts to reflect the refinancing of the convertible bond in November 2019, but otherwise our headline revenue and EBITDA numbers remain unchanged for the moment. Although CREALOGIX has yet to see an adverse impact on its business from COVID-19 with just over three months left before the end of the financial year, we note that FY20 risk is clearly on the downside due to its negative (but as yet unquantified) impact on the economy and business.
To achieve our FY20 revenue estimate, H220 overall sales need to increase by 17% over H120. The Goods service line, although only 4.5% of overall turnover, is furthest adrift, needing to more than double in H2 versus H1; however, we understand that a forthcoming Swiss regulatory change (the introduction of the QR-bill in June, whereby all Swiss payment slips will be replaced by a new QR code – meaning all invoice processors in Switzerland must update their systems to allow payment of QR-bills within a 2 year grace period) should mean this increase will show in Q420. The other service line most behind is Licensing fees, with a major order expected close to the end of the financial year.
Hosting and SaaS revenue grew to CHF8.0m in H120 from CHF7.6m in H119. Recurring revenue (Hosting/SaaS plus maintenance) increased to CHF22.7m from CHF20.5m in H119, with our forecast indicating CHF18.1m for FY20.
Exhibit 1: Half-by-half analysis
CHF000s |
2019 |
2020e |
|
2021e |
|
|||||
H1A |
H2A |
FY |
H1A |
H2F |
H2/H1 change |
FY |
Y-o-y change |
FY |
Y-o-y change |
|
Services |
20,499 |
21,003 |
41,502 |
20,110 |
20,903 |
4% |
41,013 |
-1% |
39,550 |
-4% |
Goods |
2,519 |
2,557 |
5,076 |
1,408 |
3,160 |
124% |
4,568 |
-10% |
4,112 |
-10% |
Hosting and SaaS services |
7,604 |
7,125 |
14,729 |
8,032 |
10,058 |
25% |
18,090 |
23% |
25,920 |
43% |
Maintenance |
14,693 |
13,411 |
28,104 |
14,673 |
15,807 |
8% |
30,480 |
8% |
32,256 |
6% |
Licensing fees |
5,706 |
6,796 |
12,502 |
4,388 |
7,003 |
60% |
11,391 |
-9% |
9,214 |
-19% |
Total revenue |
51,021 |
50,892 |
101,913 |
48,611 |
56,931 |
17% |
105,542 |
4% |
111,051 |
5% |
Gross profit |
37,567 |
39,594 |
77,161 |
37,407 |
43,671 |
17% |
81,078 |
5% |
87,396 |
8% |
Gross margin |
73.6% |
77.8% |
75.7% |
77.0% |
76.7% |
|
76.8% |
1% |
78.7% |
2% |
Opex before depn and amortisation |
(34,310) |
(40,991) |
(75,301) |
(36,970) |
(41,532) |
|
(78,502) |
4% |
(82,739) |
5% |
Adjusted EBITDA |
3,257 |
(2,820) |
1,860 |
437 |
2,139 |
|
2,576 |
38% |
4,657 |
81% |
EBITDA Margin |
6.4% |
(5.5%) |
1.8% |
0.9% |
1.5% |
|
2.4% |
|
- |
|
Depreciation |
(1,218) |
(1,448) |
(2,666) |
(1,275) |
(1,391) |
|
(2,666) |
|
(2,666) |
|
Adjusted operating profit |
2,039 |
(2,845) |
(806) |
(838) |
748 |
|
(90) |
|
1,991 |
|
Operating Margin |
4.0% |
(5.6%) |
(0.8%) |
(1.7%) |
1.6% |
|
(0.1%) |
|
(1.8%) |
|
Associates |
(274) |
- |
(274) |
- |
- |
|
- |
|
- |
|
Net interest |
(311) |
(260) |
(571) |
(238) |
(202) |
|
(440) |
|
(375) |
|
Edison Profit Before Tax (norm) |
1,454 |
(3,105) |
(1,651) |
(1,076) |
545 |
|
(531) |
|
1,616 |
|
Amortisation of acquired intangibles |
(2,567) |
(2,542) |
(5,109) |
(2,464) |
(2,645) |
|
(5,109) |
|
(5,109) |
|
Profit before tax |
(1,113) |
(5,647) |
(6,760) |
(3,540) |
(2,100) |
|
(5,640) |
|
(3,493) |
|
Source: CREALOGIX (historical), Edison Investment Research (forecasts)
Cash flow: Strong cash position
Following its CHF25m convertible bond refinancing in November, at 31 December 2019 CREALOGIX had gross cash of CHF34m (CHF3.8m net cash). In addition to the bond financing, the group’s cash position was supplemented by strong free cash flow of CHF4.9m in H120 (H119: CHF2.1m loss), arising from a combination of improved cost control, tighter working capital management, effective project delivery and, ultimately, satisfied customers.
We note that December is typically the low point in the cash flow cycle with the majority of maintenance revenue collected in January. We also note the group spends c 20% of revenues on R&D, all of which is expensed as incurred rather than capitalised.
Outlook: Targets maintained
On the H120 results call, management reiterated that its order book and pipeline remain full and that, before considering any short-term impact from COVID-19, the group remains confident of achieving its revenue targets for FY20. Management also reiterated its medium-term targets for ‘solid cash flow’ and double-digit EBITDA margins.
On this basis, with just over three months left before the end of the financial year, we retain our current year forecasts, but note that FY20 risk is clearly on the downside, with the impact of coronavirus on the economy and business known, but as yet unquantified. We will review our forecasts once we are better able to quantify the business risk.
However, irrespective of the short-term risk, with management confident of its medium-term targets, for the longer-term investor we continue to believe CREALOGIX represents an attractive proposition at a defensive valuation of 1.1x our current FY20e sales estimate. Looking through to our maintained FY22 estimates (revenues CHF116m, EBITDA CHF13m), peer group multiples suggest an EV of CHF200m+ could be achievable (a 100%+ premium to today’s share price).
Exhibit 2: Peer group analysis
Name |
Year |
Current |
Quoted |
EV ($m) |
Sales growth |
EV/ |
EV/ |
EBITDA margin 1FY (%) |
EBITDA margin 2FY (%) |
EV/ |
EV/ |
P/E 1FY |
P/E 2FY |
CREALOGIX Holding |
Jun-20 |
82.8 |
CHF |
118 |
3.6 |
1.1 |
1.0 |
2.4 |
4.2 |
45.7 |
25.3 |
NM |
NM |
UK/European (non-US) Software |
|||||||||||||
Temenos |
Dec-20 |
103.2 |
CHF |
8,722 |
18.3 |
7.6 |
6.8 |
41.3 |
42.1 |
18.4 |
16.1 |
26.2 |
22.6 |
Sopra Steria Group |
Dec-20 |
87.4 |
EUR |
2,614 |
6.5 |
0.5 |
0.5 |
11.3 |
12.0 |
4.6 |
4.1 |
7.6 |
6.5 |
Flatex |
Dec-19 |
21.4 |
EUR |
648 |
6.7 |
4.5 |
3.3 |
30.7 |
37.6 |
14.6 |
8.8 |
21.0 |
13.7 |
First Derivatives |
Feb-20 |
1752.0 |
GBp |
654 |
10.7 |
2.3 |
2.1 |
18.9 |
18.9 |
12.4 |
11.2 |
20.2 |
18.1 |
Intellect Design Arena |
Mar-20 |
51.0 |
INR |
52 |
(3.6) |
0.3 |
0.2 |
5.5 |
12.2 |
5.1 |
2.0 |
19.6 |
6.9 |
GFT Technologies |
Dec-20 |
6.6 |
EUR |
331 |
NM |
0.7 |
0.6 |
10.8 |
11.4 |
6.4 |
5.7 |
8.9 |
7.3 |
Gresham Technologies |
Dec-20 |
115.0 |
GBp |
82 |
8.2 |
2.6 |
2.4 |
15.2 |
17.5 |
17.1 |
13.8 |
50.0 |
35.9 |
Mean |
7.8 |
2.6 |
2.3 |
19.1 |
21.7 |
11.2 |
8.8 |
21.9 |
15.9 |
||||
Median |
7.5 |
2.3 |
2.1 |
15.2 |
17.5 |
12.4 |
8.8 |
20.2 |
13.7 |
||||
North American Software |
|||||||||||||
FIS |
Dec-20 |
102.8 |
USD |
79,544 |
31.7 |
5.8 |
5.4 |
44.1 |
46.4 |
13.2 |
11.7 |
16.3 |
13.9 |
Broadridge Financial |
Jun-20 |
90.8 |
USD |
12,035 |
3.1 |
2.7 |
2.5 |
20.8 |
22.1 |
12.8 |
11.5 |
18.0 |
16.4 |
SS&C Technologies |
Dec-20 |
35.7 |
USD |
16,124 |
1.9 |
3.4 |
3.3 |
39.8 |
40.6 |
8.5 |
8.1 |
8.7 |
8.1 |
Q2 Holdings |
Dec-20 |
55.3 |
USD |
2,970 |
30.7 |
7.2 |
5.8 |
4.2 |
7.6 |
NM |
NM |
NM |
NM |
Envestnet |
Dec-20 |
50.2 |
USD |
3,136 |
10.2 |
3.1 |
2.8 |
21.7 |
22.2 |
14.4 |
12.8 |
22.7 |
20.1 |
Tecsys |
Apr-20 |
17.3 |
CAD |
163 |
35.7 |
2.3 |
2.1 |
10.2 |
11.3 |
22.1 |
18.2 |
NM |
42.4 |
Mean |
18.9 |
4.1 |
3.7 |
23.5 |
25.0 |
14.2 |
12.5 |
16.4 |
20.2 |
||||
Median |
20.4 |
3.3 |
3.1 |
21.3 |
22.1 |
13.2 |
11.7 |
17.1 |
16.4 |
||||
Source: Refinitiv (share price data as at 23 March 2020), Edison Investment Research
Exhibit 3: Financial summary
CHF'000s |
2017 |
2018 |
2019 |
2020e |
2021e |
2022e |
|||
Year end 30 June |
Swiss GAAP |
Swiss GAAP |
Swiss GAAP |
Swiss GAAP |
Swiss GAAP |
Swiss GAAP |
|||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
74,858 |
87,144 |
101,913 |
105,542 |
111,051 |
115,922 |
|
Gross Profit |
59,695 |
67,277 |
77,161 |
81,078 |
87,396 |
94,230 |
|||
EBITDA |
|
|
7,304 |
7,031 |
1,860 |
2,576 |
4,657 |
13,050 |
|
Operating Profit (before amort. and except.) |
|
5,916 |
5,441 |
(806) |
(90) |
(90) |
1,991 |
||
Amortisation of acquired intangibles |
(1,799) |
(2,944) |
(5,109) |
(5,109) |
(5,109) |
(5,109) |
|||
Exceptionals |
- |
- |
- |
0 |
- |
- |
|||
Operating Profit |
4,117 |
2,497 |
(5,915) |
(5,199) |
(3,118) |
5,079 |
|||
Associates |
(21) |
(20) |
(274) |
0 |
- |
- |
|||
Net Interest |
(936) |
(429) |
(571) |
(440) |
(375) |
(375) |
|||
Profit Before Tax (norm) |
|
|
4,959 |
4,992 |
(1,651) |
(531) |
1,616 |
9,813 |
|
Profit Before Tax (Statutory) |
|
|
3,160 |
2,048 |
(6,760) |
(5,640) |
(3,493) |
4,704 |
|
Tax |
(1,751) |
(1,350) |
436 |
149 |
(453) |
(1,317) |
|||
Profit After Tax (norm) |
3,208 |
3,642 |
(1,215) |
(382) |
1,164 |
8,496 |
|||
Profit After Tax (Statutory) |
1,409 |
698 |
(6,324) |
(5,491) |
(3,945) |
3,387 |
|||
Minority interest |
(360) |
(681) |
(73) |
0 |
- |
- |
|||
Net income (norm) |
2,758 |
2,944 |
(1,288) |
(382) |
1,164 |
8,496 |
|||
Net income (Statutory) |
1,049 |
17 |
(6,397) |
(5,491) |
(3,945) |
3,387 |
|||
Average Number of Shares Outstanding (m) |
1.06 |
1.23 |
1.38 |
1.39 |
1.40 |
1.40 |
|||
EPS - normalised (CHF) |
|
|
2.59 |
2.39 |
(0.94) |
(0.27) |
0.83 |
6.08 |
|
EPS - Statutory (CHF) |
|
|
0.99 |
0.01 |
(4.65) |
(3.95) |
(2.82) |
2.42 |
|
Dividend per share (CHF) |
0.50 |
0.25 |
0.00 |
0.00 |
0.25 |
1.00 |
|||
Gross Margin (%) |
79.74 |
77.20 |
75.71 |
76.82 |
78.70 |
81.29 |
|||
EBITDA Margin (%) |
9.76 |
8.07 |
1.83 |
2.44 |
4.19 |
11.26 |
|||
Op Margin (before GW and except.) (%) |
7.90 |
6.24 |
(0.79) |
(0.09) |
1.79 |
8.79 |
|||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
26,430 |
62,506 |
62,373 |
57,825 |
53,050 |
52,739 |
|
Intangible assets and deferred tax |
18,119 |
54,330 |
58,465 |
54,225 |
49,116 |
49,116 |
|||
Tangible Assets |
1,385 |
1,363 |
2,351 |
2,040 |
2,374 |
2,063 |
|||
Investments & pensions |
6,926 |
6,813 |
1,557 |
1,560 |
1,560 |
1,560 |
|||
Current Assets |
|
|
52,495 |
49,576 |
42,452 |
62,689 |
65,908 |
76,833 |
|
Stocks |
3,419 |
5,950 |
3,580 |
4,998 |
5,259 |
5,490 |
|||
Debtors |
15,301 |
22,934 |
26,028 |
25,352 |
26,675 |
27,845 |
|||
Cash |
33,775 |
20,692 |
12,844 |
32,339 |
33,974 |
43,498 |
|||
Current Liabilities |
|
|
(24,219) |
(29,704) |
(43,012) |
(40,774) |
(42,641) |
(44,292) |
|
Creditors |
(24,219) |
(29,704) |
(29,571) |
(35,774) |
(37,641) |
(39,292) |
|||
Short term borrowings |
- |
- |
(13,441) |
(5,000) |
(5,000) |
(5,000) |
|||
Long Term Liabilities |
|
|
(25,191) |
(11,325) |
(2,564) |
(25,211) |
(25,211) |
(25,211) |
|
Long term borrowings |
(23,154) |
(9,291) |
(1,459) |
(24,280) |
(24,280) |
(24,280) |
|||
Other long term liabilities |
(2,037) |
(2,034) |
(1,105) |
(931) |
(931) |
(931) |
|||
Net Assets |
|
|
29,515 |
71,053 |
59,249 |
54,529 |
51,106 |
60,069 |
|
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
9,735 |
3,388 |
499 |
8,110 |
4,867 |
13,235 |
|
Net Interest |
(616) |
(455) |
(431) |
(440) |
(375) |
(375) |
|||
Tax |
(1,273) |
(421) |
(28) |
446 |
143 |
(436) |
|||
Capex |
(862) |
(1,117) |
(2,584) |
(3,000) |
(3,000) |
(2,550) |
|||
Acquisitions/disposals |
(346) |
(11,814) |
(8,892) |
- |
- |
- |
|||
Financing |
(215) |
(2,447) |
(273) |
- |
- |
- |
|||
Dividends |
- |
(559) |
(342) |
- |
- |
(349) |
|||
Net Cash Flow |
6,423 |
(13,425) |
(12,051) |
5,115 |
1,635 |
9,524 |
|||
Opening net debt/(cash) |
|
|
(3,354) |
(10,621) |
(11,401) |
2,056 |
(3,059) |
(4,694) |
|
Other |
844 |
14,205 |
(1,406) |
- |
- |
- |
|||
Closing net debt/(cash) |
|
|
(10,621) |
(11,401) |
2,056 |
(3,059) |
(4,694) |
(14,218) |
|
Source: CREALOGIX and Edison Investment Research
|
|
Research: TMT
discoverIE’s year-end trading update confirms that coronavirus-related disruption in China is expected to modestly affect FY20 earnings. While trading elsewhere has been as expected, with good order wins, efforts to contain the virus in Europe and North America could reduce demand and introduce supply constraints over at least the next quarter. We have revised our forecasts to take a more cautious stance in H121 before factoring in a recovery starting in H221.