Crealogix Holding AG (SIX:CLXN) posted a strong performance in FY16, which follows a period of significant investment, with revenue growth of 28% and a return to profitability. EBITDA was significantly ahead of our expectations at CHF3.7m vs CHF1.4m forecasted. However, we are conservatively cutting our FY17 profit forecasts as the group’s recurring SaaS revenue book in the UK has been reduced by the fall in sterling and the growth outlook has been affected by uncertainties around Brexit. However, this is largely balanced by the growing opportunities in Germany, where projects typically involve greater services revenues, and hence our FY18 forecasts remain broadly the same. Given the attractive growth drivers and strong balance sheet, we believe the shares are attractive on 18x our FY19 EPS.
Digital banking in strong growth phase
Digital banking is in a major growth phase globally, boosted by the advent of smartphones and tablets; smartphones are expected to take 80% of the banking market by 2020 (AT Kearney). This is driving increasing spend on front-end systems and CREALOGIX expects front-end system spend to rise to c 50% of banks’ total IT spend within five years, from c 20% at present and c 5% traditionally.
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