LE T TER TO SHAREHOLDER S | CRE ALOGIX HALF -YE AR REPORT 2014/2015
Letter to shareholders
Bruno Richle, Chairman of the Board of Directors and CEO
Dear Shareholders, The first half-year of the 2014/2015 financial year (1 July to 31 December 2014) of CREALOGIX Group was characterised by the internationalisation in the defined growth markets launched in 2014. This meant among other things setting up the new CREALOGIX locations in the United Kingdom, Austria and Singapore, establishing an internationally operative sales organisation, investing in the product portfolio, and not least evaluating and training globally active implementation partners for the scaling of our activities both in Europe and in the Asia-Pacific region (APAC). This development led to an expansion in the employee base at CREALOGIX from 282 (as of 30 June 2014) to 302 (as of end of the reporting period on 31 December 2014) or to the current level of more than 350 following the takeover of MBA Systems Ltd in the UK in January 2015. We now find ourselves at the most cost-intensive point of this expansion phase, comparable with a start-up company in the global fintech competitive environment; the underlying business plan is being continuously and rigorously implemented. CREALOGIX financed the highly focused investments with its own funds. It fully expensed the development work instead of capitalising it. This will cut heavily into our profits this year as expected. The aim of this investment is to anchor CREALOGIX as a provider of solutions for tomorrow’s digital bank on an international level, enabling it to benefit from the opportunities arising as a result.
CRE ALOGIX HALF -YE AR REPORT 2014/2015 | LE T TER TO SHAREHOLDER S
The fact that our products are competitive is demonstrated among others by the presentation of the “Most Innovative Digital Offering“ award by PBI Private Banker Interna-
Top 100 Fintech
tional in Singapore in October 2014 to our customer Coutts & Co. Equally pleasing was the fact that CREALOGIX was included by IDC Financial Insights in the list of the global Top 100 fintech companies in 2014 for the first time.
Finovate Europe 2015
At the world’s most important fintech conference, the Finovate in London in February 2015, CREALOGIX’s BankClip – “on-demand video counselling for wealth management” – was rated by Finews as one of the five top trends globally.
Development of sales and results In the first half of the 2014/2015 financial year CREALOGIX generated sales of CHF 23.9 million. This equates to growth of 1.2 per cent over the previous year (CHF 23.7 million). Recurring maintenance sales increased by 13.5 per cent to CHF 6.3 million. New licence sales fell short of those generated in the very strong previous year. Profitability was hit sharply by the rigorously pursued policy of investment in internationalisation. Operating loss (EBIT) amounted to CHF 6.8 million (previous year: profit (EBIT) CHF 1.1 million). This resulted in CREALOGIX generating a consolidated loss of CHF 5.2 million compared to a profit of CHF 0.7 million in the first half of the 2013/2014 financial year. Despite this massive investment, the CREALOGIX Group remains perfectly healthy: its equity ratio stood at 65.4 per cent as of the end of the financial year (previous year: 67.5 per cent). Net cash flow from operating activities amounted to CHF –1.9 million (previous year: CHF 3.8 million). A special event in the reporting period worthy of note was the distribution of a share premium totalling CHF 2.1 million (CHF 2.00 per share).
Tomorrow’s digital banking Digital channels have achieved global strategic significance in banking, resulting in structural changes in the banking world. Digital channels will not only facilitate electronic access to the bank, as was the case hitherto, but will also form the basis of new, addi tional services and business models in the future. CREALOGIX is ideally positioned here as a provider of innovative solutions. The flagship product, the CREALOGIX digital banking platform, is an open, innovative and, at the same time, proven, secure and effective portal for tomorrow’s digital bank – both for classic Internet banking and for mobile banking. The bank’s customers are being offered a consistent and uniform user experience. New online security solutions from CREALOGIX respond to the enhanced mobile usage behaviour of bank customers and expand the range of security products available. The core of the digital banking platform from CREALOGIX enables each bank to lay a homogeneous integration layer over the existing, mostly fragmented back office systems. As such, the bank can separate itself from the complexity of the back office and obtains
ebanking. crealogix.com
LE T TER TO SHAREHOLDER S | CRE ALOGIX HALF -YE AR REPORT 2014/2015
via the existing programmable interfaces (APIs) the flexibility needed for digital solutions, notably for the integration of third-party products. These benefits of the digital banking platform and its flexibility are also reflected in a variety of customer projects. Some examples: Raiffeisenbank relies on the e-banking solution from CREALOGIX in the long term too and has just launched a new innovative version, BCI (New Caledonia) is enhancing the current project with the supply of a complete banking portal from CREALOGIX, Société Générale Private Banking is creating a totally new user interface for its e-banking solution, and leading Swiss private banks, such as Julius Bär and Banque J. Safra Sarasin, are upgrading their e-banking solutions to encompass the new digital banking platform from CREALOGIX. In our second home market Germany too, leading online banks are relying on the products and competence of CREALOGIX in digital banking. Together with DKB (Deutsche Kreditbank) the product portfolio of CREALOGIX is undergoing continuous refinement, whereby we are contributing to the internet presence and online banking. The new financial planner of Consorsbank is an essential component of the online bank’s realignment. In technological terms the solution is based on the digital banking platform from CREALOGIX which integrates the Personal Finance Management (PFM) solution from our partner Meniga. Consorsbank customers are thus provided with a comprehensive overview of their income and expenses as all the data from their accounts and credit cards is shown together in summary form. Moreover, CREALOGIX supports the bank’s advisory processes with its Advice Manager and makes sure regulatory requirements are met during the advice process. On the basis of the developments with the private bank Donner & Reuschel, the product line compatibility of the solution was established which has enabled us to market the product internationally. The innovative software CLX.NOVA for digital payment transactions of the future was launched successfully. Our corporate customers can rent this at low cost and in this way
nova. crealogix.com
use it as an SaaS solution (Software as a Service). The feedback is positive and promising. The high investment in this digital platform of the future was also debited to the income statement. The growth of our e-learning market services that has been ongoing for several years continued in the first half of the financial year, whereby we were able to extend our leading position with financial institutions still further. 14 financial institutions are already using our teaching platform CLX.Tracker to train their employees and increasingly to train their partners too. December 2014 saw the successful market launch of the completely redeveloped successor product CLX.Tracker 3. Entris Banking, Leonteq and UBS are three renowned financial institutions that have already decided in favour of our new teaching platform.
crealogix.com/ education
CRE ALOGIX HALF -YE AR REPORT 2014/2015 | LE T TER TO SHAREHOLDER S
The Center for Young Professionals (CYP) trains Swiss banking apprentices and numer ous junior staff using tools and teaching modules from CREALOGIX. CYP is now enter ing the market for the banking specialist training of adults. The specialist teaching platform needed for this, a central element of the system, was provided by CREALOGIX. In addition to this, technologically leading companies from other sectors also use our teaching platforms and the associated products for digital teaching purposes and do so successfully.
Outlook The CREALOGIX Group is in the midst of a process of transformation on its way to becom ing an internationally active fintech company of the next generation. In contrast to most start-ups in this area, CREALOGIX is not building on ‘disruptive’ solutions that are against banks but instead on innovative solutions for banks, helping them to reach the intended digitalisation of their business models quickly. CREALOGIX’s business plan is demanding and the necessary investments high as expected. As already highlighted in the previous year, sales in the second half-year will not yet improve, whereby the strength of the Swiss franc also has a dampening effect. Due to the investments made and the new sales organisation, we anticipate sales growth of 10 per cent or more as from the coming 2015/2016 financial year, and are striving to return to a balanced result. As from the 2016/2017 financial year, we expect greater profitability in addition to a further growth in sales. The current prospects of establishing CREALOGIX in the fintech sector as a leading international software provider for tomorrow’s digital bank are excellent. We are confident that we can and must make use of them rigorously and in line with the motto ‘The trend is our friend’.
A word of thanks On behalf of the Board of Directors and Group Management Committee, I would like to thank all our employees for their hard work in the first half of the 2014/2015 financial year. I am also grateful to our customers for their confidence in our services and their close cooperation. I would also like to sincerely thank you, our valued shareholders, for your trust in CREALOGIX Group.
Bruno Richle Chairman of the Board of Directors and Group CEO
CYP
7