Bravura suffers ‘difficult period’ with significant drop in revenue and profit

Bravura’s wealth management division suffered a 7 per cent decrease in revenue to $77.3 million and an 84 per cent drop in EBITDA to $3.2 million during the first half of FY23.

According to the company, which owns financial planning software provider Midwinter, the drop was mainly attributable to the impact of foreign exchange and a decline in non-recurring licence fees. Meanwhile, funds administration revenue fell 21 per cent to $41.1 million, alongside a 41 per cent drop in EBITDA to $15.0 million.

In its delayed results released to the ASX on Monday, Bravura reported an overall net loss of $190.9 million for the half, down from a net profit after tax (NPAT) of $15.3 million in 1H22.

The company declared an adjusted NPAT loss of $14.2 million – representing a $30.3 million fall on the $16.1 million profit seen in 1H22 – along with an EBITDA loss of $7.0 million, down $32.3 million.

Revenue fell by 11 per cent to $118 million, while total expenses increased by 17 per cent to $125 million. Bravura noted it had not declared a dividend “to provide cashflow support”.

“The first half was undoubtedly a difficult period with our performance impacted by a number of operational and market-related challenges,” commented Bravura CEO Libby Roy.

“However, after conducting a wide-ranging strategic review of our business and having taken some tough but necessary decisions, I believe we now have a plan in place that will allow us to better manage and monetise our suite of high-quality, mission-critical products and build on our strong customer base.”

Bravura noted it has initiated an organisational change program that will target approximately $25 to $30 million in annualised cost benefits when fully implemented. The costs associated with this program are said to be in the range of approximately $19 to $24 million.

The company also suggested that its plan to return to profitability is underpinned by “clearly defined business outcomes and financial targets”.

Stronger revenue is anticipated in the second half of the financial year, but still down from earlier expectations. The company warned that it was experiencing “delays and uncertainties” relating to two new material opportunities, including with Colonial First State.

Additionally, the trend of lower existing and new project work in the Europe, the Middle East and Africa region seen post-pandemic is projected to continue and overall operating costs are expected to remain elevated.

Bravura provided guidance of revenue for FY23 of $240 to $245 million, down from its previous guidance of $270 to $275 million. An EBITDA loss of $5 to $10 million is anticipated, compared to a profit of $10 to $15 million, while an adjusted NPAT loss of $24 to $19 million is expected, versus the $0 to $5 million predicted previously.

Capital raising

Also on Monday, Bravura confirmed it has launched a fully underwritten $23 million institutional placement and $57 million pro-rata accelerated non-renounceable entitlement offer to support its organisational change program.

Bravura said its fully underwritten equity raising of $80 million would result in the issue of some 200 million new shares, representing approximately 81 per cent of its current issued capital.

The use of proceeds are expected to fund investment in its operational change program, fund negative cash flow and transaction costs and provide balance sheet flexibility and working capital.

The equity raising is planned to be carried out through an offer of fully paid ordinary shares which will consist of two parts: an institutional placement aimed to raise approximately $23 million and a 1 for 1.73 accelerated non-renounceable entitlement offer intended to raise around $57 million.

Collectively, these two components are referred to as the “Offer”. The offer price of $0.40 per share represents a considerable discount of 38.4 per cent to the Theoretical Ex-Rights Price (“TERP”) of $0.65 based on the last closing price on 23 February 2023, as well as a significant 52.9 per cent discount to the last closing price of $0.85 on the same date.