Bravura delivers continued cash flow improvement
Sydney, 26 February 2010 (ASX: BVA / OTCQX: BRVSY) – Bravura Solutions (Bravura) – a leading global supplier of wealth management applications and professional services to the financial sector – wishes to report its results for the half year period ended 31 December 2009.
CEO of Bravura, Simon Woodfull, said: “Bravura has delivered a respectable result in a difficult sales environment. The highlights of the period were the improvement in EBITDA in the underlying business excluding licence fees of $8.6 million, and a solid operating cash flow of $7.0 million.
“The restructuring of our business during 2009 has also resulted in improved operating margins, positioning us well as our clients recover from the global financial crisis and look to improve their back office efficiency.
“A lengthened sales cycle as well as client budgetary pressures have adversely affected revenue in the short term. However, at the same time our sales pipeline remains healthy. There are considerable opportunities for us in Europe and Asia for both our wealth management and transfer agency products.”
1H10 results summary
- Revenue excluding licence fee income was $47.5 million which on a constant currency basis was broadly the same as the Prior Corresponding Period (PCP)
- Licence fee income significantly impacted by the lengthened sales cycle caused by the Global Financial Crisis. Licence revenue reduced by $13.6 million
- Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $6.0 million, in line with previous guidance
- EBITDA excluding licence fees improved by $8.6 million
- Maintenance revenue improved by $1.0 million compared to 1H09
- Professional services revenue impacted by the postponement of large capital projects by customers as a result of global economic environment
- Net operating cash flow was $7.0 million
- Net debt reduced by $16.6 million
1H10 results summary
1. Revenue excludes interest received
2. 2008 net debt and gearing calculated based on 30 June 2009
Bravura achieved revenue excluding interest income of $53.0 million for the half year ended 31 December 2009, representing a decrease of $20.0 million. The lengthening sales cycles due to the global financial crisis caused a number of large IT projects to be delayed thereby reducing licence fees by $13.6 million. Furthermore, demand for associated professional services for data migration and implementation projects was also impacted.
Revenue excluding licence fees in Australia and New Zealand decreased by $1.5 million to $15.4 million, reflecting market caution in committing to new projects in an uncertain economic environment. The key driver of the decrease in Australian and New Zealand revenue was a decrease in client discretionary spend on professional services, as well as the completion of a number of large implementations for Bravura’s Talisman and Garradin wealth management products.
The GTAS acquisition from Citi in Poland has been a successful acquisition for Bravura contributing revenue of $4.9 million for the period – an increase of $4.5 million from the PCP. Overall EMEA revenue increased $1.8 million in Constant Currency.
Revenue in Asia decreased by $2.0 million to $1.6 million as a number of large implementation projects were completed in the period.
Professional services revenue declined by $7.3 million to $23.7 million reflecting the deferring of non-critical projects at a time of economic uncertainty as a result of the GFC and the completion of large implementation projects for Talisman and Garradin. Overall, professional services accounted for 45 per cent of total revenue for the period ended 31 December 2009 compared with 42 per cent in the PCP.
Maintenance revenue increased slightly to $23.5 million. The underlying increase (before currency fluctuations) is attributable to the incremental maintenance revenue from the GTAS acquisition of $2.9 million with the remaining benefit due to the go-live of a number of clients as well as CPI increases on the existing customer base.
Bravura materially improved operating costs in the period with cost management initiatives and efficiency measures delivering a $15.0 million reduction. Bravura regularly monitors its cost base and develops strategies to actively meet client needs, improve margins and provide flexibility.
Bravura continued its extensive R&D program during the period with Company funded expenditure of $4.3 million, a marginal decrease of $0.7 million compared with the PCP. This is in addition to client funded R&D. Continued R&D spending reflects the commitment of the Company to delivering high quality innovative financial software solutions to its clients.
EBITDA for the six months ended 31 December 2009 was $6.0 million, a decrease of $5.0 million compared to the PCP.
The strengthening of the Australian dollar (relative to other currencies) resulted in a foreign exchange translation impact that reduced reported EBITDA for the period by $1.1 million. In addition, the reduction in licence fee sales for the period decreased EBITDA by $13.6 million which was offset by operational savings.
EBITDA excluding licence fees improved by $8.6 million due to restructuring and efficiency initiatives, as well as additional contribution from the GTAS acquisition.
Amortisation, depreciation and financing costs
Amortisation and depreciation expenditure increased by 20 per cent to $0.9 million compared with the PCP. Depreciation increased by $0.3 million to $1.7 million reflecting the commencement of depreciation charges on the EDS data centre. Amortisation increased by $0.6 million as result of the amortisation of intellectual property and business contracts associated with the Poland acquisition.
Financing costs declined by $1.2 million to $1.4 million due to a reduction in net debt as result of the Recapitalisation Proposal, which has been partially offset by higher interest margins on our term and working capital facilities.
Operating cash flow was $7.0 million for the six months ended 31 December 2009 compared to $13.0 million in the PCP. The decline in licence fees impacted operating cash flow for the period, however, a focus on working capital management provided a $5.5 million benefit. Net profit after tax is impacted by a number of non-cash items and items reclassified to financing activities.
The Company continued to re-invest proceeds from operating activities back into the business with some proceeds being used to partially fund the third tranche of the GTAS acquisition deferred consideration.
An interim dividend will not be paid for the six months ended 31 December 2009.
The board will consider the dividend policy in light of the continuing economic outlook, and the Company’s cash flow requirements including the final tranche of US$7.0 million to be paid to Citi for the GTAS acquisition in December 2010.
The Company’s financial position remains strong with total assets of $194.8 million and shareholders’ funds of $111.1 million as at 31 December 2009.
The significant reduction in current liabilities primarily relates to the repayment of Bravura’s working capital facility and the settlement of the foreign exchange contract net of additional working capital draw downs. In conjunction with the Rights Issue the Company’s borrowing facilities were realigned to match to its geographical earnings profile, improving the Company’s natural hedge and reducing risk for shareholders.
Bravura remained in compliance with all its banking covenants as at 31 December 2009.
Traditionally, Bravura’s performance is skewed toward the second half of the financial year with respect to both revenue and earnings. The current financial year is expected to be similar, and given that the recovery from the GFC is still in the early stages and not uniform across Bravura’s markets, we are expected to see ongoing difficulty in the level of confidence we may have in these circumstances.
The primary business objectives for the second half of FY2010 are to drive revenue growth and improve EBITDA margins. There are currently no expectations for any significant non-recurring items to adversely impact the current year’s results.