Underlying EBITDA turnaround coupled with strong operational cash flow: Movements in the right direction for Bravura Solutions
Sydney, 18 August 2010 (ASX: BVA) – Bravura Solutions Limited (Bravura) – a leading global supplier of transfer agency and wealth management software applications and professional services – today announced the full year results for the financial year ended 30 June 2010.
EBITDA profit, excluding licence fees for the 2010 financial year (FY2010) was $3 million, a strong turnaround of $13.1 million following a $10.1 million loss in 2009. Operating cash flow improved by a further 11 percent to $14.2 million, a $9 million increase over the past two years and a solid achievement.
Commenting on these particular results, Simon Woodfull Group CEO, said, “Bravura has delivered a very credible result in FY2010. We have done so in a difficult operating environment, where the effects of the Global Financial Crisis (GFC) are still prevalent amongst our clients. We have strategically focused on building and maintaining strong relationships with our existing client base, while continuing to sign agreements with key new clients.
“We are also extremely pleased with the improvement in operating cash flow. The trend of continued and sound operating cash flow is testament to the success of our strategy of engaging geographic diversification, developing a strong product offering and delivering quality financial software to an expanding client base.
“We anticipate that as the global eoconmy further recovers we will benefit from emerging opportunities that will enable us to improve our operating margins and fully utilise the infrastructure that we have in place”, Mr Woodfull said.
FY2010 key results
- EBITDA (excluding licence fees) improved by $13.1 million to $3 million
- EBITDA (including licence fees) declined by $6.1 million to $10 million
- Negative currency impact on EBITDA of $3.1 million
- Revenue (excluding licence fees) declined 11.7 percent to $94.4 million (1.2 percent to $105.5 million on a Constant Currency basis)
- Strong expense control resulting in expense reduction of $26 million including currency impact of $9.3 million
- Impairment of intangible assets of $7.6 million
- Net operating cash flow increased to $14.2 million
Revenue for FY2010 was $101.4 million. This $32.1 million or 24.1 percent decrease occurred due to currency exchange effects. Had the exchange rate from FY2009 remained constant, the revenue decrease would only have been 14.8 percent. The strong Australian dollar has had a significant impact on the translation of overseas revenue which now accounts for approximately 75 percent of total revenue.
Licence fee revenue decreased by $19.7 million, however, this has been somewhat offset by a significant improvement in underlying business as demonstrated by consistency with 2009 figures as measured in Constant Currency.
The Australian dollar / Sterling exchange rate alone, impacted revenues by $12.4 million as the GBP / AUD exchange rate declined year on year by 18 percent.
EBITDA excluding licence fees increased by $13.1 million over the previous year in actual terms and improved by $14.9 million in Constant Currency. This turnaround was the result of a continued focus on cost management. However, the exchange rate did once again result in a negative impact of $3.1 million on the EBITDA result.
The Company has significant natural hedging through its offshore personnel and infrastructure costs which have played a role in assisting to minimise currency effects.
Operating costs decreased by $26 million as a result of continued management review and focus, and strengthening of the Australian dollar.
Cash flow continues to be a focus area for the Company – it achieved an EBITDA conversion to operating cash of 142 percent for FY2010. This result compared to the previous years‟ result of 75 percent is very pleasing. It aligns with the overall trend towards a revenue and cash stream that is more recurring in nature, assisted further going forward by the Mutual Fund Technologies (MFT) acquisition.
The Company‟s financial position continues to improve with total net assets increasing by 47 percent to $131 million.
The significant reduction in liabilities relates to the reduction of the Company‟s working capital facility and the settlement of a significant forward exchange contract. Overall, debt to equity reduced to 25.6 percent following the recapitalisation undertaken in September 2009 and the recent Rights Issue relating to the MFT acquisition.
The Company remained well within compliance with banking covenants as at 30 June 2010.
Events since last year
During the last 12 months, the Company undertook a successful organisational restructure. It also completed an acquisition in line with its overall strategy for the transfer agency division of the operation. The MFT acquisition completed in June 2010, and as a result increased the Company‟s long-term annuity revenue streams and will assist in delivering improved predictability of earnings.
The earnings accretive acquisition of MFT will further strengthen the United Kingdom business while opening up other European opportunities.
Over the past year, the Company has also signed contracts with two new clients, three new contracts with existing clients and one contract extension with an existing client. It has also completed implementation projects with key clients in South Africa, Australia and Europe.
The three year strategic plan that commenced in early 2010 continues. Strengthening of the Board and Executive team, coupled with internal restructure and senior leadership changes has greatly improved operational efficiency and effectiveness. Key deliverables and a lean cost base continue to be the focus.
Lower costs associated with the Company‟s offshore centres in Poland and India will deliver improved cost savings as it moves to further utilise these facilities for operational support and development.
The Company‟s next generation Sonata solution based on SOA architecture, and utilising Oracle‟s latest database platform and Java, is now market ready and will be rolled out to clients as the year progresses.
The Company will also ensure that full utilisation of its integration capabilities are used to optimise „cross-selling‟ of its product offering and maximise available client revenue.
The Company has now clearly defined its target growth markets and with a sound financial and cash position, is able to pursue value-add opportunities that are well aligned with its acquisition strategy.
The Company remains confident that it now has an optimal business model, infrastructure and suite of products. The ability to deliver a strong EBITDA result without a dependency on licence fees, stronger recurring revenues assisted by the MFT acquisition and robust cash flow, is anticipated to enable the Company to deliver both top and bottom line future growth.