Strong underlying EBITDA continues into FY11
Sydney, 24 February 2011 (ASX: BVA) – Bravura Solutions Limited (Bravura) – a leading global supplier of transfer agency and wealth management software applications and professional services – today announced the half year results for the period ended 31 December 2010.
EBITDA was within guidance at $10.4 million. Revenue increased by 15.4% to $61.1 million and strong expense control resulted in improved EBITDA margins of 17% as compared to 11% for the corresponding prior period. Cash flow also continued to be a focus area with an inflow of $8.1 million for the half and borrowings including deferred consideration reduced by $11 million.
Bravura Chairman, Brian Mitchell said, “The financial improvement in the first half, given continued market volatility and a strong Australian dollar, has been very encouraging. The integration of Mutual Fund Technologies (MFT) has been very successful and our reduced reliance on new licence fees has underpinned a more stable, consistent and reliable financial performance.”
Bravura Group CEO, Simon Woodfull said, “We are seeing the initial signs of an improvement in global trading conditions and as a result are experiencing a strong demand for professional services assignments across our existing clients in our transfer agency and wealth management divisions. We are also seeing increasing interest in our new technology platform, Sonata. This was demonstrated by the contract signing of our first Sonata life client recently announced to the market.
“We are extremely pleased with the progress of key strategic initiatives within the business and we look forward to leveraging the strong financial foundation of the Company as we continue to expand our presence in our key growth target markets, primarily the United Kingdom and Asia.”
- Revenue (excluding licence fees) increased by 25% to $59.4 million (37% to $65.2 million on a Constant Currency basis)
- Revenue (including licence fees) increased by 15.4% to $61.1 million
- EBITDA (excluding licence fees) improved by $8.1 million to $9 million (1,114% to $10.6 million on a Constant Currency basis)
- EBITDA (including licence fees) improved by $4.4 million to $10.4 million
- Strong expense control resulted in an EBITDA margin of 17% compared to prior year of 11%
- Borrowings including deferred consideration reduced by $11 million
Revenue for H1FY2011 was $61.1 million and includes Bravura’s first Sonata licence sale. Currency continues to impact the Company’s overall results when compared to the foreign exchange rates from the prior period. The effect for H1 was $6 million of revenue predominantly due to the strengthening of the Australian dollar against the British Pound and US Dollar.
Although Licence fee revenue decreased by $3.8 million, this has been offset by a significant improvement in new and extended client contracts which has led to strong professional services revenue growth. Revenue excluding licences grew 37% in Constant Currency due to the strong demand for implementation, software enhancements and application managed services from Bravura’s client base.
EBITDA excluding licence fees increased by $8.1 million over the previous year in actuals and improved by $9.7 million in Constant Currency. This improved performance has been assisted by the recent acquisition of MFT as well as a continuing focus on cost management and headcount initiatives. However, the exchange rate did once again result in a negative impact of $1.6 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 margin reductions due to currency movements.
Operating costs continued to decline as a percentage of revenue as a result of continued management review and focus, and strengthening of the Australian dollar. The Company anticipates this trend to continue as it builds out its resource capability in lower cost jurisdictions, particularly India and Poland.
Cash flow remained consistent with prior year and provided sufficient resources to operate with a lower level of debt and the ability to make the final deferred payment relating to the earlier acquisition of GTAS from Citigroup.
The Company’s financial position remains strong with net assets consistent with the position as at end of June 2010 at $130 million. Net debt has increased marginally to $28.1 million as cash was used to settle the final consideration of the GTAS acquisition with Citigroup. Borrowings including deferred consideration decreased by $11 million since June 2010 as management continued to focus on debt reductions.
Bravura remains within all banking covenants as at 31 December 2010 and has $7.7 million of undrawn facilities.
Events over last six months
The earnings accretive acquisition of MFT, completed in June 2010, has continued to perform on or above the key objectives management established at the time of acquisition, and its contribution to the Company’s market leading position in the transfer agency business in the United Kingdom has been very encouraging. With its integration into Bravura complete, the Company is finding increased demand for its services to improve and extend the core capabilities of the GFAS platform.
Recently, Bravura signed a contract with a New Zealand life insurance company, Partners Life, for its new Sonata wealth management software. The initial five year contract will see the implementation of Sonata as Partners Life’s insurance administration platform, covering all aspects of the policy lifecycle from new business to claims processing.
Sonata will provide administration, workflow, broker new business interfaces, and reporting requirements. Sonata’s straight through processing capability will remove the need for costly integration to other systems.
Macquarie Capital Advisers were appointed to assist the Board in December 2010 in assessing a number of unsolicited proposals that the Company had received. The Bravura Board does not intend to make any further announcement unless and until a binding proposal is received which is capable of being put to shareholders.
The Company continues to focus on tight cost management and has developed a detailed plan which has begun execution, to grow its offshore centres in Poland and India over the next few years. Bravura expects this to have a positive impact on margins over time.
The Company continues to see signs of improvement in its key markets consistent with a degree of improving confidence in financial markets. Whilst this still has some way to go, the overall level of inquiry in the Company’s software and services continues to improve and it would anticipate that this will translate to improved business flows over time.
The Company believes that its continued specialisation on the transfer agency and wealth management markets, with focus on the European and emerging Asia Pacific geographies bodes well for the future.