Bravura Solutions Limited

Strong result with rise in working capital consumption: Up 2.4% on February 26, 2018, Bravura Solutions Limited’s (ASX: BVS) half-year results for the period ended 31 December 2017 highlighted revenue growth of 10% to A$102.9m in 1H18 from A$93.5m in 1H17, driven by new clients across Bravura’s operating regions of EMEA and APAC, and better project work from existing clients with long-term contracts being in place. There was a 2% rise in EBITDA while EBITDA margin was 18%, finding support from strong growth in Wealth Management margins, offsetting the loss of a Funds Administration client. Underlying NPAT was up 13% to A$14.2m in 1H18 from A$12.6m in 1H17 while the group reported for lower net interest costs at the back of lower total debt carried on the balance sheet. While the group maintained its dividend policy of paying out between 60 and 80% of underlying earnings (dividend of 4.5 cents per share declared for the half), operating cash flow decreased to A$14.6m in 1H18 from A$16.7m in 1H17 and the group also increased its investment in recruitment and training to support the growth in professional services revenue. On the other hand, return on equity of 24% in 1H18 was reported.

The group has reported that the growth has been boosted by regulatory change, expanding digital distribution channels, and efforts on increased operating efficiency across the financial services industry. Wealth Management revenue growth of 26% has supported the result with EBITDA rise of 40% against Funds Administration EBITDA and investment in Corporate. 55% of group’s total revenue comes from Sonata that witnessed a revenue growth of 35% to A$56.7m with client wins in South Africa (Discovery) and New Zealand (ASB Bank). The 2018 guidance has been revised upwards and is expected to lead to underlying EPS growth in the high-teens while funds Administration are expected to return to growth in 2H FY18. We would wait for any dip in the stock price for an investment opportunity as the stock looks “Expensive” at the current price of $2.11
 

Revenue and EBITDA in constant currency (Source: Company Reports)

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