Bravura Solutions released their results for 1H FY22 today. From their release:

• Revenue up 14% to A$132.3m (A$115.7m in 1H21)
• EBITDA up 61% to A$25.3m (A$15.8m in 1H21)
• NPAT up 69% to A$15.3m (A$9.0m in 1H21) • EBITDA margin increased to 19% (14% in 1H21)
• 1H22 EPS up 68% to 6.2cps
• Unfranked interim dividend declared of 3.7cps, bringing the dividend payout ratio to 60% of 1H22 NPAT 

On the surface this looked like a fairly good result with Revenue, EBITDA and NPAT all substantially higher than PCP. However management have flagged that while they expect revenue growth of 10% for the FY22 compared to FY21, operating costs are rising at a similar rate.

NPAT guidance was once again downgraded to $25-30m. This means that their NPAT has decreased from FY21 which was already decreased compared to FY20 even after an acquisition which cost them $42m. They have stated that this is the result of some projects being delayed till FY23.

I have decided to exit my position at a loss which I will detail in a forum post later.

Disc: Not held - Exited my position today after results were announced.

At the risk of sounding too much of a pumper in the #Bull case post I thought might be good to post the Bear case as well.

• CEO left in Sept 2021 without much notice and the new CEO (Former COO) is based in London
• Although management have stated they expect growth in FY22, it would seem Revenue and Profit would still be less than FY20 even with the acquisition of Delta.
• Delta only contributed $1.1m in NPAT at a cost of $40m to the business, so you would hope that there would be ongoing growth from this part of the business to justify to cost
• Covid-19 could continue to impact UK market especially if there is talk of a 4th wave sweeping through during their Winter which could once again slow their expected projects
• Wealth and Funds management is a competitive field and even in Australia there are plenty of alternatives which seem to be growing at much faster levels (NWL, HUB, PPS)
• Potential for a takeover if there is further consolidation in this sector

Overview

Bravura Solutions (ASX:BVS) is involved in software for Wealth Management and Funds Administration. Based primarily in Australia with their Sonata platform but have also expanded into the UK following their acquisition of Delta in October 2021.

Financials

FY21 was a very tough year for BVS with the Covid-19 pandemic impacting their growth in the UK market and as a result Revenue was down 15% to $232.8m excluding the revenue from acquisition (FY20 revenue of $274.2m). NPAT was also down 22% to $31.3m (excluding NPAT from their acquisition of Delta).

Outlook

AGM held today mentioned that management expect NPAT growth in the mid-teens as the business recovers post pandemic with increased vaccinations improving business confidence. Projects that were postponed due to the pandemic are expected to be completed in FY22.

Valuation

At the current share price of $2.56 it has a market cap of $635.9m.

Revenue (including acquisition) = $243m

P/S = 2.6x

Adjusted NPAT = $32.3m

P/E = 19.6x

If the business can begin to recover their growth that was halted by the Covid-19 pandemic then at the current multiples it is certainly not expensive however I believe the market is still waiting for some signs that growth is returning following a disappointing FY21.

Disc: Held IRL and on Strawman