The market is reacting poorly to Bravura Solutions’ financial year 2021 results.
The post Bravura Solutions (ASX:BVS) share price plunges 17% on FY21 earnings appeared first on The Motley Fool Australia. –
Right now, The Bravura share price is $3.11, 17.29% lower than its previous closing price.
Bravura share price slumps/jumps on 11% revenue decline
Here’s how the wealth management, life insurance, and funds administration software provider performed through FY21:
$243 million of revenue –11% less than that of FY20
Earnings before interest, tax, depreciation, amortisation (EBIDTA) down 15% to $49.3 million
Operating cash flow of $52.7 million
Net profit after tax of $34.6 million – down 14% on that of FY20
6-cent per share final dividend (unfranked)
Barvura’s wealth management segment reported $160.1 million of revenue in FY21, 11% less than in FY20. Its funds administration segment’s revenue fell 12% to $82.9 million.
According to Bravura, its wealth management segment’s revenue was lessened due to the effects COVID-19 had on its UK professional services work, but it was offset by contributions from FY20’s acquisitions.
But not all was dire. Contracted reoccurring revenue in wealth management rose 30%.
The company’s funds administration segment’s revenue was also impacted by the effects of COVID-19, but most of its reduced revenue was attributable to a lower mix of licence fees.
Bravura ended the period with $73.6 million cash in the bank and $1.2 million of financial facilities used.
What happened in FY21 for Bravura?
FY21 was a productive period for Bravura and its share price.
The company acquired Delta Financial Systems for $42 million in October 2020.
It also signed an initial 7-year contract with Aware Super to allow the super fund to use Bravura’s Sonata Alta and Digital Advice.
Bravura also signed or renewed contracts allowing the use of its software with a UK financial institution, a global investment bank, an Australian trustees business, an Australian superannuation fund, a New Zealand life insurance firm, a UK platform, and UK platforms for microservices.
What did management say?
Bravura’s CEO and managing director Tony Klim commented on the news driving the company’s share price today. He said:
Despite what has undoubtedly been a challenging year, Bravura has achieved its guidance. The result reflects the unprecedented impact of COVID-19, particularly on UK project work and the sales pipeline. Despite the impact, we have responded to changing market conditions and evolved Bravura’s strategy to stay well ahead of client needs. This will lead to greater flexibility for clients in the speed of their implementation and will help them smooth their IT spend. In doing so, Bravura also expands its total addressable market and moves towards a higher proportion of contracted recurring revenue…
Bravura continues to win new clients and has further developed its market credentials by investing in [research and development]. Confidence is expected to continue to improve as the COVID-19 vaccines roll out and is well placed to take advantage of improving client demand.
What’s next for Bravura?
Here’s what might drive the Bravura share price in FY22:
As the COVID-19 pandemic is still affecting its key markets, the company warned its near term outlook is uncertain.
However, it expects FY22 to bring growth of its net profits after tax in the mid-teens, relative to FY21’s adjusted profit after tax of $32.3 million.
Bravura commented that its sales pipeline is strong and demand in the UK is starting to improve. The company gave a shoutout to the UK’s vaccine rollout, which it believes is helping to instil confidence. Additionally, the company believes there are large opportunities for its Sonata Alta offering in Australia.
Over this financial year, Bravura believes its business will be driven by demand for software-as-a-service, microservices, cloud, and subscription-based services.
Additionally, it has sped up its digital transformation through the pandemic and expects demand in the UK and South Africa to pick up in FY22 as projects delayed by COVID-19 resume.
Bravura share price snapshot
The Bravura share price has lost its gains for 2021 today. Right now, it’s 1.8% lower than it was at the start of this year. It is also 28% lower than it was this time last year.
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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.