The Bravura Solutions Ltd (ASX: BVS) share price could be on the move today after the release of its half year results.
How did Bravura perform in the first half?
For the six months ended December 31, Bravura achieved further growth and continued operating leverage expansion.
On the top line, the fintech company reported a 6% increase in revenue over the prior corresponding period to $135.1 million. This includes revenue generated by the acquired Midwinter and FinoComp businesses. Excluding acquisitions, revenue would have been up 3% on the prior corresponding period.
Group EBITDA lifted 7% to $25.5 million during the half. It would have been up 8% excluding acquisitions. During the half the company's EBITDA margin increased 2 basis points to 18.8% thanks to further operating leverage expansion.
And on the bottom line, Bravura delivered a 21% increase in net profit after tax to $19.8 million. Excluding acquisitions, this would have been up 17% on the prior corresponding period.
The company reported an operating cash outflow of $3.8 million during the half. This was in line with expectations and driven by early payments received in the preceding period. Bravura finished the period in a strong financial position. It had net cash of $100.3 million at the end of December
The company's board declared an unfranked interim dividend of 5.5 cents per share, up from 5.3 cents per share a year earlier. This represents a payout of 68% of first half net profit after tax.
What were the drivers of its growth?
The Wealth Management business delivered a 1% increase in revenue to $91 million and an 11% lift in EBITDA to $26 million. This result was impacted by temporary delays in some major transformational client projects. Management notes the business is well placed, with significant sales opportunities from new clients and continuing project activity.
The star of the show during the half was the Funds Administration business. It delivered a 19% increase in revenue to $44.1 million and a 44% lift in EBITDA to $19.6 million. This was driven by higher licence fees and increased implementation and project work.
The company also provided an update on its Midwinter and FinoComp businesses. They are performing as expected and have strong sales pipelines. In addition to this, active cross-sell proposals and combined offerings across the Bravura product suite are in-flight. Its acquisitions contributed approximately $4 million to revenue and collectively had a $0.8 million contribution to net profit after tax.
Tony Klim, Chief Executive Officer, said: "The 1H20 results are in line with our expectations, with continued investment positioning Bravura for long-term growth underpinned by a significant pipeline of sales opportunities from new clients. Group margins again expanded, reflecting the operating leverage inherent in the business. We are excited by the progress of Midwinter and FinoComp, with both businesses providing the group with strategic opportunities."
Outlook.
Management advised that its full year FY 2020 net profit growth (excluding the impact of acquisitions) is expected to be in the mid-teens. Acquisitions are expected to make an additional contribution of ~$3 million to FY 2020 net profit after tax.
Mr Klim concluded: "Bravura is well positioned to take advantage of strong demand for its product portfolio across all our markets. There are a number of large transformation opportunities that we are pursuing. The nature and size of these opportunities (size and complexity, M&A/competition activities, regulatory approvals, cost profiles) make timing of closure more difficult to predict. Bravura continues to excel and meet its purpose of making our customers more successful. In markets where there is significant change and disruption, the world's financial institutions are able to consistently rely on Bravura for innovative technology solutions that allow them to achieve their long-term strategic goals."
