News & Events » Newsroom » 2007 » Appendix 4E – Supplementary commentary for the year ended 30 June 2007
Appendix 4E – Supplementary commentary for the year ended 30 June 2007
29 August 2007 Appendix 4E – Supplementary commentary for the year ended 30 June 2007 Bravura Solutions increases Revenue by 234% and EBITDA by 216% Bravura Solutions experienced another record annual result driven by significantly improved performance in all geographic regions.
Sydney 29 August 2007 (ASX: BVA) –Bravura Solutions Limited (Bravura) – a leading global supplier of wealth management applications and professional services – wishes to provide the following supplementary commentary, for results pertaining to the financial year ended 30 June 2007.
Headline results for FY07 are as follows:
business excluding depreciation and amortisation
partially finance the FY07 acquisitions and $1.8 million of non cash related interest on deferred settlement
The Company experienced exceptionally strong revenue growth of $70.1 million; with $24.1 million being organic, and $46.0 million derived from acquisitions.
Revenue in Australia increased by 14 per cent to $24.9 million, as a result of organic growth fuelled by legislative changes, and increased investment activity in the sector. Similarly, revenue in New Zealand increased by 98 per cent to $4.4 million, with much of the growth derived from KiwiSaver and PIE legislation. Revenue in Asia climbed to $8.2 million with the signing of a landmark $10.0 million deal with New York Life (International). Revenue in the UK and Europe increased by $46.0 million as a result of acquisitions, and by a further $11.2 million due to organic growth.
Licence fee revenue of $23.9 million increased by 388 per cent on the prior year, reflecting robust sales of Talisman in Asia and the UK, and ePASS in Australia. The acquired Rufus software business contributed $5.5 million to the increase in licence fee revenue. Overall, licence fees accounted for 24 per cent of total revenue in the year ended 30 June 2007, compared with 16 per cent in the prior year.
Professional services revenue of $44.3 million increased by 210 per cent on the previous year, reflecting both upgrades by existing customers, and professional services arising from the implementation of those new contracts outlined in the preceding paragraph. The acquired Rufus software business contributed $19.5 million to professional services revenue. Overall, professional services accounted for 44 per cent of total revenue in the year ended 30 June 2007, compared to 48 per cent in the prior year.
Maintenance revenue of $31.9 million increased by 195 per cent on the previous year, reflecting the expanded licence base. The acquired Rufus software business contributed $19.0 million to the increase in maintenance revenue. Overall, maintenance accounted for 32 per cent of total revenue in the year ended 30 June 2007 compared to 36 per cent in the previous year. Following completed implementation of new customer contracts, new licence agreements from FY07 will add $0.5 million to future annual maintenance revenue.
Operating costs - overview
Operating expenses in FY07 increased by 237 per cent on the prior year to $86.5 million; in line with the increase in revenues. The increase in operating expenses reflected Bravura Solutions’ expansion into key European and Asian markets that necessitated significant infrastructure and integration costs. The integration of the acquired businesses, and subsequent relocation to new European headquarters in central London, has proceeded in line with management expectations. One-off integration costs of $3 million were incurred.
In addition, R&D expenditure increased by 109 per cent on the prior year, accounting for $9.8 million of total operating expenses. This investment for the future reflects Bravura Solutions’ ongoing commitment to developing the next generation of wealth management products for its clients.
EBITDA
EBITDA for FY07 was $13.6 million, a 216 per cent increase on FY06. The EBITDA margin was 13.6 per cent, or 16.6 per cent when adjusted for the one off integration costs of $3.0 million relating to Rufus and AB Prodata.
Amortisation, Depreciation, financing costs and NPAT
Amortisation and depreciation expenditure of $4.0 million increased 233 per cent on the prior year. The increase was due to the amortisation of intangible assets associated with the acquisitions of Rufus, AB Prodata and Essential.
Bravura Solutions generated EBIT of $9.6 million, an increase of 210 per cent on the prior year.
Net finance costs of $3.0 million increased by $2.6 million on the prior year. The increase is attributable to the interest payments arising on the debt that was used to part fund the acquisitions. Finance costs also include a non cash interest expense of $1.8 million to reflect the discount associated with the deferred settlement of the acquisition of Rufus.
The effective tax rate for the year was 19 per cent, resulting in a net profit after tax of $5.4 million. The effective tax rate was reduced as a result of New Zealand tax losses from FY06 that were recouped in FY07, tax write offs on capital raising costs from both the IPO and the subsequent Rights Issue and the tax deductibility of amortisation of intangibles in the UK.
Dividend
The Company declared a final dividend of 0.9 cents per share fully franked payable on 16 October 2007, which follows the interim dividend of 1.2 cents per share fully franked paid in March 2007. Total dividends per share for FY07 are 2.1 cents per share.
Balance Sheet - Overview
The Company’s financial position remains strong with total assets at 30 June 2007 of $177.1 million, financed by Shareholders’ funds of $90.3 million.
Shareholders’ funds increased by $41.8 million on the prior year to $90.3 million, reflecting both the $38.0 million raised under the Rights Issue (net of transaction costs), the net profit after tax for the year of $5.4 million, and after making dividend payments of $3.6 million.
The Company’s total current funding facility is $55 million, with borrowings falling to $19.6 million at 30 June 2007 from the $44.0 million at 31 December 2006. The company focuses primarily on a Net Debt to Last Twelve Months EBITA ratio from a gearing perspective, and this was a conservative 1.21 times at 30 June 2007.
Capital expenditure for the twelve months was $4.1 million, most of which related to the fit out of new premises in London and Edinburgh.
Cash Flow - Overview
The net operating cash flow for the year was a cash out flow of $3.8 million. This was directly attributable to several expansionary events, including; the acquisitions of Rufus and AB Prodata, which significantly increased working capital requirements; significant up front costs in implementing two large contracts; and, ongoing commitment to R&D.
Bravura Solutions invested a combined total of $64.7 million in acquiring Rufus, AB Prodata and Garradin, of which $39.5 million was funded with debt. Bravura Solutions invested a further $3.0 million in consolidating and relocating its European headquarters to larger premises in central London and Edinburgh.
Bravura Solutions successfully raised an additional $40.6 million by way of a rights issue in March, which enabled the repayment of $22.6 million of debt. As at 30 June 2007, total net indebtedness was $12.1 million.
FY08 outlook - overview
Bravura Solutions’ business development in FY08 will remain focused on maintaining profitable growth.
Within the Asia Pacific region, the Australian business will focus on consolidating its dominant market position and improving profitability in a mature market. This will be achieved both by assisting existing customers to upgrade to next generation applications, and winning new customers with the Company’s superior product and service offering. Simultaneously, Bravura Solutions will look to continue to build on its achievements in Asia in 2007 by leveraging off its recent successes, and capitalising on growth opportunities in the broader Asian market.
The European market also presents a unique opportunity. A series of legislative, demographic and industry developments have aligned to create an environment particularly favourable to a company with the resources and expertise such as Bravura Solutions. Having established asignificant platform with the acquisition of Rufus, Bravura Solutions is well placed to take
advantage of the opportunity.
Management continues to see strong organic growth and recurring revenues in all regions, particularly EMEA and Asia. FY08 revenue is anticipated to be in the range of $155 million to $165 million, and will be underpinned by the full year contributions of Rufus, AB Prodata and Garradin. The Company will look to cross sell services and software solutions into its expanding customer base.
Cost control will be a continuing focus to ensure costs are kept in line with revenue growth. However, the Company will continue to invest in its world class products and see the Sonata suite of products driving growth in future years, with upgrades to existing customers and new sales.
The Company will continue to consider acquisitions in target markets to broaden product offerings and expand the customer base.
EBITDA is expected to be in the range of $26 million and $29 million. EBITDA margin is expected to increase to 17 per cent as a result of scale increases, completed integrations, resource management and utilisation improvements.
Management expects Earnings per Share to be more than 50 per cent higher then FY07.
