Bravura Solutions in $80m ‘half price’ raise as interim loss blows out to $191m

Software group Bravura Solutions (ASX: BVS) has reached out to shareholders to raise $80 million in fresh capital at a massive almost half-price discount after posting a blowout in losses to $191 million for the first half of FY23.

The Sydney-based Software as a Solution (SaaS) provider to financial institutions globally has issued a prospectus for the issue of 200 million shares at 40c each in a capital raise that represents 81 per cent of the company’s current shares on issue.

Bravura’s shares, which were placed into voluntary suspension on 28 February pending the capital raise announcement, last traded at 85c each, valuing the company at $211 million.

The raise will comprise a one-for-1.73 non-renounceable entitlement offer to existing shareholders to raise $57 million and an institutional placement to raise $23 million, which is fully underwritten.

Bravura, which has been struggling to maintain sales momentum and keep a lid on costs, says the funds will be used to provide ‘balance sheet flexibility, working capital and to support investment in the organisational change program'.

The program is targeting cost savings of up to $30 million a year for the company following an initial outlay of between $19 million and $24 million to implement the plan.

Among other key measures have been new senior management appointments including the managing director of Europe, Middle East and Africa (EMEA), a new chief technology officer, chief operating officer and chief strategy, marketing and commercial officer.

The change program includes the appointment of two new non-executive directors, Andrew Russell and Russell Baskerville, to the board. This follows the appointment of Libby Roy as CEO in June last year after Nick Parsons stepped down from the role.

In her first address to the AGM last year, Roy highlighted the need for the group to ‘adjust the way we think and operate’.

The message by the former managing director of business at Optus hit home in the latest half-year results which saw group revenue fall 11 per cent to $118 million and expenses increase 17 per cent to $125 million.

The rise in expenses has been attributed to wage pressures and investment in key resources in the Asia-Pacific (APAC) region.

Bravura says the drop in revenue is ‘predominately attributable to the impact of foreign exchange rates, a decline in non-recurring licence fees, continued operational investment in the Alta platform and support for new APAC projects’.

The bottom-line loss of $190.88 million for the half year compares with a $15.27 million profit a year earlier. The underlying EBITDA loss blew out to $32.3 million from $25.3 million a year earlier.

The latest result was impacted by $175.9 million in impairments, largely relating to the write-down of goodwill.

“The first half was undoubtedly a difficult period with our performance impacted by a number of operational and market-related challenges,” says Roy.

“However, after conducting a wide-ranging strategic review of our business and having taken some tough but necessary decisions, I believe we now have a plan in place that will allow us to better manage and monetise our suite of high quality, mission-critical products and build on our strong customer base.

“I am confident in the team’s ability to execute on this plan and achieve our targets of delivering an estimated $25 million to $30 million in annualised cost benefits once fully implemented.”

Bravura plans to refinance its $11 million debt facility following the $80 million capital raise as part of a debt restructuring plan for the group.

Amid the turmoil facing the company, Bravura has offered a slightly better outlook for the current half year, although still lower than previous forecasts.

The company is forecasting higher revenue than the first half, but it warns that it is still experiencing lower existing and project work in EMEA and that a key project involving Colonial First State is suffering delays.

Operating costs will remain elevated and in line with the first half despite an expected $2 million in savings to come from the change program.

After closing off the December half year with $32.66 million in cash, Bravura reports that it had cash at bank of $19.8 million on 28 February 2023.