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Bravura Solutions share price on watch after strong FY 2020 growth but cautious guidance

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The Bravura Solutions Ltd (ASX: BVS) share price will be on watch on Wednesday following the release of its full year results.

How did Bravura perform in FY 2020?

Bravura was on form in FY 2020 and delivered another year of growth and further operating leverage expansion.

For the 12 months ended 30 June 2020, Bravura reported a 6% increase in revenue to $274.2 million. This comprised a 2% increase in Wealth Management revenue to $180.4 million and a 16% lift in Funds Administration revenue to $93.8 million.

Thanks to the aforementioned operating leverage expansion, the company earnings before interest, tax, depreciation and amortisation (EBITDA) margin increased from 18.8% to 21.1% in FY 2020. This led to Bravura reporting a 19% increase in EBITDA to $57.8 million.

This EBITDA growth was driven entirely by its Funds Administration business, which reported a 33% increase in EBITDA to $43 million. This offset a 2% decline in EBITDA for its Wealth Management segment to $52.9 million. Management advised that this decline was driven by lower licence fees during the year. Nevertheless, it notes that the business has a sales pipeline that is strong and growing, with significant opportunities across all key markets. Though, it warned that COVID-19 is lengthening the sales cycle.

On the bottom line, Bravura posted a 22% increase in net profit after tax to $40.1 million. Approximately $3 million of this came from acquisitions. On a per share basis, earnings came in at 16.5 cents.

In light of its positive form during the pandemic, the Bravura board declared a 5.5 cents per share unfranked final dividend.

Bravura’s Chief Executive Officer, Tony Klim, was pleased with the company’s performance in FY 2020.

He said: “We are pleased to report our FY20 results, with continued investment and the acquisitions of FinoComp and Midwinter positioning Bravura for long-term growth driven by market demands for microservices ecosystems, digital solutions and automation. Midwinter and FinoComp expand our product ecosystem, integrating adviser and microservices solutions with our core registry offerings. As expected, group margins continued to expand, reflecting the benefits of scale and operating leverage in the business.”

FY 2021 outlook.

Although the company has a strong sales pipeline across its key markets, management has warned that FY 2021 could be a challenging year because of the pandemic. As a result, its earnings could be flat year on year.

It explained: “While the new sales pipeline remains strong, due to the wider impact of COVID-19 there is greater uncertainty in the timing of deal closures when compared to prior years. It is therefore possible that FY21 NPAT will be similar to FY20.”

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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