Costly strategy pivot
Significant downgrades to guidance and dividend suspended.
Need To Know
- Revenue growth guided to 1%-3%. Costs guided to grow 16%-20%.
- EBITDA downgraded to ~A$10-15m, 65% below consensus.
- Dividend suspended as free cashflow expected to be negative for the year.
Investment Implications
Overview: New CEO Libby Roy provided an update as part of the businesses strategic review. The update highlighted a significant downgrade to earnings guidance causing the market to react with an -57% share price move (one of BVS’s largest single day moves).
Guidance update: Revenue growth guided to 1-3% and cost growth guided to 16-20%. This suggests a full year EBITDA of A$10-$15m (a ~65% miss to consensus expectations of A$44m) and NPAT of -A$5 to A$0m (vs consensus at A$23m). The downgrade is driven by a complete reinvestment into the new business strategy, suggesting a significant underinvestment by previous management.
Suspension of the dividend: Free cash flow (FCF) is expected to come in negative for the year. As a result of this the group is suspending dividends until the FCF generation returns.
Management: Clearly management is on the back foot with their strategic review. A downgrade to guidance this large is a clear signal of internal mismanagement. The trajectory of the earnings recovery is highly uncertain.
Summary: Highly uncertain earnings outlook and ongoing strategic reset is likely to overhang the company and share price. BVS has been subject to M&A interest in the past. The collapse in the share price and strategic uncertainty could spark interest. Our Hold Rating is under review.
Stock overview
Share Price
Company overview
Bravura Solutions is an Australia-based provider of software solutions for the wealth management, life insurance, and funds administration industries.
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