Bravura Solutions has announced a large capital raise at a value less than half its last close

Bravura Solutions shareholders are in for a tough day when trade in its shares resumes after the announcement of a deeply discounted capital raise.

Bravura Solutions chief executive Libby Roy. Picture: Hollie Adams

Bravura Solutions is looking to raise $80m at a massive discount with a large proportion of that going to funding its cash burn after a difficult first half.

The management software developer is looking to raise the funds at 40c - a steep discount to the 85c level its shares last traded at, and well below 12-month highs of $1.91 in late April last year.

The company’s shares have been suspended from trade since February 24 while the company worked its way through a restructuring plan for the business and in the meantime, have been dropped from the ASX300 index.

Bravura also yesterday reported a steep fall in earnings, swinging from a first half profit of $16.1m for the previous corresponding period to a net loss of $14.2m, on revenue which was 10.6 per cent lower at $118.3m.

Once impairment charges of $175.9m booked mainly against the company’s wealth management division’s goodwill are factored in, the net loss falls to $190.9m.

The capital raising includes a $23m institutional placement as well as a $57m accelerated, non-renounceable entitlement for existing shareholders under which they can subscribe for one new share for each 1.73 shares owned.

The 200m new shares to be issued will be equivalent to about 81 per cent of the company’s current shares on issue, Bravura told the ASX.

“The use of proceeds are expected to fund investment in its operational change program, fund negative cashflow and transaction costs and provide balance sheet flexibility and working capital,’’ the company said in a statement on Monday.

The operational change program would take up $22m of the funds with $36m set aside to fund negative cashflow and $5m in transaction costs, while another $22m is for “balance sheet flexibility and working capital’’.

Bravura also announced it had amended its debt facility as part of the process and now had an $11m debt limit, down from $30m, and would seek to refinance once the capital raise was completed.

At the end of the half year it had $9.5m in drawn debt.

The company said it was targeting annualised cost savings of $25m-$30m once the organisational change program was fully implemented, and it had a “clear plan focused on core product capabilities and enhancing efficiency’’.

The organisational change program itself is costed at $19m-$24m.

On the results front, Bravura said about 48 per cent of the $14m drop in revenue for the half was caused by non-recurring licence fees running their course, as well as a large impact from foreign exchange movements.

Across the company’s two divisions, wealth management revenue fell 7 per cent while funds administration revenue was 21 per cent lower in the first half.

Both operating expenses and corporate costs rose, driven by a combination of continued wage pressures, investment in key resources ahead of client work, and costs associated with additional executive hires.

Bravura chief executive Libby Roy said after a tough first half the company was looking to the future.

“The first half was undoubtedly a difficult period with our performance impacted by a number of operational and market‐related challenges,’’ Ms Roy said.

“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 $25‐30m in annualised cost benefits once fully implemented.”

Bravura shares remain suspended from trade while the institutional placement is completed.

The retail share offer will open on March 13 and close on March 22, with the company saying all of its directors were intending to take it up in full.

Originally published as Bravura Solutions has announced a large capital raise at a value less than half its last close