Existing shareholders in Bravura Solutions face a massive dilution as the company looks to save itself via a $80 million fundraising that will boost issued capital by 81%.
The issue has all the hallmark of an emergency with the company slumping into a $14 million trading loss for the six months to December and then revealing massive impairments to take the total loss for the half to $191 million
To survive, Bravura will issue new shares at 40 cents each to help fund a big cost cuts program and buy some time for new CEO Libby Roy to execute a turnaround plan.
The deal will see Bravura raise the $80 million via a one-for-1.73 entitlement offer to raise $57 million and an institutional placement to raise $23 million.
Both issues will be done at $0.40 share, a 50% plus discount to the last traded price on February 23 of $0.85.
Bravura says the raising will see the “issue of approximately 200 million new shares, representing approximately 81% of the current issued capital of Bravura”, a huge dilution for existing shareholders if they do not take up the issue (there will be a large dilution just from the $23 million placement alone for smaller holders).
The 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.
As well as the issue, Bravura says it has amended its debt facility and intends to refinance its debt after the capital raising is completed. The shares will remain halted for the time being.
Bravura describes itself as a “provider of software solutions for the wealth management, life insurance, and funds administration industries.”
The company had its shares suspended last week when it missed the February 28 deadline for December 30 interim reports and accounts and intimated at the time it was looking for new capital.
Monday also saw the company release its delayed December 31 interim results – in short they were terrible, with a massive impairment and cash running down quickly.
Bravura reported an 11% drop in revenue for the six months to $118 million, a 17% surge in costs to $125 million, an EBITDA loss of $7 million (down from a profit of $25.3 million in the first half of 2021-22. The adjusted net loss of $14.2 million, for from $16.1 million a year ago. And no dividend (no wonder).
Cash of $32.7 million and net cash of $23.2 million as at December 2022 had become cash of $19.8 million at February 20, 2023. The company says it has made total non-cash impairments of $176 million, including $163 million in goodwill and $13 million of work in progress.
The net loss of $190.88 million compares very poorly with the profit of $15 million for the six months to December, 2021.
On Monday Bravura said the issue would “provide balance sheet flexibility and working capital, and to support investment in its Organisational Change Program.”
Bravura does have a new CEO, so the write down, loss and issue is standard operating procedure – a kitchen sink clean out – for a company under pressure.
A last gasp bailout would be more accurate, judging by the size of the issue and the impairments.
