The share price now sits at A$0.60 (£0.34) after it fell from A$1.30 (£0.74) yesterday (November 3) after Bravura admitted performance in 2023 will be "below market expectation" before planning to return to revenue growth in 2024.
Over the past year, Bravura's share price has dipped by nearly 80 per cent.
Bravura's tech underpins platforms such as Nucleus, Fidelity and M&G Wealth.
Its new chief executive, Libby Roy, has been conducting a strategic review of the business since taking on the role in August.
But in an analyst note following a Bravura update, MST Emerging said the technology provider needed “a significantly higher investment” in its cost base than initially envisaged.
In the update, published yesterday, Bravura said it had "solid foundations" but that the business needed to be "reconfigured" to scale products and revamp its technology stack.
"Operating costs continue to rise because of industry wide increase in people costs to attract and retain talent in a competitive labour market," it said.
"In addition, the current misalignment of resources has necessitated additional headcount to meet delivery and performance obligations across several significant projects."
The balance sheet position is significantly more precarious than we had previously envisaged.MST EmergingBut MST Emerging estimated a 20 per cent increase in operating costs, coupled with a "sharp decline" in high margin licence revenue, and a "slower than expected" transition to microservices.
"[This] will drive significant margin compression and cash burn in 2023," said MST Emerging.
The analyst note also said: “The balance sheet position is significantly more precarious than we had previously envisaged. And we wonder whether Bravura’s customer base is as comfortable with the capital position as management appears to be.”
“With Ebitda [earnings before tax] set to contract by around 65 per cent in 2023 and the long-term margin outlook now significantly lower than historical levels, this is one to avoid for the time being.”
Bravura also mentioned the winding down of three high margin legacy contracts, but confirmed no other long term contracts were at risk.
MST Emerging said Bravura's revenue model is "shifting away from lumpy licence fee payments", suggesting that Bravura’s sustainable margin profile is going to be significantly lower than what was previously assumed.
It also said risks there was "reputational damage" associated with the platform of "a key UK client".
Later this month, the company will deliver its annual general meeting. Until the company gives greater visibility as to the group’s long-term margin profile and evidence of both revenue growth and operating leverage, MST Emerging said it expects the stock to remain under pressure.
Rumours of a takeover follow rival FNZ’s failed attempt to buy GBST after it was ruled out by the UK’s Competition and Markets Authority.
FTAdviser approached Bravura but the company was not available for further comment.
It concluded in its strategic review update: "The company is confident that the measures that are being implemented and the repositioning of the business pursuant to the strategic review will return the business to a stronger footing."
ruby.hinchliffe@ft.com
