(“Brady”, the “Company” or the “Group”)
INTERIM RESULTS
For the six months to 30 June 2015
Brady, the leading global provider of trading and risk management solutions for metals, recycling, energy and soft commodities, is pleased to announce its interim results for the six months to 30 June 2015.
Highlights
Performance in line with market expectations for the full year with nine significant new licence deals signed in first half of the year
· Anticipated strong performance for H2 2015 with visibility on 80% of revenues for the full year
· Continued progress on size and geographic scope of contract wins. Landmark deals include:
o Global deal with one of the world’s largest commodity companies to deploy software in eight locations around the world
o First major recycling deal outside the US for world’s largest recycling company with deployment in the Asia Pacific region as part of a global roll-out.
Financial Highlights
· Revenues of £14.2 million (H1 2014: £15.6 million). YOY reduction resulting from forex movements (£0.5 million) and timing of licence sales.
· Progress on recurring revenues
o £7.8 million recurring revenues (£8.2 million at consistent currency rates) compared to £7.9 million in H1 2014, representing organic growth of 4 per cent year on year.
o 55 per cent of total sales (H1 2014: 51 per cent).
· Strong financial position maintained – cash at bank on 30 June 2015 of £6.2 million (£7.5 million at end of July 2015)
Financial Summary:
(Unaudited)
(Unaudited)
(Audited)
6 months to
30 June
2015
6 months to
30 June
2014
Year to
31 December 2014
£’000
£’000
£’000
Revenue
14,106
15,604
31,015
Recurring revenue
7,799
7,933
15,848
EBITDA before exceptional items
1,184
3,016
6,288
Operating result before exceptional items
(389)
1,440
3,174
Dividend paid (pence per share)
1.85
1.70
1.70
Adjusted earnings per share (pence) 2
0.53
2.49
5.31
Basic earnings per share (pence)
(0.53)
1.32
3.51
Cash
6,197
6,006
9,580
No exceptional items in H1 2015 or H1 2014
1Consistent currency numbers are calculated by translating the 2015 interim results at the same exchange rates as those used in the 2014 interim consolidation.
2Adjusted earnings per share, as calculated by external analysts, are based on the profit after tax adjusted for acquired intangible assets amortisation, share based compensation, exceptional items and normalised tax.
Operational Highlights:
· Nine significant new licence deals signed in first half of the year, including:
o A global deal with one of the world’s largest commodity companies to deploy software in eight locations around the world
o A significant recycling deal with the world’s largest recycling company, extending its deployment of Brady in the Asia Pacific region, as part of a global roll-out. This is our first major recycling deal signed outside the US
· Substantial progress in the Energy business with six new deals and 24 clients signed up for the upgrade route ahead of changes to the Nordic balancing market. Energy Division contribution up 23%
· Seven new clients went live in the first half
· First mobile handheld inspection device launched for recycling companies
· First Cloud-based Hedge Manager solution for commodities live
Paul Fullagar, Chairman of Brady plc, commented:
“I am pleased to see that our investments continue to pay off. This is evidenced by the ability to sign global contracts with the best names in the market place and endorses our investment in product and demonstrates our ability to service and support our clients around the world. Having established leadership in the metals market, the Group can now demonstrate global expansion with world leading clients in the recycling industry. Our transactions are increasing in value which is a reflection of our brand value.
I was delighted to be able to announce the acquisition of ScrapRunner today. This acquisition has further strengthened our offering to the recycling and scrap market as ScrapRunner is the market leading truck dispatch system designed specifically for the recycling and scrap industry.
Our Energy unit continues to grow in revenue and profitability, addressing the market needs as renewables become more influential as a power source and the increase in short term trading and regulatory changes further impacts the requirements of companies to have real-time trading solutions.
Whilst certain segments of the markets in which we operate are experiencing challenges, the long term outlook for renewables, recycling, commodities and energy provides very exciting markets and Brady is increasing market share.”
For further information please contact:
Brady plc
Gavin Lavelle, Chief Executive Officer
Martin Thorneycroft, Chief Financial Officer
Telephone: +44 (0)1223 479479
Cenkos Securities
Ivonne Cantu
Alex Aylen (sales)
Telephone: +44 (0)20 7397 8900
Redleaf Polhill
Charlie Geller / David Ison
Telephone: +44 (0)20 7382 4730
About Brady
Brady plc (BRY.L) is the largest European-headquartered provider of trading and risk management software to the global commodity and energy markets. Brady combines fully integrated and complete solutions supporting the entire commodity trading operation, from capture of financial and physical trading, through risk management, handling of physical operations to back office financials and treasury settlement, for energy, refined, unrefined and scrap metals, soft commodities and agriculturals.
Brady has 30 years’ expertise in the commodity markets with some 300 customers worldwide who depend on Brady’s software solutions to deliver vital business transactions across their global operations. Brady clients include many of the world’s largest financial institutions, trading companies, miners, refiners and producers, recycling companies, scrap processors, tier one banks and a large number of London Metal Exchange (LME) Category 1 and 2 clearing members and many leading European energy generators, traders and consumers.
For further information visit: www.bradyplc.com
Brady plc: Twitter/Facebook/LinkedIn
CHAIRMAN’S STATEMENT
The Group has signed important new deals in the first half of 2015 and is operating in line with management expectations for the full year. Brady’s performance has been achieved against a well-publicised environment of challenging market conditions for commodities, energy and scrap metals globally. Against this backdrop the Group continues to increase the size and geographic scope of contract wins, demonstrating its ability to deliver major contracts around the world.
The Group recorded revenue of £14.1 million (2014: £15.6 million), and reported a loss after tax of £0.4 million (2014: profit of £1.1 million) and EBITDA of £1.2 million (2014: £3.0 million). Net cash increased by £0.2 million to £6.2 million.
Revenues reduced by £1.5 million compared to H1 2014. £0.5 million of this is as a result of foreign exchange movements. The remainder is a result of the timing of licence sales. The Group recorded revenue on two significant deals in 2015, compared to three in H1 2014 (c £1.0 million each). Another significant reason for the decline was the high level of backlog revenue recognised in 2014, totalling £1.9 million compared to £0.2 million in 2015.
Recurring revenue for the period was £7.8 million (£8.2 million at consistent currency rates) compared to £7.9 million in the prior period, representing organic growth of 4 per cent year on year in underlying operations. Recurring revenues represent 55 per cent of total sales (H1 2014: 51 per cent). The gross margin for the first half of 2015 increased to 65 per cent compared to 64 per cent for the first half of 2014.
Brady has historically secured the majority of new contracts in the second half and the Board believes this pattern will be repeated in 2015. The Group has visibility on 80% of its revenue for the full year, with contracts signed, and a number of further contracts are in advanced stages of negotiation. Our focus is on securing these licences and continuing to deliver the backlog of projects and revenue that has already been agreed.
The slowdown in the Chinese economy and the related impact on the price of commodities and the general global economic impact have been speculated on recently in the media. To date we have not seen a slowdown in the level of activity in our business. However, we will of course keep the market informed should we see a deteriorating position.
Divisions
The Commodities and Recycling business units have both signed strategically important deals in the first half of 2015. The Recycling business has signed its first major deal outside of the Americas, in line with our strategy of expanding this business unit geographically. The Commodities business has signed a deal with one of the world’s largest commodity companies for ore, concentrate and refined metal on a single platform, which is to be deployed in eight locations around the world. This would not have been possible without the investment made over the past few years in our single platform, multi-asset physical commodities trading system.
The Energy business accelerated the momentum of 2014 with four new deals and two migrations to the go-forward platform. This resulted in underlying currency sales growth of 6.7 per cent and contribution growth of 52 per cent.
Strategy and Operations
More than 50 per cent of Brady’s revenues are recurring, and it has a strong licence backlog and increasing demand for services and development to support our new and existing clients. The Group continues to have a robust balance sheet, with a healthy cash position, no debt and a progressive dividend policy.
The fundamentals remain strong. The global ECTRM market for the commodity, energy and recycling sectors is estimated to be worth over $1.5 billion annually and Brady is securing an increasing share of the global market.
The Group’s strategy is to retain and strengthen its position in providing trading, risk management, settlement and logistics solutions to the global energy, metals, recycling and soft commodity markets.
Brady is signing and delivering larger licence agreements across some of the biggest names in the industry. We have over 300 clients and more than 10,000 end users of our solutions.
Brady’s strategy is to address the global market and continue to win more global deals. Today more than 35 per cent of the Group’s revenues come from outside of Europe and the Group recently signed its first major deal in Australia for the Recycling business. Further, Brady increasingly delivers solutions via the Cloud.
Brady continues to look for synergies across the Group by:
· Integrating the sales teams along geographical lines: Europe, Americas and APAC;
· Cross-selling Brady solutions into the enlarged customer base;
· Reusing technology across the Group, for example Cloud and web deployment;
· Sharing service and development resources across the Group; and
· Using the extended sales team to explore recycling deals outside of the Americas.
I would like to thank all directors and employees for their hard work and commitment during a very busy first half of the year.
Paul Fullagar
Chairman
CHIEF EXECUTIVE’S REVIEW
The Group confirmed its global leadership position in ores, concentrates and refined metals solutions during the first half of 2015. After a competitive bid process, Brady was selected to provide a global solution to one of the world’s largest commodity companies. Our software will be deployed in eight countries and will be used by over 200 people. This endorses our strategy of investing in our solution and critical services and support around the world. To win global deals, it is a prerequisite to have global engagement and credibility with the client.
Brady already has leadership in the North American recycling market, with six of the top ten recyclers using Brady as their principal software solution. The North American recycling market is the world’s largest. The turnover in North America is estimated to be in excess of $100 billion and there are over 1,600 registered members of ISRI, the main recycling trade association. Brady’s strategy is to become the number one recycling software company globally. Therefore, it is very encouraging to sign a significant deal with a major global player in Australia. The solution will support the AAPAC region. This is our first important recycling deal outside of the Americas and underlines our international growth strategy. Brady already provides the principal solution to the customer in North America, the client’s largest region. The next step is to deploy the solution in Europe and complete the global roll-out.
Brady Energy’s momentum continued in the first half, signing six new contracts, including four new names and two migrations from the legacy platform. Clients include a leading European energy company, a large French industrial company and a major energy company in Norway. There are significant changes in the Nordic power settlement market and Brady has signed 24 clients who require these changes to participate in the market.
To optimise on customer engagement and the growing number of our customers involved in multiple asset classes, Brady has completed the full integration of the sales team along geographical lines. Previously, the sales team was aligned with individual product streams.
Having signed nine deals, bookings are ahead of plan and there is good sales momentum going into the second half of the year. Brady is in advanced negotiation for several major contracts and anticipates a strong second half for the business, which is traditionally second half weighted.
Group Technology
Brady started in the refined metals market, and acquired expertise and IP in the ore and concentrates market. The major product initiative in the last year has been to merge the IP for refined, ores and concentrates into a single solution. This investment has now yielded substantial bookings in less than two years. It underlines our position as market leaders and validates our strategy of acquiring selective IP and domain knowledge.
Brady sees growing demand for Cloud services and has signed two further Cloud deals in the first half. The Cloud environment has been strengthened and our first client receiving 99.995% availability has gone live.
In 2016 a major change in the Nordic power market will take place. The current settlement and balancing arrangements, where individual countries have distinct settlement systems and processes, will change to a common pan-Nordic settlement system. Therefore, anyone wishing to settle power in these regions needs to upgrade their solution to meet the new protocols. Brady has signed and engaged with 24 existing and new clients for this new functionality.
The Group has also gone live with the new Hedge Management solution to provide hedging and risk management solutions for metals, recycling and agricultural commodities. This is also delivered as an online Cloud service, vastly reducing the costs associated with accessing these solutions.
Brady Recycling has gone live with a mobile yard inspection device, allowing yard inspectors, equipped with an iPhone/iPad, to perform key tasks related to receiving loads in the recycling yard. This development also forms part of a wider initiative to expand the next generation of Brady solutions into the mobile arena.
Brady Commodities
With the knowledge that one of the leading international trading companies was considering selecting a CTRM solution to manage its global refined metal and concentrate activities, Brady Commodities focused its attention on getting this deal signed and validating our unparalleled capabilities in this space. In the area of metals, our leading multi-commodity physical trading solution now handles refined ferrous, non-ferrous and precious metals, as well as concentrates, scrap and recycled metals. Functionality has also been enhanced for the cotton sector, through integratedUS cotton specific functionalities such as The Seam (this helpscotton growers and buyers find the best cotton prices), equity bale redemption management, EWR warehouse integration, and AMS bale quality management throughout the system.
Hedge Manager, a Cloud-based solution designed specifically for risk management in today’s volatile commodity markets, went live with a major European aluminium producer.
Throughout the first half we have also seen significant ongoing implementations across both metals and agricultural commodities, including go-lives for:
· A major Korean consumer electronics group for its metal trading and procurement activities
· A major Brazilian investment bank for metal warehousing
· A Stamford based trading company focused on concentrates and refined metal trading
· A fund manager, based in Singapore, focused on provision of trade finance and structured finance to commodity clients.
Brady Energy
In H1 2015, Brady Energy’s momentum in winning new contracts continued, comprising four new clients and two migrations from legacy applications. To underscore our strategy two of the new clients were cross sales of new solutions into existing energy clients. New deals include:
· A joint venture between two multi-nationals deploying Brady in a power plant in Northern France, which is predicted to be one of the world’s most flexible and efficient gas-fired power plants. Our solutionallows them to assess the performance and reliability of new turbine technology
· A global organisation that is a world leader in gases, technologies and services for industry and health – producing high value-added gases for its international customers. Our solution is used for gas tolling
· A major regional power producer based in southern Norway, the seventh largest power producer in Norway. It will deploy the Brady solution as its main physical settlement and invoicing engine. The solution is a cross-sell as it already uses Brady ETRM
· A company 100 per cent owned by a Norwegian municipality that aims to be the market leader in the management of financial and physical Nordic power (another cross-sale)
The investment in gas functionality has materialised in the delivery of additional product functionality for a major asset-backed trading client in Continental Europe. Our solution set has been extended to allow for the capture, management and hedging of more complex gas trading structures, as part of the ETRM solution to energy trading organisations. This includes support for procurement contracts, gas storage and complex gas options as well as core gas functionality, such as gas days and locations.
Delivery of changes to support the new NBS (“Nordic Imbalance Settlement”) continues on time and on budget. The NBS project is the harmonisation of systems across the three Nordic countries and represents a fundamental change for the Nordic power market. NBS will provide a harmonised framework of operational business processes for all Nordic balance responsible parties, including reporting, performing settlement, invoicing and collateral management. As such, all market participants are required to adapt to the new rules and standards for information exchange. In addition to increasing the number of existing clients participating in the project to over 20 customers, the division has won new business as market participants gear up for the change.
The division continues to advance its adoption of new technology, with both extensions to the web portal developed last year and deployed at a number of clients, and a new data warehouse module to provide additional and easily accessible data for management and/or web reporting.
Brady Energy had three new clients going live in H1 2015, including:
· A major global renewable energy company using Brady for overall market settlement in Ireland;
· A significant bank in the commodity space using our Cloud-based solution for Power Scheduling & Nomination to support cross border trading and supply activities across multiple European grid networks; and
· A German renewable energy supply company delivering clean energy to large industrial and commercial consumers using Brady’s Power Scheduling & Balancing.
Brady Recycling
Integration of Recycling sales with the rest of the Group was completed in Q1 2015. There has also been a major push to extend our sales and marketing outside of the Americas. It is very encouraging to sign a major deal in Australia for the APAC region. We have also strengthened marketing in the US and Recycling has signed a new client in ferrous scrap trading and based in Ohio.
In regards to product, we have made some excellent progress:
· Recycling launched a mobile yard inspection device, allowing yard inspectors, equipped with a mobile device (iPhone/iPad) connected via cellular/VPN or Wi-Fi, to perform key tasks related to receiving loads in the yard. Operations that previously relied on radio communications or paper documents are now done electronically in real time, improving accuracy and supplier relations through enhanced documentation, increasing frequency updates, and reducing input errors and preventing the danger of any fraudulent transactions.
· Our Buyer Workbench solution is also now available, providing full insight into how best to manage suppliers and supply chain optimisation. Everyone in the recycling industry knows that buying at the right price at predictable volumes is the key to optimal margins. Managing supplier relationships, maintaining favourable pricing and consistently securing material is a difficult balancing act. Alongside supplier contact information and activity history, our robust analytical reporting tools offer the best possible scenarios to optimise feed requirements at the best possible price, based on supplier capabilities, locational restrictions and historical activity.
FINANCIAL RESULTS
Group Revenues
Revenues for the first half of 2015 were £14.1 million (H1 2014: £15.6 million). Currency exchange rates for the Norwegian Krone and the US dollar have changed materially between 30 June 2014 and 30 June 2015, with the average rate for the Norwegian Krone weakening against the pound by 17 per cent and the US dollar strengthening by 8.7 per cent. Overall exchange rate movements have reduced 2015 revenues by £0.5 million. Revenues are down against the same period last year due to the timing of licence sales with three (c £1.0 million each) sales booked in 2014 against two in 2015. Service revenues are also down due to the timing of the licence deals, as the 2015 sales occurred towards the end of the period and hence relatively little associated service fees were billed. Whereas in 2014, most of the deals were signed either in the previous year or early in the period and so more service work was performed by 30 June.
Revenue by Type
H1 2015
H1 2015 (at consistent* rates)
H1 2014
Software licence sales
2,871
2,855
3,589
Recurring (maintenance, rental and hosting)
7,799
8,184
7,933
Service fees including development
3,436
3,613
4,082
14,106
14,652
15,604
Revenue and Contribution by Business Unit
Revenue
H1 2015
Contribution
H1 2015
Revenue
H1 2015 (at consistent* rates)
Contribution
H1 2015 (at consistent* rates)
Revenue
H1 2014
Contribution
H1 2014
Commodities
6,129
1,646
6,063
1,639
7,149
2,898
Energy
5,572
934
6,375
1,151
5,964
757
Recycling
2,405
409
2,214
381
2,491
864
14,106
2,989
14,652
3,171
15,604
4,519
* Consistent currency numbers are calculated by translating the 2015 interim results at the same exchange rates as those used in the 2014 interim consolidation.
Software licence sales were £0.7 million less than the same period last year. Backlog revenue (contracts signed in 2014 but revenue recognised in 2015) amounted to £0.2 million (2014: £1.9 million) of the total software licence sales. Backlog revenue carried into the second half of 2015 amounted to £2.1 million (2014: £2.1 million).
Recurring revenue for the period was £7.8 million (£8.2 million at consistent currency rates) compared to £7.9 million in the prior period, which is organic growth of 4 per cent year on year in underlying operations. Recurring revenues represent 55 per cent of total sales (H1 2014: 51 per cent).
Service and development fees were £3.4 million (£3.6 million at consistent currency rate) against £4.0 million last year.
Operating Result by Business Unit
· Brady Commodities
Revenues decreased from £7.1 million to £6.1 million in the comparative period. Contribution also declined to £1.6 million from £2.9 million (no significant exchange rate impact). The most significant reason for the decline was the high level of backlog revenue totalling £1.5 million recognised in 2014 compared to £0.2 million in 2015. The margin moved down as the Commodity business increased staff to cope with the level of business expected in H2.
· Brady Energy
In consistent currency, revenues increased by 6.7 per cent from £6.0 million in 2014 to £6.4 million in 2015. At actual exchange rates revenues declined from £6.0 million to £5.6 million. In consistent currency, contribution increased by 52 per cent from £0.8 million to £1.2 million and at actual exchange rates by 23 per cent. Margin increased in Energy as tight cost control has resulted in the majority of sales growth dropping straight through to contribution.
· Brady Recycling
In consistent currency, revenues decreased from £2.5 million in 2014 to £2.2 million in 2015 (£2.4 million at actual currency rates). Contribution also reduced to £0.4 million from £0.9 million in the prior period (no significant exchange rate impact) partly as a result of the reduction in sales and partly as a result of an increase in staff and legal and professional fees.
Group Margin
The gross margin for the first half of 2015 increased to 65 per cent compared to 64 per cent for the first half of 2014.
Selling and Administrative Costs
Selling and administrative costs grew to £9.6 million from £8.6 million in the same period last year. The main contributor to this movement was an increase in non-technical staff costs of £0.6 million.
Research and development expenditure represented 25 per cent (£3.5 million) of the Group’s revenues in the first half of 2015 compared to 24 per cent (£3.7 million) in the first half of 2014. This is in line with the Group’s commitment to ensuring that its product offering is maintained and up-to-date. Of the above research and development cost, £1.1 million was capitalised (2014: £0.7 million).
Profitability
Loss before taxation for the first half of 2015 was £0.4 million compared to a profit before taxation of £1.5 million for the first half of 2014. Loss after taxation for the first half of 2015 was £0.4 million, compared to a profit of £1.1 million for the first half of 2014.
EBITDA for the first half of 2015 was £1.2 million compared to £3.0 million for the first half of 2014. The EBITDA margin for the first half of 2015 was 8 per cent compared to 19 per cent for the first half of 2014.
Adjusted earnings per share for the first half of 2015 were 0.53 pence compared to 2.49 pence for the first half of 2014. Basic earnings per share for the first half of 2015 were negative 0.53 pence per share compared to an EPS of 1.32 pence per share for the first half of 2014.
Balance Sheet
The balance sheet continues to be dominated by goodwill and other intangible assets, largely as a natural consequence of the completion of acquisitions. As the majority of acquisitions were denominated in foreign currency, most of which have weakened significantly against sterling between balance sheet dates, there has been a combined reduction in carrying value of £1.4 million which has been charged to reserves.
The Group continues to enjoy a strong balance sheet with net cash balances at 30 June 2015 of £6.2 million (H1 2014: £6.0 million) increasing to £7.5 million by the end of July 2015.
Cash Flow
Cash outflow from operations in H1 2015 was £1.0 million compared to a cash inflow of £1.1 million for the same period in 2014. This is significantly different to EBITDA of £1.1 million. The main reasons for the difference are the changes in working capital, with payables reducing as a result of 2014 year-end bonuses being paid and receivables increasing. This was due to the large licence deals being signed towards the end of H1 with cash only being received in July 2015. Cash at 31 July 2015 was £7.5 million. Brady has no debt.
Investing activities this year consisted solely of capitalised development and fixed asset purchases of £1.1 million and £0.3 million respectively compared to £0.7 million and £0.3 million in 2014.
The Group paid a dividend in May 2015 of £1.5 million, compared to £1.4 million paid in May 2014, an increase of 11 per cent. Consistent with prior years, the Board is not recommending the payment of an interim dividend for 2015.
Market
H1 has seen a drop in most commodity prices across the board. For example, we are experiencing a six-year low in copper prices, with oversupply expected to double this year, and demand to remain weak with China’s economy expanding at the slowest pace since 1990. Whilst Brady’s revenues do not directly correlate to commodity and energy prices, the volatility in the underlying prices creates opportunities for traders and consumers to benefit from lower input prices. Commodity producers are focusing on cost reduction. With a pick up in the US economy offset by a slowdown in China’s growth, the Group believes that the general rebound in the global economy has yet to be reflected in overall increased demand for commodities and energy. Commodity prices are cyclical and will recover in due course. The Group also recognises ongoing opportunities as a result of the further deregulation of the European energy market.
The change in commodity driven businesses has shifted dramatically over the past five years with bank revenues declining from $8.7 billion to $3.8 billion and commodity trading companies increasing from $411.8 billion to $816.4 billion. With over 50 per cent of revenues deriving from the trading community, Brady views this market shift favourably.
The activities of the scrap recycling industry in the United States generate nearly $105.8 billion annually in economic benefits in the US. All told, the US scrap recycling industry accounts for 0.68 per cent of the nation’s total economic activity, making it similar in size to the data processing and hosting industry, the dental industry and the automotive repair industry. Brady is perfectly placed, with six of the top ten US recyclers using Brady as their principal processing solution, to address the needs of this growing market sector, particularly in light of increased regulatory demands.
Brady believes that the ECTRM market spends over $1.5 billion annually on software. As the largest European software company with a growing global market share, the Group continues to see significant potential for further growth.
Outlook
The Group has demonstrated good sales performance in the first half of 2015 considering the overall market conditions, with bookings ahead of plan.
For the second half, the Group still has a significant revenue backlog of contracts that have been signed but the revenue not yet recognised, which, when added to the new sales in the first half, underpins the remainder of 2015 and beyond.
The Group’s tendency to secure the majority of new contracts in the second half appears to be trending again in 2015, with significant new licence opportunities in advanced discussions. We look forward to signing and announcing further business in the second half of the year.
Gavin Lavelle
Chief Executive
Consolidated interim statement of comprehensive income
For the six months ended 30 June 2015
Six months to 30 Jun 2015 (unaudited)
Six months to 30 Jun 2014 (unaudited)
Before exceptional items
2014
Exceptional item
2014
2014
Notes
£’000
£’000
£’000
£’000
£’000
Revenue
4
14,106
15,604
31,015
–
31,015
Cost of sales
(4,915)
(5,577)
(10,977)
–
(10,977)
Gross profit
9,191
10,027
20,038
–
20,038
Selling and administrative expenses
(9,580)
(8,587)
(16,864)
(2,143)
(19,007)
Operating result
(389)
1,440
3,174
(2,143)
1,031
Finance income
26
19
58
–
58
(Loss)/profit for the period before taxation
(363)
1,459
3,232
(2,143)
1,089
Income tax expense
(71)
(392)
(380)
(250)
(630)
(Loss)/profit for the period attributable to shareholders of Brady plc
(434)
1,067
2,852
(2,393)
459
Other comprehensive income
Exchange differences on translation of foreign operations
(1,816)
(1,213)
(2,970)
–
(2,970)
Movement in actuarial valuation of defined benefit pension schemes
(286)
(185)
(1,205)
–
(1,205)
Total comprehensive income for the period
(2,536)
(331)
(1,323)
(2,393)
(3,716)
EBITDA
1,184
3,016
6,288
(2,393)
3,895
Earnings per share (pence)
7
Basic
(0.53)
1.32
3.51
(2.95)
0.56
Diluted
(0.53)
1.30
3.47
(2.91)
0.56
Adjusted
0.53
2.49
5.31
(2.95)
2.36
All of the above relate to continuing operations.
Consolidated interim statement of financial position
30 June 2015
30 Jun 2015 (unaudited)
30 Jun 2014
(unaudited)
31 Dec 2014
Notes
£’000
£’000
£’000
Assets
Non-current assets
Goodwill
10
16,724
21,296
17,567
Other intangible assets
11
12,689
14,405
13,429
Deferred tax asset
505
600
542
Property, plant and equipment
991
868
1,076
30,909
37,169
32,614
Current assets
Trade and other receivables
6,493
6,805
6,209
Accrued income
1,829
2,351
1,159
Cash and cash equivalents
12
6,197
6,006
9,580
14,519
15,162
16,948
Total assets
45,428
52,331
49,562
Equity
Share capital
833
813
817
Treasury shares
(3)
(3)
(3)
Share premium account
37,025
36,167
36,350
Merger reserve
680
680
680
Merger relief reserve
530
1,348
530
Equity reserve
612
935
890
Foreign exchange reserve
(9,042)
(5,469)
(7,226)
Capital reserve
1
1
1
Retained earnings
429
2,975
2,327
Total equity
31,065
37,447
34,366
Liabilities
Current liabilities
Trade and other payables
3,593
4,133
4,466
Deferred income
5,210
5,855
5,389
Current tax payable
593
790
690
9,396
10,778
10,545
Non-current liabilities
Deferred tax liabilities
2,571
3,219
2,789
Pension obligations
2,396
887
1,862
4,967
4,106
4,651
Total liabilities
14,363
14,884
15,196
Total equity and liabilities
45,428
52,331
49,562
Consolidated interim statement of changes in equity
30 June 2015
Share capital
Treasury shares
Share premium account
Merger reserve
Merger relief reserve
Equity reserve
Foreign exchange reserve
Capital reserve
Retained earnings
Total equity
Equity attributable to equity holders of Brady plc:
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at 1 January 2014
811
(3)
36,018
680
1,348
819
(4,256)
1
3,472
38,890
Dividends
–
–
–
–
–
–
–
–
(1,378)
(1,378)
Increase in equity reserve in relation to options issued
–
–
–
–
–
116
–
–
–
116
Exercise and cancellation of options
–
–
–
–
–
–
–
–
–
–
Allotment of shares following exercise of options
2
–
149
–
–
–
–
–
–
151
Transactions with owners
2
–
149
–
–
116
–
–
(1,378)
(1,111)
Profit for the period
–
–
–
–
–
–
–
–
1,067
1,067
Other comprehensive income:
Movement in actuarial valuation of defined benefit pension plan
–
–
–
–
–
–
–
–
(185)
(185)
Exchange difference on translation of foreign operations
–
–
–
–
–
–
(1,213)
–
–
(1,213)
Total comprehensive income for the period
–
–
–
–
–
–
(1,213)
–
882
(331)
Balance at 30 June 2014
813
(3)
36,167
680
1,348
935
(5,469)
1
2,976
37,448
Increase in equity reserve in relation to options issued
–
–
–
–
–
116
–
–
–
116
Exercise and cancellation of options
–
–
–
–
–
(161)
–
–
161
–
Transfer of reserves
–
–
–
–
(818)
–
–
–
818
–
Allotment of shares
4
–
183
–
–
–
–
–
–
187
Transactions with owners
4
–
183
–
(818)
(45)
–
–
979
303
Profit for the period
–
–
–
–
–
–
–
–
(608)
(608)
Other comprehensive income:
–
–
–
–
–
–
–
–
–
–
Movement in actuarial valuations of defined benefit pension plan
–
–
–
–
–
–
–
–
(1,020)
(1,020)
Exchange difference on translation of foreign operations
–
–
–
–
–
–
(1,757)
–
–
(1,757)
Total comprehensive income for the period
–
–
–
–
–
–
(1,757)
–
(1,628)
(3,385)
Balance at 31 December 2014
817
(3)
36,350
680
530
890
(7,226)
1
2,327
34,366
Dividends
–
–
–
–
–
–
–
–
(1,525)
(1,525)
Increase in equity reserve in relation to options issued
–
–
–
–
–
69
–
–
–
69
Exercise and cancellation of options
–
–
–
–
–
(347)
–
–
347
–
Allotment of shares following exercise of options
16
–
675
–
–
–
–
–
–
691
Transactions with owners
16
–
675
–
–
(278)
–
–
(1,178)
(765)
Profit for the period
–
–
–
–
–
–
–
–
(434)
(434)
Other comprehensive income:
–
–
–
–
–
–
–
–
–
–
Movement in actuarial valuation of defined benefit pension plan
–
–
–
–
–
–
–
–
(286)
(286)
Exchange difference on translation of foreign operations
–
–
–
–
–
–
(1,816)
–
–
(1,816)
Total comprehensive income for the period
–
–
–
–
–
–
(1,816)
–
(720)
(2,536)
Balance at 30 June 2015
833
(3)
37,025
680
530
612
(9,042)
1
429
31,065
Consolidated interim statement of cash flows
For the six months ended 30 June 2015
Six months to 30 Jun 2015 (unaudited)
Six months to
30 Jun 2014 (unaudited)
2014
£’000
£’000
£’000
Operating activities
Profit/(loss) for the period before exceptional items
(434)
1,067
2,852
Exceptional items
–
–
(2,393)
Profit/(loss) for the period
(434)
1,067
459
Depreciation of property, plant and equipment
279
287
573
Amortisation of intangible assets
1,294
1,289
2,540
Impairment of goodwill
–
–
2,528
Interest receivable
(26)
(19)
(58)
Tax charge/(credit)
71
392
630
Employee equity settled share options
69
116
232
Changes in trade and other receivables
(1,223)
(1,054)
(71)
Changes in trade and other payables
(1,012)
(969)
(624)
Taxes paid
–
–
(420)
Net cash inflow from operating activities
(982)
1,109
5,789
Investing activities
Cash payments to acquire property, plant and equipment
(252)
(265)
(618)
Cash payments on capitalised development
(1,093)
(669)
(1,801)
Interest received
26
–
58
Net cash outflow from investing activities
(1,319)
(934)
(2,361)
Financing activities
Proceeds from other share issues
691
152
338
Dividends paid
(1,525)
(1,378)
(1,378)
Net cash outflow from financing activities
(834)
(1,226)
(1,040)
Net changes in cash and cash equivalents
(3,135)
(1,051)
2,388
Cash and cash equivalents, beginning of period
9,580
7,222
7,222
Exchange differences on cash and cash equivalents
(248)
(165)
(30)
Cash and cash equivalents, end of period
6,197
6,006
9,580
Selected explanatory notes
1. Nature of operations and general information
Brady plc and its subsidiaries’ principal activity is the provision of trading, risk management and settlement solutions to the energy, metals, recycling and soft commodities industries, through the delivery of client focused software and services.
The Group provides the leading trading and risk management software for global commodity markets. The Group provides a complete integrated solution supporting entire commodities trading operations.
Brady plc, a public limited liability company, is the Group’s ultimate parent company. It is registered in England and Wales. The address of Brady plc’s registered office is Riverside House, 7th Floor, 2A Southwark Bridge Road, London SE1 9HA.
These condensed consolidated interim financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards (“IFRS”) as adopted by the European Union and as issued by the International Accounting Standards Board. They do not include all of the information required for full annual financial statements as defined in Section 434 of the Companies Act 2006 and should be read in conjunction with the Consolidated Financial Statements of the Group as at and for the year ended 31 December 2014. The auditor’s report on those financial statements was unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The consolidated financial statements have been filed with the Registrar of Companies and are available on the Group’s website, www.bradyplc.com.
Brady plc’s shares are listed on the London Stock Exchange’s AIM. Brady plc’s consolidated interim financial statements are presented in British pounds (£), which is also the functional currency of the ultimate parent company.
2. Accounting policies
The accounting policies applied by the Group are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2014.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.
3. Critical accounting judgements and key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimating uncertainty at the reporting date, that have a risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial period are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2014.
4. Segment analysis reporting
Operating Segments
In accordance with IFRS 8, “Operating Segments”, information for the Group’s business units has been derived using the information used by the chief operating decision maker. The Executive Directors have been identified as the chief operating decision makers and the Board is responsible for the allocation of resources to business units and assessing their performance. The Group is organised into three business units comprising different market sectors within the ECTRM market and each business unit is able to operate globally. The three business units are Commodities, Energy and Recycling. The profit measure used by the Board is business unit contribution, which is operating profit for the business unit before the allocation of central and shared expenses, the amortisation of acquired intangible assets, interest income, interest expense and before exceptional items and taxation.
The tables below show an analysis of the results by operating segment:
Six months to 30 Jun 2015
Revenues
Six months to 30 Jun 2015
Contribution
Six months to 30 Jun 2014
Revenues
Six months to 30 Jun 2014
Contribution
2014
Revenues
2014 Contribution
£’000
£’000
£’000
£’000
£’000
£’000
Commodities business unit
6,129
1,646
7,149
2,898
14,420
5,859
Energy business unit
5,572
934
5,964
757
12,589
2,816
Recycling business unit
2,405
409
2,491
864
4,006
787
14,106
2,989
15,604
4,519
31,015
9,462
Amortisation of acquired intangibles
(806)
(801)
(1,613)
Central and shared costs
(2,572)
(2,278)
(4,675)
Operating result before exceptional items
(389)
1,440
3,174
Add back:
Depreciation
279
297
573
Amortisation of capitalised development
488
478
928
Amortisation of acquired intangibles
806
801
1,613
EBITDA
1,184
3,016
6,288
Revenue by Geography
An analysis of sales revenue by geographical market is given below:
Six months to
30 Jun 2015 (unaudited)
Six months to
30 Jun 2014 (unaudited)
2014
£’000
£’000
£’000
EMEA
10,231
9,568
21,096
Americas
3,415
4,205
7,206
APAC
460
1,831
2,713
14,106
15,604
31,015
The Group generates revenue from software licence sales, recurring support and maintenance and rental fees and the provision of associated consulting and development services. Revenues can be analysed as below:
Six months to
30 Jun 2015 (unaudited)
Six months to
30 Jun 2014 (unaudited)
2014
£’000
£’000
£’000
Software licence sales
2,871
3,589
7,541
Recurring support and maintenance and rental revenues
7,799
7,933
15,848
Service fees including development
3,436
4,082
7,626
14,106
15,604
31,015
5. Share issues
The Company made various allotments of ordinary 1 pence shares during the period on the exercise of various share options. This increased the Company’s ordinary shares issued and fully paid at the end of the period by 1,601,553 (year ended 31 December 2014: 222,500).
6. Share buyback
During the period under review, the number of ordinary shares held in treasury has remained at 4,306.
7. Earnings per share
The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Brady plc divided by the weighted average number of shares in issue during the period. All earnings per share calculations relate to continuing operations of the Group. Separate calculations have been prepared related to the profit before and after exceptional items.
Profits/(loss) attributable to shareholders
£’000
Weighted average number of shares
Basic earnings per share amount in pence
Six months ended 30 June 2015
(434)
82,226,920
(0.53)
Six months ended 30 June 2014
1,067
81,134,261
1.32
Year ended 31 December 2014 before exceptional items
2,852
81,316,778
3.51
Year ended 31 December 2014
459
81,316,778
0.56
The calculation of the diluted earnings per share is based on the profits attributable to the shareholders of Brady plc divided by the weighted average number of shares in issue during the period, as adjusted for dilutive share options. All earnings per share calculations relate to continuing operations of the Group. Separate calculations have been prepared related to the profit before and after exceptional items.
Dilutive options
Anti-dilutive options
Diluted earnings per share amount in pence
Six months ended 30 June 2015
1,828,701
–
(0.53)
Six months ended 30 June 2014
930,961
3,045,374
1.30
Year ended 31 December 2014 before exceptional items
933,817
1,747,971
3.47
Year ended 31 December 2014
933,817
1,747,971
0.56
The calculation of the adjusted earnings per share, as calculated by external analysts, is based on the profit after tax adjusted for acquired intangible assets amortisation, share based compensation, exceptional items and normalised tax and is calculated as follows:
Six months to
30 Jun 2015 (unaudited)
Six months to
30 Jun 2014 (unaudited)
2014
£’000
£’000
£’000
Profit for the year
(434)
1,067
459
Add back:
Exceptional items
–
–
2,393
Amortisation of acquired intangibles
806
801
1,613
Share based compensation
68
116
232
Tax charge
71
392
380
Deduct:
Normalised tax at 15% (2014: 15%)
(77)
(356)
(762)
Adjusted profit
434
2,020
4,315
Adjusted profits attributable to shareholders
£’000
Weighted average number of shares
Basic adjusted earnings per share amount in pence
Six months ended 30 June 2015
434
82,226,920
0.53
Six months ended 30 June 2014
2,020
81,134,261
2.49
Year ended 31 December 2014
4,315
81,316,778
5.31
8. Dividends
During the period Brady plc paid dividends of £1,525,000 to its equity shareholders (period ended 30 June 2014: £1,378,000).
9. Exceptional Items
There were no exceptional costs in the period. Exceptional costs in the period ended 31 December 2014 can be summarised as follows:
Six months
30 Jun 2015 (unaudited)
Six months
30 Jun 2014 (unaudited)
2014
£’000
£’000
£’000
Impairment of goodwill
–
–
2,528
Provision in respect of overseas tax enquiry regarding transfer pricing
–
–
250
Other professional fees relating to enquiry
–
–
72
Release of SAI earnout
–
–
(457)
–
–
2,393
10. Goodwill
The net carrying amount of Group goodwill can be analysed as follows:
Goodwill on consolidation
Purchased goodwill
Total
£’000
£’000
£’000
Gross carrying amount
20,116
90
20,206
Accumulated impairment
(3,392)
(90)
(3,482)
Carrying amount at 30 June 2015
16,724
–
16,724
Gross carrying amount
20,959
90
21,049
Accumulated impairment
(3,392)
(90)
(3,482)
Carrying amount at 31 December 2014
17,567
–
17,567
There were no changes in the net carrying amount of purchased goodwill. Changes in the net carrying amount of goodwill on consolidation can be summarised as follows:
Total
£’000
Carrying amount at 1 January 2015
17,567
Foreign exchange movement on retranslation
(843)
Carrying amount at 30 June 2015
16,724
11. Other intangible assets
Intangible assets comprise the following:
30 Jun 2015 (unaudited)
30 Jun 2014 (unaudited)
31 Dec 2014
£’000
£’000
£’000
Capitalised development
5,815
4,573
5,210
Acquired software
4,837
6,892
5,773
Acquired customer contracts
2,037
2,940
2,446
12,689
14,405
13,429
The carrying value of intangible assets at 30 June 2015 can be split into the following cash generating units:
Capitalised development
costs
Acquired
software
Acquired
customer
contracts
Total
£’000
£’000
£’000
£’000
Commodities business unit
2,694
673
234
3,601
Energy business unit
2,582
3,085
1,421
7,088
Recycling business unit
539
1,079
382
2,000
Carrying amount at 30 June 2015
5,815
4,837
2,037
12,689
Changes in the net carrying amount of Group intangible assets can be summarised as follows:
Capitalised development
costs
Acquired
software
Acquired
customer
contracts
Total
£’000
£’000
£’000
£’000
Carrying amount at 1 January 2015
5,210
5,773
2,446
13,429
Additions in the period
1,093
–
–
1,093
Amortisation in the period
(488)
(567)
(239)
(1,294)
Forex movement on retranslation
–
(369)
(170)
(539)
Carrying amount at 30 June 2015
5,815
4,837
2,037
12,689
12. Cash and cash equivalents
Cash and cash equivalents comprise the following:
30 Jun 2015
(unaudited)
30 Jun 2014
(unaudited)
31 Dec 2014
£’000
£’000
£’000
Cash and cash equivalents
6,197
6,006
9,580
13. Financial statements
The financial information for the year ended 31 December 2014 included in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group’s statutory accounts for the year ended 31 December 2014 have been filed with the Registrar of Companies. This statement can be obtained from the Company’s registered office at Riverside House, 7th Floor, 2A Southwark Bridge Road, London SE1 9HA and will be available on the Company’s website www.bradyplc.com.