Brady Regulatory News (BRY)

16 March 2015

Brady plc

("Brady", "the Company" or "the Group")

PRELIMINARY RESULTS

For the year ended 31 December 2014

Brady plc (BRY.L), the leading global provider of trading, risk management and settlement solutions to the energy, metals, recycling and soft commodities sectors, is pleased to announce its preliminary results for the year ended 31 December 2014.

Financial Summary:

1 EBITDA before exceptional costs comprises operating profit before depreciation, amortisation and exceptional costs

2 Adjusted earnings per share is based on earnings excluding exceptional items, acquired intangible asset amortisation charges and share based compensation charges and at a consistent normalised tax rate assumed to be 15%.

3 The majority of the exceptional item comprises a non-cash impairment charge against goodwill.

4 Consistent currency numbers are calculated by translating the 2014 result at the same exchange rate as those used in the 2013 results.

Operational Highlights:

· A record 20 new contracts - including the world's largest nickel producer and the largest trading company in Korea

· Encouraging momentum in the Energy business, signing six new contracts and four migrations

· 32% of revenues now come from outside of Europe

· Over 100% growth in Cloud revenues - 30% of new licences delivered through Cloud Services

· Return to 20%+ operating margin

Financial Highlights:

· Revenues up 13% to £31.0 million (on consistent currency basis4)

· Recurring revenues of £15.9 million and deferred licence revenue of £1.7 million

· EBITDA (before exceptional items) up 80% to £6.3 million

· Net cash at year end increased by £2.4 million to £9.6 million

· Proposed dividend increased by 9% to 1.85p per share

Paul Fullagar, Chairman of Brady plc, commented:

"This year the Group demonstrated that it can sign and deliver increasingly larger contracts with leading names in the commodity, energy and recycling sectors around the world. The successful implementation of our software with these major companies has resulted in record licence revenue, providing excellent earnings visibility. We have maintained our market leading position in Europe, and have established a strong presence globally. Over 30% of revenues now come from outside of Europe.

We now have diverse, global revenue streams, significantly improved earnings and cash generation that exceeded market expectations. We have also successfully transitioned clients to our Cloud Service, allowing us to offer a complete turnkey solution to clients while improving our operating margin, which exceeds 20%.

Brady is well placed to grow further, both organically, and by acquisition, thanks to a balance sheet dominated by cash. There is real momentum behind the business and we look forward to both keeping our shareholders informed of our progress, and rewarding them for their support with a progressive dividend that exceeds the market average."

For further information please contact:

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's 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

Chairman's Statement

I am pleased to report that the Group enjoyed a year of significant growth in 2014, signing a record number of contracts, delivering good sales growth, an EBITDA margin of 20% and strong positive cashflow.

The Group achieved an EBITDA of £6.3 million compared to £3.5 million in 2013. Profit after tax was £2.9 million before exceptional items and £0.5 million net of a non-cash exceptional cost. Net cash increased by £2.4 million to £9.6 million.

The Group has signed 20 contracts with leading names in commodities, energy and recycling companies across the globe. The scale of contract size is increasing and licence revenue was £7.5m, with good visibility for 2015 and beyond.

Revenue for the year was £31.0 million, up 13% in local currency terms and 6% in sterling terms due to the relative strength of £ sterling in the year. Costs were lower than last year mainly due to the same currency effect but also due to firm cost management and the contribution from our three operating divisions was up 35% to £9.5m.

It is very encouraging that our Energy division signed six new contracts and migrated four clients from a legacy system to the 'go forward' platform. As the energy market moves quickly to renewable energy forms our scheduling and nomination systems are extremely well suited to support this trend. We are securing new clients and momentum, particularly in new European regions which is reassuring. The main item in our exceptional line relates to our energy business and the integration of our two energy units in Switzerland and Norway. The combined business is performing well and the combined value in use of the units exceeds the carrying value by £11.5 million. Despite this positive scenario, the accounting treatment of goodwill in each unit resulted in a £2.5 million non-cash impairment and corresponding exceptional P&L charge which is not reflective of the operational performance or prospects of our Energy unit.

The Group continued to diversify geographically, with 32% of revenues now from outside EMEA, up from 28% last year. North America benefited from the integration of the Recycling business and the improving macro-economic environment. The Group signed its first contract in Korea, demonstrating our commitment and presence in this fast growing region.

Brady offers solutions to companies dealing with commodities, energy and recycling around the world. Naturally, everybody needs food, energy, metal and increasingly recycles the output. For example, 92% of steel in cars is now from recycled material as is 50% of the world's aluminium usage. The Group provides compelling solutions to meet the pressing business needs of our clients, whether they are expanding into new markets and/or asset classes, or simply meeting the ever evolving regulatory needs.

Diversity is important for the Group to ensure that we are not reliant on any single geography, asset class or customer type. Although commodity markets have been volatile, the need for regulatory compliant, up to date trading and risk management systems continues to increase. As the strength of our brand increases more markets open up for us.

This is a massive global market and Brady is increasing its market share.

People

I would like to thank all of our colleagues for their efforts during a very busy year. The commitment, loyalty, innovation and hard work of the team continue to be very much appreciated and their teamwork is the foundation of our success.

Clients

The Group appreciates the support from our client base. This year alone the Group has added the world's largest nickel producer, the largest trading company in Korea and has gone live with the world's largest aluminium producer. The geographical spread of the Group's revenues now comprises £21.1 million (2013: £21.2 million) in EMEA, £7.2 million (2013: £6.8 million) in the Americas and £2.7 million (2013: £1.4 million) in Asia.

Investors 

We have received ongoing support from our investor base, with 68% of Brady stock being institutionally held and 13% of shares held by the Board and Management. In 2014, the Brady share price has outperformed the FTSE AIM Index by more than 29%.

Dividend

The Board is pleased to propose an increase in the dividend to 1.85 pence per share (2013: 1.7 pence per share). This continues a track record of increasing the annual dividend per share each year and maintaining a dividend yield above the sector average. If this is approved by shareholders at the forthcoming Annual General Meeting, the dividend will be paid on 19 May 2015 to members whose names appear on the register at the close of business on 24 April 2015.

Looking Ahead

I am delighted with the progress made in 2014. Brady has returned to its long term growth trend, and achieved its target EBITDA margin of 20%. We have healthy cash generation, whilst we are continuing to invest in product innovation and open new geographic markets. We start 2015 with good visibility and confident of further growth and profit in the years to come.

Paul Fullagar

Chairman

Chief Executive's Review

Our achievements during 2014 demonstrate that Brady can sign and deliver increasingly large contracts around the globe. The strong contract momentum gave us visibility for the year and the team duly delivered whilst keeping costs under control. Furthermore, contract signature momentum has continued and this gives good visibility for 2015 and beyond.

Coming into 2014 there were a number of important objectives:

· Deliver the significant licences

· Keep costs down and significantly improve earnings

· Sign new business to give visibility going forward

· Deploy more solutions via the cloud

· Drive the energy business forward

I am pleased to report that each of these have been achieved, resulting in good growth and a substantial pick-up in earnings.

The key focus for the Group is to sign contracts and then ensure the clients go into production. For larger deals the time to implement the solution can be longer but clearly resulting in more revenue. The successful implementation of the software has led to a record licence revenue year for Brady. There are not only the financial benefits associated with this, but it also strengthens Brady's reputation as a leader in our space is growing. Successful delivery to leading names in itself is our best reference.

At the end of 2013 Brady rationalised our solution set and management structure, resulting in £2.0 million in cost savings which came through in the full year 2014. The resulting 80% pick up in EBITDA puts us back on our long term growth trend of 20+% operating margin. The Group is focused on both top line growth and margin, leading to strong cash generation and a healthy balance sheet.

The Group signed 20 new contracts, which represents a record year for Brady. New clients include the world largest nickel producer, a substantial Korean consumer electronics group, a large Australian Bank, a Middle Eastern metal fabricator, a Middle Eastern oil and gas producer, a large American wind farm manager and a German company focused on clean energy production. These contracts combined with our existing recurring revenue base of 51% and significant service contracts from existing projects, enables the Group to enjoy very good visibility for 2015 and beyond.

There is a clear trend in the technology market that solutions will increasingly be delivered via the Cloud. Brady's focus on this area is now bearing fruit. 30% of our new licences were delivered through our Cloud Services. This allows our clients to get into production more quickly with a lower cost of ownership. The Cloud also allows us to provide resources in a flexible manner, scaling processing and storage according to demand. Cloud delivery deepens our relationship with our clients and also increases our recurring revenues.

Brady Energy

The Energy Business Unit moved significantly forward in 2014, signing six new contracts: including a major Australian bank using our cloud solution, a major US Company building windfarms, a large Middle Eastern oil & gas producer, a major Northern European energy producer, a German energy company sourcing power from renewable sources. Four clients selected to migrate to our go forward platform increasing functionality and providing a future proofed solution to our clients, whilst reducing platform costs for Brady.

Energy saw further strong demand by selling five instances of the Energy web portal launched in 2013. This solution equips clients with a web solution that provides energy consumption and spot pricing on a 'real-time' basis.

The Energy team also developed and sold six EMIR regulatory reporting solutions which are based upon Brady's Group technology strategy, using state-of-the-art web tools.

The combination of new sales, more service work and lower cost base has led to a significant pick-up in Energy earnings.

The European Electricity Grid Initiative requires European countries to transmit and distribute up to 35% of electricity from dispersed and concentrated renewable energy sources by 2020, with the aim of putting in place a completely decarbonised electricity production network by 2050. Alongside further political pressure to move away from nuclear plants, the increase of Renewable/ Distributed Energy Resources (RES, DER) is driving the market to focus more on shorter-term trading and further cross-border trading: This is due to the unpredictability of renewable energy sources increasing price volatility and the potential sudden and severe collapses of production. This has in turn lead to a greater focus on using short-term markets to balance production deficits through the procurement from alternative cross-border geographies. As a result of this we are seeing a push towards market standardisation and a common workflow across Europe. Brady's leading pan-European scheduling and balancing solution is ideally positioned to address these real-time changes in trading patterns. The rationalisation of our solution set and management structure also means that we can deliver a more comprehensive suite to our clients at a reduced cost to Brady.

Brady Commodities

The Commodities Business Unit signed a contract with the world's largest nickel producer. The client is using Brady's next generation solution for both refined metal and metal concentrate trading. The latter has been a major investment for Brady and gives the Group clear leadership in this market.

Other contracts include a major consumer electronics group in Korea, and a European trading company. These contract wins underline our ability to sign the leading names in the market and increasingly opening new markets. The contract win in Korea was completely sourced and delivered via our Asian office, underscoring our investment in the region.

In the second half of 2014 Brady Commodities also launched the Hedge Manager Cloud solution specifically targeted at commodity fabricators focused on hedging and risk management. Given the volatility in the commodity markets the need from the industry is clear and Commodities immediately signed two new clients.

There has been significant growth in licences and services in the physical trading business as larger contracts have been delivered. Major go-lives included the world's largest aluminium producer which is now using our hedging solution, an iron ore trading company and a Brazilian investment bank that has been expanding aggressively in the physical commodity markets.

Looking forward, there is a change in the market place. Markets remain volatile too, which is good for our trading and brokerage clients who account for around 50% of our client base. A number of commodity prices are lower, which is also good for the consuming companies that make things from metal, or process food. On the other hand production companies will be focused on cost cutting, risk management and compliance; all of which are core competences for Brady.

Brady has invested in ensuring that its solutions comply with current and pending regulatory directives. The regulatory landscape will continue to tighten this year with MiFID II and EMIR, which are anticipated to extend the reach of organisations falling under regulatory requirements. The additional regulation also increases the need for these companies to have adequate systems for risk control, and limit and margin management in place.

Brady Recycling

The Recycling Business Unit signed four new clients in 2014; including a large North American recycling company, a recycling processor based in Puerto Rico, a ferrous scrap brokerage company and a company that purchases, processes and markets recyclable commodities.

Brady Recycling focuses on very high customer satisfaction. Major go-lives include: a major supplier of scrap to steel mills, which operates in 14 countries and required a multi-currency solution; a company providing ferrous scrap to steel mills; and the Puerto Rican scrap processor.

Product launches include the Buyer Workbench, which is a solution developed to facilitate the scrap buying challenges, by tracking buying patterns and material availability of scrap suppliers.

Brady has a leadership position in the North American recycling market, the world's largest recycled goods producer. Brady provides the major critical processing solutions to six of the top ten recycling companies and an estimated 50% of ferrous scrap goes through Brady solutions. The drive towards protecting margins and market share has resulted in further consolidation in the industry, on both national and international levels. This consolidation, along with the increase in environmental and regulatory requirements introduces the need for clients to rely on a strong partner who can service their needs globally. Brady is ideally positioned to be this global leader.

The strategic next steps for Recycling are to now leverage the global Brady salesforce and brand:

· Create a single North American Brady sales and marketing team by integrating into the wider Brady sales and marketing group;

· Working with our clients' international operations to support them and provide services and support to them outside of the Americas. Groundwork has been laid in 2014 and the Group is confident of signing new names outside of the Americas in 2015.

Technology initiatives

Cloud

Cloud remains a key strategic initiative for Brady and Cloud Service revenues were up over 100% in 2014 with six new Cloud contracts. This represented 30% of all new deals for 2014. In 2014 we delivered new Cloud services that quickly and easily extend existing client solutions with hedging and regulatory reporting features. At the other end of the spectrum, Brady extended its Cloud Services to a new level of service & availability. These enhancements included being able to offer a wider range of availability levels from 99% right up to 99.995% as well as full connectivity services, to TSO's and market data providers, from our Cloud environment. Extending our Cloud Services in this way has enabled Brady to offer a complete turnkey solution to clients with even the most demanding SLA requirements and this resulted in a major energy Cloud transaction with an international investment bank in 2014.

The Group anticipates further significant growth in this sector in 2015.

Service Oriented Architecture Programme

Central to the Group strategy is our Service Oriented Architecture (SOA) programme which aims to deliver 'best of breed' enterprise wide services, leveraging our enlarged technology team. Brady has more than 100 technology staff. These SOA services, built using the latest interoperable technologies, allow us to facilitate platform and product consolidation, and make features previously only available in one product, available to all, providing greater business agility and reducing maintenance costs. They also enable Brady to more effectively leverage the flexibility and economies of our Cloud platform and, in so doing, deliver further value to our customers.

In 2014 we added a further five services to our inventory, taking the total number of services to 25. These are now widely employed across the Group and are being used extensively in our programme to consolidate solutions, including the delivery of our latest platforms for refined and raw materials. This initiative further cements Brady's position as the strategic partner of choice for metals organisations. Brady has already signed up a number of strategic clients wishing to participate in this programme - this includes a significant transaction with a major metal trading company in 2014.

Brady Web Framework

Brady's Web Development Framework allows our development teams to rapidly develop new applications and functionality that can extend, enhance and update our product portfolio. The framework is now the de facto standard for 'next generation' development across the Group and was used widely across our product portfolio and development programmes in 2014. Within Energy, the framework was used to deliver our new EMIR/regulatory reporting functionality which was developed rapidly, can be used by any of our products and went live with four customers last year. Also within Energy, the largest supplier of electricity in Norway went live with new functionality, built using the framework, and this facilitated four follow-on sales, of the same functionality, to major energy customers.

The success and adoption of the framework across the Group now also means that Brady is able to offer it as a software development kit to customers and this introduces some exciting opportunities for further growth and development in 2015.

Market

There continued to be a lot of volatility in the commodity markets in 2014; sharp price rises in nickel, as Indonesia banned exports and Ukrainian wheat supply disruptions following political unrest. However, the overall commodity index finished the year sharply lower, with metals and iron ore following oil and gas prices lower due to a drop in Chinese demand. On the other hand lower input prices, combined with a rebounding US economy have fuelled significant growth in demand in the USA.

For Brady in the last couple of years we have seen stronger sales in the US compared to other regions. Since the financial crash of 2008, some companies have not updated their systems for over 10 years. Brady anticipates continued above average demand for solutions in the Americas. It is believed that strong US economic growth will ultimately pull Europe and Asia along.

For trading companies market volatility is a positive factor, although they will need to be focused on timely payment by their producing partners and their inherent credit risk. Fabricating and industrial companies have a golden opportunity to benefit from lower input and energy prices, further fuelling growth. For production companies, lower commodity prices imply cost cutting, with a revised focus on risk and compliance challenges.

Brady has powerful value propositions for each of these scenarios.

Growth drivers

Significant growth areas for 2015 include:

· The continued global expansion of our Commodities business, particularly our comprehensive solutions offering for trading companies to ensure robust business controls. Trading companies face tighter lending conditions as banks have a requirement to ensure their clients' operations and risks are under control, they have to comply with EMIR and REMIT reporting and they are under pressure to optimise margining. They also need greater visibility and control of their delivery and credit risks as producers and procurers focus on cashflow.

· Continued strong growth of our Recycling business, both in the domestic US as we add more sales resources, and internationally using the strength of the Brady brand and distribution network. Brady is the market leader in North America, the world's largest producer of recyclable material. As the industry consolidates, Brady provides enterprise-wide solutions to deal with regional and national regulatory and tax reporting requirements and uniquely provides daily mark to market of inventory values.

· An increase in short term and cross border energy trading, driven by the shift in energy supply to renewable sources, as dictated by the EEGI, prompting intensified interest in our scheduling and balancing solutions. A cross party agreement was announced in February 2015 whereby the leaders of the three main UK political partiesagreed "to accelerate the transition to a competitive, energy-efficient low-carbon economy and to end the use of unabated coal for power generation."

· Cloud revenues are expected to continue to grow strongly. With 99.995% availability, Brady has raised the bar in terms of reliability.

Summary and Outlook

We are encouraged by the very good underlying core strength in the business. The Group is increasingly signing larger contracts around the world with top quality names. This demonstrates that the Group has compelling value propositions and can sell to both the trading and risk/compliance sides of the market. As we successfully deliver solutions to our clients, our reputation and brand value increases. Critically each of the business lines has been showing improved performance, with Energy in particular signing a number of new contracts, migrating clients to the latest platform, whilst keeping costs under control, resulting in strong growth.

Brady returned to an upward trend of its financial results in 2014. Good organic growth and excellent improvement in earnings has meant operating margin of above 20%, leading us to beat market expectations for cash generation. Brady has a balance sheet dominated by cash and once again pays a progressive dividend which exceeds the market average. This compares favourably to some of our competitors, who are over leveraged with debt.

The successful Group strategy continues to be to drive organic growth complemented by selective acquisition. There are a number of good software companies that can be appended to extend our overall offering and grow faster due to Brady's stronger brand and distribution capabilities.

The Group's trading for the year remains in-line with market expectations.

Gavin Lavelle

CEO

Financial Review

I am pleased to provide a more detailed review of the financial highlights:

Foreign Exchange Rates

Foreign exchange rates have moved significantly between 2013 and 2014 for several of the currencies in which Brady both generates revenue and incurs costs. The most significant currency pairs are Sterling - US $, Sterling - NOK and Sterling - CHF. The movement in the average rate between 2013 and 2014 for each currency pair was 5%, 14% and 4% respectively. In each case the foreign currency has weakened against Sterling. The movement in year-end rates between the currency pairs are -6%, 15% and 5% respectively.

Group Trading Performance

In order to enable a better appreciation of the business performance in the underlying currencies Brady has provided details of revenues in both actual and consistent currency. Consistent currency numbers are calculated by translating the 2014 results at the same exchange rate as those used in the 2013 results.

Revenue Mix

The revenue composition is summarised in the tables below:

At consistent currency:-

Organic growth in revenue at actual exchange rates was 6% (2013: -7%). At consistent currency, organic growth was 13%.

Licence revenues increased 83% to £7.5 million from £4.1 million. At consistent currency rates, licence revenue grew by 93% to £7.9 million from £4.1 million. 14 new deals were signed in the year generating £4.3 million of licence revenue.

Recurring revenue declined by £0.7 million at actual exchange rates. At consistent currency rates, recurring revenue grew by 2.4% to £17.0 million from £16.6 million.

Services and development revenues decreased 13% to £7.6 million from £8.7 million. At consistent currency services and development revenue decreased 4.5% to £8.3 million from £8.7 million. The majority of the reduction was recorded in the energy business where tightening conditions have resulted in a reduction of discretionary spend.

Trading performance by business unit (before exceptional items)

The revenue and contribution by business unit, prior to any allocation of central and shared costs and amortisation of intangible assets, is summarised below:

In consistent currency:-

Brady Commodities

Revenue increased 15% in 2014 to £14.4 million compared to £12.5 million in 2013. In consistent currency the increase was 18% to £14.7 million. The contribution margin was 41% (2013: 34%). Revenue growth was driven by licence revenue which was up to £4.7 million compared to £2.7 million in the previous year.

Brady Energy

Headline revenues decreased in 2014 to £12.6 million compared to £13.4 million in 2013. In consistent currency, revenues increased by 7% to £14.3 million. Revenue growth was driven mainly by new business generated by the scheduling and balancing solution.

The business unit contribution margin was 22% (2013: 17%).

Brady Recycling

Revenue increased 14% in 2014 to £4.0 million compared to £3.5 million in 2013. In consistent currency the increase was 20% to £4.2 million. This growth was driven through new licence revenues. The contribution margin was 20% (2013: 12%).

Gross margin

The overall gross margin increased to 65% from 62%.

Profitability

EBITDA (earnings before interest, tax, depreciation and amortisation) before exceptional items increased to £6.3 million (2013: £3.5 million).

Operating profit before exceptional items and tax increased to £3.2 million (2013: £0.5 million). Profit before exceptional items after tax increased to £2.9 million (2013: £0.8 million).

Research and development expenditure

Total research and development spend amounted to £7.3 million (2013: £6.9 million). Of this, £5.5 million was expensed (2013: £5.0 million) and £1.8 million (2013: £1.9 million) was capitalised, representing 23% of the total research and development spend (2013: 27%). The business remains committed to investing in its product offering with total research and development representing 24% (2013: 24%) of total sales. This level of investment will be maintained for the foreseeable future. Capitalised development which is referred to internally within Brady as strategic software development ("SDD") represents large strategic developments of either significant new modules or functionality. These projects are selected and approved by the Board as part of the business planning and budget process. SDD for 2015 is expected to be slightly higher than in 2014.

Exceptional items

The main item in our exceptional line relates to our energy business and the integration of our two energy units in Switzerland and Norway. The combined business is performing well and the combined value in use of the units exceeds the carrying value by £11.5m. Despite this positive scenario, the accounting treatment of goodwill in each unit has led to a £2.5m non-cash impairment and corresponding exceptional P&L charge resulting from the following:

· EDIS, our Swiss unit is growing and performed well in 2014. Its strong performance has benefitted from the growth in short term energy trading and closer operational integration with the Norwegian unit. As a result, the value in use of our Swiss unit exceeds the carrying value by £13.5m. This excess value is not reflected in the calculation of goodwill.

· Elviz/Pomax, our Norwegian unit performed well in 2014. However the calculation of goodwill in respect of this division was impacted by the further migration of customers to the Swiss unit, the fall in the value of the Norwegian NOK and macro growth rates used in the calculation. This resulted in an impairment of acquired goodwill of £2.5m.

In addition to the non-cash impairment charge of £2.5m the exceptional items comprise a credit of £0.5 million in respect of an earnout provision no longer needed, and a provision of £0.3 million in respect of potential tax and associated professional fees relating to prior periods as a result of a current tax enquiry in a foreign jurisdiction.

Finance income

Interest income from the Group's cash resources was £58,000 (2013: £29,000), again remaining modest due to inherently low interest rates available during the year.

Income Tax

The overall tax charge for the year was £0.4 million (2013: tax credit of £0.2 million). Although a proportion of profits are being generated in higher taxed jurisdictions such as the U.S.A., Norway and Switzerland, the Group continues to benefit from the attractive research and development tax credit regime in the United Kingdom which contributed to significantly reducing the Group's overall tax rate in the year. The Group also inherited unutilised tax losses following its acquisition of Navita and the Group has benefited from deferred tax credits associated with the amortisation of acquired intangible assets and capitalisation of development costs. The Group retains unused tax losses of approximately £9.0 million which are expected to be available to offset against future taxable profits.

Earnings and dividends

After including the exceptional charges, profit before tax increased to £1.1 million (2013: £0.9 million) and profit after tax decreased to £0.5 million (2013: £1.1 million).

The weighted average number of shares in issue increased to 81.3 million (2013: 80.9 million). Adjusted earnings per share, as calculated by market analysts, adjusted to exclude share based payments, amortisation of acquired intangible assets, exceptional items and assuming a consistent normalised tax rate of 15%, increased to 5.31 pence per share (2013: 2.78 pence per share).

The Board proposes an increase in the dividend to 1.85 pence per share (2013: 1.7 pence per share) in line with previous years. If this is approved by shareholders at the forthcoming Annual General Meeting, the dividend will be paid on 19 May 2015 to members whose names appear on the register at the close of business on 24 April 2015.

Share issues

549,000 (2013: 325,000) share options held under the Company's share option schemes were exercised. The exercise proceeds following the exercise of these share options was £338,000 (2013: £125,000).

In 2013, 150,572 shares were issued as deferred consideration for the 2012 acquisition of SAI.

Treasury shares

The total number of ordinary shares held in treasury during the year remained at 4,306.

Acquisitions

No acquisitions took place during 2013 or 2014.

In February 2013, £0.3 million of deferred consideration was paid in cash relating to the 2012 syseca acquisition.

In March 2013, £0.5 million of cash was paid and 150,572 of Brady plc shares were issued as deferred consideration relating to the 2012 SAI acquisition.

Balance sheet

The Group continues to retain a strong balance sheet, with significant cash reserves and no debt.

Non-current assets

Goodwill decreased to £17.6 million from £22.0 million due to impairment of Norwegian goodwill (£2.5 million) and foreign exchange movements on retranslation (£1.9 million).

Acquired software decreased to £5.8 million from £7.8 million and acquired client contracts decreased to £2.4 million from £3.3 million as a result of amortisation during the period and foreign exchange movements on translation.

As required by IAS38 Intangible assets, the Group capitalised £1.8 million (2013: £1.9 million) of expenditure in relation to strategic software development programmes. The Group has a continued commitment of enhancing and expanding its offerings and taking its technology forward. The bulk of expenditure incurred during the year on research and development was, however, expensed as incurred. Net of amortisation to date, the book value of capitalised development costs increased to £5.2 million (2013: £4.4 million).

A deferred tax asset of £0.5 million has been recognised in relation to historic tax losses acquired in Norway. These losses are anticipated to be available for set-off against future trading profits.

Current assets

Trade and other receivables decreased to £6.2 million (2013: £6.6 million) and accrued income decreased to £1.2 million (2013: £1.6 million). Accrued income arises principally on consulting and professional services revenue which is typically invoiced in the month following provision of the service. Additionally accrued income can arise on large contracts based on negotiated invoice terms.

Current liabilities

Trade and other payables decreased to £4.5 million (2013: £5.4 million) and deferred income remained at £5.4 million (2013: £5.4 million). Deferred income arises principally as a consequence of payments received in advance of revenue recognition with respect to both rental and licence revenues.

Non-current liabilities

Deferred tax liabilities decreased to £2.8 million (2013: £3.4 million), reflecting a reduction in UK corporation tax rates and foreign exchange movements.

Cash and cash flow

Operating cash generation was £5.8 million (2013: £3.9 million), again running comfortably ahead of operating profit after exceptional costs.

The Group had investment outflows of £2.4 million (2013: £3.2 million). During 2014, investment outflows of £1.8 million related to capitalised development (2013: £1.9 million). Investment outflows of £0.6 million related to property, plant and equipment (2013: £0.5 million).

Financing activities show a net cash outflow during 2014 of £1.0 million (2013: £1.2 million outflow). This was largely made up of the dividend paid during the year of £1.4 million (2013: £1.3 million).

The Group's cash balance continues to be maintained in excess of its normal working capital requirements. The Board continues to believe that a strong balance sheet, with high cash balances, is an important requirement for the Group's large global clients and potential clients looking to contract with Brady. It is also anticipated that part of the surplus cash resources may be used to finance smaller "bolt-on" future acquisition opportunities.

Exchange Rates

The principal currencies used within the Group are Pound sterling (Brady Metals and Group), Norwegian Krone (Brady Energy), Swiss Franc (Brady Commodities) and the US Dollar (Brady Recycling). The exchange rates used for 2014 and 2013 are shown below:

Average Rates

Year End Rates

Martin Thorneycroft

CFO

Consolidated statement of comprehensive income

For the year ended 31 December 2014

All of the above relate to continuing operations.

.

Consolidated Statement of Changes in Equity

31 December 2014

Consolidated Statement of Cash Flows

For the year ended 31 December 2014

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 commodity 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, which is also its principal place of business, is 281 Cambridge Science Park, Milton Road, Cambridge, CB4 0WE.

Brady plc's shares are listed on the London Stock Exchange's Alternative Investment Market (AIM). Brady plc's consolidated full year financial statements are presented in British pounds (£), which is also the functional currency of the parent company.

2. Basis of preparation

The financial information included in this report does not constitute statutory accounts for the purposes of section 434 of the Companies Act 2006. The comparative financial information contained in this statement has been extracted from the 2013 financial statements upon which the Auditor's opinion is unqualified and does not include any statement under Section 498(2) or Section 498(3) of the Companies Act 2006. For further information, please refer to Brady plc's Consolidated Financial Statements 2013, which have been filed with the Registrar of Companies and are available on the Company's website, www.bradyplc.com

These condensed consolidated preliminary financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and the Companies Act 2006 that applies to companies reporting under IFRS and IFRIC interpretations.

3. Summary of significant 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 2013.

Going concern

The Group has maintained its strong liquidity position and remains debt-free. The Group's forecasts and projections, taking into account reasonably possible changes in trading performance of the Group show that the Group should be able to operate within the level of its current financing. Revenue, operating margin and cashflow budgets have been prepared at business unit level and as a result, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

4. Segment 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 maker as 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 expenses and before exceptional items and taxation.

The tables below show an analysis of the results by business unit:

Revenue by geography

An analysis of sales revenue by geographical market is given below:

Countries where revenue represents more than 10% of Group revenues are detailed below:

The Group generates revenue from software licence sales and rentals, recurring software support and maintenance fees and the provision of associated consulting and development services. Revenues can be analysed as below:

The ability to predict the timing of large contract closures is inherently difficult. The Group's product offerings are important software applications and new clients need to carefully evaluate the software before placing an order. This creates long lead times and the potential for unpredictable fluctuations in sales revenue.

Assets by geography

The Group had non-current assets (excluded deferred tax) outside of the United Kingdom at the year-end date as follows:

This reconciles to total non-current assets (excluding deferred tax) as follows:

5. Share issues

The Company made various allotments of ordinary 1p shares during the year following the exercise of various share options. These increased the Company's ordinary shares issued and fully paid at the end of the year by 548,750 (2013: 475,572).

6. 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 year.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.

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 year, 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.

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:-

The reconciliation of average number of ordinary shares used for basic and diluted earnings per share is as below:

7. Exceptional items

8. Income Tax

The relationship between the expected tax expense based on the domestic tax rate of the Group (the UK tax rate) at 21.5% (2013: 23.5%) and the tax expense actually recognised in the statement of comprehensive income can be reconciled as follows:

9. Dividends

During the year Brady plc paid dividends of £1,378,000 to its equity shareholders (2013: £1,296,000). This represented a payment of 1.7 pence per share (2013: 1.6 pence per share).

The Directors propose the payment of a dividend in 2015 of 1.85 pence per share being approximately £1,511,000 (2013: 1.7 pence per share being approximately £1,378,000). As the distribution of dividends by the Company requires approval of the shareholders, no liability in this respect is recognised in the 2014 consolidated financial statements. No income tax consequences are expected to arise as a result of this transaction at the Group level.

10. Goodwill

The net carrying amount of goodwill can be analysed as follows:

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:

On initial recognition, the carrying value of goodwill is allocated to the following cash-generating units:

Management has considered all cash generating units separately when determining appropriate assumptions. The recoverable amounts for the cash-generating units given above were determined based on value-in-use calculations, at a level where there are largely independent cash inflows. Management prepares five year cash flow forecasts, based initially on the detailed 2015 operating budget which is then extended for a further four years plus a terminal value, then applies a discount rate in order to calculate the present value of such cash flows, which represents the recoverable amount. The discount rate used in the calculations was 12.7% for all CGUs, being the Group's estimated weighted average cost of capital.

The principal assumptions used in the forecasts have been increasing market penetration and pricing creating annual revenue growth and estimated growth in expenses in relation to the resources required to support the business unit's growth. Growth rates used were as follows:-

The annual growth rates are based on market growth rates provided by external analysts, but reduced where considered prudent by management. The growth rates exceed the overall economic long-term average growth rates because this sector is expected to continue to grow at above-average rates for the foreseeable future. A long term growth rate into perpetuity has been limited to 2%, being the estimated GDP rates for the countries of operation. Any impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount and this impairment loss is used to reduce the carrying amount of any goodwill allocated to that cash-generating unit.

In the case of the Elviz/Pomax product lines, an impairment of £2,528,000 has been recognised. In accordance with IAS 36 the fair value of the CGU has been determined. The fair value of the CGU has been based on independent professional appraisals that would have been classified as level 3 of the fair value hierarchy as defined in IFRS13 (Fair Value Measurement). They key assumption used in the fair valuation calculation is a multiple of 2.6x revenues. The fair value has then been allocated to the constituent parts comprising the CGU and the impairment of goodwill was consistent with the value determined by the value-in-use calculation.

Other than the above, the management of the Group is not currently aware of any reasonably possible changes that would create an impairment charge.

11. Other intangible assets

Other intangible assets comprise the following:

The net carrying amount can be analysed as follows:

Changes in the net carrying amount of Group intangible assets can be summarised as follows:

There are no individually material intangible assets.

The carrying value of intangible assets is allocated to the following cash-generating units: