10 Sep 2008 07:00
10 September 2008 INTERIM RESULTS For the six months to 30 June 2008
Brady plc ("Brady", the "Company" or the "Group"), the global provider of trading, risk management and settlement solutions to the metals and commodities sectors, announces its interim results for the six months to 30 June 2008.
Financial Summary: (Unaudited) (Unaudited) (Audited) 6 months to 6 months to Year to 30 June 30 June 31 December 2008 2007 2007 ‚£'000 ‚£'000 ‚£'000 Sales revenue 2,475 2,548 5,711 Profit for the period before 218 144 639taxation Profit for the period after 168 101 486taxation Cash and cash equivalents 6,714 5,636 5,957
Basic earnings per share (pence) 0.61 0.38
1.82
Diluted earnings per share (pence) 0.56 0.35
1.64
Highlights:
* Profit before taxation up 51% to ‚£218,000 compared to ‚£144,000 for H1 2007
* Recurring maintenance revenues increased to ‚£1.0 million (40% of total revenues) compared to ‚£0.7 million (28% of total revenues) for H1 2007
* ‚£6.7 million of cash resources as at 30 June 2008 (equivalent to 24 pence
per share) * One significant new contract signed in H1 of 2008 (with three further significant new contracts signed in July 2008 and one in August 2008) * A more advanced sales opportunity pipeline that has doubled in size
* Two more clients have reached project acceptance and one further has gone
live
For further information please contact:
Brady plc Telephone: +44(0)1223 479479 Gavin Lavelle, Chief Executive Officer
Tony Ratcliffe, Finance Director
Oriel Securities Limited Telephone: +44 (0)20 7710 7600 Andrew Edwards CHAIRMAN'S STATEMENTBrady's principal activity is the global provision of trading, risk managementand settlement solutions to the metals and commodities sectors, through thedelivery of customer focused software and services. The Group is focused on themetals markets, both base and precious, and on the soft commodities markets.Its offerings are capable of meeting these customer needs and of providing theGroup with significant growth in sales revenues and profitability.
I am pleased to provide a summary of the developments at Brady in the first half of 2008, together with the financial results and the outlook for the rest of 2008 and beyond:
New ContractsThe Group has announced one significant new licence contract in the first halfof 2008 to Xstrata, to support their risk management operations of both refinedmetals and concentrates for their Dubai operations. The Group also announced on31 July 2008 the signing of a further three significant new licence contracts:One with a Category 1 London Metal Exchange ("LME") ring dealing member fordealing and processing of all LME exchange traded and OTC metal trades, onewith Ducab, a leading cable manufacturer in the Gulf region to support theirrisk management and hedging operations and a third one with Prysmian, one ofthe world's largest cable manufacturers to support their European riskmanagement operations. The Group also announced on 21 August 2008 the signingof a significant new licence contract with the hedge fund division of a leadingUS private equity firm to support the trading and risk management operations ofits commodities and metals fund. This compared to the signing of twosignificant new contracts in the first half of 2007 and three in the whole
of2007.Market Outlook
Brady's focus is on the metals and commodities markets. These markets havereceived significant attention from the world's investors given the dramaticprice increases in recent years. Although there has been a reduction in somemetals and commodities prices in recent months, this has not impacted thecontinued strong results from producers and fabricators. There have also beenmore entrants to the LME, which is a core market for the Group. Overall, theincrease in activity in this area appears to be strong for the coming years,particularly relative to other asset classes and bearing in mind the globalcredit crunch in general.
Strategy and Operations
Brady's goal is to be the solutions supplier of choice for producers, fabricators, banks, brokers and hedge funds, essentially covering the `buy' and `sell' sides of its chosen markets.
Following the completion of the commercial restructuring and our investment inbuilding the European and North American sales teams, the Group is encouragedto see a more advanced pipeline. In monetary terms, the sales opportunitypipeline has more than doubled in value over the last six months. The Group nowhas six experienced quota-carrying account managers, compared to two that werein place a year ago.
We have signed significant deals in the year to date with industry leading global clients in London, Chicago, New York, Dubai and Italy, thus demonstrating that our solutions can be deployed around the world.
Geographically, 2008 has seen a strong focus in developing the North Americanbusiness to support our existing client base and also to develop growth in newbusiness. We expect to see the benefits of this development in the latter partof 2008 and into 2009.From a product perspective, in the first half of 2008 the Group introducedhigh-speed web based applications so that clients may deal over the web andreceive high performance position and profit and loss updates. There are alsosignificant changes within the LME as the market becomes increasinglyelectronic. Brady is ideally positioned to support the new fully automated LMEsettlement system, LME SMART. The Group has also developed FIX formatmessaging, allowing consistent message formats between LME market participants.
Financial Results
Total revenues for the first half of 2008 were ‚£2.5 million, similar to the ‚£2.5 million for the first half of 2007. Within the total, ‚£1.0 million (40% oftotal revenue) was recurring support revenue, compared to ‚£0.7 million (28% oftotal revenue) for the same period in 2007, reflecting the increasing installedbase. A further ‚£0.6 million (22% of total revenue) was for licence sales,compared to ‚£0.8 million (32% of total revenue) for the same period in 2007. Aspreviously forecasted, there has been limited opportunity to recognisesignificant licence revenues before the second half of 2008, due to newcontract licence revenues not being recognised until customer acceptance. Thelicence sales in the first half of 2008 included the revenue recognisedfollowing the acceptance of two Trinity projects that were signed during 2007.In addition, KGHM, a copper miner based in Poland, went live during the period,the licence revenue having been recognised upon acceptance in 2007. Finally, ‚£0.9 million (38% of total revenue) was for professional services anddevelopment revenues, in line with the ‚£1.0 million (40% of total revenue) forthe same period in 2007.The gross margin for the first half of 2008 increased to 57% compared to 49%for the first half of 2007, primarily as a result of a higher proportion ofrevenues being recurring support revenues and a greater level of productivityachieved by the services teams.The Board has successfully contained the Group's cost base whilst the benefitsfrom the recent reorganisation and investment in the sales force feed into newlicence contracts signed and ultimately into greater recognised revenues goingforward. Expenses incurred in the first half of 2008 were ‚£2.4 million, reducedfrom ‚£2.5 million in the first half of 2007. In addition, expenditure inrelation to strategic development programmes totalled ‚£0.1 million, which,under IAS 38, were required to be capitalised, The Group remains committed to aprogramme of continuing development and upgrade of its solutions in order tocontinue to meet customer requirements and to remain at the forefront oftechnological advancements.
Profit before taxation for the first half of 2008 was ‚£218,000 compared to ‚£ 144,000 for the first half of 2007, an increase of 51%.
The effective tax rate for the first half of 2008 was 23% compared to an effective tax rate of 30% for the first half of 2007. This is due to the anticipated impact of research and development tax credits.
Profit after taxation for the first half of 2008 was ‚£168,000, compared to ‚£ 101,000 for the first half of 2007, an increase of 66%.
Basic earnings per share for the first half of 2008 increased to 0.61 pencefrom 0.38 pence for the first half of 2007. Diluted earnings per share for thefirst half of 2008 increased to 0.56 pence from 0.35 pence for the first halfof 2007.The Group's cash balances at 30 June 2008 were ‚£6.7 million, an increase of ‚£0.7 million from 31 December 2007. The Group's cash balances at 31 August 2008had further increased to ‚£7.0 million, primarily due to a reduction inreceivables balances.The Group's cash inflows from operating activities for the first half of 2008was strong at ‚£1.0 million. The Group continues to enjoy a very strong balancesheet and is committed to maintaining a tight control over its cash and workingcapital balances.Board ChangesWe are delighted to report that the Company has been able to announce two newBoard members in this six month period. Pat Brazel and Geoff Bicknell joined asNon-Executive Directors in January 2008. Both have a great deal of experiencewhich we believe will be of significant value to the Group, strengthening ourposition in supplying global enterprise-level risk management and tradingsystems to our core markets.
The Board remains convinced that following their recruitment, the Group now has the skills and experience required to take the Group to the next level of development, to fulfil its potential and achieve sustained future growth.
Outlook
The Board is pleased with the Group's progress in the first half of 2008 and,following the announcement of five significant new licence contacts signed inthe year so far, demonstrates early success of the recent reorganisation andinvestment in the sales force.The Group expects to accelerate further growth of the sales opportunitypipeline and to translate this into the execution of further licence contracts,as well as to complete a number of implementations during the remainder of2008. The revenue associated with these and other activities in the second halfof 2008 provides confidence in the Group meeting its financial expectations forthe full year.Overall, the Board believes that there remains a very positive marketopportunity and there is evidence of strong continuing interest in the Group'sproduct offerings. The Board remains convinced that the recent reorganisationchanges made and the strategic investment in the sales force have provided astrong foundation to support further growth and financial payback in theremainder of 2008, into 2009 and beyond.
The Group continues to look for opportunities to use its strong balance sheet to enhance its product offering and build on its customer base through selective acquisitions.
Summary
Having successfully completed its reorganisation, the Board believes that theGroup is well placed to capitalise on a substantial and attractive marketopportunity, having a leading position within the metals and mining sector. TheGroup has a strong product offering, an exceptionally solid balance sheet andhas built a quality customer base and excellent reputation over a number ofyears. The new team continues to be excited by the challenge of aggressivelyseeking and securing new customer opportunities to add to the existing clientbase, and in delivering attractive organic revenue and profit growth.The Board is not recommending the payment of an interim dividend for 2008.
Paul FullagarChairman
Consolidated interim income statement For the six months ended 30 June 2008
Six months Six months Year ended 30 June 30 June 31 Dec 2008 2007 2007 (unaudited) (unaudited) Notes ‚£'000 ‚£'000 ‚£'000 Sales revenue 4 2,475 2,548 5,711 Cost of sales (1,073) (1,300) (2,401) Gross profit 1,402 1,248 3,310 Selling and administrative (1,368) (1,245) (2,988)expenses Operating result 34 3 322 Finance income 184 141 317 Result for the period before 218 144 639taxation Tax expense, net (50) (43) (153) Net result for the period 168 101 486
Attributable to shareholders of 168 101
486Brady plc Earnings per share (pence) 6 Basic 0.61 0.38 1.82 Diluted 0.56 0.35 1.64
Consolidated interim balance sheet
30 June 2008 30 June 2008 30 June 2007 31 Dec 2007 (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 Assets Non-current assets
Property, plant and equipment 264 154
287 Intangible assets Goodwill 243 243 243
Capitalised development costs 135 -
- Other intangible assets - 15 15 642 412 545 Current assets Trade and other receivables 948 1,358 2,031 Cash and cash equivalents 6,714 5,636 5,957 Total 7,662 6,994 7,988 Total assets 8,304 7,406 8,533 Equity Share capital 275 263 274 Share premium account 3,804 3,154 3,762 Merger reserve 680 680 680 Equity reserve 255 183 216 Capital reserve 1 1 1 Retained earnings 1,309 1,062 1,447 Total Equity 6,324 5,343 6,380 Liabilities Current liabilities Trade and other payables 1,534 1,600 1,778 Current tax payable 446 463 375 Total liabilities 1,980 2,063 2,153 Total equity and liabilities 8,304 7,406 8,533
Consolidated interim statement of changes in equity
30 June 2008 Equity attributable to equity holders of Brady plc:
Share Share Merger Equity Capital Retained Total capital premium reserve reserve reserve earnings equity account ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Balance at 1 January 2007 262 3,121 680 161 1 1,223 5,448
Increase in equity reserve in - - - 22 -
- 22relation to options issued
Allotment of shares following 1 33 - - -
- 34exercise of share options Profit and total recognised - - - - - 101 101income and expenditure for the six month period Dividends - - - - - (262) (262) Balance at 30 June 2007 263 3,154 680 183 1 1,062 5,343
Increase in equity reserve in - - - 33 -
- 33relation to options issued
Allotment of shares following 10 590 - - -
- 600placing of shares
Allotment of shares following 1 18 - - -
- 19exercise of share options Profit and total recognised - - - - - 385 385income and expenditure for the six month period Balance at 31 December 2007 274 3,762 680 216 1 1,447 6,380
Increase in equity reserve in - - - 39 -
- 39relation to options issued
Allotment of shares following 1 42 - - -
- 43exercise of share options Profit and total recognised - - - - - 168 168income and expenditure for the six month period Exchange difference on - - - - - (5) (5)consolidation Dividends - - - - - (301) (301) Balance at 30 June 2008 275 3,804 680 255 1 1,309 6,324
Consolidated interim cash flow statement For the six months ended 30 June 2008
Six months Six months Year ended 30 June 30 June 31 Dec 2008 2007 2007 (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 Operating activities
Result for the period after tax 168 101
486
Depreciation of property, plant 64 46
103and equipment
Impairment of intangible assets 15 71
71 Interest receivable (184) (141) (317) Employee equity settled share 39 22 55options Changes in trade and other 1,062 929 255receivables Change in trade and other payables (173) (275) (185) Exchange differences on (5) - -consolidation Taxes refunded 21 115 115 1,007 868 583 Investing activities Additions to property, plant and (41) (62) (251)equipment Additions to capitalised (135) - -development Interest received 184 141 317 8 79 66 Financing activities Proceeds from share issues 43 34 653 Dividends paid (301) (262) (262) (258) (228) 391 Net changes in cash and cash 757 719 1,040equivalents Cash and cash equivalents, 5,957 4,917 4,917beginning of period Cash and cash equivalents, end of 6,714 5,636 5,957period Selected explanatory notes
1. Nature of operations and general information
Brady plc and its subsidiaries' principal activity is the provision of risk management and settlement solutions to the metals and commodities industries, through the delivery of customer focused software and services.
The Group provides the leading trading and risk management software for global commodity markets. On a single platform, the Group provides a complete integrated solution supporting entire commodities trading operations.
Brady plc, a limited liability company, is the Group's ultimate parent company.It is registered in England and Wales. The address of Brady plc's registeredoffice, which is also its principal place of business, is 281 Cambridge SciencePark, Milton Road, Cambridge, CB4 0WE.These condensed consolidated interim financial statements have been preparedusing the recognition and measurement principles of International FinancialReporting Standards ("IFRS") as adopted by the European Union and as issued bythe International Accounting Standards Board, and in accordance with IAS34Interim Financial Reporting. They do not include all of the informationrequired for full annual financial statements and should be read in conjunctionwith the Consolidated Financial Statements of the Group as at and for the yearended 31 December 2007. The auditors' report on those financial statements wasunqualified and did not contain a statement under Section 240 of the CompaniesAct 1985. The Consolidated Financial Statements have been filed with theRegistrar of Companies and are available on the Company's website,www.bradyplc.com.Brady plc's shares are listed on the London Stock Exchange's AlternativeInvestment Market (AIM). Brady plc's consolidated interim financial statementsare presented in British pounds (‚£), which is also the functional currency
ofthe ultimate parent company.2. Accounting policies
The accounting policies applied by the Group are the same as those applied bythe Group in its consolidated financial statements as at and for the year ended31 December 2007.
3. Sales revenue fluctuations
The ability to predict the timing of large contract closures is inherentlydifficult. The Group's principal offering, Trinity, is an important softwareapplication and new customers need to carefully evaluate the software beforeplacing an order. This, together with the Group's revenue recognition policy,creates long lead times and the potential for unpredictable fluctuations insales revenue.
4. Segment analysis
The Group has one principal activity and makes sales to a variety of globaldestinations. An analysis of sales revenue by geographical market is givenbelow: Six months 30 Six months 30 Year ended 31 June 2008 June 2007 Dec 2007 (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000 United Kingdom 1,212 902 2,350 Rest of Europe 199 52 750 North America 1,015 1,357 2,503 Rest of World 49 237 108 2,475 2,548 5,7115. Share issuesDuring the period under review, share options under Brady plc's share optionschemes have been exercised. This increased Brady plc's ordinary shares issuedand fully paid at the end of the period under review by 165,000 (year ended 31December 2007: 166,000 in addition to 1,000,000 issued via a placing.)
6. Earnings per share and dividends
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 Company.
Profits Weighted Basic attributable to average number earnings per shareholders of shares share amount in pence
Six months ended 30 June 2008 168,000 27,418,172
0.61
Six months ended 30 June 2007 101,000 26,370,165
0.38 Year ended 31 December 2007 486,000 26,742,316 1.82The calculation of the diluted earnings per share is based on the profitsattributable to the shareholders of Brady plc divided by the weighted averagenumber of shares in issue during the period, as adjusted for dilutive shareoptions. All earnings per share calculations relate to continuing operations ofthe Company. Dilutive options Anti-dilutive Diluted options earnings per share amount in pence Six months ended 30 June 2008 2,470,891 1,569,000 0.56 Six months ended 30 June 2007 2,744,648 - 0.35 Year ended 31 December 2007 2,852,423 200,000 1.64
During the period ended 30 June 2008, Brady plc paid dividends of ‚£301,000 to its equity shareholders (period ended 30 June 2007: ‚£262,000)
7. Financial Statements
The financial information included in this report does not constitute statutoryaccounts for the purposes of section 240 of the Companies Act 1985. Thisstatement can be obtained from the Company's registered office at 281 CambridgeScience Park, Milton Road, Cambridge, CB4 0WE and will be available on theCompany's website www.bradyplc.com.
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