Brady Regulatory News (BRY)

23 September 2019

Brady PLC

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

UNAUDITED INTERIM RESULTS

For the six months to 30 June 2019

Brady plc, the leading global provider of trading, risk management and settlement solutions to the energy and commodities sectors, is pleased to announce its unaudited interim results for the six months to 30 June 2019.

Financial Summary:

1 Adjusted loss per share, is calculated as loss after tax adjusted for acquired intangible assets amortisation, share based payments, exceptional items and normalised tax

2 Cash and cash equivalents excludes bank overdrafts

3 Adjusted EBITDA is defined as earnings before interest, tax, share option cost, depreciation, amortisation less property rental costs

Operational Highlights:

·; The strategic product review served as a cornerstone for the Company's forward strategy

·; Brady is focussed on delivering a scalable, predictable and sustainable business 

Carmen Carey, Chief Executive, said: 

"Although Brady's half-year performance was broadly aligned with expectations, our forecasted pipeline of revenue from new customers will not materialise during 2019 leading to expected revenues of £19m and a consequent impact on EBITDA. This performance, combined with the full strategic product review that we have now completed, has led us to initiate a comprehensive new strategic plan. This is focussed on nurturing our customers, improving execution fundamentals, expanding our reach and ensuring we secure our market leadership position during this exciting time in the trading and risk management industry. With this new strategy and a new and experienced board in place, we believe we are well-positioned to deliver a scalable, predictable and sustainable business."

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, back office financials and treasury settlement, for energy, refined and unrefined metals, soft commodities and agriculturals.

Brady has 30 years' expertise in the commodity markets and its clients include many of the world's largest financial institutions, trading companies, miners, refiners and producers, 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

Revenue for the 6 months to 30 June 2019 was £9.55m, down 9% on the prior period (£10.54m in H1 2018). The decrease in revenue was driven by a lower level of services, development and licence revenue as a result of fewer client projects being completed in the period compared to the prior period. Our gross margin has improved marginally from 51% in 2018 to 53% during the period. The adjusted EBITDA loss before exceptional items increased from £0.42m in H1 2018 to a loss of £1.13m in H1 2019. Loss after tax for continuing operations increased from £2.04m in H1 2018 to £3.29m in H1 2018.

On 21 August 2019 we announced that the pipeline of revenue from new customers previously forecasted will not materialise during 2019, although new business bookings are anticipated in the second half. As such, we re-iterate that full year revenue will be circa £19m, and this will have a consequential impact on EBITDA performance. We also announced that the strategic product review had concluded, informing the business strategy going forward to align, optimise and advance the product portfolio.

Net debt as at 31 December 2019 will continue to be in line with market expectations. However, the Company will require access to a modest level of additional working capital to support the Company's existing operations prior to the end of November 2019. We are currently advancing a number of financing options to provide increased working capital to meet the Group's short-term liquidity requirements and to underpin our strategic plan, with indications of support to date from two major shareholders, if required.

CHIEF EXECUTIVE'S REVIEW

Although first half performance is broadly aligned with expectations, our update to the market in August, indicating a downward movement in our FY19 outturn, reflects the need to complete the essential elements of business transformation inhibiting our progress.

The downturn in forecasted revenues is a result of failure to convert anticipated net new customer wins in the first half and secure the corresponding second half revenue. Several factors contributed to this, including competitive losses and elongated decision-making cycles moving opportunities into H2 FY19 or H1 FY20.

My entry as CEO in February, coupled with the feedback from the competitive losses noted above, triggered a programme of work designed to bring a fresh and objective perspective of our current state and inform a plan to enable Brady to demonstrate our leadership in the E/CTRM market. The cornerstone of this programme was the undertaking of a strategic product review leveraging an unbiased industry specialist third party coupled with the contribution of our internal subject matter experts across our product portfolio to take a "three lenses" view of:

·; Our internal review of our value propositions, technology stacks, architecture and ways of working

·; The voice of the customer

·; The independent 3rd party benchmark against 'best in class' criteria and current market dynamics

The output of this strategic product review, complemented by the learnings resulting from my time listening to our customers, has underpinned our strategy and plan going forward. Our plan imperatives focus on nurturing our customers, improving execution fundamentals and expanding our reach, ensuring that we secure our market leadership position and deliver a scalable, predictable and sustainable business.

The relationship with our customers is a critical differentiator, and the expertise we have is crucial to customer retention and ensuring we are adding value through our subject matter expertise as well as our software. Continuity of these relationships and capability is essential to the success of our customers and to Brady. The strategic product review has provided a basis for understanding how we sensibly drive product rationalisation, and a focussed programme to deliver business efficiencies has been initiated.

Recent market consolidation has created an inflection point for an E/CTRM vendor of size, scale and capability to emerge as the leading independent trading and risk management vendor. Brady is one of a small number of organisations with the opportunity to take advantage of this. Our core strengths and strategy going forward, coupled with our plan to redress the challenges we have experienced, ensure we are well positioned to capitalise on this very significant market leadership opportunity.

FINANCIAL RESULTS

Group Revenues

Revenues by type

Revenue was £9.5m for the first half of 2019 (H1 2018: £10.5m) and was in line with management's expectations. Recurring revenue for the period was £7.8m, consistent with the prior period, however it now represents 82% of total sales in H1 2019 (H1 2018: 74%). On a constant currency basis, recurring revenue is unchanged at £7.8m (82%).

Service and development fees were lower by £0.5m for the six months ended June 2019, at £1.1m, compared to £1.6m in the same period last year. The reduction reflects the lower level of client projects completed this year compared to the prior period. Software licence revenues at £0.6m, was £0.5m less than in the same period last year. Term renewals and sale of additional user licences in the first half of 2019 was consistent with the same period last year at £0.6m. There were no new customer installations completed in H1 2019 compared to 2 in H1 2018 (£0.5m of licence revenue). However, long-term key customer projects where concluded.

The impact of the Group's main trading currencies (Swiss Franc, US Dollar and Norwegian NOK) against Sterling on revenue was minimal.

Gross margin

Following a detailed review and to more appropriately reflect the nature of the Group's activities the Group reconsidered the composition and nature of its operating costs and has therefore reclassified certain costs between operating expenses and cost of revenues. The impact was to reduce gross margin in H1 2018 from 55% to 51%, but gross margin at year end 2018 remains at 60%.

Overall gross margin before exceptional items for the period was 53% (H1 2018: 51%). On a constant currency basis, the gross margin is also 53%. The increase in gross margin year on year is due to savings made on service delivery staff costs (£0.3m), coupled with a number of role changes within the organisation from technical management to portfolio management, which resulted in £0.4m of cost being reclassified from cost of revenues into operating costs.

Operating costs

Other operating costs (before exceptionals) increased by £0.4m on the same period last year, to £6.2m (H1 2018: £5.8m). This was driven by the role changes mentioned above from cost of revenues of £0.4m, offset by staff cost savings of £0.1m, and an increase in the net impairment losses on financial and contract assets (bad debt) of £0.1m.

£1.0m of research and development costs were capitalised (H1 2018: £1.2m) and was primarily invested in additional functionality within the Fintrade and EDM products.

The Group incurred £0.2m of exceptional costs in the six months to 30 June 2019 (H1 2018: £nil) pertaining to advisors fees on the appeal on Norwegian tax.

Total operating costs and including impairment losses increased from £7.7m in H1 2018 to £8.4m in H1 2019, reflecting the increase in other operating costs of £0.4m (noted above), £0.1m relating to share based payments and £0.2m of exceptional items.

Impact of IFRS 16

The Group has adopted IFRS 16 from 1 January 2019. Under this accounting standard, the Group's previously held operating leases are now accounted for as "Right of Use" assets on the balance sheet, with a corresponding lease liability. Depreciation on the assets is now recognised within operating costs, as well as an additional finance charge, before arriving at the loss before tax for the period. Rental payments made reduce the lease liability on the balance sheet. For the purposes of consistent comparison with prior years, the Group has added back rent charges in order to calculate adjusted EBITDA.

Profitability

Loss before taxation for the first half of 2019 was £3.5m compared to £2.3m for the first half of 2018.

Adjusted EBITDA (EBITDA before exceptional items) for the first half of 2019 was a £1.1m loss compared to a loss of £0.4m for the first half of 2018.

Basic earnings per share for the first half of 2019 was (3.94) pence per share compared to an EPS of (2.77) pence per share for the first half of 2018. Adjusted diluted EPS was (3.04) pence per share, compared to and EPS of (2.31) pence in H1 2018.

Balance Sheet

As in previous years, intangible assets comprising software and intellectual property, and goodwill associated with acquisitions, comprise the majority of assets. The Group has recognised £4.6m in relation to Right of Use assets at 30 June 2019 (2018: £nil). These assets relate to property leasing agreements for the Group's operations at various offices located across Europe and Asia. There is a corresponding lease liability of £4.8m.

Cash balances at 30 June 2019 were £1.9m excluding bank overdrafts (H1 2018: £4.8m). During the period, the Group drew down on its overdraft facility and had borrowings of £0.9m at the 30 June 2019 (2018: £nil).

Cash Flow

Cash outflow from operations in H1 2019 was £1.9m compared to a cash outflow of £1.0m for the same period in 2018. Of the outflow in H1 2019, £1.6m related to income taxes paid in Norway. Payments for property rent are now recognised within financing activities within the cash flow and amounted to £0.5m for the period. In the prior period, these payments have been recognised within cash flows generated from operating activities.

Net cash outflow from investing activities was £1.1m in the first half of 2019 compared to an inflow of £1.6m for the same period last year. Investing activities in the first half of 2019 consisted of capitalised development of £1.0m (H1 2018: £1.2m) and property, plant and equipment purchases of £0.1m (H1 2018: £0.1m).

Selected explanatory notes 

1. Nature of operations and general information

Brady plc ('the Company') and its subsidiaries' (together 'the Group') principal activity is the provision of trading and risk management software to the global energy and commodities markets.

The Group provides 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, back office financials and treasury settlement, for energy, refined and unrefined, soft commodities and agriculturals.

Brady plc, a public limited liability company, is the Group's ultimate parent company. It is registered, incorporated and domiciled in England and Wales. The address of Brady plc's registered office is Centennium House, 100 Lower Thames Street, London, EC3R 6DL.

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 2018. 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.

The financial information presented for the six-month periods ended 30 June 2019 and 30 June 2018 has not been audited. The comparative financial information for the year ended 31 December 2018 does not constitute the full statutory annual report of Brady plc for that year.

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 2018, except for the adoption of the new accounting standard (IFRS 16) relating to leases, as set out below. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

After making enquiries, the Directors have concluded that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these interim condensed consolidated financial statements.

New standards adopted by the Group as at 1 January 2019

IFRS 16 - Leases

IFRS 16 "Leases" is the new standard for the recognition and measurement of leases and it replaces IAS 17 "Leases". The Group had to change its accounting policies as a result of adopting IFRS 16 "Leases".

The Group has adopted IFRS 16 retrospectively from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in IFRS 16. The cumulative effect of initially applying the new leasing rules was recognised in the opening balance sheet on 1 January 2019.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.75%.

Previously, including the year ended 31 December 2018, leases of property, plant and equipment were classified as either finance or operating leases in accordance with IAS 17.

Under IAS 17, leases of software and property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership were classified as finance leases. Finance leases were capitalised, at the lease's inception, at the fair value of the leased asset or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, were included in other short-term and long-term borrowings. Each lease payment was allocated between the liability and finance cost. The finance cost was charged to profit or loss over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The software and property, plant and equipment acquired under finance leases were depreciated over the asset's useful life, or over the shorter of the asset's useful life and the lease term if there was no reasonable certainty that the Group will obtain ownership at the end of the lease term.

Operating lease rentals were charged as operating expenses to the income statement in equal annual amounts over the lease term. Assets leased under operating leases were not recorded in the consolidated statement of financial position because the lessor retains a significant portion of the risks and rewards of ownership.

The benefit of lease incentives such as rent-free periods or up-front cash payments were spread equally on a straight-line basis over the lease term.

From 1 January 2019, under IFRS 16, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

The cumulative effect of the adoption of the new standard at 1 January 2019 on retained earnings was £282,000. Further information on the impact of the adoption of the leasing standard and the new accounting policies are disclosed in note 14 below.

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 2018. New key judgements in the 6 months ended 30 June 2019 are as follows:

IFRS 16 Leases - Critical judgements in determining the lease term

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.

4. Segment analysis reporting

Operating Segments

IFRS 8 requires a "management approach" under which information in these condensed consolidated interim statements is presented on the same basis as that used for internal management reporting purposes.

The Group is organised for reporting purposes into a single, global business unit. This is the basis of the Group's external market offering and internal organisational and management structure. The Chief Operating Decision Maker (CODM), which is the operating board, comprising Executive directors and certain senior management, receives financial information reported as a single business unit and the Group has determined that it has only one reportable segment as defined by IFRS 8.

The internal management accounting information has been prepared on an IFRS basis but has a non-GAAP "Adjusted EBITDA" as a profit measure for the overall Group and this is reported on the face of the consolidated income statement.

 Revenue by Geography and nature

The Group's revenue from external customer by geography is detailed below. Revenues from external customers in the Group's domicile, the UK, as well as its major markets, EMEA, Americas and Asia Pacific, have been identified on the basis of the customer's geographical location.

The Operating Board consider that the business has three revenue streams with difference characteristics, which are generated from the same asset and cost base. The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines and geographical regions:

5. Costs

Operating costs can be analysed as follows:

The costs are presented within cost of revenues and operating costs as follows:

During the period, the Group reconsidered the composition and nature of its operating costs and has therefore reclassified certain costs between operating expenses and cost of sales, to more appropriately reflect the nature of the Group's activities. As a result, the prior periods have been restated.

6. Share issues

The Company made no allotments of ordinary shares of 1p each during the period (H1 2018 and FY 2018: nil).

7. Share buyback

During the period under review, the number of ordinary shares held in treasury was 4,306 (H1 2018 and FY 2018: 4,306).

8. Earnings per share

The calculation of the basic earnings per share is based on the loss attributable to the shareholders of Brady plc divided by the weighted average number of shares in issue during the period. The earnings per share calculations relate to the total Group and the earnings per share for the discontinued operation is disclosed below. Separate calculations have been prepared related to the loss before and after exceptional items.

As there was a loss after tax for the six months ended June 2019, the six months ended June 2018 and the year ended December 2018, there was no dilutive effect.

There were no discontinued operations in H1 2019 hence basic earnings per share for the discontinued operation was £nil (H1 2018: 0.33 pence loss per share, FY 2018: 0.33 pence loss per share).

The calculation of the adjusted earnings per share, as used by external analysts, is based on the loss after tax adjusted for acquired intangible assets amortisation, share based payments, exceptional items and normalised tax and is calculated as follows:

There were no discontinued operations in H1 2019 hence adjusted diluted earnings per share for the discontinued operation was £nil (H1 2018: 0.33 pence loss per share, FY 2018: 0.33 pence loss per share).

 9. Exceptional items

The table below shows the exceptional costs incurred during the period.

10. Goodwill

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

There were no changes in the net carrying amount of purchased goodwill in the period. Changes in the net carrying amount of goodwill on consolidation can be summarised as follows:

11. Other intangible assets

The net book value of the other intangible assets comprise the following:

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

12. Net cash and cash equivalents

Net cash and cash equivalents comprise the following:

13. Discontinued operation

In autumn 2017, the Board decided to exit the Recycling market in the USA and initiated an active programme to sell its subsidiaries, Brady US Holdings, Inc. and Systems Alternatives International LLC. The associated assets and liabilities were consequently presented as held for sale in the 2017 financial statements. The subsidiaries were sold on 25 January 2018 and the results for the 12 months ended 31 December 2018 and 6 months ended 30 June 2018 are reported as a discontinued operation in accordance with IFRS 5.

The carrying amounts of assets and liabilities at this date were:

The trading performance of the disposal group in 2018 up to the date of sale was as follows:

The cashflow information of the disposal group in 2018 up to the date of sale was as follows:

The loss on disposal was as follows:

The net proceeds from the disposal of the Recycling business was £2,936,000, comprising of £3,701,000 cash consideration less £145,000 costs to sell and £620,000 cash from the disposal group at the date of the transaction.

The total amount recognised in the statement of comprehensive income relating to the discontinued operation is:

14. Adoption of IFRS 16

This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements and discloses the new accounting policies that have been applied from 1 January 2019.

The Group has adopted IFRS 16 retrospectively from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.

Adjustments recognised on adoption of IFRS 16

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 4.75%.

For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. There were no measurement adjustments required to the lease liabilities immediately after the date of initial application.

The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. Other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

All the recognised right-of-use assets relate to the following types of assets:

The change in accounting policy affected the following items in the balance sheet on 1 January 2019:

·; Intangibles assets - decrease by £256,000

·; Property, plant and equipment - decrease by £290,000

·; Right-of-use assets - increase by £5,012,000

·; Prepayments - decrease by £48,000

·; Accruals - decrease by £165,000

·; Provisions - increase by £107,000

·; Lease liabilities - increase by £5,238,000

The change in accounting policy affected the following items in the consolidated income statement for the six months to 30 June 2019:

·; Interest expense - increase by £107,000

·; Depreciation - increase by £386,000

·; Rent expense under IAS 17 - decrease by £485,000

The net impact on retained earnings on 1 January 2019 was a decrease of £282,000.

Impact on Earnings per share

Loss per share increased by 0.01 pence per share for the six months to 30 June 2019 as a result of the adoption of IFRS 16.

Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

·; the use of a single discount rate to a portfolio of leases with reasonably similar characteristics

·; the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and

·; the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

The Group's leasing activities and how these are accounted for

The Group leases various offices and equipment. Rental contracts are typically made for fixed periods of 3 to 10 years but may have extension options as described in below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Until the 2018 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

·; fixed payments less any lease incentives receivable,

·; variable lease payments, and

·; payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

·; the amount of the initial measurement of lease liability

·; any lease payments made at or before the commencement date less any lease incentives received, and

·; restoration costs.

Payments associated with leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low-value assets comprise office equipment.

Variable lease payments

Estimation uncertainty arising from variable lease payments 

Some property leases contain variable payment terms that are linked to number of staff in the leased property. Variable payment terms are used mainly to minimise the fixed costs. Variable lease payments that depend on number of staff are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

Extension and termination options 

Extension and termination options are included in a number of property leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts.

15. Financial statements

The financial information for the year ended 31 December 2018 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 2018 have been filed with the Registrar of Companies. This statement can be obtained from the Company's registered office at Centennium House, 100 Lower Thames Street, London, EC3R 6DL and are available on the Company's website www.bradyplc.com.