Brady Regulatory News (BRY)

17 March 2014

Brady plc

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

PRELIMINARY RESULTS

For the year ended 31 December 2013

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 2013.

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 10%

Operational Highlights:

· 16 new contracts - very strong second half, including two record contracts, one in USA and the other in Asia

· 50% of new licences signed outside EMEA

· 19% Growth in Cloud revenues

· 26 major projects - including 4 go-lives in Asia

· Recycling business fully integrated opening an important new channel for business

· Consolidation into three operating units (from 4) to leverage physical, derivative and risk strengths

Financial Highlights:

· Revenues up 4% to £29.4m

· Recurring revenues up 14% to £16.6m (57% of turnover)

· Licence revenue of £3.2m deferred to 2014 (2012: £0.6m backlog)

· Significant cost savings - £2.2m of annualised costs removed

· EBITDA decreased to £3.5m (2012: £5.6m) as a result of timing of contract wins and cost base prior to the implementation of saving initiatives.

· Strong operating cash flow for the year at £3.9m (2012: £1.3m)

· Net cash at year end was £7.2m (2012: £7.8m)

· Proposed dividend increased by 6% to 1.7p per share

Paul Fullagar, Chairman of Brady plc, commented:

"The Group signed substantial business in the second half, including two record global deals. Due to the size and scope of these deals, they took longer to negotiate, and have had negligible impact on 2013 revenues. Whilst we did not meet our expectations for the year, there is strong underlying momentum in the business, strong recurring revenues, record licence backlog going into 2014 and beyond. In addition the Group has reduced costs by £2.2million allowing us to focus resources on growth areas. I am confident that profitability will be significantly higher in 2014 and beyond".

I look forward to reporting further positive progress in the coming months."

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, unrefined and scrap metals, soft commodities and agriculturals.

Brady has 25 years' expertise in the commodity markets with some 300 customers worldwide, who depend on Brady's software solutions to deliver vital business transactions across their global operations. Brady clients include many of the world's largest financial institutions, trading companies, miners, refiners and producers, recycling companies, scrap processors, tier one banks and a large number of London Metal Exchange (LME) Category 1 and 2 clearing members and many leading European energy generators, traders and consumers.

For further information visit: www.bradyplc.com

Chairman's Statement

I am pleased to report that, although total revenue for the year of £29.4 million was only 4% up on last year (2012: £28.1 million), there were a number of significant contract signings in the last quarter of the year. Licence revenue of £3.2 million (2012: £0.6 million) associated with 5 of these contracts was not recognised in 2013 and was deferred into 2014 pending full customer acceptance. As a result revenue for 2013 was lower than originally anticipated. Excluding the impact of acquisitions, organic revenues declined by 7%; however the mix of revenues improved with recurring revenues up 14% to 57% and a larger proportion of licence revenues are deferred to future years.

As a consequence the Group achieved an EBITDA before exceptional items lower than originally forecast at £3.5 million compared to £5.6 million for 2012. Profit after Tax (before exceptional items) was £0.8 million (2012: £3.0 million) and Profit after Tax (after exceptional items) was £1.1 million (2012: £0.5 million). Operating cash flow in the year was strong at £3.9 million and net cash at year end was £7.2 million (2012: £7.8 million).

The three businesses acquired during 2012 have been fully integrated into the Group. In the case of the Energy business this has involved synergies and savings beyond the level envisaged upon acquisition. Brady has also consolidated solutions and removed managerial overhead resulting in an annualised cost saving of £2.2 million per annum. The costs associated with this re-organisation of £0.6 million have been treated as exceptional costs. Following the re-organisation the Group has aligned resources more efficiently by investing in the business units with higher contracted growth, providing a strong platform for profitable growth in 2014.

It is very encouraging that the Recycling division has signed two substantial contracts, and we have signed seven significant deals in total in this market, since the company was acquired just over a year ago. The team has been really well integrated into Brady, opening up a very exciting new market for us, complementing our existing leadership in metals and overall strengthening our presence in the Americas.

Brady's strategy remains to provide integrated trading and risk management solutions to commodity, energy and recycling companies.  The Energy & Commodity Trading & Risk Management software market is estimated to be a $1.6 billion per annum spend. Brady is already the leading European supplier by revenues and is also ranked number one in the metals market globally, number one in US Recycling software and has the largest European energy installed base. By investing in sales and professional services staff in the Americas four years ago and in Asia in the last two years, and complementing our offering with targeted acquisitions to strengthen our domain knowledge, Brady is now demonstrating its capabilities to deliver solutions to market leading companies around the globe.

People

I would like to thank all of our directors and employees for their efforts during a very busy year. In particular on behalf of the board I would like to thank Tony Ratcliffe for his significant contribution to the development of the Group over the past seven years and welcome Martin Thorneycroft who joined as our Chief Financial Officer in January 2014. Bob Beveridge joined the Board in August 2013 as Chairman of the Audit Committee; he brings recent and relevant financial experience to the Board. Robert de Picciotto also joined the Board in June 2013 as a Non-Executive Director following his retirement as CEO of Brady Physicals; he brings extensive knowledge of the international commodity trading market to the Board. The commitment, loyalty and hard work of the team continue to be very much appreciated and their teamwork will be crucial in delivering the major new projects in 2014 and beyond.

Clients

The Group appreciates the support from our client base. In the last five years the number of clients has increased from 57 to more than 300, including many of the leading names in the industry. The geographical spread of the Group's revenues now comprises of £21.2 million (2012 - £22.0 million) in EMEA, £6.8 million (2012 - £3.7 million) in the Americas (following the first full year of contribution from Brady Recycling) and £1.4 million (2012 - £2.4 million) in Asia.

Dividend

The Board is pleased to propose an increase in the dividend to 1.7 pence per share (2012: 1.6 pence per share). This continues a track record of increasing the annual dividend by 0.1 pence per share per year. If this is approved by shareholders at the forthcoming Annual General Meeting, the dividend will be paid on 20 May 2014 to members whose names appear on the register at the close of business on 25 April 2014.

Looking Ahead

Although the 2013 results are not as strong as we would have wished the Board is confident that the strong momentum in the business, demonstrated by large contract wins in the last quarter, and the impact of the restructuring of costs achieved in 2013 should result in significantly higher profitability in 2014 and beyond.

Brady operates in a large, global market. Everybody on the planet is reliant on commodities and energy and Brady continues to be well placed for profitable growth.

Paul Fullagar

Chairman

Chief Executive's Review

Demonstrating the strong underlying momentum in the business, Brady secured 16 new contracts, of which half were signed outside of the EMEA region and 2 were record transactions for Brady. The contract size has progressively grown, continuing a trend of recent years, confirming the increase in our pricing power. The average licence size in 2013 was £374k compared with our average licence sale of £242k two years previously. Brady's ability to sign these global deals is underpinned by its high quality solutions which are in tune with our clients' needs. At the same time, we have continued to invest significantly in our ability to support clients around the world and have extended our solution set and domain knowledge.

Brady has achieved a second successive record sales year in the Americas, extending Brady's footprint in the region. Total Americas contracted sales amounted to £8.5 million (£6.8 million of revenue plus a £1.7 million deferred contract), which is greater than Brady's total turnover in 2009. The Americas now represent 23% of Brady's turnover.

The largest new contract signature in 2013 was made possible by consolidating the offerings of two recent acquisitions, thus providing the client with a unique offering, setting us apart from the overall marketplace.

I am particularly pleased with the integration of the Recycling team. Since the acquisition in November 2012, we have signed seven significant deals with recycling customers; again this includes both existing Brady solutions and also the newly acquired platform.

As the scale of new contracts increases the deals consequently take longer to negotiate, because of their global nature, and consequently will also take longer to deliver. Brady's revenue recognition policy, results in very little revenue from these deals being recorded in 2013. However, it does mean that we enter 2014 with a substantial backlog of unrecognised revenues from licences along with a strong service and development order book (£3.2m compared to £0.6m in 2013).

It is particularly pleasing to sign these transactions despite a challenging commodity market where the Commodities Index has fallen 12%. Brady, is a leading supplier of trading and risk management software solutions for metals, recycling, energy and soft commodities companies - the market has an estimated spend of $1.6 billion per year. Brady is now the leading European provider in this space by revenue and the fourth largest player globally. It is particularly pleasing to be signing substantial business in the Americas; both the largest and most competitive market place, and it gives clear evidence of the confidence we have in our overall strategy.

This is a testimony to the quality of our people, our solutions and also the support that we get from our clients.

The Group has been focused on driving the larger, global deals. To win these transactions Brady has engaged at senior levels with both business and IT principals around the globe. In most cases this required collaboration between different operating units across Europe, the Americas and Asia. As our organisation has strengthened globally we are better able to service our clients, provide more localised domain expertise and respond to requests in a timely manner. To further encourage this close collaboration, from 2014 we have consolidated Brady into three operating units: Commodities (formerly Metals & Physicals), Energy and Recycling. This has the benefit of leveraging the combined skills of both our physical commodity domain knowledge and proven expertise in derivatives, risk management and compliance and is more aligned with how our clients organise their trading departments.

Brady Physicals

2013 was a particularly strong booking year for physicals with six new contracts. Four of these contracts were in the USA, where the product was introduced last year. Three of the deals were signed in Stamford, the main hub in the USA for commodity trading companies demonstrating our strong customer references and the reputation we are building.

The largest transaction signed was with a global metal trading company and was as a result of the combination of skills from our physical commodities and concentrates teams.

Another trading deal in the Americas was in the recycling space, a new business line to Physicals, but facilitated due to our leadership position in recycling resulting from the Brady Recycling acquisition at the end of 2012.

It was also a strong year for software implementation, including a recycling company in Hong Kong, a global cotton trader in Singapore and two Swiss trading companies, importing and exporting soft commodities from Eastern Europe.

The metals warehouse management solution has been enhanced in line with market demand and further developments are planned to extend electronic interfaces to the warehouses.

Support for the global cotton industry has been significantly strengthened, by incorporating bale management and connectivity for the US market. This additional functionality was a pre-requisite for a contract we signed with a leading cotton trading company and has been well received by the wider marketplace.

When the Group acquired the Physicals business three years ago the client base was primarily Swiss. By investing in sales and services in both the Americas and Asia to complement our European core business we have rapidly extended the international footprint of the solution; and asset classes have been increased to include scrap and recycled metals.

This has been a very good payback for investing in sales and services in both the Americas and Asia to complement our European core business.

Looking forward, the solution will be enhanced to support raw materials and collaborate with the risk & derivatives team to strengthen the overall offering.

Brady Metals

The Metals division signed a deal with the world's largest aluminium producer for hedging and risk management. This follows a similar deal with the world's largest copper producer in 2012. Furthermore Metals delivered a major project that provides a web-based trading system, using state-of-the art performance and technology (Brady CTR) to the world's largest metal trading company. This clearly underpins Brady's leadership in the global metals trading and risk management market place.

In the second half of the year Metals signed what at the time was a record deal for Brady, with a major UK bank that has substantial interest in Asia, and particularly providing trade and finance functionality into China.

A Service Oriented Architecture (SOA) margin service has been delivered into production for a major US investment bank to support their reporting requirements for listed and OTC derivatives for the recently enacted Dodd Frank regulations.

Looking forward, Metals is focused on rolling out Commodity Trading & Risk (CTR) to the wider client base. There are major changes underway at the LME post the 2012 acquisition by Hong Kong Exchanges and Clearing Ltd, including moving clearing from the LCH to the new LMEclear, for which Brady will provide mission-critical software.

The team will further explore the recycling market where we are seeing demand for the risk and compliance skills that we expertly deploy in the raw material and refined metals markets. Given that Brady has six of the top ten recycling clients in the USA, Brady is uniquely positioned to explore this opportunity.

Brady Recycling

Overall the Group is delighted with the integration of the Recycling team, which was acquired in the fourth quarter of 2012 and has been rebranded as Brady Recycling. The team has integrated well, bringing recycling expertise and top class clients to the Brady portfolio. The acquisition also strengthens our metals presence in the Americas and is opening up the steel producing market, which offers the Group significant opportunities. Since the acquisition, Brady has signed seven significant deals in the recycling market. This performance is particularly encouraging as scrap prices have been depressed and market conditions have not been easy, with several major players reporting significant losses in earnings.

The Recycling unit has successfully launched the IMPACT product, which was developed with a major electric arc furnace steel producer. The solution addresses the unique needs of bulk commodity procurement management. The team also developed and deployed a new offering that deals with the nuances of procurement, settlement and accounting for high temperature alloys.

Recycling has leveraged from Brady expertise and can now deliver its solution via the Cloud. The Group believes this is a compelling proposition, ensuring a fast route to market, scalability, security and avoids clients having to concern themselves with infrastructure issues, particularly in scrap yards.

Looking forward, Recycling will use the wider Commodities sales force, which will open up international opportunities. There is also an exciting opportunity to bring the proven risk and derivative expertise from the Commodities unit to the scrap market. There has definitely been client interest in this area which we hope to satisfy. The Recycling team will complete the delivery of a handheld inspection application and also complete the multi-currency development to facilitate international sales.

Brady Energy

2013 has been a challenging year for the Energy business. Overall energy prices are lower and companies in the energy industry have been looking to reduce costs. The business unit focussed on selling rental contracts and licence revenues were down £1.2 million, offset by an increase in recurring revenues. From a sales perspective it was very encouraging to sign our first energy deals in Germany, including supplying our Logistics solution to two of the major German power companies, one of them having built a Biomass power plant in the UK with the intention to sell power to the UK Grid. The clients' trade in multiple different countries and Brady's Logistics solution provides a single tool to access multiple European power markets via a single application. A major Scandinavian power trading company chose Brady's Energy Data Management solution for automating its physical trading operations.

Brady partnered with the largest energy provider in Norway, to provide an extensive next generation web portal facilitating interactive two way customer communications offering real-time online reporting and a variety of configurable dashboards. This was built using the Brady Web Framework, a Group initiative to deploy new technology across Brady. This is a market leading application which we are in discussions to sell to a number of existing clients. Energy also signed major service deals with the energy market and transmission operators for the Republic of Ireland. Gas functionality has been extended to meet the growing demand for gas solutions as Europe moves away from nuclear to gas, coal and renewables. New reporting regulations are a requirement in Europe under the EMIR initiative, and Energy have launched and signed their first sales.

There is growing demand for short-term trading in power, Brady is well positioned in 2014 given the combination of our Energy Trading & Risk Solution and Logistic Solution, which were separate acquisitions. Energy have begun integrating the applications and look forward to the sales benefits in 2014. The Energy cost base has been reduced by £1.5 million or 10% during 2013, giving greater confidence that earnings will increase in 2014.

Technology initiatives

Cloud

Strategic Cloud Service revenues have grown by 19% in 2013 (2012 - 89%). Cloud Service revenues form part of our overall recurring revenues which are up 14% to £16.6 million (57% of turnover).

A major Group strategic initiative is to deploy our solutions via the Cloud making our solutions more reliable, secure and flexible than a typical on premise deployment while at the same time delivering a reduced total cost of ownership and increased business agility.

Significantly, we have extended our Cloud Services offering to the recently acquired Brady Recycling division and product line. This standardisation allows us to leverage a greater economy of scale on both the infrastructure and service side.

The Group anticipates that there will be significant further growth in this sector in 2014.

Service Oriented Architecture Programme

Central to the Group strategy is our SOA program which aims to deliver 'best of breed' enterprise wide services, leveraging our enlarged technology team. Brady has around 100 technology staff; an increase from 25 staff five years ago. These SOA services, built using the latest interoperable technologies, allow us to facilitate platform and product consolidation, make features previously only available in one product available to all, provide greater business agility and reduce maintenance costs.

To further illustrate the value of our SOA programme, 2012 saw one sale that incorporated SOA services, whereas, in contrast, we had 6 sales incorporating these services in 2013. We also had a go live with a major commodity trading company on a new platform (for Derivative Trading & Risk) comprised entirely of new SOA services. Brady now has a SOA service inventory of 20 enterprise services, up from three services two years ago when the program began.

Brady Web Framework

Reuse of our next generation web technology has also been extended and this has now become a core strategic framework for the Group. The most notable reuse of the Brady Web Framework was by the Physicals division as part of the delivery to a major metals client. This year, the same framework, has already been reused by the Energy division in a project for the largest supplier of electricity in Norway.

A significant contract win this year was a result of the combination of skills in refined metals and raw materials, both acquired from separate acquisitions.

Market

The underlying markets for commodities, energy and recycling were difficult in 2013, with prices for non-energy products particularly weak. However, volatile market conditions are good for trading companies (around 50% of Brady revenues) who thrive on the opportunities provided by volatility and fabricators (10% of revenues) enjoy the benefits of lower input prices. Major commodity trading companies have been showing good trading results which is positive for their suppliers.

Energy prices have also remained soft, North American gas prices rose 29% but from a ten year low due to fracking. Scrap prices have also been weak.

Whilst banks are focusing on regulation (EMIR, Mifid2 etc) and some have exited the commodity markets, the businesses are being bought by commodity trading companies. For example, the acquisition of some of JP Morgan's commodity business by Freepoint. The Group believes that there will be more disposals by banks, picked up by trading companies who are less impacted such regulatory requirements. This provides new selling opportunities for Brady.

Brady sells to both traders and risk and compliance departments, traders tend to have buying power when market conditions are good for trading. Conversely, when trading conditions are poor, then risk management and compliance departments drive spending. This means that we can provide solutions independently from the overall market levels.

Significant growth areas for Brady in 2014 include:

• The continuing global expansion of our Commodities business unit, leveraging the strength of our physicals and derivatives expertise.

• The Energy business unit has come through significant organisational improvements, particularly in sales and market positioning. Product rationalisation and focusing resources on revenue generating activities will give much stronger top and bottom line performance in 2014.

• The Recycling business expects to continue to deliver strong growth as the management team has finished the acquisition integration and can fully focus on new business through its existing impressive client base.

• Cloud revenues are expected to continue to grow significantly, as the offering is deployed across the Group.

Summary and Outlook

The underlying momentum in the business is very strong. Whilst recognising the financial results for 2013 were lower than expected, the Group secured major deals in 2013, the benefits which will show in the financial results of 2014 and beyond. Critically, winning these major contracts, around the world, has enhanced our reputation as a leading provider in the commodities, energy and recycling market place. The markets we serve are a tight knit community and successful software implementations that are critical to client success resonate in the industry.

For 2014 the focus is on delivering the major contracts that we have already signed and leveraging on our recent success to win new contracts. This will naturally give us strong organic growth. The Group will also bring more new names on board from our pipeline which has never been healthier. Combined with the impact of already realised efficiency saving I am confident of seeing higher margin and profitability in 2014.

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

Gavin Lavelle

CEO

Financial Review

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

Group Trading Performance (before exceptional items)

Revenue Mix

The revenue composition is summarised in the table below:

The increase in recurring revenues continues to be an important metric which helps to underpin quality and visibility of earnings. Recurring revenues comprise annual maintenance fees generated from the Group's up-front licence sales as well as recurring licence rental fees. Recurring revenues grew by 14% to £16.6 million from £14.5 million as a consequence of the Group's larger installed client base and a full year's contribution from Brady Recycling (formerly SAI).

Licence revenues decreased to £4.1 million from £6.3 million. 16 significant new licence contracts were signed in the year (2012 - 17) at an average licence contract value of £374,000 (2012 - £367,000). Under our revenue recognition policy licence revenues are only recognised once the software has been accepted by our client in accordance with the contract. The revenues from 11 of these deals were recognised in 2013 and 5 will be recognised in future periods. The license revenue backlog (Revenue contracted but not recognised in the 2013 accounts) associated with these 5 contracts amounted to £3.2 million (2012 - £0.6 million).

Services and development revenues increased 19% to £8.7 million from £7.3 million. Mainly as a result of a full year's contribution from SAI.

Revenue growth

Headline revenue for the year increased by 4% to £29.4 million (2012: £28.1 million). Stripping out the impact of acquisitions, organic growth was -7%. There were no acquisitions during the year, however there were three acquisitions in the previous year. The number of months the 2012 acquisitions were included in the 2012 accounts are shown below:

The existing business comprises Brady Metals, Brady Physicals and Brady Energy (excluding Navita and syseca).

Trading performance by business unit (before exceptional items)

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

Brady Metals

Revenues decreased marginally in 2013 to £7.5 million compared to £8.0 million in 2012. A significant reason for this was the timing on the revenue recognition of a £895k licence deal which is deferred to 2014 pending clients' acceptance. The business unit contribution margin, prior to any allocation of central or shared costs, was 49% (2012: 50%).

Brady Physicals

Revenues increased 6% in 2013 to £5.0 million compared to £4.7 million in 2012. The business unit secured its largest ever deal in the second half of the year - the deal being worth over £4.5 million in total with the majority of this to be recognised in 2014-2016. The revenue recognised on this deal in 2013 was £60,000. The contribution margin was 14% (2012: 21%). Investment has continued in service and delivery in order to ensure that the business is well placed to deliver on the substantial momentum of deal flow that it is currently enjoying.

Brady Energy

Headline revenues decreased in 2013 to £13.4 million compared to £14.0 million in 2012. 2013 included a full year's revenue from two acquisitions completed during 2012. The reduction in the business excluding acquisitions reflects the disruption resulting from the integration process for the three energy businesses. It should be noted that there was £1.3 million of licence revenues in 2012 and the business only sold rentals in 2013.

The business unit contribution margin was 17% (2012: 24%). The reduction is largely due to the reduced level of new business secured during the extended integration period. During the second half of 2013 the business unit undertook a significant cost reduction programme which has delivered annualised cost savings of approximately £1.5 million for 2014.

Brady Recycling

Revenues increased significantly in the year as a result of the business being consolidated for a full year rather than the 1.7 months in 2012. 2012 revenues were £1.4 million as a result of the business closing and recognising a substantial licence deal in the period between acquisition and the year end. The 2013 business unit contribution margin reduced to 11% from 73% in 2012. The 2012 margin was abnormally high due to the licence deal mentioned above and the 2013 margin is below expectations because total licence revenue for the year reduced to £0.9 million. The business unit has had a very good start to 2014 with a significant licence deal of approximately £0.7 million already signed and recognised.

Gross margin

The overall gross margin decreased to 62% from 64%. The decrease is primarily a reflection of the sales mix which saw a reduction in the proportion of licence revenue.

Profitability

EBITDA before exceptional items decreased to £3.5 million (2012: £5.6 million).

Operating profit before exceptional items and tax declined to £0.5 million (2012: £3.3 million). Profit before exceptional items after tax declined to £0.8 million (2012: £3.0 million).

Research and development expenditure

Total research and development spend amounted to £6.9 million (2012: £5.9 million). Of this, £5.0 million was expensed (2012: £4.0 million) and £1.9 million (2012: £1.9 million) was capitalised, representing 27% of the total research and development spend (2012: 32%). The business remains committed to investing in its product offer with total research and development representing 24% (2012 - 21%) of total sales.

Exceptional items

The exceptional income in the year of £355,000 comprised primarily £547,000 of costs relating to the restructuring of overheads, offset by a credit of £916,000, being the partial release of the earnout provision made at the time of the SAI acquisition.

Finance income

Interest income from the Group's cash resources was £29,000 (2012: £64,000), again remaining modest due to inherently low interest rates available during the year.

Income Tax

The overall tax credit for the year was £0.2 million (2012: tax charge of £0.3 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 reduce 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 in the UK and Norway of approximately £8.4 million which are expected to be available for set-off against future taxable profits.

Earnings and dividends

After including the exceptional credit, profit before tax increased to £0.9 million (2012: £0.8 million) and profit after tax increased to £1.1 million (2012: £0.5 million).

The weighted average number of shares in issue increased to 80.9 million (2012: 75.6 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 10%, decreased to 2.78 pence per share (2012: 5.94 pence per share).

The Board proposes an increase in the dividend to 1.7 pence per share (2012: 1.6 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 20 May 2014 to members whose names appear on the register at the close of business on 25 April 2014.

Share issues

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

Additionally 325,000 (2012: 1,368,455) share options held under the Company's share option schemes were exercised. The exercise proceeds following the exercise of these share options was £125,000 (2012: £672,000).

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.

Three acquisitions were completed in 2012.

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 £22.0 million from £23.8 million entirely due to foreign exchange movements on translation.

Acquired software decreased to £7.8 million from £9.8 million and acquired client contracts decreased to £3.3 million from £4.2 million as a result of amortisation during the period and foreign exchange movements on translation.

As required by IAS38 Intangible assets the Group capitalised £1.9 million (2012: £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 £4.4 million (2012: £3.2 million).

A deferred tax asset of £0.6 million has been recognised in relation to historic tax losses acquired in Navita. These losses are anticipated to be available for set-off against future trading profits.

Current assets

Trade and other receivables decreased to £6.7 million (2012: £7.0 million) and accrued income decreased to £1.6 million (2012: £2.0 million). Accrued income arises principally on consulting and professional services revenue which is typically invoiced in the month following provision of the service as well as on large contracts based on negotiated invoice terms.

Current liabilities

Trade and other payables decreased to £5.5 million (2012: £7.2 million) and deferred income increased to £5.4 million (2012: £3.7 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 £3.4 million (2012: £4.2 million), reflecting a reduction in UK corporation tax rates. Included within non-current liabilities are contingent acquisition payments totalling £0.5 million in respect of SAI.

Cash and cash flow

Operating cash generation was £3.9 million (2012: £1.3 million), again running comfortably ahead of operating profit after exceptional costs.

The Group had investment outflows of £3.2 million (2012: £19.8 million). During 2013, investment outflows of £1.9 million related to capitalised development (2012: £1.9 million). Investment outflows of £0.4 million related to property, plant and equipment (2012: £0.4 million). The 2012 outflow included £17.5 million related to payments in relation to acquisitions, principally £14.8 million in relation to Navita and £2.8 million in relation to SAI.

Financing activities show a net cash outflow during 2013 of £1.2 million (2012: £16.1 million inflow). This was largely made up of the dividend paid during the year of £1.3 million (2012: £1.2 million). During 2012 the net financial inflow of £16.1 million was made largely made up of the £17.1 million proceeds of a share placing.

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 Physicals) and the US Dollar (Brady Recycling). The exchange rates used for 2013 and 2012 are shown below:

Average Rates

Year End Rates

Martin Thorneycroft

CFO

Consolidated statement of comprehensive income

For the year ended 31 December 2013

All of the above relate to continuing operations.

Consolidated Statement of Changes in Equity

31 December 2013

Consolidated Statement of Cash Flows

For the year ended 31 December 2013

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 2012 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 2012, 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 2012 except for the impact of the adoption of the following amendments to IFRS issued by the IASB which are relevant to and effective for the Group's financial statements for the annual period beginning 1 January 2013.

- Amendment to IAS 1 - Presentation of Financial Statements

- Employee Benefits, revised

- IFRS13 - Fair value measurement

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 four business units comprising different market sectors within the ECTRM market and each business unit is able to operate globally. The four business units are Metals, Physicals (or soft 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. Additionally, 150,572 shares were issued as deferred consideration for the 2012 acquisition of SAI. These increased the Company's ordinary shares issued and fully paid at the end of the year by 475,572 (2012: 1,368,455).

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 23.5% (2012: 24.5%) 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 £1,296,000 to its equity shareholders (2012: £1,206,000). This represented a payment of 1.6 pence per share (2012: 1.5 pence per share).

The Directors propose the payment of a dividend in 2014 of 1.7 pence per share being approximately £1,378,000 (2012: 1.6 pence per share being approximately £1,290,000). As the distribution of dividends by the Company requires approval of the shareholders, no liability in this respect is recognised in the 2013 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 2014 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.

No impairment was deemed necessary as shown in the table below:

In the case of the Elviz/Pomax product lines, the key assumptions used are the achievement of the 2014 budget and the subsequent 1% growth in operating margin. A 10% shortfall against the budget in 2014 and no subsequent margin growth would result in an impairment of £237,000.

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: