21st Mar 2006 07:00
BRADY PLCFINAL RESULTSFor Immediate Release 21 March 2006-03-16Brady PLC ("BRY") the international supplier of fully integrated front to backofficecommodity trading software solutions, announce its results for the twelvemonths to 31 December 2005.Highlights: * Turnover down 49.7 % to ‚£2,431,609 (2004: ‚£4,832,440) * Loss before tax ‚£1,035,046 (2004: profit before tax ‚£1,914,789) * Cash balance ‚£3,604,744 (2004: ‚£4,550,562) * V600 Trinity completed * First sale of v600 Trinty announced on 1 March Graham Simister, Chairman of Brady, said:"The company started 2005 with a great deal of optimism, but the year clearlydid not go the way we hoped. We believe we have firmly grasped the challengespresented to us, and acted to make changes, and to protect the business. Ourtask for 2006 must be to concentrate on rolling out Trinity version 600 to ourexisting clients; continue to enhance it; and to sell it to our pipeline ofpotential new clients. It is pleasing therefore to have been able to report ourfirst sale of Trinity V600 earlier this month."-ENDS-For further information please contact:Graham Simister, Chairman 01223 479479Robert Brady, CEO 01223 479479Notes to the editorsFounded in 1985, Brady is a software solution provider whose main product,Trinity, is targeted towards companies within the Metals & Mining Industry.Brady is acknowledged as the leading provider of Trading & Risk ManagementSoftware for the global metals marketplace, installed with producers,merchants, banks, brokers and end users around the globe.Brady is listed on the London Stock Exchange (BRY) with headquarters based onthe Cambridge Science Park in the UK, with offices in London and the USA.Chairman's StatementMarch 2006The company started 2005 with a great deal of optimism, but the year clearlydid not go the way we hoped and originally expected as is evidenced by thesefinancial results. We continue to believe in the quality of our products andthe growth prospects for our chosen marketplace. We have spent considerabletime and effort building the new version of our main product and we believe itis now at a stage at which it can begin to deliver the revenues it needs to.In the first quarter of 2005 our two large, new Trinity customers from 2004went live without problems as planned and our biggest Opval customer went livelater in the first half on an upgraded version of this product. At the time ofthe last annual report the board was confident both that the company hadexcellent prospects of signing and implementing a number of substantial newlicense sales and that these prospects would be reinforced by the release ofthe latest version of Trinity, version 600 in the third quarter.With the benefit of hindsight the new version of the system was being sloweddown by numerous changes to specification for one of our launch customers.These changes slowed development and increased our costs substantially whilstnot resulting in corresponding recognised revenues during the year. There is anongoing dispute relating to this project and the associated recovery of feeswhich the company believes payable, as detailed in note 7 to the financialstatements. The delay in the release of Trinity version 600 also contributed toour failure to close other business from our pipeline. Potential customersadopted a wait and see position and business that we would normally haveexpected to close had we not announced we were about to release a new versionof our main product remained open. The recent sale of Trinity version 600should go some way to rectifying this situation.Brady remains a company with a product that addresses a known need in afocussed marketplace that is undergoing strong growth. We have many yearsexperience in developing the specialised solutions necessary to managecommodities, especially metals, risk. We have upgraded our product to providenot only the capacity that our previous version had, but also a range of newcapabilities, which extend its usefulness into other, related areas. Weredoubled our efforts to improve product quality during the course of 2006,whilst writing off all the development costs, in order to build a solidplatform on which to develop for several years without the need for fundamentalarchitectural changes. The current version is now release based and we believethat we can install it with higher quality and speed than we could attain withthe previous one.Board changesIn October 2005 Richard Kellett-Clarke announced his intention to resign asfinance director with effect from April 2006. Following the year end, thecompany announced in January 2006 that Joel Koschitzky resigned as a nonexecutive director with immediate effect to concentrate on his other businessinterests. Announcements on their replacements will follow in due course.OutlookOur task for 2006 must be to get Trinity version 600 out to our existingclients so that they can receive the benefits of the upgrade and to establishsufficient live sites to allow our pipeline of potential new clients to see theadvantages of using our technology by seeing it in operation at other sites. Wethen need to continue to build out the further modules which the new versionwas designed to support and which will extend the appeal of the product tofurther parts of the organisations we currently support and to new clients. Ifwe can do this we believe we can return to profitability and growth after afrustrating pause in 2005.I would like to thank those within the company who have shown resolve inaddressing the issues we have been faced with in 2005 and in the coming monthsI hope to have substantially better news to deliver.Chief Executive's StatementMarch 2006Operational ReviewDuring the year we invested, more heavily than planned, in the next version ofour flagship product, Trinity version 600. This product is designed to matchour target market closely. It integrates trading and risk management withphysical logistics more effectively than the previous version, and it is ouraim that it will become the system of choice in this marketplace. The productdevelopment encountered delays and other difficulties that are referred to inthe Chairman's statement; however shortly following the year-end, the productwas installed for customer test and upgrade, and we were able to announce asale of the product to one of the largest producers of copper and other metalsin the world.During the year we also worked with, and made joint proposals with, two of themajor systems integrators that are closely involved in the commodities producermarketplace. Conventional sales methods also led to proposals to our targetmarketplace. The lead-time associated with this type of mission-critical saleis a long one, but nevertheless we were disappointed with the level of salesresulting from these activities in 2005.During 2005 Brady continued the strategy of expanding its market fromprofessional commodity traders, to encompass metal producers. Theseorganizations have a requirement for risk management integrated with physicallogistics (such as shipping material around the world). This functionality isalso increasingly a requirement of the professional traders where Brady has itstraditional market penetration. We believe this market presents an opportunitybecause of the unique functionality we offer and because of the increasingrequirements for control for reasons that include regulation.In order to accelerate penetration of the market for organisations withlogistics requirements, the company acquired Tradesoft BV in July 2005.Tradesoft's principal product, Alltrade, specialises in physical logistics andconcentrates. It is our intention to maintain support for the Alltrade productfor a period to allow customers to migrate to Trinity version 600.Financial results - Operating performanceGroup sales decreased by 49.7 per cent to ‚£2,431,609 (2004: ‚£4,832,440). Thisdecrease in sales reflects the delays in version 600.The operating loss for the year was ‚£1,227,222 (2004: profit ‚£1,780,478).Operating loss for the year before amortisation of intangibles was ‚£1,111,104(2004: profit ‚£1,831,715). The group's gross margin decreased to 32.3 percent(2004: 65.2 percent).Development expenditure for Trinity is, and has historically been, expensed inthe year incurred meaning there is no depreciation of capitalised developmentwork.Financial results - Balance sheet and cash flowGroup cash ouflow from operations was ‚£678,930 (2004: inflow of ‚£566,022) andwe received ‚£192,176 (2004: ‚£134,311) of interest and paid ‚£391,221 (2004: ‚£2,374) of tax, resulting in a net cash outflow of ‚£877,975 (2004: inflow of ‚£697,959) before acquisitions and capital investment.The acquisition of Tradesoft BV resulted in goodwill of ‚£81,863 that is beingamortised over 3 years.OutlookThis has been a year of consolidation for the group. Our investment in salesand marketing continued in 2005. We established working relationships with twomajor industry consultants to the level of making customer proposals. We weredisappointed with the level of sales closed in 2005. The recent sale to one ofthe world's largest producers, in 2006, is the direct result of investment in2005 but we were disappointed that this and other opportunities did not closeduring the year. We will continue to focus on our international sales effortsand on relationships with consultants as part of the strategy to penetrate ournew target market.Robert BradyChief ExecutiveCONSOLIDATED PROFIT & LOSS ACCOUNTFor the year ended 31 December 2005 Note ‚£ 2005 Restated ‚£ 2004 ‚£ Turnover 2 Continuing operations 2,260,550 4,720,504 Acquisitions 171,059 111,936 2,431,609 4,832,440 Cost of sales 1,645,059 1,682,132 Gross profit 786,550 3,150,308 Administrative expenses 2,013,772 1,369,830 Operating (loss)/profit Continuing operations (1,251,954) 1,908,736 Acquisitions 24,732 (128,258) (1,227,222) 1,780,478 Interest receivable and 192,176 134,311 similar income (Loss)/profit on ordinary (1,035,046) 1,914,789 activities before taxation Taxation on (loss)/profit on 3 (332,412) 481,527 ordinary activities Retained (loss)/profit for (702,634) 1,433,262 the year (Loss)/Earnings per ordinary share Basic 4 (2.7)p 6.1p Diluted 4 (2.7)p 5.8p CONSOLIDATED BALANCE SHEETFor the year ended 31 December 2005 2005 2004 Note ‚£ ‚£ ‚£ ‚£ Fixed assets Intangible assets 939,248 973,504 Tangible assets 109,237 129,085 Investments 15,027 15,027 1,063,512 1,117,616 Current assets Debtors 1,289,842 1,524,374 Cash at bank and in hand 3,604,744 4,550,562 4,894,586 6,074,936 Creditors: amounts falling due within one year (746,767) (1,298,599) Net current assets 4,147,819 4,776,337 Total assets less current 5,211,331 5,893,953 liabilities Provisions for liabilities (3,262) (25,000) 5,208,069 5,868,953 Capital and reserves Called up share capital 259,692 258,062 Share premium account 3,061,898 3,021,778 Merger reserve 680,000 680,000 Capital reserve 1,000 1,000 Profit and loss account 1,205,479 1,908,113 Shareholders' funds 5,208,069 5,868,953 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2005 2005 2004 Note ‚£ ‚£ Net cash (outflow)/inflow from operating 5 (678,930) 566,022 activities Returns on investments and servicing of finance Interest received 192,176 134,311 Net cash inflow from returns on investments and servicing of finance 192,176 134,311 Taxation (391,221) (2,374) Capital expenditure and financial investment Purchase of tangible fixed assets (62,081) (82,628) Net cash outflow from capital expenditure and financial investment (62,081) (82,628) Acquisitions Acquisition of business (47,512) (282,204) Financing Issue of ordinary share capital 41,750 2,864,224 Issue costs - (462,063) Net cash inflow from financing 41,750 2,402,161 (Decrease)/increase in cash 6 (945,818) 2,735,288 * BASIS OF PREPARATION The financial information set out above in respect of 31 December 2005 does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The financial information contained in this announcement has beenextracted from the 2005 financial statements upon which the auditors opinion isunqualified and does not include any statement under Section 237 of theCompanies Act 1985.The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost convention.The principal accounting policies of the Group are set out in the 2004 annualreport and financial statements. The policies in this preliminary announcementhave remained unchanged from the 2004 financial statements, except that thegroup has implemented FRS 21 Events After The Balance Sheet Date, FRS 22Earnings Per Share, the presentational aspects of FRS 25 Financial Instruments;Disclosure and Presentation, and FRS 28 Corresponding Amounts. Theimplementation of these new standards has had no significant effect on thegroup's existing disclosures. * Turnover and (Loss)/profit on ordinary activities before taxation Turnover and (loss)/profit before taxation are attributable to the oneprincipal activity of the company.The group makes sales to a variety of world destinations. An analysis ofturnover by geographical market is given below: 2005 2004 ‚£ ‚£ United Kingdom 1,564,982 2,722,650 Italy 32,248 59,374 Rest of Europe 136,126 152,503 South Africa - 23,640 North America 545,993 1,680,279 Asia 85,032 129,768 Australia 67,228 64,226 2,431,609 4,832,440 * Taxation on (Loss)/profit on ordinary activities The taxation (credit)/charge represents: 2005 2004 ‚£ ‚£ Corporation tax at 30% (2004: 30%) (260,471) 501,356 Adjustments in respect of prior periods (50,203) (44,829) Total current tax (310,674) 456,527 Deferred taxation: Origination of timing differences (21,738) 25,000 Taxation on (loss)/profit on ordinary activities (332,412) 481,527 The current tax assessed for the year is lower (2004: lower) than the standardrate of corporation tax in the UK of 30% (2004: 30%). The differences areexplained as follows: 2005 2004 ‚£ ‚£ (Loss)/profit on ordinary activities before taxation (1,035,046) 1,914,789 (Loss)/profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2004: 30%) (310,513) 574,437 Effect of: Expenses not deductible for tax purposes 38,938 17,786 Differences between capital allowances and depreciation 10,839 (3,751) Other timing differences 265 - Utilisation of tax losses - (87,116) Adjustments to tax charge in respect of prior periods (50,203) (44,829) Current tax (credit)/charge for period (310,674) 456,527 * (loss)/earnings per share The calculation of the basic (loss)/earnings per share is based on the (loss)/earnings attributable to ordinary shareholders divided by the weighted averagenumber of shares in issue during the year.The calculation of diluted (loss)/earnings per share is based on the basic(loss)/earnings per share adjusted to allow for the issue of shares on theassumed conversion of dilutive options. For both basic and adjusted loss pershare in the current year, the potential ordinary shares are not treated asdilutive as, under FRS 22, the loss per share is increasedReconciliation of the (loss)/earnings and weighted average number of sharesused in the calculations are set out below. 2005 2004 ‚£ ‚£ Basic and diluted (loss)/earnings per share (Loss)/profit for the financial year (702,634) 1,433,262 Number Number Weighted average number of ordinary shares in issue 25,870,841 23,370,477during the year Basic (loss)/earnings per share (pence) (2.7) 6.1 Diluted (loss)/earnings per share (pence) (2.7) 5.8 Number Number Reconciliation of average number of ordinary shares used for Basic and diluted (loss)/earnings per share Weighted average number of ordinary shares used for basic 25,870,841 23,370,477(loss)/earnings per share Weighted average number of shares under option 1,313,222 1,209,854 Weighted average number of ordinary shares used for 27,184,063 24,580,331diluted (loss)/earnings per share Adjusted basic (loss)/earnings per share and adjusted diluted (loss)/earningsper share are based on the (loss)/earnings attributable to ordinaryshareholders adjusted for goodwill amortisation. Reconciliation of the (loss)/earnings used in the calculations is set out below. 2005 2004 ‚£ ‚£ Adjusted (loss)/earnings per share Operating (loss)/profit (1,227,222) 1,780,478 Goodwill amortisation 116,118 51,237 Adjusted operating (loss)/profit (1,111,104) 1,831,715 Net interest 192,176 134,311 Adjusted (loss)/profit on ordinary activities before (918,928) 1,966,026 taxation Taxation on adjusted (loss)/profit on ordinary (332,412) 481,527 activities Adjusted (loss)/profit for the financial period (586,516) 1,484,499 Adjusted basic (loss)/earnings per share (pence) (2.3) 6.4 Adjusted diluted (loss)/earnings per share (pence) (2.3) 6.0 * Net cash (OUTFLOW)/inflow from operating activities * 2005 2004 ‚£ ‚£ Operating (loss)/profit (1,227,222) 1,780,478 Depreciation 81,929 70,182 Loss on sale of tangible fixed assets - 59 Amortisation of goodwill 116,118 51,237 Decrease/(increase) in debtors 458,059 (1,192,404) Decrease in creditors (107,814) (143,530) Net cash (outflow)/inflow from operating activities (678,930) 566,022 * Reconciliation of net cash flow to movement in net funds * 2005 2004 ‚£ ‚£ (Decrease)/increase in cash in the year (945,818) 2,735,288 Movement in net funds in the year (945,818) 2,735,288 Net funds at 1 January 2005 4,550,562 1,815,274 Net funds at 31 December 2005 3,604,744 4,550,5627 COntingent liabilitiesOn 29 December 2005 Sempra Metals Ltd ("Sempra") issued a claim form againstthe Company in the High Court of Justice, London seeking damages of ‚£3,121,659together with interest and costs. The claim relates to alleged breaches ofcontract on the part of the Company regarding a software development contract.The claim form was not served until 31 January 2006. It was served withoutParticulars of Claim; these were served on 15 February 2006. A substantivedefence is being prepared. It is also the Company's intention to counter claimfor fees payable under the software contract and damages in the order of ‚£2,901,182 (exclusive of VAT).As to the value of Sempra's claim, the software contract contains a provisionlimiting the Company's liability to the total licence fees paid by Sempra,namely ‚£577,500. Further, the Company maintains indemnity insurance for claimsand legal expenses associated with errors and omissions arising under softwarecontracts.At this early stage of the proceedings it is not possible to estimate thevalue, if any, of any financial obligations that might arise. Accordingly:(i) No provision has been made in these financial statements for any liabilitythat might arise as a result of the claim;(ii) Equally it has not been considered appropriate to recognise any incomerelating to other fees and damages potentially payable by Sempra over and abovethose amounts already invoiced by the Company;(iii) Unpaid invoices raised by the Company to the value of ‚£369,862 have notbeen provided against in these financial statements and are included in tradedebtors .8 REPORT AND ACCOUNTSCopies of the annual report and accounts will be posted to the shareholdersshortly.ENDBRADY PLCRelated Shares:
Brady