Interim Results

12 September 2016

Brady PLC

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

INTERIM RESULTS

For the six months to 30 June 2016

Brady, the leading global provider of trading and risk management solutions for metals, recycling, energy and soft commodities, is pleased to announce its interim results for the six months to 30 June 2016.

Operations Highlights

· 70% of new business cloud deployed

· Ten new deals across all business lines

· Integration of sales teams

· Retained #1 position across all metal products in Vendor Perception study

Financial Highlights

· Revenues increased 5% to £14.8m from £14.1 m

· EBITDA increased 72% to £2.04 m from £1.18 m

· Recurring Revenues increased to 60% (from 55%)

· Cash cost reduction of £1.6m in H1

· Net Cash £6.4m (£6.2m)

· Net cash generated £1m

· Adjusted EPS 1.05p (0.53p)

Financial Summary:

Exceptional items

H1-2016: During the year costs were incurred in relation to the acquisition of Energy Credit of £0.3m

H1-2015: No exceptional items

1 Consistent currency numbers are calculated by translating the 2016 interim results at the same exchange rates as those used in the 2015 interim consolidation.

2 Adjusted earnings per share, as calculated by external analysts, are based on the profit after tax adjusted for acquired intangible assets amortisation, share based compensation, exceptional items and normalised tax.

Ian Jenks, Executive Chairman, commented:

"We are very pleased to have achieved the improvement in profitability with growth in overall revenue, EBITDA and cash generation despite the continued difficult market conditions. At the end of 2015 the Company initiated a programme which has successfully delivered significant cost reductions. We are now focused on pursuing further opportunities to drive effectiveness and efficiency across the Group over the coming period."

"The Company has leading market positions and best in class solutions which form a solid foundation to build upon. We believe our initiatives will fuel an efficient engine to facilitate growth and position the business to take advantage of any market upturn."

For further information please contact:

About Brady

Brady plc (BRY.L) is the largest European-headquartered provider of trading and risk management software to the global commodity and energy markets. Brady combines fully integrated and complete solutions supporting the entire commodity trading operation, from capture of financial and physical trading, through risk management, handling of physical operations to back office financials and treasury settlement, for energy, refined, unrefined and scrap metals, soft commodities and agriculturals.

Brady has 30 years' expertise in the commodity markets with some 400 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

Brady plc: Twitter/Facebook/LinkedIn

CHAIRMAN'S STATEMENT

I am pleased to report that against a background of continued difficult market conditions, the Group has returned to profitability. Overall revenues grew by 5% and profit before exceptional items and tax improved by £0.5 million to a profit of £0.1 million (from a loss of £0.4 million). EBITDA improved 66% from £1.2 million to £2.0 million. Net cash inflow from operations improved by £2 million to £1.0 million compared to an outflow of £1.0 in the same period last year.

Recurring revenue and service fees increased to £8.9 million and £4.3 million from £7.8 million and £3.4 million respectively. Recurring revenues now represent 60% of total sales (2015 - 55%).

In H1 2015 ten new licence deals were signed including two deals of c. £1 million each. In 2016 ten new licence deals were signed but not of comparable size to the prior year and as a result licence sales have declined from £2.9m to £1.5 million.

The Group's cost saving programme has progressed well, resulting in year on year cost reductions of £1.6m in the first half.

The Group acquired ScrapRunner in September 2015 and energycredit in January 2016. The revenues and costs of these companies are included in the 2016 results, but not in the comparatives for 2015. Excluding the impact of acquisitions from the 2016 results; revenues declined by 5% (£0.7 million) whilst operating profit improved by £0.5 million due to the significant cost savings achieved more than offsetting the reduction in licence revenues.

The movement in foreign exchange rates between the two periods has been marginally positive. Revenues have benefited by £0.3 million and Profit before Tax by £90,000.

Business Units

The Energy business unit has continued the improvements from 2015. Organic revenues were broadly flat but contribution grew to £1.4 million from £0.9 million as the business continues to improve efficiency. The acquisition of energycredit has provided a welcome addition to the Energy division's portfolio, providing upsell and cross sell opportunities. The first phase of integration with the existing Energy solution suite has been completed allowing existing customers to take advantage of this complimentary functionality as an add-on to their existing ETRM solution. Additionally, Brady continues to be at the forefront of other Energy market changes. The market harmonisation projects in the Nordics are now due to be implemented during 2017, with Brady's solution well advanced to enable companies to participate in the market. As an existing supplier to the Irish market, Brady is also deeply involved with the Integrated Single Electricity Market (I-SEM) project and is well positioned to service these requirements.

In the Commodities business unit, sales fell from £6.1 million to £6.0 million (£5.9 million in consistent currency). This is the net position of a fall in licence revenue of £0.6 million partially offset by increases in both maintenance and services revenue. Despite the fall in revenues, contribution remained flat at £1.6 million. Brady has retained its leading position across all metal products in the 2016 vendor perception study and signed three new Cloud deals with metal trading companies in the period. The ability to offer end to end Cloud deployed solutions, covering soft commodities, ores, concentrates, refined and precious metals and scrap is becoming a key differentiator from the competition. Our Cloud solutions allow customers a cost efficient and quickly deployed alternative to traditional client installed models.

In Recycling, organic revenues declined by £0.5 million. This is a combination of a £0.7 million fall in licence sales partially offset by an increase in maintenance and services revenue. Organic contribution declined by £0.2 million. The business unit onboarded six new customers and in response to customer requests, the ScrapRunner handheld container management software has now been launched for use on Android devices. 32 ScrapRunner customers migrated their solutions to the Brady Cloud environment.

People

As previously announced, Gavin Lavelle has stepped down as CEO and in the interim, I have assumed operational control of the Company until a replacement is appointed.

Looking forward

Continuing the momentum achieved in the first half with the Group's return to profitability and the significant cost reduction, the Board will be implementing further measures to drive the effectiveness and efficiency of the Group's operation. The review of its organisational structure has already begun and it is our intention to integrate the business more closely across its disciplines including sales, technology and support. This will enable us to drive common systems, methodologies and processes across the Group and importantly enable quicker and more efficient delivery of our products to our customers.

Although current market conditions are difficult the Group has leading market positions, best in class solutions and strong people and teams; we are focused on capitalising on these foundations and building an efficient engine for success to support our future earnings growth.

FINANCIAL RESULTS

Group Revenues

Revenue by Type

* Consistent currency numbers are calculated by translating the 2016 interim results at the same exchange rates as those used in the 2015 interim consolidation.

The average exchange rate for both Swiss Francs and US Dollars was marginally beneficial with both strengthening against sterling by 3% and 7% respectively. The average exchange rate for the Norwegian NOK was almost exactly the same for both periods. Overall revenues were helped by exchange rate movements by £0.3 million (2%).

The acquisitions contributed £1.4 million (10%) to Revenue. Excluding the impact of acquisitions organic revenue declined by £0.7 million (5%) being a combination of a fall in Licence sales of £1.5 million and increases in recurring revenues and services of £0.3 million and £0.5 million respectively.

Software licence sales were £1.4 million less than the same period last year. In 2015 Brady signed 9 Licence deals including two deals of circ. £1million each. In 2016 we have signed 9 deals but there were no corresponding large deals.

Recurring revenue for the period was £8.9 million (£8.7 million at consistent currency rates) compared to £7.8 million in the prior period. £0.9 million of the £1.1 million was due to the impact of the acquisitions and £0.2 million (3%) is organic growth. Recurring revenues represent 60 per cent of total sales (H1 2015: 55 per cent).

Service and development fees were £4.3 million (£4.4 million at consistent currency rate) against £3.4m last year. £0.6 million of the £0.9 million was due to the impact of the acquisitions an £0.3 million (9%) is organic growth.

Revenue and Contribution by Business Unit

* Consistent currency numbers are calculated by translating the 2016 interim results at the same exchange rates as those used in the 2015 interim consolidation.

Operating Result by Business Unit

· Brady Commodities

Revenues decreased from £6.1 million to £6.0 million in the comparative period. In consistent currency revenues declined to £5.9 million. Contribution remained flat at £1.6 million (£1.6 million in consistent currency) as a result of the cost reduction exercise.

· Brady Energy

After adjusting for the impact of acquisitions revenues remained flat, whilst contribution increased by £0.5 million as the business continues to improve efficiency.

· Brady Recycling

After adjusting for the impact of acquisitions revenues declined by £0.5 million from £2.4 million to £1.9 million. Contribution declined from £0.4 million to £0.2 million.

Group Margin

The gross margin for the first half of 2016 decreased to 62 per cent compared to 65 per cent for the first half of 2015. This reflects the fall in higher margin Licence sales to £1.5 million from £2.9 million.

Cash Costs

Following the cost reduction programme at the end of 2015 cash costs in the six months to 30 June 2016 have been reduced by £1.6 million. The reconciliation of this to the interim results (before Exceptional items) is shown below:

Selling and Administrative Costs

Selling and administrative costs reduced to £9.0 million from £9.6 million in the same period last year as a result of the cost cutting initiative.

Research and development expenditure represented 23 per cent (£3.4 million) of the Group's revenues in the first half of 2016 compared to 25 per cent (£3.5 million) in the first half of 2015. This is in line with the Group's commitment to ensuring that its product offering is maintained and up-to-date. Of the above research and development cost, £0.8 million was capitalised (2015 - £1.1 million).

Profitability

Profit before taxation for the first half of 2016 was £0.1 million compared to a loss before taxation of £0.4 million for the first half of 2015.

EBITDA for the first half of 2016 was £2.0 million compared to £1.2 million for the first half of 2015. The EBITDA margin for the first half of 2016 was 14 per cent compared to 8 per cent for the first half of 2015.

Basic earnings per share for the first half of 2016 was (0.32) pence per share compared to an EPS of (0.53) pence per share for the first half of 2015. Adjusted EPS improved to 1.05 pence from 0.53 pence in 2015.

Balance Sheet

The balance sheet continues to be dominated by goodwill and other intangible assets, largely as a natural consequence of the completion of acquisitions in previous years. As the majority of acquisitions were denominated in foreign currency, most have increased in carrying value between balance sheet dates, there has been a combined increase in carrying value of £3.0 million since 31 December 2015 of which £0.4 million relates to the acquisition of Energy Credit and the rest relates to foreign exchange.

The Group continues to enjoy a strong balance sheet with net cash balances at 30 June 2016 of £6.4 million (H1 2015: £6.2 million).

Cash Flow

Cash inflow from operations in H1 2016 was £1.0 million compared to a cash outflow of £1.0 million for the same period in 2015.

Investing activities consisted of capitalised development £0.8 million (H1 2015: £1.1m), fixed asset purchases of £0.3 million (H1 2015: £0.3m), and the acquisition of Energy Credit £0.3 million (H1: 2015 £nil).

Consolidated interim statement of financial position

30 June 2016

Consolidated interim statement of changes in equity

30 June 2016

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 commodities 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 is Riverside House, 7th Floor, 2A Southwark Bridge Road, London, SE1 9HA.

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 2015. 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.

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 2015.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

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 2015.

4. Segment analysis 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 makers and the Board is responsible for the allocation of resources to business units and assessing their performance. The Group is organised into three business units comprising different market sectors within the ECTRM market and each business unit is able to operate globally. The three business units are Commodities, Energy and Recycling. The profit measure used by the Board is business unit contribution, which is operating profit for the business unit before the allocation of central and shared expenses, the amortisation of acquired intangible assets, interest income, interest expense and before exceptional items and taxation.

The tables below show an analysis of the results by operating segment:

Revenue by Geography

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

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

5. Share issues

The Company made various allotments of ordinary 1 pence shares during the period on the exercise of various share options. This increased the Company's ordinary shares issued and fully paid at the end of the period by 50,000 (year ended 31 December 2015: 1,637,003).

6. Share buyback

During the period under review, the number of ordinary shares held in treasury has remained at 4,306.

7. 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 period. 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.

As there was a loss after tax for the six months ended June 2016 and the year ended December 2015, there was no dilutive effect.

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:

8. Dividends

During the period Brady plc paid dividends of £Nil to its equity shareholders (period ended 30 June 2015: £1,525,000).

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. Changes in the net carrying amount of goodwill on consolidation can be summarised as follows:

11. Other intangible assets

Intangible assets comprise the following:

The carrying value of intangible assets at 30 June 2016 can be split into the following cash generating units:

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

12. Cash and cash equivalents

Cash and cash equivalents comprise the following:

13. Financial statements

The financial information for the year ended 31 December 2015 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 2015 have been filed with the Registrar of Companies. This statement can be obtained from the Company's registered office at Riverside House, 7th Floor, 2A Southwark Bridge Road, London, SE1 9HA and will be available on the Company's website www.bradyplc.com.