12th Sep 2006 07:00
INTERIM RESULTS For the six months to June 2006 Brady plc, the international supplier of fully integrated software solutionsfor commodity trading and supply chain management, announces its interimresults for the six months to 30 June 2006.Trading Performance: * Revenue increased 12.3% at ‚£1,718,798 (2005: ‚£1,530,585) * Loss before tax ‚£(193,443) (2005: loss ‚£283,610) * Loss per share of 0.63p per share (2005: loss per share of 0.86p) * Cash balances ‚£3,920,279 (2005: ‚£4,268,592) Operations: * Improved level of contract wins * Four new Trinity license sales so far this year * Two new Opval license sales For further information please contact:Brady plc Graham Simister, Chairman Tel: 020 7351 0425 Robert Brady, Chief Executive Tel: 01223 479 479 CHAIRMAN'S STATEMENTI am pleased to report that the first half of 2006 saw a much improved level ofnew contract wins with the signing of three new Trinity license sales and twoOpval license sales. Additionally in July, following the end of the half yearperiod we announced a further Trinity sale. This represents positive progressfor the business following the disappointing level of new contract wins in2005. This sales success does not have an immediate effect on the financialresults of the company, as licence revenue is not recognised until the systemsare delivered in a substantially complete form. This is reflected in the lossof ‚£163,443 reported for the first half, a result which includes amortisationof employee stock options for the first time. The benefits of the recentlicense sales should start to be seen in the financial results for the secondhalf of 2006, when a return to profitability is expected, and in 2007, as thesystems are delivered and the revenue is recognised. So that investors can understand the performance of the business better I wouldlike to provide further detail on the recent new license agreements. The fournew Trinity contracts signed so far in 2006 have an aggregate contract valuebased on current scoping of ‚£1.6 million. In addition a further ‚£0.2 million ofTrinity license sales have been made to existing customers and approximately ‚£0.3 million of Opval sale have been made in the same period. No licence revenuehas been recognised in the first half of 2006 for any of the new Trinity salesunder the company's accounting policies despite over ‚£0.5 million having beeninvoiced. This revenue will only be recognised once the system has beendelivered in a substantially complete form, the timing of which is dependent onclient scheduling and integration with existing systems. The performance of the company will always be dependent to a large degree onthe level of new Trinity sales, however we are working to reach a positionwhere the cost base of the business is substantially covered by regularmaintenance revenues and the revenues from professional services anddevelopment for existing customers which have historically been morepredictable than new licence sales. We hope to be much closer to achieving thisposition in 2007 and the increase in new Trinity users from the recent contractwins will assist in this respect. The litigation with a former customer, Sempra Metals is ongoing. This wasdisclosed in the 2005 accounts, and litigation on this matter is ongoing as setout in Note 6 below. The board does not regard this as a threat to thebusiness and hopes the matter will be resolved with a further payment to thecompany that it believes is due under the contract, but this is clearly notcertain. All legal expenses associated with the matter are being expensed asincurred, though the company hopes to be able to recover them. Our task in the rest of 2006 is to manage the implementation of the sales wehave made to the ever-higher standards that our market demands and to continueto secure new contracts. To ensure that we can meet the level of demandanticipated the company has made a number of additional hires both in systemsimplementation and systems development. The company is confident that it hasthe resources to meet all contracted sales and intends to continue to hireadditional staff as further contracts are signed. With Trinity version 600 now successfully installed and in use and a good levelof new business already signed this year and further promising leads in thepipeline the outlook is much improved from this time last year.Graham SimisterChairmanConsolidated Profit and Loss Account For the six months ended 30 June 2006 Six months Six months Year ended 30 June 2006 30 June 2005 31 Dec 2005 (unaudited) (unaudited) (audited) (as (as restated) restated) Notes ‚£ ‚£ ‚£ Turnover 2 1,718,798 1,530,585 2,431,609 Operating loss (264,492) (366,863) (1,272,822) Net interest receivable 71,049 83,253 192,176 Loss on ordinary activities (193,443) (283,610) (1,080,646)before taxation Tax on loss on ordinary 4 (30,000) (61,827) (332,412)activities Loss on ordinary activities (163,443) (221,783) (748,234)after taxation Loss for the period (163,443) (221,783) (748,234) Basic loss per share 5 (0.63) (0.86) (2.89) Fully diluted loss per share 5 (0.63) (0.86) (2.89) Consolidated Balance Sheet For the six months ended 30 June 2006 Six months Six months Year ended 31 30 June 30 June 2005 Dec 2005 2006 (unaudited) (audited) (unaudited) (as (as restated) restated) ‚£ ‚£ ‚£ Fixed Assets Intangible assets 875,426 922,267 939,248 Tangible assets 112,050 142,546 109,237 Investments 15,027 15,027 15,027 1,002,503 1,079,840 1,063,512 Current Assets Debtors 1,718,445 1,433,955 1,289,842 Cash at bank and in hand 3,920,279 4,268,592 3,604,744 5,638,724 5,702,547 4,894,586 Creditors: amount falling due within one (1,544,061) (1,064,644) (746,767)year Net current assets 4,094,663 4,637,903 4,147,819 Total assets less current 5,097,166 5,717,743 5,211,331liabilities Provision for liabilities (3,262) (25,000) (3,262) Net assets 5,093,904 5,692,743 5,208,069 Capital and Reserves Called up share capital 260,692 259,242 259,692 Share premium account 3,085,898 3,051,098 3,061,898 Equity Reserve 93,880 39,074 69,602 Merger reserve 680,000 680,000 680,000 Capital reserve 1,000 1,000 1,000 Profit and loss account 972,434 1,662,329 1,135,877 Equity shareholders' funds 5,093,904 5,692,743 5,208,069 Consolidated Cash Flow Statement For the six months ended 30 June 2006 Six months Six months Year ended 30 June 30 June 2005 31 Dec 2005 2006 (unaudited) (audited) (unaudited) (as (as restated) restated) ‚£ ‚£ ‚£ Cash outflow from operating (54,798) (341,051) (678,930)activites Interest received 71,049 83,253 192,176 Taxation 317,400 - (391,221) Capital expenditure (43,116) (54,672) (62,081) Acquisition - - (47,512) Cash inflow/(outflow) before 290,535 (312,470) (987,568)financing Financing Issue of share capital 25,000 30,500 41,750 Funds from capital raising 25,000 30,500 41,750 Increase/(decrease) in cash for 315,535 (281,970) (945,818)the period Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash for 315,535 (281,970) (945,818)the period Net funds at the beginning of the 3,604,744 4,550,562 4,550,562period Net funds at the end of the period 3,920,279 4,268,592 3,604,744 Reconciliation of operating loss to cash flow Six months Six months Year ended 30 June 30 June 2005 31 Dec 2005 2006 (unaudited) (audited) (unaudited) (as (as restated) restated) ‚£ ‚£ ‚£ Operating (loss) (264,492) (366,863) (1,272,822) Depreciation 40,303 41,211 81,929 Amortisation of goodwill 63,822 51,237 116,118 Charge for fair value of share 24,277 15,073 45,600options granted (Increase)/decrease in debtors (716,003) 90,419 458,059 Increase/(decrease) in creditors 797,295 (172,128) (107,814) Net cash outflow from operating (54,798) (341,051) (678,930)activities notes 1. Basis of preparation The interim financial information has been prepared in accordance withapplicable United Kingdom accounting standards and under the historical costconvention. The principal accounting policies are set out in the company's 2005statutory financial statements. The policies remain as stated in the annualreport for the year ended 31 December 2005, except for the adoption of FRS 20(see note 3 below).The financial information set out in this report does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. The figures forthe year ended 31 December 2005 have been extracted from the statutoryfinancial statements, which have been filed with the Registrar of Companies.The auditors' report on those financial statements was unqualified and did notcontain a statement under Section 240 of the Companies Act 1985. The financialstatements for the six months ended 30 June 2006 and 30 June 2005 areun-audited. In both cases these comparative figures have been restated toreflect the impact of adoption of FRS 20, as required by that standard.2. Segmental Analysis Six months 30 Six months 30 Year ended 31 June 2006 June 2005 Dec 2005 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ By Destination United Kingdom 1,155,043 1,103,029 1,564,982 Rest of Europe 16,159 84,350 168,374 North America 470,923 239,782 545,993 Rest of World 76,673 103,424 152,260 1,718,798 1,530,585 2,431,6093. Share Based PaymentsThe Group is required to adopt FRS 20 for the first time for accounting periodscommencing on or after 1 January 2006. FRS 20 `Share Based Payments' requiresthe Group to recognise an expense in respect of the granting of options overshares to employees and directors. This expense, which is calculated byreference to the fair value of the options granted, is recognised on a straightline basis over the performance period based on the Group's estimate of optionsthat will eventually vest. The adoption of this standard has no overall effecton the Group's retained reserves, or cash flow.Management have used a Binomial model to estimate the value of options grantedin the current and prior periods.The implementation of FRS 20 has the effect of reducing profits for the sixmonths to 30 June 2006 by ‚£24,277. The equivalent charge for the six months to30 June 2005 is ‚£15,073, and for the year to 31 December 2005 is ‚£45,600, andthe comparative figures for those periods have been restated accordingly. Inaddition retained earnings has been reduced by ‚£24,001 in respect of periodsfalling before 1 January 2005. 4. Taxation The tax credit (2005: credit) for the six months June 2006 is calculated byapplying a tax rate of 30% (2005: 30%) to the estimated profits chargeable tocorporation tax for the period.5. Loss per ordinary shareThe calculation of the basic loss per share is based on the losses attributableto ordinary shareholders divided by the weighted average number of shares inissue during the period. Losses Weighted average Basic loss attributable to number of shares per share ordinary shares amount in pence Six months ended 30 June (163,443) 25,973,383 (0.63)2006 Six months ended 30 June (221,783) 25,865,216 (0.86)2005 Year ended 31 December 2005 (748,234) 25,870,841 (2.89)During the period ended 30 June 2006, options existed which had theanti-dilutive effect of increasing the weighted average number of shares by1,983,055 to 27,956,438. During the period ended 30 June 2005, options existedwhich had the anti-dilutive effect of increasing the weighted average number ofshares by 1,134,033 to 26,999,249. During the year ended 31 December 2005,options existed which had the anti-dilutive effect of increasing the weightedaverage number of shares by 1,313,222 to 27,184,063.6. Contingent liabilityOn 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.A substantive defence has been lodged, and the Company has counter claimed forfees 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 stage of the proceedings it is not possible to estimate the value, ifany, 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;(iv) All legal fees incurred to date have been charged to profit and loss.7. DistributionThis statement can be obtained from the company's registered office: 281Cambridge Science Park, Milton Road, Cambridge, CB4 0WE.ENDBRADY PLCRelated Shares:
Brady