Interim Results

5 September 2011

Brady PLC

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

INTERIM RESULTS

For the six months to 30 June 2011

Brady, the leading global supplier of trading and risk management solutions to the metals, energy and soft commodities markets, announces its interim results for the six months to 30 June 2011.

Financial Summary (before exceptional items for 2010):

1 EBITDA before share based compensation

2 Adjusted EBITDA after interest income and depreciation charge

3 Using adjusted profit before tax and incorporating tax charge at notional annual tax rate

Financial Highlights:

·; Sales revenue up 91% to £8.84 million (H1 2010: £4.63 million) and like-for-like revenue growth of 11%

·; Recurring revenues up 168% to £4.78 million (H1 2010: £1.78 million) now comprising 54% of total revenue (H1 2010: 38%)

·; EBITDA up 127% to £1.24 million (H1 2010: £0.55 million) and operating profit up 54% to £0.55 million (H1 2010: £0.35 million)

·; Earnings per share up 20% to 1.37p per share (H1 2010: 1.14p per share)

·; £10.4 million of free cash at 30 June 2011 (equivalent to 19p per share) and no debt

Operational Highlights:

·; Successful integration of the Viz Risk Management acquisition (since renamed as Brady Energy);

·; Significantly stronger market position - Brady is now the largest energy and commodity trading and risk management software company in Europe and the largest in metals globally (source: Commoditypoint)

·; Client base increased to 150 globally

·; Six significant new licence contracts signed in the first half and nine in the year to date. This compares with four significant new licence contracts signed in H1 2010 and ten in FY 2010

·; Three contracts signed in APAC including the Group's first soft commodity clients in North America, Asia and North Africa

·; Fifteen new installations

·; Continued product enhancements including a web based application for real-time power portfolio optimisation, a collateral management solution to monitor counterparty risk and enhanced cross-asset risk modelling

Paul Fullagar, Chairman of Brady plc, commented:

"The Group has delivered strong growth in revenues and profitability in the first half of 2011 compared to 2010 and in continuing challenging economic conditions. I am also pleased to report a swift and successful integration of the recent Brady Energy acquisition and am delighted to report that it is already performing above our initial expectations.

"The increase in recurring revenues to 54% of total revenue gives us more confidence in our outlook and reduces risk of volatility in earnings. The growing client base provides a solid and diversified foundation to our business. We continue to retain a very strong balance sheet position, dominated by cash, and with no debt. To complement the anticipated continued growth, the Group will continue to look for further opportunities to enhance its product and customer base through selective acquisitions."

For further information please contact:

About Brady

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

Brady has 25 years' expertise in the commodity markets with over 150 customers worldwide, including some of the largest financial institutions, producers and mining corporations which depend on Brady's software solutions to deliver vital business transactions across their global operations. Brady clients include many of the world's largest miners, refiners and producers, trading companies, 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

The Group has continued to generate strong growth in both revenues and profits in the first half of 2011 and continued to deliver positive momentum since the management team's appointment and the announcement of a new growth strategy in 2007.

Brady Energy was acquired in December 2010 and has already been successfully integrated and delivered performance above management's initial expectations. This continues the track record of over-performance of the other recently acquired businesses - Comsoft in January 2009 and Brady Switzerland in March 2010 - which both continue to trade substantially above their pre-acquisition levels.

We are particularly pleased to see the significant growth in recurring revenue levels, now comprising 54% of total revenues, versus less than 40% historically. We believe this is a critical metric to continue to focus on, providing much improved quality of earnings and reducing the Group's overall risk attached to the timing of new licence business.

The Group has signed six new significant deals in the first half and nine in the year so far in spite of continuing challenging economic conditions. This level of business provides good visibility for full year 2011 revenues.

The Group continues to enjoy a strong financial position with net cash at 30 June of £10.4 million and no debt. There are no deferred consideration obligations outstanding for any acquisitions.

To complement the anticipated organic growth, the Group will continue to look for further opportunities to enhance its product and customer base through selective acquisitions. I believe the management team has shown a sound ability to identify, execute, integrate and deliver improved performance from the acquisitions to date and I look forward to reporting further news in this area in due course.

Paul Fullagar

Chairman

CHIEF EXECUTIVE'S REVIEW

I am pleased to provide a summary of the operational and financial highlights at Brady in the first half of 2011, together with the outlook for the rest of the year.

Strategy and Operations

The Group continues to expand its market presence, strengthen its product offering, improve routes to market and develop a pipeline of new business opportunities. Following the acquisition of Brady Energy, the Group is now the largest native European commodities software company, providing solutions across multiple assets classes including metals, soft commodities and energy, and able to deliver across multiple geographies.

Approximately 83% of our revenues derive from EMEA, 12% from the Americas and 5% from APAC. The Group has considerably strengthened its presence in mainland and northern Europe following its acquisitions of Brady Switzerland and Brady Energy in 2010. In addition, local operations in the Americas and Asia continue to support strategically important American, Asian and global clients. We continue to believe that rewards will be maximised by having sales, delivery and support personnel located close to our key customers.

As noted in the 2010 Annual Report, the Group sells its metal and soft commodity solutions under a traditional term licence model and its energy solutions under a licence rental model. This does present challenges when offering two licence models to the same customers and the Board is evaluating whether to adopt a rental model across the whole business.

I believe that Brady has a first class team and a unique and compelling opportunity to grow its position within its market, both organically and by acquisition. We expect that this will create an attractive investment opportunity and deliver significant value to our shareholders.

Brady Energy Acquisition

The Group completed its acquisition of Brady Energy in late December 2010. The team has been quickly and successfully integrated within Brady and is already trading ahead of our initial expectations. We are pleased to see the team working well with other Brady colleagues and already signing new business opportunities. The Brady Energy and earlier Brady Switzerland and Comsoft acquisitions clearly demonstrate the strategic value of securing complementary asset classes.

New Contracts

The Group has signed nine significant new licence contracts in the year so far, with six significant deals in the first half year. This represents an accelerated pace from 2010 when the Group signed four significant new licence contracts in the first half year and ten in the whole year. These deals were distributed across the metals, energy and soft commodity sectors, demonstrating the value of a wider portfolio. The solutions that the Group has acquired are clearly benefiting from the Group's stronger distribution capabilities, and I am particularly pleased to see three deals signed in APAC in the period. The Group has also signed its first soft commodity deals in the Americas, Africa and APAC.

Brief details of the deals are:

·; M3 Capital AS, a newly established hedge fund specialising in trading energy products in the Nordic power market, selected Brady's energy solution for their core energy trading and portfolio management activities;

·; Riceland, one of the world's largest rice miller and marketers selected Brady's trading and risk management solutions to manage their futures and options trading, processing and margin management in North America;

·; Singapore-based Yarlun Capital selected Brady's front-to-back office solution for managing their newly launched commodities fund;

·; One of the world's largest trading companies and an existing client, significantly increased its user base by acquiring additional Brady licences;

·; Global Capital Commodities selected Brady's trading and risk management solutions to manage its futures and options trading for base metals; and

·; Holmarcom Group, a diversified Moroccan holding company, opted to install a Brady solution to manage its grain trading positions as well as to manage the complete supply chain management cycle for its grain logistics from the field to the ultimate delivery point.

Since 30 June, Brady has signed three further significant licence deals. Brief details of the deals are:

·; Statoil, one of the world's largest producers and suppliers of oil and gas in Scandinavia, expanded the scope of its contract with Brady to add further functionality to its energy solution. The functionality of this solution has been extended to cover schedule management by interfacing Brady's offering with the EDIS scheduling system from Syseca;

·; Australian Bullion Exchange ("ABX") opted for a Brady solution to enable them to bring bullion trading to the private investor. ABX and Brady have agreed a long-term partnership where Brady will become the core system for the exchange's infrastructure; and

·; KGHM Pollska Miedz SA, the largest European copper producer and the world's third largest silver producer, selected Brady's raw materials trading and risk management solution to manage its raw materials purchasing activities. 

These contracts demonstrate the Group's ability to provide complex solutions across the range of commodity asset classes, across multiple geographic regions and to identify and deliver new business to both new and existing clients. With more than 150 customers, including many of the world's largest financial institutions, producers, trading companies, energy generators and mining corporations, we believe there is strong potential for further growth.

Client Go-lives

The Group saw fifteen clients go-live with Brady solutions in the period, which is a record. These clients included Norsk Hydro and EGL in the energy sector, Mitsubishi, Xstrata & Newedge in metals and Invivo and Riceland in soft commodities.

Product Initiatives

There have been many new product initiatives in the period including a web solution to allow real-time power portfolio optimisation, allowing customers to model via the web their power consumption and therefore optimise energy purchases. Given the increased delivery of renewable energy and hence the increase in energy volatility, this is a important new initiative.

In today's uncertain market conditions, counterparty risk is at the forefront of business leaders' thinking. The Group has developed (and signed its first client) for collateral management, allowing metals, energy or soft commodity customers to manage the collateral used for financing commodity and energy purchases.

One of the Group's core strengths is the management of both physical and financial risk exposures and during the period the Group launched a new service to manage the risk attached to refined and unrefined materials, with all new development in state-of-the-art service oriented architecture using the latest Microsoft and Oracle technology.

Market Outlook

We believe that the drivers for our business remain strong. Our customers are facing increasing regulatory and accounting compliance requirements and a dramatic increase in electronic trading which require technology innovation. Our broad offering for the metals, energy and soft commodities markets is well positioned to address the needs of our diversified customer base in the sectors, comprising trading companies, producers, banks, brokers and fabricators. Whilst the macro outlook for banking remains uncertain, banks only represent approximately 10% of Group revenues and is therefore not anticipated to have a material impact.

Financial Results

Total revenues for the first half of 2011 were £8.84 million, an increase of 91% on the £4.63 million for the first half of 2010. Within the total, £4.78 million (54% of total revenue) was recurring support and licence rental revenue, an increase of 168% on the £1.78 million (39% of total revenue) for the same period in 2010 and 35% for the full year 2010. This increase is a consequence both of the Group's continued focus towards maximising recurring revenues as well as the inclusion of Brady Energy which operates a licence rental model. A further £3.15 million (36% of total revenue) was for professional services and development revenues, an increase of 49% on the £2.11 million (45% of total revenue) for the same period in 2010. This increase derived from increased workload in delivering the new software business that had been contracted in 2010 and from further billable work secured. Finally, a further £0.91 million (10% of total revenue) was for licence sales, an increase of 24% on the £0.74 million (16% of total revenue) for the same period in 2010. Taking into account the 2010 acquisitions, there was 11% like-for-like growth in revenues from the first half of 2010 to the first half of 2011.

The gross margin for the first half of 2011 decreased modestly to 50% compared to 53% for the first half of 2010.

The Board continues to tightly manage the Group's cost base. The Group is committed to building sustained growth in underlying profitability by ensuring that expenses growth remains slower than revenue growth. Recruitment has been heavily focussed on revenue generating roles with tight control of headcount costs.

Due to the increased amortisation expense attached to acquisitions, EBITDA is now a more appropriate measure of underlying trading profitability than operating profits. The EBITDA for the first half of 2011 was £1.24 million compared to £0.55 million prior to the exceptional item for the first half of 2010, an increase of 127%. The EBITDA margin for the first half of 2011 was 14.0%, a healthy increase on the 11.8% for the first half of 2010.

Operating profit for the first half of 2011 was £0.55 million compared to £0.35 million prior to the exceptional item for the first half of 2010, an increase of 54%. The operating margin for the first half of 2011 decreased slightly to 6.2% compared to 7.6% for the first half of 2010. Profit before taxation for the first half of 2011 was £0.58 million compared to £0.36 million prior to the exceptional item for the first half of 2010, an increase of 59%. The profit before tax margin for the first half of 2011 was 6.5%, modestly down on the rate of 7.9% for the first half of 2010.

The effective tax rate for the first half of 2011 was minus 28% compared to an effective tax rate of 13% prior to the exceptional item for the first half of 2010. Although a higher proportion of profits are being generated in higher taxed jurisdictions such as 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 period.

Profit after taxation for the first half of 2011 was £0.74 million, compared to £0.32 million prior to the exceptional item for the first half of 2010, an increase of 134%.

Basic earnings per share for the first half of 2011 were 1.37 pence compared to 1.14 pence for the first half of 2010 prior to the exceptional item, an increase of 20%. Diluted earnings per share for the first half of 2011 were 1.32 pence compared to 1.08 pence for the first half of 2010 prior to the exceptional item, an increase of 22%.

The Group continues to enjoy a very strong balance sheet with total and free cash balances at 30 June 2011 of £10.4 million, an increase of £0.6 million from the free cash balances of £9.8 million at 31 December 2010. The Group continues to be debt free.

The Group generated cash from operations of £1.96 million, compared to £0.15 million for the first half of 2010, an increase of 1,182%. The Group paid the outstanding obligations of £1.85 million in relation to the Brady Energy acquisition in the period and has no remaining liabilities in relation to acquisitions, with the outstanding deferred consideration amounts attached to the Brady Energy acquisition placed in external escrow accounts and excluded from the Group's balance sheet. The Group continues to focus on tight financial management in order to maximise cash collection and optimise working capital.

The Group paid an increased dividend in May 2011 of £0.76 million, compared to £0.37 million paid in May 2010, an increase of 105%. Consistent with prior years, the Board is not recommending the payment of an interim dividend for 2011.

Outlook

The Board is very pleased with the Group's progress in the first half of 2011 showing substantial growth in revenues, operating profits and EBITDA and the announcement of nine significant new contracts signed in the year to date. This continues a track record of solid growth and increased performance and demonstrates the success of the strategy adopted in late 2007.

In spite of continuing challenging business conditions, the Group expects further growth of the sales pipeline and to translate this into new licence contracts. The Group's trading continues to be in line with the Board's expectations for the full year.

Overall, the Board believes that there remains an attractive market with a strong opportunity to continue to consolidate a fragmented marketplace. The Group continues to look for further opportunities and is actively engaged with a number of potential acquisition targets, in order to enhance its product offering and build on its customer base through selective further acquisitions.

Gavin Lavelle

Chief Executive Officer

All of the above relates to continuing operations.

Selected explanatory notes

1. Nature of operations and general information

Brady plc and its subsidiaries' principal activity is the provision of trading and risk management solutions to the metals, energy and soft commodities industries, through the delivery of customer focused software and services. 

The Group provides the leading trading and risk management software for global commodity markets. On a single platform the Group provides a complete integrated solution supporting entire commodities trading operations.

Brady plc, a 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 281 Cambridge Science Park, Milton Road, Cambridge, CB4 0WE.

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 2010. The auditors' 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 2010.

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

3. Sales revenue fluctuations

The ability to predict the timing of large contract closures is inherently difficult. The Group's product offerings are important software applications and new customers need to carefully evaluate the software before placing an order. This, together with the Group's revenue recognition policy, creates long lead times and the potential for unpredictable fluctuations in sales revenue attached to licence sales. This effect has been reduced since the acquisition of Brady Energy, whose licences are sold under a licence rental model.

4. Segment analysis reporting

The Group has one operating segment of developing and selling trading, risk management and settlement solutions to the metals and commodities sectors and makes sales to a variety of global destinations. An analysis of sales revenue by geographical market is given below:

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

5. Share issues

During the period under review, a number of share options under Brady plc's share option schemes have been exercised. This increased Brady plc's ordinary shares issued and fully paid at the end of the period under review by 310,000 (year ended 31 December 2010: 293,750).

6. Share buyback

During the period under review, the Company purchased none of the Company's own shares to retain in treasury (year ended 31 December 2010: 281,250). During the period under review, the Company utilised 276,944 of the Company's own shares in order to satisfy the granting of employee share options (year ended 31 December 2010: nil). The total number of ordinary shares held in treasury at the end of the period under review was 4,306 (31 December 2010: 281,250).

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.

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 period, as adjusted for dilutive share options. All earnings per share calculations relate to continuing operations of the Group. Separate calculations have been prepared for the year ended 31 December 2010 and the period ended 30 June 2010 earnings per share related to the profit before and after the exceptional items.

8. Dividends

During the period ended 30 June 2011, Brady plc paid dividends of £759,000 to its equity shareholders (period ended 30 June 2010: £370,000).

9. Goodwill

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

The carrying value of goodwill is allocated to the following cash-generating units:

10. Other intangible assets

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: 

11. Cash and cash equivalents

Cash and cash equivalents comprise the following:

12. Financial Statements

The financial information for the year ended 31 December 2010 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 2010 have been filed with the Registrar of Companies. This statement can be obtained from the Company's registered office at 281 Cambridge Science Park, Milton Road, Cambridge, CB4 0WE and will be available on the Company's website www.bradyplc.com.