Preliminary Results

Brady plc

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

PRELIMINARY RESULTS

For the year ended 31 December 2010

Brady, the leading provider of trading, risk management and settlement solutions to the metals, energy and soft commodity sectors, is pleased to announce its preliminary results for the year ended 31 December 2010.

Operational Highlights:

·; 12 significant new contracts signed in the year compared to six in 2009

·; 15 successful installations or upgrades completed in Europe, the Americas and Asia

·; Acquisition and successful integration of Brady Switzerland in March 2010, extending commodity asset class coverage to include soft commodities and oil

·; Acquisition and ongoing integration of Viz Risk Management AS ("Brady Energy") in December 2010, extending commodity asset class coverage to include energy markets, primarily electricity, gas, coal, and emission certificates.

Financial Summary:

Financial Highlights:

·; Sales revenue up 36% to £11.12 million (2009: £8.19 million)

·; Recurring revenues up 39% to £3.96 million (2009: £2.85 million) 

·; Operating profit before exceptional transaction costs up 33% to £1.51 million (2009: £1.14 million) and EBITDA before exceptional transaction costs up 46% to £2.08 million (2009: £1.43 million)

·; Earnings per share before exceptional items up 13% to 4.82 pence per share (2009: 4.27 pence per share)

·; Proposed final dividend up 8% to 1.4 pence per share (2009: 1.3 pence per share)

·; Completed share placing of £14.25 million net of expenses

·; £11.6 million of net cash or £9.8 million after deducting outstanding acquisition costs (equivalent to 18 pence per share).

Paul Fullagar, Chairman of Brady plc, commented:

"The Group has continued to deliver strong growth in both revenue and underlying profitability in 2010 and has secured a number of new client wins, all the more encouraging given the generally challenging economic conditions. The Group also completed two acquisitions in the year: the first significantly exceeded expectations, the second completed in December and had minimal impact on 2010.

"Following the share placing in December, the Company has significantly expanded its institutional shareholder base, with excellent support from both existing and new shareholders. I am particularly pleased to welcome a number of new shareholders to Brady and look forward to reporting further positive progress in the months to come."

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

For 2010, the Group has delivered solid growth in revenues and underlying profitability. This demonstrates the continuing success of the business plan laid out in 2008 and provides further momentum following the strong performance in 2009. The Group has signed more new licence deals in the year, which is very encouraging given the continuing challenging economic conditions. These deals are detailed further in the Chief Executive's Review.

Brady Switzerland was acquired in March 2010 and, having been quickly and successfully integrated, continues to perform above management's expectations. Brady Energy was acquired in December 2010, the integration is underway and progressing well. The Group continues to look for further opportunities to lead the consolidation of the sector and to complement the expected organic growth with enhanced asset class coverage, product offering, geographical footprint and customer base.

The Group's underlying markets appear to be rebounding and the Group is well placed to capitalise on what we see as an attractive opportunity. The Group has built a world leading position in the commodities and energy sectors and is well placed to continue to build on this. The Group has a strong product offering, enhanced in the year with Brady Switzerland's soft commodities and Brady Energy's energy solutions. The year has seen a continued growth in our world class customer base and has demonstrated notable success following the ongoing investment in the routes to market, delivery capability, product management and latest technologies.

Following the share placing in December, the Group enjoys an even stronger financial position with net cash at 31 December of £9.8 million (after allowing for certain outstanding acquisition related payments expected to be made in 2011) with no debt. The Board is very pleased to welcome a number of new shareholders.

People

I would like to thank all of our Directors and employees for all their efforts during a challenging and very busy year delivering this impressive growth and strong performance. Their commitment, loyalty and hard work is much appreciated and will remain vital to support further positive progress.

Conclusion

The Board continues to see the commodity trading market as an attractive market opportunity. The Group has a clear growth strategy and has demonstrated strong execution in recent years. There is a good customer pipeline and we remain focused on securing additional licence business and service engagements from existing clients, as well as winning business from new clients, whilst actively pursuing further attractive acquisition opportunities. Economic conditions have been difficult and it still remains challenging to forecast accurately the timing of new deals. Subject to this risk, the Group's trading is in line with the Board's expectations for the full year. 

We look forward to building on the success achieved in 2010 and reporting positive progress in 2011.

Paul Fullagar

Chairman

CHIEF EXECUTIVE'S REVIEW

I am very pleased to announce continued strong growth and progress from the Group. Brady continues to win attractive business around the world with some of the leading names in the marketplace. We have expanded our asset class coverage to include both energy, in particular electricity, gas, coal and emission certificates as well as soft commodities, through the acquisitions of Brady Energy and Brady Switzerland respectively. We now have a broad multi-asset class product offering, with wide geographical coverage, allowing us to capitalise on the significant potential cross selling opportunities from the larger customer base. This customer base now numbers more than 150, approximately three times the level at the start of 2010. The tangible benefits of cross-selling have already been successfully demonstrated by the Comsoft and Brady Switzerland acquisitions and provide a compelling rationale for our desire to consolidate a fragmented marketplace.

I believe we have a first class team and a unique opportunity to grow and maintain this world leading position within our chosen markets, both organically and by acquisition. We anticipate that this will create an attractive investment opportunity and deliver significant value for our shareholders.

I am pleased to provide a summary of the financial and operational highlights in 2010, together with an outlook for 2011:

Financial Highlights

·; Sales revenues increased by 36% to £11.12 million (2009: £8.19 million)

·; Recurring revenues increased by 39% to £3.96 million (2009: £2.85 million), comprising 36% of total revenues (2009: 35%);

·; Operating profit before exceptional transaction costs increased by 33% to £1.51 million (2009: £1.14 million) and EBITDA before exceptional transaction costs increased by 46% to £2.08 million (2009: £1.43 million). Operating profit decreased by 60% to £0.60 million (2009: £1.00 million);

·; Basic earnings per share before exceptional items increased by 13% to 4.82 pence (2009: 4.27 pence). On a fully diluted basis this equates to an increase of 13% to 4.61 pence (2009: 4.09 pence). Basic earnings per share decreased by 55% to 1.69 pence (2009: 3.77 pence). On a fully diluted basis this equates to a decrease of 55% to 1.62 pence (2009: 3.61 pence);

·; Successful £14.25 million share placing, net of fees;

·; Net cash resources at the end of the year were £11.6 million, or £9.8 million after deducting certain acquisition related payments that were made after the year end date, contributing to a very strong balance sheet with no debt; and

·; Proposed final dividend up 8% to 1.4 pence per share (2009: 1.3 pence per share).

These financial highlights are discussed in more detail in the Financial Review.

Operational Highlights

2010 has seen a number of successful commercial activities:

·; The Group has successfully increased its market share in the attractive commodity and energy markets with the successful integration and strong performance of the Brady Switzerland acquisition and the Brady Energy integration progressing well;

·; In total 10 significant new licence deals were signed in 2010 (compared to six in 2009), across all of our key business lines - metals, raw materials and soft commodities, and in all our primary sales territories - EMEA, Americas and APAC; and

·; 15 new clients have either gone live or upgraded.

These highlights are reviewed in more detail below.

New Contracts

The Group signed 12 significant new contracts in 2010, 10 licence and service contracts and two significant service only deals:

·; With ING Belgium (Geneva branch), a leading trade and commodity finance business, a service contract for the outsourced management and maintenance of their current trade finance application;

·; With a leading global commodities trading organisation, already a Brady customer, to support the client's cotton trading activity using the Fintrade trading solution and the Finaccount accounting package;

·; With InVivo Group, the leading global farming co-operative group, for a complete solution to support their substantial grain trading and risk activity using both the Fintrade and Opval trading solutions;

·; With Paul Reinhart AG, a world leading trader of high quality cotton, to provide an enterprise-wide risk management solution;

·; With a substantial global commodities trading company, a service contract to upgrade their existing Trinity applications;

·; With Xstrata Copper, to implement Brady's leading risk management technology at an enterprise level across Xstrata Copper's operations and projects;

·; With Engineered Products, a global business specialising in the processing, manufacture and supply of aluminium-based products for an end-to-end solution-set, on a hosted basis;

·; With Selco Finance & Industrial group, a leading global trading group of base oil products, for a complete solution to support their substantial base oil trading;

·; With BTI Bulk Trading International SA, a leading independent trading company with activities across the globe, dealing in solid fuels for power generators, cement and steel factories as well as base metals wordwide, for its trading activities;

·; With a leading bank in the Netherlands, for a comprehensive collateral management solution for the commodity and trade finance operations of the bank;

·; With Ronly, a worldwide trading company dealing with metallurgical and agricultural commodities, to provide its trading and risk management solution to support Ronly's new derivatives trading operations; and

·; With Xstrata Copper Australia as part of Xstrata Copper's continuing extension to the global rollout of Brady's trading and risk management solution, following the implementations in Chile, Peru, Dubai and Argentina.

These new contracts demonstrate the Group's ability to provide complex global solutions across increasing commodity asset classes and to identify and deliver additional business to existing clients. They also demonstrate the Group's ability to secure deals in spite of challenging conditions and the valuable contribution from cross-selling. Following the acquisition of Brady Energy in December 2010, the Group has increased its sales team by two and the enlarged sales team has been organised and trained to sell the complete cross-product offering to all our customers, new and existing, in their respective territories. These additional sales managers strengthen the Group's sales capability in Northern and Eastern Europe. With more than 150 customers, including a number of the largest financial institutions, producers, trading companies, energy generators and mining corporations in the world, we believe this represents substantial potential for further licence deals.

Delivery

Having secured new business, the Group recognises the critical need to successfully install and deliver its solutions to its clients and to provide them with ongoing support. This has been demonstrated on a global basis with 15 clients either going live or upgrading, including clients in Europe, North and South America, and Asia. The Group already has strong service team presence in four locations in Europe and in North America and intends to create a local service organisation at our Singapore hub in the Asia region during 2011 in order to capitalise on identified opportunities from the client base. We continue to believe in the importance of locating sales and service personnel close to our key customers.

Acquisitions

The Group completed its acquisition of Brady Switzerland in March 2010. As referred to in the interim results statement, the team was very quickly integrated within Brady and has consistently traded ahead of initial expectations. The Brady Switzerland acquisition clearly demonstrates the benefit of identifying and securing complementary assets and capitalising on near-term cross-selling opportunities.

Brady Energy was acquired in December 2010 and, although integration is still underway, the initial signs are that this is bedding in well and we believe that this will also prove to be a successful acquisition. It was satisfying to report the first new licence deal early in 2011. We believe that the large and expanding energy markets for electricity, gas, emission certificates and coal are highly complementary to Brady's established commodity markets, offering growth due to the global expansion in carbon trading and renewable energy and significant cross-selling opportunities from the enlarged customer base.

The Group remains active in seeking potential further opportunities to enhance its asset class coverage, product offering, geographical presence and customer base through selective acquisitions. 

Strategy and Operations

The Group has continued to demonstrate that it can secure contracts with blue-chip customer names around the world. To complement a strong European presence, the Group has built a team in North America to service local clients, with 24% of total revenue coming from the Americas. The Group recently opened an office in Singapore which has demonstrated early sales success, with APAC generating 6% of total revenue.

The Group is optimistic that the rebound in the Group's underlying markets and the powerful market drivers, including the industry focus on risk, governance and on meeting increased regulatory requirements, will provide a strong market opportunity. The Group now has a stronger cross-product offering and wider geographic reach in order to take advantage of this opportunity. We are encouraged by an advanced pipeline which, in monetary terms, has also increased in 2010. I look forward to reporting further new licence wins in the coming months.

The Group sells its metal and soft commodity solutions under traditional term licences and its energy solutions under licence rental arrangements. This does present challenges in offering two licence models to the same customers. The Group recognises that the rental model provides higher quality of earnings, lower risk and potentially higher lifetime revenues from individual contracts, although it postpones some revenue that would have been recognised earlier with the traditional licence model. Now that the Group's overall recurring revenues are expected to be approximately 50% in 2011, the Board is considering, in consultation with shareholders, a likely transition of licencing arrangements for new deals to an all rental model.

The Group continues to use Microsoft and Oracle technologies and has been using the very latest offerings, including Silverlight, web services, C#, .Net and Oracle 11g and with significant investment made in product development aimed at addressing identified market needs. The Group expects to continue to invest to maintain its offering and to expand its use of Service Orientated Architecture (SOA) technology as it enables real-time data integration with customers' existing systems allowing the offering of cross-platform functionality to customers.

The Group now has approximately 150 employees around the world, substantially increasing domain expertise and the ability to execute globally, with more than 50% of employees having a first language other than English, enabling strong client communication locally.

Market

Brady operates in the metals, energy and soft commodities markets, with a particular expertise in delivering software solutions and associated services for physical and derivative trading, risk management, finance and logistics. These markets have continued to receive attention from investors worldwide partially because of the dramatic price volatility. As well as this, key drivers behind demand for new systems include:

·; the expected profound changes in the way that many markets trade as the regulators respond to the credit crunch with more centralised clearing and increased regulatory requirements, for example from the Dodd-Frank law, MIFID and Basel 3;

·; the dramatic increase in electronic trading; and

·; technology innovation, including the use of newer technologies, for example Smart Phones, tablets and SOA, providing a stimulus to allow traders to more easily access their trade information whilst travelling and provide very user-friendly interfaces

As noted in the 2009 Annual Report, as a consequence of the recent economic climate, the Group has seen a general reduction in the volume of requests for proposals (RFPs) and requests for information (RFIs) received and general delays in clients being able to formally commit to new contracts. In spite of this, the Group has secured good new business and has also been able to capitalise on significantly more service work attached to some of the larger deals that were signed. The market appears to have rebounded strongly and, as a consequence, the pipeline has grown and there are positive signals that the pace in market activity is increasing and I am confident of securing attractive further business over the coming months.

Summary and Outlook

The Board is very pleased with the Group's progress in 2010 which, with 12 significant new contracts, 15 installations, two successful acquisitions and a substantial share placing, continues to demonstrate the success of the Group's strategy. The continuing attention to the Group's sales and delivery capability and the increased commercial focus has delivered strong revenue and profitability growth. The Board believes that the Group is well placed to deliver further growth in 2011 and beyond.

The Group expects to see further growth in the pipeline and to translate this into the signing of new licence contracts, however it is always a challenge to accurately forecast the timing and value of new deals, which is a risk. The year is expected to be very busy as we will be working hard to complete the implementations currently underway, to secure new business going forward and to complete the integration of Brady Energy. As in previous years, we expect a second half bias in terms of our revenue and profitability.

Gavin Lavelle

Chief Executive

FINANCIAL REVIEW

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

Group Trading Performance (before exceptional items)

The trading performance includes results of Brady Switzerland since its acquisition on 15 March 2010 and the results of eight days of trading of Brady Energy, acquired on 23 December 2010.

Revenue for the year increased by 36% to £11.1 million (2009: £8.2 million). The revenue composition is summarised in the table below:

The increase in recurring revenues is a primary focus which helps to underpin quality of earnings and comprises recurring annual maintenance fees on the Group's traditional licence sales and, following the acquisition of Brady Energy, recurring licence rental fees. Recurring revenues grew by 39% to £4.0 million from £2.8 million, primarily as a consequence of the Group's larger installed customer base. Although reflected negligibly in the results of 2010, this is anticipated to further increase following the acquisition of Brady Energy which, prior to the acquisition, had approximately 80% of recurring revenues.

Services and development revenues have increased 84% to £5.1 million from £2.8 million. This significant increase was anticipated early in 2010 and derived from the increased service work attached to a number of substantial contracts secured in 2009 and 2010.

Finally, licence revenues decreased by 21% to £2.0 million from £2.6 million. Whilst the Group recognises that 2010 presented a tough environment to secure new licence business, the positive momentum of new deals secured in the second half of 2010 is encouraging and the Group was able to successfully capitalise on large service revenue opportunities from existing and new clients, to compensate.

Revenue attributable to the Brady Switzerland acquisition (from 15 March 2010) and the Brady Energy acquisition (from 23 December 2010) was £3.2 million and £0.1 million respectively. Excluding these acquisitions, revenue for the year at £7.8 million remained broadly in line with 2009: £8.2 million.

As anticipated, the overall gross margin reduced of 55% down from 60% is a reflection of the business mix which saw a larger services component in 2010. This effect has been minimised as the Group continues to improve the level of productivity within the services and development teams.

Selling and administrative expenses before exceptional items increased by 21% to £4.6 million from £3.8 million, largely as a result of the Brady Switzerland acquisition and continuing investment in the Group's routes to market and in its delivery and product management. These expenses also include amortisation of intangible assets acquired of £193,000 (2009: £87,000) and amortisation of capitalised development of £111,000 (2009: £30,000).

As a consequence of the above, operating profits before exceptional items increased substantially in the year, by 33% to £1.51 million (2009: £1.14 million), maintaining a consistent 14% operating margin.

Exceptional Items

The exceptional items in the year of £909,000 related to the professional fees incurred in relation to the acquisitions of Brady Switzerland and Brady Energy which, under the revised IFRS3, were required to be expensed in the statement of comprehensive income rather than included within the acquisition cost. The exceptional item of £140,000 in 2009 related to the professional fees incurred on an aborted potential acquisition in 2009.

Finance Income

Interest income from the Group's cash resources was £19,000 (2009: £45,000), again remaining very modest due to interest rates staying low during the year.

Tax

The corporation tax charge for the year was £0.13 million (2009: £0.01 million credit), representing an effective tax rate on profits before exceptional items of 8% (2009: -1%). These rates take into account benefits from research and development tax credit claims submitted.

Earnings and dividends

Profit before the exceptional item and tax increased 29% to £1.53 million (2009: £1.18 million), representing a consistent profit before exceptional items and tax margin of 14%. EBITDA before exceptional transaction costs increased more substantially in the year, by 46% to £2.08 million (2009: £1.43 million), increasing the EBITDA margin to 19% from 18%.

After including the exceptional acquisition transaction costs, profit before tax reduced to £0.62 million (2009: £1.04 million) and profit after tax decreased to £0.49 million (2009: £1.06 million).

The weighted average number of shares in issue increased to 29.1 million (2009: 28.0 million), only modestly increased by the share placing which took place in December 2010. Adjusted basic earnings per share increased to 4.82 pence (or 1.69 pence after the exceptional items) from 4.27 pence (or 3.77 pence after the exceptional item) in 2009. The weighted average number of dilutive share options in issue increased to 1.3 million (2009: 1.2 million). Adjusted diluted earnings per share increased to 4.61 pence (or 1.62 pence after the exceptional items) from 4.09 pence per share in 2009 (or 3.61 pence after the exceptional item).

The Board is pleased to propose an increase in the dividend to 1.4 pence per share (2009: 1.3 pence per share). If this is approved by shareholders at the forthcoming Annual General Meeting, the dividend will be paid on 24 May 2011 to members whose names appear on the register at the close of business on 26 April 2011.

Share Buyback

During the year the Company purchased a total of 281,250 of the Company's own shares and retained these in treasury. The total number of ordinary shares held in treasury at the end of the year was 281,250 (2009: nil).

Share Placing

In December 2010, the Company completed a share placing primarily to support the acquisition of Brady Energy. A total of £15 million was raised by the issuance of 25,423,729 shares at 59 pence per share. Net of fees, this contributed £14.3 million to cash resources.

Acquisitions

As explained in more detail in the accompanying notes, the Company completed two acquisitions in the year.

In relation to the acquisition of Comsoft in 2009, all remaining deferred consideration amounts that were held in escrow accounts (and excluded from the Group's cash resources) were released in 2010 or in January 2011. In addition, final deferred consideration of £0.1 million was paid in January 2011 from the Group's cash resources.

In March 2010, the Company acquired Brady Switzerland at a cost of £2.7 million or £2.1 million net of cash acquired. This was financed by the Group's existing cash resources.

In December 2010, the Company acquired Brady Energy at a cost of £11.0 million or £8.8 million net of cash acquired. This was largely financed by the share placing in December 2010. Surplus working capital to be repaid to the vendors of Brady Energy amounted to £1.4 million and remaining professional fees unpaid at 31 December amounted to £0.4 million, together totalling £1.8 million. These amounts are expected to be paid in 2011. Deferred consideration amounts of approximately £2.5 million (included within the acquisition cost above) have been paid into an escrow account and have been deducted from the Group's cash balances.

Balance sheet

The Group continues to retain a very strong balance sheet, dominated by cash and cash equivalents and free of debt.

Goodwill increased to £9.2 million from £1.5 million following the two acquisitions in the year. The increase of £7.7 million related to the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in the two acquisitions, as adjusted for deferred tax. The Board believes that the goodwill arising on the acquisitions is largely attributable to the incremental sales synergies that can be anticipated to be associated with being part of the Group.

Following a detailed review of the fair value of assets and liabilities acquired from the Brady Switzerland acquisition, in accordance with IFRS3 Business Combinations the Group has recognised two intangible assets totalling £1.1 million, which are software and customer contracts. These are both being amortised over their estimated economic lives of up to ten years. At acquisition, the software was valued at £0.8 million and the customer contracts were valued at £0.3 million. Amortisation in the year amounted to £30,000.

Following a similar detailed review of the fair value of assets and liabilities acquired from the Brady Energy acquisition, in accordance with IFRS3 Business Combinations the Group has recognised two intangible assets totalling £3.8 million, which are software and customer contracts. These are both being amortised over their estimated economic lives of primarily ten years. At acquisition, the software was valued at £3.3 million and the customer contracts were valued at £0.5 million. There was no amortisation in the year.

As required by IAS38 Intangible assets the Group capitalised £0.6 million (2009: £0.4 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 amounted to £1.1 million at the end of 2010 (2009: £0.6 million).

Trade and other receivables increased to £4.1 million (2009: £1.9 million) largely as a result of the increase in size of the Group, with immaterial provisions required. Trade and other payables increased to £7.7 million from £2.6 million, £1.8 million of the increase relating to deferred acquisition related payments and £3.3 million relating to trading operations.

Cash flow

Net cash at the end of the year increased to £11.6 million (2009: £5.9 million).

The Group enjoyed significantly improved positive operating cash flow, at £1.8 million (2009: £0.3 million).

The Group incurred substantial investment outflows of £9.9 million (2009: £2.2 million) of which £9.0 million related to payments in relation to the two acquisitions in the year.

As noted above, at 31 December 2010 there remained liabilities in relation to fees associated with the acquisition of Brady Energy amounting to approximately £0.4 million, which were subsequently paid in 2011. There was also a liability in relation to surplus working capital within Brady Energy, amounting to £1.4 million, which was has been provisionally agreed following a detailed completion accounts verification process and is expected to be paid to the vendors of Brady Energy in 2011. If these items are deducted from the £11.6 million of cash at 31 December 2010, the Group's net free cash at 31 December 2010 was £9.8 million.

The Company completed a placing in December 2010 totalling £14.3m, net of fees.

Net cash at 28 February 2011was maintained at £9.8 million (2009: £6.1 million). This is in excess of the Group's working capital requirements and is anticipated, in part, to be used in relation to potential future acquisition opportunities.

Risk

The principal credit risk faced by the Group relates to trade receivables, although this risk is mitigated by the fact that the Group's principal customers are large institutions or companies. A significant proportion of the Group's revenues and expenses are denominated in pounds sterling, but this proportion is anticipated to decrease in 2011 following the acquisition of Brady Energy. The Group has partial natural hedges of payables partially offsetting receivables for US Dollars, Norwegian Krone, Swiss Francs and Euros, but new treasury and exchange rate management procedures are under consideration.

Tony Ratcliffe

Finance Director

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 metals and 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, 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. Accounting policies and changes thereto

Basis of preparation

The financial information included in this report does not constitute statutory accounts for the purposes of section 435 of the Companies Act 2006. The financial information contained in this statement has been extracted from the 2009 financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 248 of the Companies Act 2006.

These condensed consolidated preliminary financial statements have been prepared in accordance with IFRS as adopted by the European Union and under the historical cost convention. The measurement bases and principal accounting policies for the Group are set out below: 

Changes in 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 2009, except for the adoption of IFRS 3 Business Combinations (Revised 2008) and IAS 27 Consolidated and Separate Financial Statements (Revised 2009).

The revised standard on business combinations (IFRS 3R) introduced major changes to the accounting requirements for business combinations. It retains the major features of the purchase method of accounting, now referred to as the acquisition method. The most significant changes in IFRS 3R that had an impact on the Group's acquisitions in 2010 are as follows:

·; Acquisition-related transaction costs of the combination are recorded as expenses in the income statement. Previously, these costs would have been accounted for as part of the cost of the acquisition;

·; Any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration arrangement gives rise to a financial liability, any subsequent changes are generally recognised in profit or loss. Previously, contingent consideration was recognised only once its payment was probable and changes were recognised as an adjustment to goodwill; and

·; The measurement of assets acquired and liabilities assumed at their acquisition-date fair values is retained. However, IFRS 3R includes certain exceptions and provides specific measurement rules.

IFRS 3R has been applied prospectively to business combinations for which the acquisition date is on or after 1 January 2010. For the year ended 31 December 2010, the adoption of IFRS 3R has affected the accounting for the Group's acquisitions of Brady Switzerland and Brady Energy by increasing the Group's expenses related to acquisition-related costs by £909,000. Basic and diluted earnings per share for the current period have decreased, as detailed in note 8.

Business combinations for which the acquisition date is before 1 January 2010 have not been restated.

The adoption of IFRS 3R required that the revised IAS27 (IAS 27R) is adopted at the same time. IAS 27R introduced changes to the accounting requirements for transactions with non-controlling (formerly called "minority") interests and the loss of control of a subsidiary. These changes are applied prospectively. During the current year, the Group had no transactions with non-controlling interests.

Basis of consolidation

The Group financial statements consolidate those of Brady plc and of its subsidiary undertakings at the statement of financial position date. Subsidiary undertakings are entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits from the activities, which is considered to represent control. The Group obtains and exercises control through voting rights.

Profits or losses on intra-Group transactions are eliminated in full, unless intra-group losses indicate impairment in which case elimination may not be appropriate. Acquisitions of subsidiaries are dealt with by the purchase method.

Business combinations

For Business Combinations since 1 January 2010, the requirements of IFRS 3 have been applied (see above).

On acquisition of a subsidiary, all of the subsidiary's assets and liabilities which exist at the date of acquisition are recorded at their fair values reflecting their condition at that date. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of consideration over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Identifiable assets are recognised regardless of whether they have been previously recognised in the acquired company's financial statements. Consideration is the fair values at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control. Acquisition costs are expensed as incurred.

Prior to 1 January 2010, business combinations were accounted under the previous version of IFRS3 or under UK GAAP.

When Brady plc acquired Colplan Systems Limited in 2004, there was a share-for-share exchange. The UK GAAP merger relief criteria were met and so a merger reserve was recognised. The business combination was prior to the date of transition to IFRS being 1 January 2006.

Operating segments

In identifying its operating segments, management follows the Group's market sectors, which each may contain a number of main products and services.

The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements.

The Directors believe that the Group has one market sector, the commodities market and therefore one segment. For this reason, there has been no additional disclosure under IFRS 8 Operating Segments in the financial statements.

Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the identifiable net assets acquired and is capitalised.

Goodwill is subject to annual impairment testing. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Goodwill is allocated to those cash-generating units that are expected to benefit from the synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows. The recoverable amount is tested annually or when events or changes in circumstances indicate that it may be impaired. The recoverable amount is the higher of the fair value less costs and the value in use in the Group. An impairment loss is recognised to the extent that the carrying value exceeds the recoverable amount. In determining a value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the goodwill that have not already been included in the estimate of future cash flows. 

If the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, then the identifiable assets, liabilities, contingent liabilities and the cost of combination are re-assessed. Following the re-assessment, any profit or loss in excess of the carrying value is recognised immediately.

Goodwill previously written-off under UK GAAP prior to the adoption of IFRS for the restated statement of financial position of 1 January 2006 has not been reinstated. Goodwill previously written off to reserves is not written back to the statement of comprehensive income on subsequent disposal.

Revenue

Revenue comprises the value of sales (excluding trade discounts and VAT) of goods and services in the normal course of business. All revenue is measured at fair value of consideration. The Group has four sources of revenue and the policy on revenue recognition of each is as follows:

·; Licence fee revenues are recognised on practical acceptance of the software, when all obligations have been substantially completed. This is when the customer has accepted the product, the risks and rewards of ownership have been transferred, it is probable that the economic benefits of the transaction will flow to the Group, all costs and revenue in relation to the transaction can reliably be measured and the Group has no further managerial involvement over the goods to the degree usually associated with ownership. To the extent that payments have been received in advance for licences, where practical acceptance has not yet been reached, these amounts are recognised as deferred income;

·; For licence rental fees, amounts are recognised over the period to which it relates but only after practical acceptance of the software, as defined above, has been received;

·; Consulting and professional service fee revenues are recognised as the work is performed provided that the amount of revenue can be measured reliably, it is probable that the economic benefits of the work performed will flow to the Group and the costs involved in providing the service can be measured reliably;

·; Maintenance and rental income is recognised over the period to which it relates provided that the revenue can be measured reliably, it is probable that the economic benefits of the work performed will flow to the Group and the costs involved in fulfilling the maintenance or service can be measured and its is probable that the maintenance or rental period will be completed; and

·; Where revenue arises from customer specific-software development, or where specific customisation or modification of the software is required, then revenue is recognised as the revenue and costs of the contract progresses, the stage of completion of the contract can be reliably measured and it is probable that the remaining obligations on the project will be satisfied and so economic benefits will flow to the Group. Full provision is made for losses on contracts in the period in which the loss is first foreseen.

Interest

Interest is recognised using the effective interest method, which calculates the amortised cost of a financial asset and allocates the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying value of the financial asset.

Dividends

Dividends are recognised when the shareholders' right to receive payment is established.

Research and development

Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. 

Development costs incurred are capitalised only when all the following conditions are satisfied:

·; Completion of the intangible asset is technically feasible;

·; The Group intends to complete the intangible asset and use or sell it;

·; The Group has the ability to use the asset or sell it;

·; The intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits;

·; There are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

·; The expenditure attributable to the intangible asset during its development can be measured reliably.

The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the intangible asset to be capable of operating in the manner intended by management. Directly attributable costs comprise employee salary and other employment costs incurred, on a time apportioned basis, on software development. The costs of internally generated software developments are recognised as intangible assets and are subsequently measured in the same way as externally acquired licences. However, until completion of the development project, the assets are subject to annual impairment testing only. Amortisation commences upon completion of the asset, and is shown within selling and administrative expenses in the statement of comprehensive income. The amortisation period for development costs incurred in the Group is five years.

Development costs not meeting the criteria for capitalisation are expensed as incurred. Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each statement of financial position date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors.

Amortisation of intangible assets

Intangible assets are stated at cost, net of amortisation and any provision for impairment. Amortisation is calculated to write off the cost of all intangible assets over the expected useful economic lives of typically ten years. Following any impairment, the amortisation is based on the revalued amount and, where applicable, the revised useful life.

Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment, if applicable. Depreciation is calculated to write off the depreciable amount (cost less residual value) of all property, plant and equipment by equal instalments over their expected useful economic lives. The rates generally applicable are:

·; Improvements to property 25% on cost

·; Computer equipment 33% on cost

·; Computer software 33% on cost

·; Fixtures, fittings and equipment 20% - 25% on cost

Material residual value estimates are updated as required, but at least annually. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation.

Taxation

Current tax is the tax currently payable based on taxable profit for the year.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the statement of financial position date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited directly to equity (such as share based payments) in which case the related deferred tax is also charged or credited directly to equity.

Exceptional items

Exceptional items are those significant items which are separately disclosed by virtue of their size of incidence to enable a full understanding of the financial performance. Transactions which may give rise to exceptional items are principally acquisition transaction costs.

Financial assets

Financial assets are divided into the following categories: loans and receivables; available-for-sale financial assets; and held-to-maturity investments. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available.

All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are recognised at fair value plus transaction costs.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are classified as loans and receivables. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the profit or loss.

Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the profit or loss when they are sold or when the investment is impaired.

In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income on equity instruments are not reversed through the profit or loss.

An assessment for impairment is undertaken at least at each reporting date.

Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct issue costs.

At each reporting date all financial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the profit or loss. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the profit or loss on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

A financial liability is de-recognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

Foreign currencies

Transactions in foreign currencies are translated into the functional currency of the individual entity within the Group at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the statement of financial position date. All exchange differences are dealt with through the profit or loss.

The assets and liabilities in the financial statements of foreign subsidiaries and associates and related goodwill are translated at the rate of exchange ruling at the statement of financial position date. Income and expenses are translated at the actual exchange rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries and associates are taken directly to the foreign currency reserve in equity. On disposal of a foreign operation, the cumulative translation differences are transferred to the profit or loss as part of the gain or loss on disposal.

The Group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS. The gain or loss on disposal of these operations excludes translation differences that arose before the date of transition to IFRS.

Post employment benefits and short-term employee benefits

The Group provides post employment benefits through defined benefit plans as well as various defined contribution plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. The Group contributes to several schemes for individual employees that are defined contribution plans. Contributions to the plans are recognised as an expense in the period that relevant employee services are received.

Plans that do not meet the definition of a defined contribution plan are defined benefit plans. The legal obligation for any benefits remains with the Group, even if plan assets for funding the defined benefit plans have been set aside. Plan assets may include assets specifically designated to a long-term benefit fund as well as qualifying insurance policies. The liability recognised in the statement of financial position for defined benefit plans is the present value of the defined benefit obligation (DBO) at the reporting date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs.

Management estimates the DBO annually with the assistance of independent actuaries. The estimate of its post retirement benefit obligation is based on standard rates of inflation and mortality. It also takes into account the group's specific anticipation of future salary increases. Discount factors are determined close to each year-end by reference to high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

All post employment benefits expenses are included in employee benefits expense.

Short-term employee benefits, including holiday entitlement are included in current pension and other employee obligations at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.

Leased assets

All leases are regarded as operating leases as the risks and rewards of ownership are not transferred. Payments made under leases are charged to the profit or loss on a straight-line basis over the lease term. Lease incentives are spread over the term of the lease.

Share options

All share-based payment arrangements granted that had not vested prior to 1 January 2006 are recognised in the financial statements. The Group operates a number of employee share schemes under which it makes equity-settled share-based payments to certain employees. None of the Group's plans feature any options for a cash settlement.

Where employees are rewarded using share-based payments, the fair values of employees' services are determined by reference to the fair value at the grant date of equity instruments issued by the Group. The fair value of these instruments (options) is determined using the binomial valuation model. The share-based payment is recognised as an expense in the profit or loss, together with a corresponding credit to a share-based payment reserve in equity. This expense is incurred on a straight-line basis based on the Group's estimate of the number of shares that will vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded in the share premium account.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Equity

Equity comprises the following:

·; "Share capital" represents the nominal value of equity shares;

·; "Treasury shares" comprise own shares in Brady plc purchased and retained by the Company;

·; "Share premium account" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue;

·; "Merger reserve" represents the merger reserve set up in relation to the accounting for the acquisition of Colplan Systems Limited in 2004 that was present under UK GAAP and exempt from reclassification on transition to IFRS;

·; "Capital reserve" represents the capital reserve set up to account for shares redeemed or purchased wholly out of distributable profits that was present under UK GAAP and exempt from reclassification on transition to IFRS;

·; "Equity reserve" represents the reserve in relation to share options issued but not yet exercised;

·; "Foreign exchange reserve" represents the exchange difference on consolidation of investments in overseas subsidiaries; and

·; "Retained earnings" represents retained profits.

Treasury Shares

Equity shares in Brady plc held by the Company are classified as Treasury Shares. These shares are treated as a deduction from the issued and weighted average number of shares. The consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from Group equity until the shares are cancelled, reissued or disposed of. When such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders. Distributions received on treasury shares are eliminated on consolidation.

For further information, please refer to Brady plc's Consolidated Financial Statements 2009, which have been filed with the Registrar of Companies and are available on the Companies website, www.bradyplc.com

2. 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.

3. Segment reporting

Although the Group has five main products, the Group has one principal activity and one business segment, being the provision of software solutions to the global commodities trading and risk management market. The products aggregate to provide a full offering to broadly similar customers around the world. The KPIs used to manage the business apply to the segment as a whole. An analysis of sales revenue by geographical market is given below:

Countries where revenue represents more than 10% of Group revenues are detailed below:

During 2010, £0.8 million or 7% of the Group's revenue depended on a single customer in France in relation to a licence agreement together with associated services and maintenance. During 2009, £1.0m or 12% of the Group's revenue depended on a single customer in Japan in relation to a licence agreement together with associated services and maintenance.

Within this one activity, the Group generates revenue from software licence sales, recurring maintenance fees and the provision of associated consulting and development services. Revenues can be analysed as below:

Within this one activity, the Group had non-current assets (excluding goodwill) outside of the United Kingdom at the year-end date as follows:

This reconciles to total non-current assets (excluding goodwill) as follows:

The management of the Group does not analyse the net assets according to revenue type.

4. Goodwill

The main change relates to goodwill acquired with the acquisitions of Brady Switzerland and Brady Energy (2009: acquisition of Comsoft). 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:

Subsequent to the annual impairment tests, the carrying value of goodwill is allocated to the following cash-generating units:

There were no changes in the net carrying amount of purchased goodwill.

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 detailed ten year cash flow forecasts and determines 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 calculation was 15%. The principal assumption used in the forecasts have been the growth rate in relation to new licence revenues at 7.5% or 10% per annum, being conservative in relation to recent performance, the continuance of existing maintenance revenue streams and current levels of resources required to support the business unit. 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.

Key judgements and estimates are made in determining the value in use of the cash-generating units described above. The management of the Group is not currently aware of any probable changes that would necessitate changes in its key estimates.

5. 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: 

Subsequent to the annual impairment tests, the carrying value of Group intangible assets is allocated to the following cash-generating units:

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. The carrying value of the intangible fixed assets has been compared and justified by reference to the Group's forecasts for the five years following the reporting date. 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.

Key judgements and estimates are made in determining the value in use of the cash-generating unit described above. The management of the Group is not currently aware of any probable changes that would necessitate changes in its key estimates.

6. Share issues

The Company made various allotments of ordinary 1p shares during the year following the exercise of various share options. This increased the Company's ordinary shares issued and fully paid at the end of the year by 293,750 (2009: 719,666).

In addition, the Company raised £15 million, prior to expenses, in December 2010 following the placing of 25,423,729 ordinary 1p shares at 59 pence per share.

7. Share buyback

During the year the Company purchased a total of 281,250 of the Company's own shares and retained these in treasury. The total number of ordinary shares held in treasury at the end of the year was 281,250 (2009: nil).

8. 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.

The reconciliation of average number of ordinary shares used for basic and diluted earnings per share is as below:

9. Dividends

During the year Brady plc paid dividends of £370,000 to its equity shareholders (2009: £336,000). This represented a payment of 1.3 pence per share (2009: 1.2 pence per share).

The Directors propose the payment of a dividend in 2011 of 1.4 pence per share being approximately £756,000 (2009: 1.3 pence per share being approximately £368,000). As the distribution of dividends by the Company requires approval of the shareholders, no liability in this respect is recognised in the 2010 consolidated financial statements. No income tax consequences are expected to arise as a result of this transaction at the Group level.

10. Acquisitions

Viveo Switzerland SA (Brady Switzerland)

On 15 March 2010 the Group acquired the entire issued share capital of Viveo Switzerland SA (Brady Switzerland), a company incorporated in Switzerland. Brady Switzerland provides software for the risk management, trading and administration of soft commodities and has clients based in Europe.

The net assets and liabilities acquired were as follows:

The total consideration of £2,737,000 net of cash acquired of £654,000 was £2,083,000.

Included within the fair value adjustment of £260,000 to liabilities was £249,000 in relation to a shortfall in pension liabilities under pension schemes which technically redefined as defined benefit pension plans under IFRS. In addition, following a detailed review of the fair value of assets and liabilities acquired, in accordance with IFRS3 Business Combinations the Group has recognised two intangible assets totalling £1,119,000, which are customer contracts and software, both of which are being amortised over their estimated economic lives of ten years. The customer contracts have been valued at £315,000 and the software (Fintrade and other suites, for future customer resale) has been valued at £804,000.

Trade and other receivables included trade receivables of £163,000 after a provision of £72,000, the balance of which is anticipated to be collectible.

Goodwill of £1,474,000 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The goodwill arising on the acquisition is largely attributable to the incremental sales synergies anticipated to be associated with being part of the Group and the ability to sell and cross sell with a larger combined sales force.

As part of the acquisition, the Group agreed to pay additional consideration against surplus working capital above an agreed threshold that was retained in the business at completion. Following a completion accounts verification process during the half year period, an amount of £223,000 was paid to the vendors of Brady Switzerland in relation to this surplus working capital and a further amount of £57,000 has been provided for.

From the date of acquisition to 31 December 2010, Brady Switzerland contributed £3,224,000 to revenue and £714,000 to profit before taxation and contributed £453,000 to the Group's net operating cashflows. In the last financial year, being the year ended 31 December 2009, Brady Switzerland made a loss before taxation of £20,000. If Brady Switzerland had been acquired as of 1 January 2010, it would have contributed £3,662,000 to revenue and £781,000 to profit before taxation and contributed £781,000 to the Group's net operating cashflows.

Transaction costs of £476,000 in related to this acquisition were expensed as exceptional transaction costs.

Viz Risk Management AS (Brady Energy)

On 23 December 2010 the Group acquired the entire issued share capital of Viz Risk Management AS (Brady Energy), a company incorporated in Norway. Brady Energy provides software for the risk management, trading and administration of energy and has clients based in Northern and mainland Europe.

The net assets and liabilities acquired were as follows:

The total consideration of £10,968,000 net of cash acquired of £2,171,000 was £8,797,000.

Following a detailed review of the fair value of assets and liabilities acquired, in accordance with IFRS3 Business Combinations the Group has recognised two intangible assets totalling £3,856,000 which are customer contracts and software, both of which are being amortised over their estimated economic lives of ten years. The customer contracts have been valued at £542,000 and the software (Elviz and other suites, for future customer resale) has been valued at £3,314,000.

Trade and other receivables included trade receivables of £1,322,000 all of which is anticipated to be collectible.

Goodwill of £6,235,000 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The goodwill arising on the acquisition is again largely attributable to the incremental sales synergies anticipated to be associated with being part of the Group and the ability to sell and cross sell with a larger combined sales force.

As part of the acquisition, the Group agreed to pay additional consideration against surplus working capital above an agreed threshold that was retained in the business at completion. Following a completion accounts verification process completed in February 2011, an amount of up to £1,368,000 was agreed to be paid to the vendors of Brady Energy in relation to this surplus working capital. In addition, transaction costs of £485,000 were paid in 2011.

From the date of acquisition to 31 December 2010, Brady Energy contributed £152,000 to revenue and negative £1,000 to profit before taxation and contributed £569,000 to the Group's net operating cashflows. In the last financial year, being the year ended 31 December 2009, Brady Energy made a profit before taxation of £188,000. If Brady Energy had been acquired as of 1 January 2010, it would have contributed £5,641,000 to revenue and minus £953,000 to profit before taxation and contributed minus £856,000 to the Group's net operating cashflows.

Transaction costs of £433,000 in related to this acquisition were expensed as exceptional transaction costs.

11. Financial Statements

Copies of the annual return and accounts will be posted to shareholders shortly and will be available from the Company's registered office at 281 Cambridge Science Park, Milton Road, Cambridge, CB4 0WE and on the Company's website www.bradyplc.com