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UPDATE - Brady confident of 2014 profitability as momentum builds

UPDATE - Brady confident of 2014 profitability as momentum builds


There is strong momentum in the business, global commodity trading specialist Brady (LON:BRY) told investors on Monday, as it posted preliminary results, which were in line with expectations.

The group, which provides software for commodities trading, had a very strong second half in the year to December 31, including signing two record contracts - one in the US, the other in Asia.

In 2014, the focus will be to deliver on major contracts already won and sealing new ones. 

The company expects that to lead to higher margin and profitability in 2014.

Total revenue for the 12 months was up 4% at £29.3mln (2012: £28.1mln), while recurring revenues grew 14% to £16.6mln - representing 57% of turnover.

The firm reduced £2.2mln of costs in the period and proposes a dividend of 1.7p a share, compared to 1.6p in 2012 - a 6% increase.

EBITDA (earnings before interest, tax, depreciation and amortisation) decreased to £3.5mln (2012: £5.6mln) due to the timing of contract wins and cost base before savings measures were implemented.

The company won 16 new contracts in the second half of the year, while, notably 50% of new licences were sold outside Europe, Middle East and Africa (EMEA).

There was 19% growth in cloud revenues, a sector, which the group sees growing further in 2014, and where it now has more than 20 customers.

Brady provides trading and risk management software to the global commodity and energy markets and clients include many of the world's largest financial institutions, trading companies, miners, refiners and producers.

Chief executive Gavin Lavelle said: "For 2014 the focus is on delivering the major contracts that we have already signed and leveraging on our recent success to win new contracts. 

"This will naturally give us strong organic growth. The group will also bring more new names on board from our pipeline which has never been healthier."

Speaking to Proactive investors, he added: "The combination of good visibility on revenues, lower cost base, gives us very good confidence for 2014 and beyond.

"But I think the most important thing is the quality of clients we are signing. These are some of the biggesdt names around the world and we can do that because we can now sell and support our software around the world."

Chairman Paul Fullagar added: "Brady operates in a large, global market. Everybody on the planet is reliant on commodities and energy and Brady continues to be well placed for profitable growth."

Broker Cenkos rates the shares a 'buy', pointing out that the shares are cheap on most metrics, while Panmure reckons it's also time to buy the stock.

Analyst Adam Lawson notes a record-breaking licence revenue backlog and the impact of cost restructuring gives Panmure a high degree of confidence in its forecasts – and makes a full year 2014 EV/EBITDA multiple of 8.3 times look "distinctly good value". 

On Monday, shares in the group eased 2.9% to 67p each.

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