Operating profit plummeted 84 per cent to just £0.5m at commodities-trading software provider Brady (BRY), with management blaming the result mostly on the timing of revenue recognition. This was no worse than expected, however, following a profit warning in September and disappointing guidance in January.
According to chief executive Gavin Lavelle, five of the 16 new contracts Brady won in 2013 were given the go-ahead in the fourth quarter, including two “record contracts”. But because the company’s revenue recognition policy does not allow it to book revenues until a raft of follow-up customer-acceptance documents has been fully signed off, around £3.2m of licence revenue had to be deferred into 2014. That compares with just £0.6m of deferred revenues the year before.
Brady also cut about £2.2m of annualised costs toward the end of 2013, mainly by reducing head count. “We wanted to take some costs out and realign the business,” Mr Lavelle said - but again this will largely take effect from 2014. To some extent, then, these headline numbers mask decent progress towards profit growth. It's also promising that half the contracts originated outside of Europe, the Middle East and Africa.
Broker Panmure Gordon expects adjusted pre-tax profits of £4.9m in 2014, giving EPS of 5.3p - up from 2.7p in 2013 but broadly flat against 2012.
BRADY (BRY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 67p | MARKET VALUE: | £ 54m | |
| TOUCH: | 66-68p | 12-MONTH HIGH: | 88p | LOW: 59p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 48 | |
| NET ASSET VALUE: | 48p* | NET CASH: | £7.2m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 8.2 | 1 | 3.8 | 1.3 |
| 2010 | 11.1 | 0.6 | 1.7 | 1.4 |
| 2011 | 19.2 | 2.1 | 3.6 | 1.5 |
| 2012 | 28.1 | 0.8 | 0.6 | 1.6 |
| 2013 | 29.4 | 0.9 | 1.4 | 1.7 |
| % change | +4 | +13 | +133 | +6 |
Ex-div:23 Apr Payment:20 May *Includes intangible assets of £37.5m, or 46p a share | ||||
