Share Name Share Symbol Market Type Share ISIN Share Description
Brady Plc LSE:BRY London Ordinary Share GB00B0188P35 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +1.00p +10.70% 10.35p 10.20p 10.50p 10.35p 9.20p 9.75p 2,936,307 16:27:19
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Software & Computer Services 23.2 -1.1 -2.5 - 9

Brady plc Preliminary Results

25/03/2019 7:01am

UK Regulatory (RNS & others)


Brady (LSE:BRY)
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1 Year : From Oct 2018 to Oct 2019

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TIDMBRY

RNS Number : 8038T

Brady plc

25 March 2019

25 March 2019

Brady plc ("Brady" or the "Group")

PRELIMINARY RESULTS

For the year ended 31 December 2018

Brady plc (BRY.L), a global provider of trading, risk management and settlement solutions to the energy and commodities sectors, is pleased to announce its unaudited preliminary results for the year ended 31 December 2018.

Financial Highlights

   --      Adjusted EBITDA* GBP2.6 million (2017: GBP0.3 million loss) 
   --      Revenues up 4% to GBP23.2 million (2017: GBP22.2 million) 
   --      Gross profit up by 15% to GBP13.9 million 
   --      Cash costs reduced by GBP1.1 million 
   --      Net cash inflow from operations GBP0.9 million (2017: GBP0.1 million outflow) 
   --      Net cash at 31 December 2018 GBP4.6 million (2017: 4.1 million) 

Operational Highlights

   --      Focus on existing customer engagement and delivery on key milestones 

-- Significant product progress: CTRM fast start, tolling module, Elhub project live, I-SEM delivered

   --      Carmen Carey appointed CEO with effect from 18 February 2019 
   --      Improved staff engagement through a series of internal initiatives 

-- Completion of Recycling business disposal, receiving net cash proceeds in year of GBP2.9 million

Financial Summary

 
                                                         Unaudited 
                                             Unaudited    restated 
                                                  2018       2017* 
                                               GBP'000     GBP'000 
                                          ------------  ---------- 
 Revenues - continuing                          23,157      22,215 
 
 EBITDA before exceptional costs (1)             2,628       (307) 
 
 Operating loss after exceptional costs 
  (2)                                          (1,102)     (6,950) 
 Operating loss before exceptional 
  costs (2)                                      (828)     (4,509) 
 
 Loss after tax and exceptional costs 
  - continuing                                 (1,808)     (6,845) 
 
 Basic loss per share (in pence)                (2.49)     (10.52) 
 Adjusted earnings/(loss) per share 
  (in pence) (3)                                  0.01      (5.67) 
 
 Cash                                            4,627       4,089 
 

*restated for changes in accounting policies (see note 12)

(1) EBITDA before exceptional costs comprises operating loss before share based payments, depreciation, amortisation and exceptional costs

(2) The majority of exceptional items incurred in 2018 relates to professional fees incurred pertaining to the appeal against the Norwegian tax assessment. In the prior year, exceptional costs primarily related to the functional transformation of the Group

(3) Adjusted earnings per share is based on earnings excluding exceptional items, acquired intangible asset amortisation charges and share based payment charges and at a consistent normalised tax rate assumed to be 15%

Outlook

We have an outstanding team led by our recently appointed CEO, an impressive portfolio of customers world-wide and our products continue to be recognised as market-leading. Our committed revenues for the year to December 2019 are approximately GBP18 million with cash on the balance sheet of GBP4.6 million at 31 December 2018. Implementation of the plan set out in the last two annual reports remains on track as we leverage the foundations we have established to deliver high quality customer relationships and growth in line with commitments made to our employees, customers and shareholders. Going into 2019, we look to the future with confidence.

Carmen Carey, CEO, said,

"I am delighted to join Brady as CEO and look forward to leading the team as we look ahead to 2019 and beyond. We have exceptional people and world-class customers, providing us with a strong foundation for high quality customer relationships, growth and innovation".

For further information please contact:

 
 Brady plc 
  Carmen Carey, CEO 
  Martin Thorneycroft, CFO              Telephone: +44 (0)1223 479479 
 
 Cenkos Securities plc                  Telephone: +44 (0)20 7397 
  Mark Connelly                         8900 
 
 
 Newgate Communications Bob Huxford     Telephone: +44 (0)20 3757 
  Ian Silvera                           6767 
 

About Brady

Brady plc (BRY.L) is the largest European-headquartered provider of trading and risk management software to the global 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, soft commodities and agriculturals.

Brady has over 30 years' expertise in the commodity markets with some 200 customers worldwide, who depend on Brady's software solutions to deliver vital business transactions across their global operations. Brady clients include many of the world's largest financial institutions, trading companies, miners, refiners and producers, 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 strategy and plan agreed by the Board at the end of 2016 has not changed. In 2017, we completed much of the work urgently needed to restructure the company and establish the foundations for execution and growth. In 2018, we continued to focus on delivery against our agreed plan, including our commitments to our employees and delivering to our base of blue-chip customers, resulting in a high-quality revenue stream with a high level of recurring earnings to our shareholders. Execution against new customer acquisition has been secondary to our focus on resourcing and delivering against existing customer commitments.

Strategic progress

In my report last year, we set out our priorities for the year ended 31 December 2018 and we delivered progress against those items as follows:

Deliver a customer centric experience to the market

The account management team had a strong year. The improved dialogue and relationships with our customers resulted in the team exceeding their targets for value added and revenue. None of this would have been possible without the engineering teams making substantial progress in the delivery of several long-term customer projects. We are engaging with customers and industry experts to validate customer and market perspectives as we prioritise our future developments and innovation roadmap.

Re-establish our technology and product leadership

We continued to extend our product capabilities. We released our new fast start version of CTRM that allows customers to start trading in a number of commodities markets using an off the shelf product. We also released an upgrade of our tolling module, supporting our CTRM product expansion. We defined a refactored version of our credit risk product and delivered key market change updates to our ETRM products. The progress we are making is being recognised by the wider market with Brady being featured on the front cover of CIO magazine and back to number one in metals trading software in ComTech Advisory's annual survey.

Create simplicity and efficiency in our organisation

We followed the restructuring of 2017 with the definition and implementation of common processes across the business. Our business enablement team has delivered new and improved back office systems, improved management reporting across a suite of KPI's, and additional leadership and job specific training.

Create a high-performance culture and company.

We completed an internal consultation process to determine our values and principles. The revised Brady values are innovation, trust and collaboration. Now, our task is to bring these values to life in everything we do. A core component of our trust value is our continued commitment to act on the results of the employee surveys. We completed two during the year, both with strong participation and positive progression. One of the actions coming out of the 2017 survey was our commitment to support the professional growth of our managers throughout the organisation. In line with this, we currently have 35 managers going through a comprehensive leadership program, called the Ripple Effect.

Financial performance

Our revenues for the year ended 31 December 2018 were GBP23.2 million and adjusted EBITDA before one-off exceptional items was GBP2.6 million. This is a significant turnaround from 2017 when we showed revenue of GBP22.2 million and an adjusted EBITDA loss of GBP0.3 million. Recurring revenues increased by 2% to GBP16 million.

Our operating loss before exceptional items was GBP0.8 million for the continuing business compared with a loss of GBP4.5 million in 2017. This year we incurred non-recurring costs of GBP0.3 million, compared to GBP2.4 million in 2017.

We start 2019 with committed recurring revenues and contracted development and services revenues of approximately GBP18 million and cash on hand of GBP4.6 million.

Summary and outlook

I would like to thank all Brady employees for their continued quality work during the year which enabled us to deliver on our commitments to our customers and our shareholders. Looking ahead to 2019, our strategic direction remains focused on:

   --      delivering a best in class customer-centric experience; 
   --      new customer acquisition; 
   --      product alignment; and 

-- increasing employee satisfaction through consistent, open engagement whilst ensuring transparency and alignment throughout the organisation.

We have an outstanding team led by our recently appointed CEO, an impressive portfolio of customers world-wide and our products continue to be recognised as market-leading. Our committed revenues are approximately GBP18 million with cash on the balance sheet of GBP4.6 million at 31 December 2018. The plan set out in the last two annual reports remains the same as we leverage the foundations we have established to deliver high quality customer relationships and growth in line with commitments made to our employees, customers and shareholders.

In the period since September 2016 when I became Executive Chairman at Brady, we have achieved a huge amount of change. The business has evolved positively in terms of product value proposition, customer satisfaction and employee engagement. The people within Brady made these changes and our progress possible. As I step back from being Executive Chairman to Non-Executive Chairman and Carmen becomes CEO, the Board and I can look to the future of the Brady with confidence.

Ian Jenks

Executive Chairman

Operating review

Our customers and market

The focus in 2018 was reconnecting with our customers. Teams across Brady played a significant role in ensuring we delivered key customer projects during the year. The Account Management team secured multiple licence renewals and project upgrades, and we increased our presence in the market through thought leadership and market engagement.

We launched our new branding, which has been well received by customers, our team and the market. We were featured in the CIO magazine series as leaders in the Top 10 ETRM solutions providers (in July 2018) and again in November 2018 featured as leaders in the Top 10 ERM publication. In addition, Brady were once again recognized as the leaders in metals by ComTech Advisory in their biennial vendor perception report.

Our products

Throughout 2018, we executed the stated product strategy for the commodities and energy markets.

In the commodities product portfolio, we implemented concentrates functionality including a new end-to-end tolling process. In terms of features enhancements, we added automatic creation of inter-company transactions, processes for single content concentrates, more granularity in the content of concentrates (multiple moistures) and pricing functionality.

Other enhancements delivered focused on the contract management components and functionality to support the introduction of the new LME ferrous contracts.

For the energy markets, we launched the Elhub project which provides support for over 3 million energy meters in the Norwegian power market, added the regulation module for electronic activation of RK and delivered I-SEM for the Irish energy market.

In terms of market regulation, we implemented functionality to support GDPR, support of the German/Austrian market split and enhanced our connectors and adaptors to various exchanges including NASDAQ for German futures, ICE FIX adapter, EEX pricing structure changes, a Danish adaptor for the power market and changes to the French power market formats. New instruments have been added including green certificates, structured deal and OMIP gas futures. Finally, we added functionality for spot bidding that automates the submission into EPEX power auctions.

Looking to the future, we have initiated the design phase of the new limits management module. This component will be designed for deployment across Brady's product portfolio across commodities and energy products.

Our people

The focus for 2018 was to build strong, united foundations for our culture and people approach, ensuring consistency and effective leadership in alignment with our values of trust, innovation and collaboration.

A key deliverable in our people agenda was our Employee Handbook celebrating Brady's rich heritage, introducing new team members to the business, establishing common ground for long-serving employees and ensuring we all understand who we are as a business and how we get things done.

We implemented a self-service HR system providing all team members with a common platform to collaborate regarding performance and professional growth.

We invested in our commitment to transparent and capable leadership through the launch of a bespoke values-led professional growth program for our people leaders across the business with the objective to deliver a superlative leadership experience to our teams and employees.

We are excited and optimistic to see the Brady culture evolve in 2019. We will continue to build on the high-quality contributions of all team members in 2018 and focus on their professional growth as well as initiatives that promote our values such as employee nominated recognition for employees delivering our values in exceptional ways through our Sally Marshall Awards in honour of late long-term team member.

Ian Jenks

Executive Chairman

Financial review

Group trading performance

Revenue mix

The revenue composition is summarised in the tables below:

 
                                     2018                                 2017 
                              GBP million          % of total      GBP million     % of total 
==========================  =============  ==================  ===============  ============= 
 Recurring revenues                  16.0                 69%             15.7            71% 
 Services and development 
  revenues                            3.8                 16%              4.2            19% 
 Licence revenues                     3.4                 15%              2.3            10% 
==========================  =============  ==================  ===============  ============= 
 Total revenues                      23.2                100%             22.2           100% 
==========================  =============  ==================  ===============  ============= 
 

2018's revenue performance was driven by a focus on servicing our existing client base and achieving revenue recognition milestones on several long-term implementations. Revenue within the businesses (Energy and Commodities products) increased in total to GBP23.2 million, an increase of 4%. Recurring revenues comprised 69% (2017: 71%) of our total revenues. This slight decrease in overall percentage was as a result of the increase in licence revenue in the year on customer implementations as revenue recognition milestones were achieved. Net customer churn, being the annual revenue lost less annual revenue gained, was GBP0.2 million (2017: GBP(0.4) million). Services and development revenues at GBP3.8 million, were down GBP0.4 million on 2017, reflecting the lower level of new business in the year.

Gross margin

The overall gross margin before exceptional items for the continuing business increased to 60% (2017: 56%) as a result of increased efficiencies in delivering customer contractual obligations and an increase in licence revenues as a result of renewals and the achievement of revenue recognition milestones on several customer implementations.

Profitability

Adjusted EBITDA (earnings before interest, tax, share option costs, depreciation, amortisation) before exceptional items increased to GBP2.6 million (2017: loss of GBP0.3 million). The improvement in adjusted EBITDA is driven by an increase in revenue of GBP0.9 million, an improvement in efficiency of GBP1.1 million and a higher level of capitalised development of GBP0.9 million as we continue to invest in our products. The improvement in efficiencies were as a result of the re-organisation in 2017.

Operating loss before exceptional items and tax decreased to a loss of GBP0.8 million (2017: GBP4.5 million loss). Loss after exceptional items and tax decreased to GBP1.8 million (2017: GBP6.8 million loss) for the continuing business.

Research and development expenditure

Total research and development spend for the continuing business amounted to GBP7.0 million (2017: GBP7.5 million). Of this, GBP4.1 million was expensed (2017: GBP5.4 million) and GBP2.9 million (2017: GBP2.1 million) was capitalised. This was a year of substantially increased investment in Strategic Software Development (SSD). During the year notable developments were made to the concentrates product and a new tolling module in our commodities trading and risk platform. Significant new functionality was also added to our energy trading and risk management platform.

Capitalised development, which is referred to internally within Brady as SSD, represents large strategic developments of significant new modules or functionality. These projects are selected and approved by the Board as part of the business planning and budget process. The largest single capitalised project in 2018 was GBP0.5 million (2017: GBP0.5 million) in respect of the tolling module for the Fintrade product. This allows a customer to process tolling contracts for raw materials and expands our product offering to the commodity trading market. SSD for 2019 is expected to be approximately GBP3 million.

Foreign exchange rates

Foreign exchange rates used to translate the balance sheets of our subsidiaries at 31 December have strengthened against Sterling between 2017 and 2018. However, the average exchange rates used to translate the income statements of our subsidiaries have weakened against sterling. Compared to the 2017 average rates the 2018 average rates for the US dollar, Norwegian Krone and Swiss franc all weakened against sterling by 4%, 2% and 3% respectively. The impact of this for the continuing business was to decrease both revenue and costs by GBP0.3 million respectively.

Exceptional items and disposal of the Recycling business

The exceptional items comprise:

-- GBP0.2 million of professional fees pertaining to the appeal against the Norwegian tax assessment and GBP0.1 million of costs in respect of one-off recruitment for a new chief executive and legal costs pertaining to an employee dispute.

Disposal of the Recycling business

The Recycling business was disposed of on 25 January 2018 and has therefore been accounted for as a disposal group. Its financial performance for the year ended 31 December 2018 has been brought into the consolidated income statement as a single line. The income statement in 2017 includes an adjustment to write down the net assets to its disposal carrying value. The analysis of performance for 2018 and 2017 is shown below:

 
                                                      2018       2017 
                                                   GBP'000    GBP'000 
-------------------------------------------     ----------  --------- 
 Revenue                                               273      4,220 
 Cost of revenues                                    (105)    (1,960) 
----------------------------------------------  ----------  --------- 
 Gross profit                                          168      2,260 
 Operating expenses                                  (132)    (2,198) 
----------------------------------------------  ----------  --------- 
 Operating profit before adjustments 
  to write down carrying value of 
  net assets                                            36         62 
----------------------------------------------  ----------  --------- 
 Analysed as: 
 Gross profit                                          168      2,260 
 Operating expenses                                  (115)    (1,877) 
----------------------------------------------  ----------  --------- 
 Adjusted EBITDA before adjustments 
  to write down carrying value of 
  net assets                                            53        383 
 Depreciation                                          (3)       (48) 
 Amortisation of acquired intangible 
  assets                                               (5)       (84) 
 Amortisation of other intangible 
  assets                                               (9)      (189) 
----------------------------------------------  ----------  --------- 
 Operating profit before adjustments 
  to write down carrying value of 
  net assets                                            36         62 
----------------------------------------------  ----------  --------- 
 Adjustments to write down net assets 
  to carrying value at disposal                          -    (1,906) 
----------------------------------------------  ----------  --------- 
 Operating profit/(loss) after adjustments 
  to write down carrying value of 
  net assets                                            36    (1,844) 
 Tax expense                                             -      (190) 
 Adjustment to deferred tax                              -        112 
 Profit/(loss) from discontinued 
  operations                                            36    (1,922) 
----------------------------------------------  ----------  --------- 
 

The loss on disposal of the Recycling business was GBP0.3 million. Cash received on 25 January 2018 amounted to GBP3.7 million with the balance of GBP1.0 million to be paid in July 2019.

Income tax

The overall tax charge for the year was GBP0.7 million (2017: GBP0.1 million credit). The charge in 2018 was higher due to the improvement in the Group's overall profitability. The ongoing transfer pricing tax issue in Norway which relates to an alleged transfer of intellectual property from Norway to the UK in 2011 and 2012 following the acquisitions of Viz Risk Management AS and Navita AS, for which the Group has provided GBP2.1 million as at 31 December 2018, has seen some further developments. The tax authorities have issued a decision which the Group does not agree with, and following professional advice has appealed this decision since the year end.

Subsequent to the year end, the Group has received (net) tax invoices amounting to GBP2.6 million for the period 2011 to 2017, for which the Group has provided GBP1.6 million. The maximum exposure is an additional GBP1.0 million on top of the provision made of GBP2.1 million. The Group has also agreed with the Norwegian tax authorities a deferred payment plan. If the appeal is upheld then any tax paid in excess of the determined amount will be refunded. Having regard to the professional advice received, the GBP2.1 million provision made remains management's best estimate of the likely outcome.

Earnings and dividends

After including the exceptional charges, the loss after tax on continuing operations decreased to a loss of GBP1.8 million (2017: GBP6.8 million loss).

The weighted average number of shares in issue increased to 83.4 million (2017: 83.3 million). Basic and diluted loss per share was 2.49 pence per share (2017: loss per share of 10.52 pence). Adjusted earnings per share, as calculated by market analysts, adjusted to exclude share-based payments, amortisation of acquired intangible assets, exceptional items and, assuming a consistent normalised tax rate of 15%, was 0.01 pence profit per share (2017: 5.67 pence loss per share).

The Board does not propose a dividend for the year.

Share issues

No share options (2017: 285,000) held under the Company's share option schemes were exercised in 2018. Proceeds from the exercise of share options were therefore GBPnil (2017: GBP190,000).

Treasury shares

The total number of ordinary shares held in treasury during the year remained at 4,306 (2017: 4,306).

Consolidated Statement of Financial Position

The Group continues to retain a strong balance sheet with significant cash reserves.

Non-current assets

Goodwill increased to GBP15.8 million from GBP15.7 million due to movement foreign exchange.

Acquired software decreased to GBP2.3 million from GBP3.2 million and acquired customer relationships decreased to GBP1.0 million from GBP1.3 million as a result of amortisation during the year.

The Group capitalised GBP2.9 million (2017: GBP2.1 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. The book value of capitalised development costs increased to GBP6.8 million (2017: GBP5.5 million) reflecting the increased investment in new product functionality.

Current assets

Other current assets, which mainly comprises prepayments and other receivables, decreased from GBP1.5 million in 2017 to GBP1.1 million in 2018. Included within GBP0.4 million (2017: GBP0.5 million) of contract assets are amounts recoverable on contracts and contract fulfilment cost. Amounts recoverable on contracts arises principally on consulting and professional services revenue, which is typically invoiced in the month following provision of the service. Trade and other receivables increased to GBP4.2 million (2017: GBP2.8 million), Included within trade receivables is deferred consideration of GBP0.9 million due for the sale of the Group's Recycling business on 25 January 2018.

Current liabilities

Trade and other payables decreased to GBP5.3 million (2017: GBP5.4 million). Contract liabilities, which comprises deferred income, decreased to GBP6.4 million (2017: GBP7.8 million). Deferred income arises principally as a consequence of payments received in advance of revenue recognition.

Cash and cash flow

Operating cash generation was GBP0.9 million (2017: GBP(0.1) million).

The Group had investment outflows of GBP0.4 million (2017: GBP2.8 million), as spending on intangible assets increased to GBP3.0 million (2017: GBP2.5 million) in 2018, offset by net proceeds of GBP2.9 million from the sale of the Recycling business.

Cash in hand at 31 December 2018 was GBP4.6 million (2017: GBP4.4 million).

At 31 December 2018, the Group had an unutilised bank overdraft facility of GBP0.5 million. In March 2019, this was increased to GBP1.0 million to cover short-term working capital requirements. The facility reduces to GBP0.5 million on 1 August 2019 and then increases back to GBP1.0 million from 16 October 2019 until 15 January 2020 and decreases to GBP0.5 million from 16 January 2020, in line with the Group's seasonal working capital cycle.

Martin Thorneycroft

Chief Financial Officer

Consolidated income statement

For the year ended 31 December 2018

 
                                     Unaudited                                  Restated* 
                                        Before      Unaudited                      Before      Restated* 
                                   exceptional    Exceptional                 exceptional    Exceptional 
                                         items          items    Unaudited          items          items     Restated* 
                                          2018           2018         2018           2017           2017          2017 
                          Notes        GBP'000        GBP'000      GBP'000        GBP'000        GBP'000       GBP'000 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Revenue from 
  contracts 
  with customers              4         23,157              -       23,157         22,215              -        22,215 
 Cost of revenues                      (9,250)              -      (9,250)        (9,852)          (267)      (10,119) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Gross profit                           13,907              -       13,907         12,363          (267)        12,096 
 Operating expenses         5.1       (14,480)          (274)     (14,754)       (16,738)        (1,634)      (18,372) 
 Net impairment 
  losses 
  on financial and 
  contract 
  assets                                 (255)              -        (255)          (134)          (540)         (674) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Operating loss                          (828)          (274)      (1,102)        (4,509)        (2,441)       (6,950) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Analysed as: 
 Gross profit                           13,907              -       13,907         12,363          (267)        12,096 
 Other operating 
  expenses                            (11,279)          (274)     (11,553)       (12,670)        (2,174)      (14,844) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Adjusted EBITDA                         2,628          (274)        2,354          (307)        (2,441)       (2,748) 
 Share based payment 
  credit/(charge)                          137              -          137            (9)              -           (9) 
 Depreciation               5.1          (367)              -        (367)          (298)              -         (298) 
 Amortisation of 
  acquired 
  intangible assets         5.1        (1,283)              -      (1,283)        (1,559)              -       (1,559) 
 Amortisation of 
  other 
  intangible assets         5.1        (1,943)              -      (1,943)        (2,336)              -       (2,336) 
 Operating loss                          (828)          (274)      (1,102)        (4,509)        (2,441)       (6,950) 
                       ========  =============  =============  ===========  =============  ============= 
 Net finance expense                      (42)              -         (42)           (22)              -          (22) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Loss before tax                         (870)          (274)      (1,144)        (4,531)        (2,441)       (6,972) 
 Income tax 
  (expense)/ 
  credit                      6          (664)              -        (664)            127              -           127 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Loss for the year 
  from 
  continuing 
  operations                           (1,534)          (274)      (1,808)        (4,404)        (2,441)       (6,845) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Loss from 
  discontinued 
  operations                             (271)              -        (271)        (1,922)              -       (1,922) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 Loss for the year                     (1,805)          (274)      (2,079)        (6,326)        (2,441)       (8,767) 
---------------------  --------  -------------  -------------  -----------  -------------  -------------  ------------ 
 
 
 Loss per share attributable to the equity shareholders 
  of the Parent Company (pence) 
 Basic                      7.1                                    (2.49p)                                    (10.52p) 
 Diluted                    7.1                                    (2.49p)                                    (10.52p) 
=====================  ========  =============  =============  ===========  =============  =============  ============ 
 

* See note 12 for details regarding the restatements for changes in accounting policies.

The accompanying notes are an integral part of this preliminary information.

Consolidated statement of comprehensive income

For the year ended 31 December 2018

 
                                                    Unaudited   Restated* 
                                                         2018        2017 
                                            Notes     GBP'000     GBP'000 
---------------------------------------    ------  ----------  ---------- 
 Loss for the year                                    (2,079)     (8,767) 
 Other comprehensive income/(loss): 
 Items that may be reclassified 
  subsequently to profit and loss 
 Exchange differences on retranslation 
  of foreign operations                        11         272     (1,419) 
 Exchange differences relating 
  to discontinued operations                   11        (27)        (57) 
 Items that will not be reclassified 
  subsequently to profit and loss 
 Remeasurements of post-employment 
  benefit obligations                                     704         261 
=========================================  ======  ==========  ========== 
 Other comprehensive income/(loss) 
  for the year                                            949     (1,215) 
-----------------------------------------  ------  ----------  ---------- 
 Total comprehensive loss for the 
  year                                                (1,130)     (9,982) 
-----------------------------------------  ------  ----------  ---------- 
 

* See note 12 for details regarding the restatements for changes in accounting policies.

The accompanying notes are an integral part of this preliminary information.

Consolidated statement of changes in equity

For the year ended 31 December 2018

 
                                              Share 
                                            capital      Other       Other    Retained 
                                          & premium     equity    reserves    earnings      Total 
                                            GBP'000    GBP'000     GBP'000     GBP'000    GBP'000 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 Balance at 1 January 2017, 
  as previously reported                     37,930     (3)        (1,888)     (2,703)     33,336 
 Change in accounting policy 
  (See note 12)                                   -          -           -     (1,350)    (1,350) 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 Restated total equity at 1 
  January 2017                               37,930        (3)     (1,888)     (4,053)     31,986 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 Loss for the year (restated*)                    -          -           -     (8,767)    (8,767) 
 Other comprehensive loss                         -          -     (1,476)         261   (1,215) 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 Total comprehensive loss for 
  the year                                        -          -     (1,476)     (8,506)    (9,982) 
 Credit for equity-settled 
  share-based payments                            -          -          11           -         11 
 Transfer for exercised & forfeited 
  share options                                   -          -       (361)         361          - 
 Issue of new share capital                     190          -           -           -        190 
======================================  ===========  =========  ==========  ==========  ========= 
 Transactions with owners                       190          -       (350)         361        201 
======================================  ===========  =========  ==========  ==========  ========= 
 Balance at 31 December 2017                 38,120        (3)     (3,714)    (12,198)     22,205 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 
 Balance at 1 January 2018, 
  as previously reported                     38,120        (3)     (3,714)    (10,328)     24,075 
 Change in accounting policy 
  (See note 12)                                   -          -           -     (1,870)    (1,870) 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 Restated total equity as at 
  1 January 2018                             38,120        (3)     (3,714)    (12,198)     22,205 
 Loss for the year                                -          -           -     (2,079)    (2,079) 
 Other comprehensive income                  -               -         245         704        949 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 Total comprehensive loss for 
  the year                                   -               -         245     (1,375)    (1,130) 
 Release of credit for equity-settled 
  share-based payments                            -          -       (137)           -      (137) 
 Transfer for exercised & forfeited 
  share options                                   -          -        (55)          55          - 
 Transactions with owners                         -          -       (192)          55      (137) 
======================================  ===========  =========  ==========  ==========  ========= 
 Balance at 31 December 2018                 38,120        (3)     (3,661)    (13,518)     20,938 
--------------------------------------  -----------  ---------  ----------  ----------  --------- 
 

* See note 12 for details regarding the restatements for changes in accounting policies.

A reconciliation of the components of Other reserves is given in note 11.

The accompanying notes are an integral part of this preliminary information.

Consolidated statement of financial position

As at 31 December 2018

 
                                                                           Restated* 
                                                Unaudited     Restated*    1 January 
                                                     2018          2017         2017 
                                    Notes         GBP'000       GBP'000      GBP'000 
---------------------------------  ------      ----------  ------------  ----------- 
 Assets 
 Non-current assets 
 Intangible assets                                 26,449        26,091       35,999 
 Property, plant and equipment                        746           487          978 
 Deferred income tax asset                             90           423          456 
---------------------------------  ------      ----------  ------------  ----------- 
 Total non-current assets                          27,285        27,001       37,433 
---------------------------------  ------      ----------  ------------  ----------- 
 Current assets 
 Other current assets                               1,073         1,461        1,822 
 Contract assets                      4.4             360           516        1,135 
 Trade and other receivables                        4,167         2,810        4,340 
 Cash and cash equivalents                          4,627         4,089        7,343 
 Assets classified as held for                          -         5,848            - 
  sale 
---------------------------------  ------      ----------  ------------  ----------- 
 Total current assets                              10,227        14,724       14,640 
---------------------------------  ------      ----------  ------------  ----------- 
 Total assets                                      37,512        41,725       52,073 
---------------------------------  ------      ----------  ------------  ----------- 
 Liabilities 
 Current liabilities 
 Trade and other payables                         (5,295)       (5,355)      (5,800) 
 Contract liabilities                 4.4         (6,360)       (7,838)      (8,617) 
 Borrowings                             8           (233)             -            - 
 Provisions                                         (364)         (350)            - 
 Liabilities classified as held                         -     (1,384)              - 
  for sale 
 Total current liabilities                       (12,252)      (14,927)     (14,417) 
---------------------------------  ------      ----------  ------------  ----------- 
 Non-current liabilities 
 Borrowings                             8           (296)             -            - 
 Deferred income tax liabilities                  (1,975)       (2,099)      (2,938) 
 Pension obligations                              (2,051)       (2,494)      (2,732) 
---------------------------------  ------      ----------  ------------  ----------- 
 Total non-current liabilities                    (4,322)       (4,593)      (5,670) 
---------------------------------  ------      ----------  ------------  ----------- 
 Total liabilities                               (16,574)    (19,520)       (20,087) 
                                                        )        ) 
---------------------------------  ------      ----------  ------------  ----------- 
 Net assets                                        20,938        22,205       31,986 
---------------------------------  ------      ----------  ------------  ----------- 
 
 
 
 Equity attributable to owners of 
  the Parent Company 
 Share capital and share premium         9     38,120     38,120    37,930 
 Treasury shares                        10        (3)        (3)       (3) 
 Other reserves                         11    (3,661)    (3,714)   (1,888) 
 Retained earnings                           (13,518)   (12,198)   (4,053) 
-------------------------------------  ---  ---------  ---------  -------- 
 Equity attributable to shareholders 
  of the Parent Company                        20,938     22,205    31,986 
-------------------------------------  ---  ---------  ---------  -------- 
 

* See note 12 for details regarding the restatements for changes in accounting policies.

The accompanying notes are an integral part of this preliminary information.

Consolidated statement of changes in cash flows

For the year ended 31 December 2018

 
                                                     Unaudited   Restated* 
                                                          2018        2017 
                                             Notes     GBP'000     GBP'000 
------------------------------------------  ------  ----------  ---------- 
 Loss before tax continuing operations                 (1,144)     (6,972) 
 Loss before tax discontinued operations                 (271)     (1,844) 
 Adjustments for: 
 Write down of carrying value of 
  net assets for discontinued operations                     -       1,906 
 Depreciation                                              367         346 
 Amortisation of acquired intangible 
  assets                                                 1,283       1,643 
 Amortisation of other intangible 
  assets                                                 1,943       2,525 
 Loss from disposal of property, 
  plant and equipment                          5.1          42           5 
 Share-based payment (credit)/charge                     (137)          11 
 Non-cash movement of defined benefit 
  pension charge                                            82         134 
 Net finance expense                                        42          22 
 Loss on disposal of discontinued                          307           - 
  operation 
 Operating cash flows before working 
  capital movement                                       2,514     (2,224) 
 Change in receivables                                     200         817 
 Change in payables                                      (404)         901 
 Change in provisions                                       14         350 
 Change in contract assets                                 156         619 
 Change in contract liabilities                        (1,478)       (779) 
------------------------------------------  ------  ----------  ---------- 
 Cash generated from/(used in) operations 
  before tax                                             1,002       (316) 
------------------------------------------  ------  ----------  ---------- 
 Net income taxes (paid)/received                         (73)         247 
 Net interest paid                                         (7)           - 
------------------------------------------  ------  ----------  ---------- 
 Net cash flows from/(used in) operating 
  activities                                               922        (69) 
------------------------------------------  ------  ----------  ---------- 
 Cash flows from investing activities 
 Net proceeds from sale of subsidiaries                  2,936           - 
 Purchases of property, plant and 
  equipment                                              (317)       (314) 
 Expenditure on intangible assets                      (2,986)     (2,492) 
 Proceeds from disposal of property,                        14           - 
  plant and equipment 
------------------------------------------  ------  ----------  ---------- 
 Net cash flows used in investing 
  activities                                             (353)     (2,806) 
------------------------------------------  ------  ----------  ---------- 
 Cash flows from financing activities 
 Proceeds from the issue of ordinary 
  share capital                                  9           -         190 
 Interest paid on borrowings                              (64)        (22) 
 Principal elements of finance lease                     (180)           - 
  payments 
------------------------------------------  ------  ----------  ---------- 
 Net cash flows (used in)/generated 
  by financing activities                                (244)         168 
------------------------------------------  ------  ----------  ---------- 
 Net increase/(decrease) in cash and 
  cash equivalents                                         325     (2,707) 
 Cash and cash equivalents at start 
  of year                                                4,354       7,343 
 Exchange differences on cash and 
  cash equivalents                                        (52)       (282) 
------------------------------------------  ------  ----------  ---------- 
 Cash and cash equivalents at end 
  of year                                                4,627       4,354 
------------------------------------------  ------  ----------  ---------- 
 

* See note 12 for details regarding the restatements for changes in accounting policies.

The accompanying notes are an integral part of this preliminary information.

   1    General information 

Brady plc ("the Company") and its subsidiaries (together, "the Group") provides trading and risk management software to the global commodity and energy markets.

The Company is a public limited company which is listed on AIM part of the London Stock Exchange (BRY) and is incorporated and domiciled in England and Wales. The address of its registered office, which is also its principal place of business, is 100 Lower Thames Street, London, EC3R 6DL.

The Group has its main operations in the UK, Switzerland, Norway, USA, Singapore and India and sells mainly in Europe, North America and Asia Pacific. The Group legally consists of 19 companies headed by Brady plc (UK) as at 31 December 2018.

The preliminary financial information has been approved for issue by the Board of Directors on 22 March 2019.

   2    Significant accounting policies 

Alternative performance measures

The Group uses alternative (non-Generally Accepted Accounting Practice ('non-GAAP')) performance measures of 'Adjusted EBITDA' and 'Adjusted earnings per share (EPS)'. These measures are not defined within the International Financial Reporting Standards ('IFRS') and, therefore, these measures as defined by the Group may not be comparable with similarly titled measures used by other companies. The Directors do not regard these measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with IFRS. The Directors present these measures in the financial statements in order to assist investors in their assessment of the trading performance of the Group. Adjusted EBITDA and Adjusted EPS exclude specific items that are considered to hinder comparison of the trading performance of the Group's businesses either year on year and are used for internal performance analysis and in relation to certain employee incentive arrangements. The measures are explained as follows:

(a) Adjusted EBITDA: The Group calculates this measure by making adjustments to exclude certain items from operating profit or loss namely: amortisation or impairment of acquired and other intangible assets, share-based payments, depreciation and exceptional items such as integration or reorganisation costs that meet the criteria to be adjusted.

The criteria for the adjusted items in the calculation of adjusted EBITDA is operating income or expenses that are material and either arise from an irregular and significant event or the income/cost is recognised in a pattern that is unrelated to the resulting operational performance. The calculation of this measure is shown in the Consolidated income statement.

(b) Adjusted earnings per share ('EPS'): The Group calculates this measure by dividing adjusted loss after tax by the weighted average number of shares in issue and the calculation of this measure is disclosed in note 7.2. The tax rate applied to calculate the tax charge in this measure is a normalised tax rate for the year which is 15% (2017: 15%) which results in a comparable tax charge year on year. The Group also calculates this measure by excluding amortisation on acquired intangible assets, share-based payment (credit)/charge, exceptional items such as integration or reorganisation costs, and the actual tax charge from the measurement of loss for the year.

The adjusted EPS information is considered to provide a fairer representation of the Group's trading performance.

Segment reporting

IFRS 8 requires a "management approach" under which information in the financial statements is presented on the same basis as that used for internal management reporting purposes. Segment results are reported according to the internal management reporting structure at the reporting date.

Following the functional transformation of the business, effective 1 January 2017, the Group is now organised for reporting purposes into a single, global business unit.

The internal management accounting information has been prepared on an IFRS basis but has a non-GAAP "Adjusted EBITDA" as a profit measure for the overall Group and this is reported on the face of the Consolidated income statement.

Revenue recognition

Revenue comprises the value of sales (excluding trade discounts and VAT) of goods and services in the normal course of business. The Group has multiple revenue streams and the policy for each is detailed below. The Group acts as the principle in all sales.

To determine whether to recognise revenue, the Group follows a 5-step process:

   1.     Identifying the contract with a customer 
   2.     Identifying the performance obligations 
   3.     Determining the transaction price 
   4.     Allocating the transaction price to the performance obligations 
   5.     Recognising revenue when/as the performance obligation(s) are satisfied. 

Contracts typically contain a number of revenue streams and, depending on the contractual terms, may not be distinct and therefore considered to be one performance obligation. The total contract transaction price is allocated to the various performance obligations based on their relative standalone selling prices.

Software and associated installation services

Revenue from rental (subscription) of software is recognised evenly over the period from the date the customer can benefit from using the software, typically the point when the customer has the ability to 'go-live', until the contract end date. Software rental contracts are under a 'right to access' model and the Group retains control of the intellectual property throughout the contract term.

Revenue from sale of software term licences is recognised at a point in time when the customer has control of the asset, which is typically at the point when the customer has the ability to 'go-live'. Software term licence contracts are under a 'right to use' model and the customer is entitled to the intellectual property as it stands at a point in time.

Due to the nature of the Group's software offerings, there is typically a period of installation before the customer can benefit from the asset. Revenue from installation services is recognised on completion of related performance obligations, typically when the customer has the ability to 'go-live'.

Consulting and professional service fee revenues

Revenue from consulting and professional service fees is recognised over time as the work is performed as this reflects when control is considered to be transferred. The customer receives and consumes the benefit of the service as it is performed, and the Group has an enforceable right to payment for work completed to date on a time and materials basis.

The Group performs some bespoke development work on its software products at client request. Revenue from bespoke development work is recognised at a point in time when contractual commitments have been delivered, which is typically when the customer has the ability to 'go-live'.

Support, maintenance and hosting

Revenue from support, maintenance and hosting is recognised evenly over period to which it relates in line with contractual terms. As the amount of work required under these contract elements does not vary significantly from month-to-month, the straight-line method provides a faithful depiction of the transfer of goods or services.

Contract assets and liabilities

The Group recognises the following contract assets in the Consolidated statement of financial position:

-- Amounts recoverable on contracts, if the Group satisfies a performance obligation before it invoices the customer. The asset is derecognised at the point in time when the Group invoices the customer.

   --      Contract fulfilment costs, if the following criteria are met: 

o The costs directly relate to a contractual performance obligation;

o The costs relate to satisfaction of a performance obligation in the future; and

o The costs are expected to be recovered.

The asset is amortised over the period in which the revenue from the related performance obligation is recognised.

At each reporting date, contract assets are assessed for impairment by comparing the carrying amount of the asset to the remaining consideration that the Group expects to receive under the contract, less future costs to complete.

No contract assets are recognised for incremental costs of obtaining customer contracts as assessment of whether such costs are recoverable is not probable.

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as 'contract liabilities' in the consolidated statement of financial position.

Financing elements

The Group does not expect to have any contracts where the period between revenue recognition and payment by the customer exceeds one year. Consequently, the Group applies the practical expedient in IFRS 15.63 and does not adjust the transaction price for the time value of money.

Contract modifications

From time to time, there is a change in scope of the original contract between the Group and a customer. All contract modifications are supported by contractual change orders. Change orders are accounted for as a separate contract when:

   --      The change order includes distinct goods or services; and 
   --      The price changes relative to the standalone prices of the goods or services. 

If both criteria are not met, the change order is not accounted for as a separate contract and the Group accounts for the change order as if it were part of the performance obligations in the existing contract. The effect of the change order on contract value and progress to date is assessed at the contract modification date and a cumulative catch-up adjustment to revenue is recognised at this point.

Exceptional items

Material, non-recurring and incremental costs and income are identified and reported as exceptional items separately from the underlying operating expenses and income. They comprise material amounts outside of the course of normal trading activities which are one off/non-recurring.

Discontinued operations

A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Consolidated income statement and are shown net of tax.

Held for sale assets and liabilities

Where an asset or group of assets (a disposal group) is available for immediate sale and the sale is highly probable and expected to occur within one year, the disposal group is deemed held for sale. At this point the gross assets and gross liabilities of the disposal group are shown separately as held for sale. The value of the disposal group is measured at the lower of the carrying amount and fair value less costs of disposal.

   3    Segmental information 

3.1 Results by operating segment

IFRS 8 requires a "management approach" under which information in the financial statements is presented on the same basis as that used for internal management reporting purposes.

Following the functional transformation of the business, effective 1 January 2017, the Group is now organised for reporting purposes into a single, global business unit. This is the basis of the Group's external market offering and internal organisational and management structure. The Chief Operating Decision Maker (CODM), which is the Operating Board comprising Executive Directors and certain senior management, receives financial information reported as a single business unit and the Group has determined that it has only one reportable segment as defined by IFRS 8.

The internal management accounting information has been prepared on an IFRS basis but has a non-GAAP "Adjusted EBITDA" as a profit measure for the overall Group and this is reported on the face of the income statement.

   4   Revenue from contracts with customers 

4.1 Disaggregation of revenue from contracts with customers

The Operating Board consider that the business has three revenue streams with different characteristics, which are generated from the same assets and cost base. The Group derives revenue form the transfer of goods and services over time and at a point in time in the following major product lines and geographical regions:

 
                                        Recurring 
                                         support,          Services 
                                      maintenance         including       Software 
 Year ended 31 December               and rentals       development       licences             Total 
  2018                                    GBP'000           GBP'000        GBP'000           GBP'000 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 UK                                         2,673               658            433             3,764 
 Switzerland                                1,585                65          1,404             3,054 
 Norway                                     3,766               622            113             4,501 
 Other EMEA                                 4,926             1,966            981             7,873 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 EMEA                                      12,950             3,311          2,931            19,192 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 USA                                        1,766                15            176             1,957 
 Other Americas                               638               130              -               768 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 Americas                                   2,404               145            176             2,725 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 Asia Pacific                                 677               312            251             1,240 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 
 Total revenues                            16,031             3,768          3,358            23,157 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 
 Timing of revenue recognition 
 At a point in time                             -             1,063          3,358             4,421 
 Over time                                 16,031             2,705              -            18,736 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 
 
                                        Recurring 
                                         support,          Services 
                                      maintenance         including       Software          Restated 
 Year ended 31 December               and rentals       development       licences             Total 
  2017                                    GBP'000           GBP'000        GBP'000           GBP'000 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 UK                                         2,226               546             51             2,823 
 Switzerland                                2,015               826            154             2,995 
 Norway                                     3,531               744            257             4,532 
 Other EMEA                                 4,725             1,584            483             6,792 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 EMEA                                      12,497             3,700            945            17,142 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 USA                                        1,946               226             26             2,198 
 Other Americas                               679                10              -               689 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 Americas                                   2,625               236             26             2,887 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 Asia Pacific                                 572               244          1,370             2,186 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 
 Total revenues                            15,694             4,180          2,341            22,215 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 
 Timing of revenue recognition 
 At a point in time                             -             1,011          2,341             3,352 
 Over time                                 15,694             3,169              -            18,863 
-------------------------------  ----------------  ----------------  -------------  ---------------- 
 

4.2 Geographical areas

The Group's revenue from external customers and information about its non-current assets (excluding deferred tax), disaggregated by primary geography is detailed below:

 
                             Revenue                Non-current assets 
----------------  --------------------------  -------------------------- 
                                    Restated 
                          2018          2017          2018          2017 
                       GBP'000       GBP'000       GBP'000       GBP'000 
----------------  ------------  ------------  ------------  ------------ 
 UK                      3,764         2,824         8,186         7,158 
 Switzerland             3,054         2,995         4,352         4,276 
 Norway                  4,501         4,532        14,628        15,043 
 Other EMEA              7,873         6,791             -             - 
----------------  ------------  ------------  ------------  ------------ 
 EMEA                   19,192        17,142        27,166        26,477 
----------------  ------------  ------------  ------------  ------------ 
 USA                     1,957         2,198             7            15 
 Other Americas            768           689             -             - 
----------------  ------------  ------------  ------------  ------------ 
 Americas                2,725         2,887             7            15 
----------------  ------------  ------------  ------------  ------------ 
 Asia Pacific            1,240         2,186            22            86 
----------------  ------------  ------------  ------------  ------------ 
                        23,157        22,215        27,195        26,578 
----------------  ------------  ------------  ------------  ------------ 
 

Revenues from external customers in the Group's domicile, the UK, as well as its major markets, EMEA, Americas and Asia Pacific, have been identified on the basis of the customer's geographical location. Non-current assets are allocated based on their physical location.

4.3 Information about major customers

There were no customers in 2018 or 2017 who contributed 10% or more of the Group's revenue.

4.4 Assets and liabilities related to contracts with customers

The Group has recognised the following assets and liabilities related to contracts with customers:

 
 
                                                                        1 Jan 
                                             2018         2017*         2017* 
                                          GBP'000       GBP'000       GBP'000 
----------------------------------   ------------  ------------  ------------ 
 Current contract assets relating 
  to: 
 Recurring maintenance, hosting 
  and rentals                                  11            23             - 
 Services including development               316           452           912 
 Licences                                      34            43           223 
 Loss allowance                               (1)           (2)             - 
-----------------------------------  ------------  ------------  ------------ 
 Total contract assets                        360           516         1,135 
-----------------------------------  ------------  ------------  ------------ 
 
 Current contract liabilities 
  relating to: 
 Recurring maintenance, hosting 
  and rentals                               5,268         4,822         6,717 
 Services including development               890         1,350           316 
 Licences                                     202         1,666         1,584 
 Total contract liabilities                 6,360         7,838         8,617 
-----------------------------------  ------------  ------------  ------------ 
 

* Reclassified and remeasured amounts - see note 12 for explanations.

   5   Analysis of expenses by nature 

5.1 Expenses by nature

The following items have been charged/(credited) to the income statement in arriving at loss before tax from continuing operations:

 
                                                          2018       2017 
                                              Notes    GBP'000    GBP'000 
-----------------------------------------    ------  ---------  --------- 
 Depreciation of property, plant 
  and equipment                                            367        298 
 Amortisation of acquired intangible 
  assets                                                 1,283      1,559 
 Amortisation of other intangible assets                 1,943      2,336 
 Loss on disposal of property, plant 
  and equipment                                             42          5 
 Research and development costs expensed                 4,064      5,418 
 Share-based payment (credit)/charge                     (137)          9 
 Operating lease rental charges 
  - land and buildings                                   1,222      1,310 
 Operating lease rental charges 
  - others                                                   3          7 
 Finance lease interest                                     64          - 
 Net foreign currency losses                                25        135 
 Exceptional items                              5.2        274      2,441 
-------------------------------------------  ------  ---------  --------- 
 
   5.2   Exceptional items 
 
                                                  2018       2017 
                                      Notes    GBP'000    GBP'000 
---------------------------------    ------  ---------  --------- 
 Functional transformation costs                   100      1,818 
 Contract disputes                                   -        623 
 Professional fees relating 
  to overseas tax enquiry                          174          - 
---------------------------------    ------  ---------  --------- 
 Exceptional items charged to 
  operating loss                        5.1        274      2,441 
-----------------------------------  ------  ---------  --------- 
 

Functional transformation costs

During 2018, the Group incurred functional transformation costs totalling GBP100,000 (2017: GBP1,818,000) comprising of GBP50,000 recruitment costs, and GBP50,000 legal and settlement costs, to align the organisational structure with the future strategy of the Group.

Contract dispute

During 2018, the Group made a provision of GBPnil (2017: GBP523,000) against a trade receivables balance and GBPnil (2017: GBP100,000) legal provision relating to certain client contract disputes.

Professional fees relating to overseas tax enquiry

During 2018, the Group incurred GBP174,000 (2017: GBPnil) for professional advice relating to the Norwegian tax enquiry.

   6   Income tax 

Income tax recognised in the income statement

 
                                                        Restated 
                                                 2018       2017 
                                              GBP'000    GBP'000 
---------------------------------------     ---------  --------- 
 Current tax 
 UK Corporation Tax at 19.00% (2017:                -          - 
  19.25%) on loss for the year 
 Adjustments in respect of prior 
  years                                             -         24 
 Research and development tax credits         (351)            - 
  - prior years 
----------------------------------------    ---------  --------- 
 UK Corporation tax (credit)/expense           (351)          24 
----------------------------------------    ---------  --------- 
 Overseas corporation taxes                       824        322 
 Total current tax expense                        473        346 
------------------------------------------  ---------  --------- 
 
 Deferred tax 
 Origination and reversal of temporary 
  differences - current year                      191      (473) 
 Total deferred tax expense/(credit)              191      (473) 
------------------------------------------  ---------  --------- 
 Total income tax expense/(credit)                664      (127) 
------------------------------------------  ---------  --------- 
 
 
 
 

The Group has an ongoing tax enquiry into prior years' transfer pricing methodology of an overseas subsidiary. During the year, there has been further clarification on this matter however the underlying uncertain tax provision of GBP2.1 million remains management's best estimate of the likely outcome. The conclusion of the matter is uncertain as the Group has lodged an appeal with an independent review body in Norway. The appeal is based on two arguments; the nature and timing of the transfer of IP to the UK and the valuation of said IP. The maximum exposure to the Group if this appeal is unsuccessful is a further tax charge of GBP1.0 million. A payment of GBP0.6 million has already been made towards the liability and the Group has agreed a payment plan for the remaining amounts.

   7   Earnings per share (EPS) 

7.1 Basic and diluted EPS

 
 
 
 
                    Basic and diluted earnings                Restated 
                                     per share         2018       2017 
----------------------------------------------     --------  --------- 
 Earnings 
 Earnings for the purposes of basic 
  and diluted EPS being net loss attributable 
  to equity holders of the Parent Company 
  (GBP'000)                                         (2,079)    (8,767) 
------------------------------------------------   --------  --------- 
 Number of shares 
 Weighted average number of ordinary shares 
  for the purposes of basic EPS ('000)               83,368     83,330 
 Effect of dilutive potential 
  ordinary shares: 
                                                          -          - 
   *    Share options ('000) 
----------------------------------------------     --------  --------- 
 Weighted average number of ordinary shares 
  for the purposes of diluted EPS ('000)             83,368     83,330 
                                                        330        330 
-------------------------------------------------  --------  --------- 
 Basic EPS (pence)                                  (2.49p)   (10.52p) 
-------------------------------------------------  --------  --------- 
 Diluted EPS (pence)                                (2.49p)   (10.52p) 
-------------------------------------------------  --------  --------- 
 

Basic earnings per share is calculated by dividing loss for the year attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the year. For diluted earnings per share, the weighted average number of shares is adjusted to allow for the effects of all dilutive share options outstanding at the end of the year. Options have no dilutive effect in loss-making years, and hence the diluted loss per share for the year is the same as the basic loss per share.

Basic and diluted EPS for the discontinued operation was a loss of 0.33 pence per share (2017: 2.31 pence loss per share).

   7.2   Adjusted diluted EPS 
 
 
 
                                                                      Restated 
              Adjusted diluted earnings per share   Notes      2018       2017 
-------------------------------------------------  ------  --------  --------- 
 Earnings for the purposes of diluted 
  EPS being net loss attributable to 
  equity holders of the Parent Company 
  (GBP'000)                                                 (2,079)    (8,767) 
 Adjustments: 
 Reversal of amortisation on acquired 
  intangible assets (GBP'000)                                 1,283      1,643 
 Reversal of share-based payment (credit)/charge 
  (GBP'000)                                                   (137)         11 
 Reversal of exceptional items (GBP'000)              5.2       274      2,441 
 Reversal of actual tax charge/(credit) 
  (GBP'000)                                                     664       (49) 
 Add Normalised tax at 15% (2017: 15%)                            -          - 
 Net adjustments (GBP'000)                                    2,084      4,046 
-------------------------------------------------  ------  --------  --------- 
 Adjusted earnings (GBP'000)                                      5   (4,721) 
-------------------------------------------------  ------  --------  --------- 
 Adjusted diluted EPS (pence) 
  p                                                           0.01p    (5.67p) 
-------------------------------------------------  ------  --------  --------- 
 

Adjusted diluted EPS for the discontinued operation was a loss of 0.33 pence per share (2017: 2.11 pence loss per share).

   8   Borrowings 
 
                              2018       2017 
                           GBP'000    GBP'000 
-----------------        ---------  --------- 
 Current                       233          - 
 Non-current                   296          - 
 Total borrowings            529            - 
-----------------        ---------  --------- 
 

The Group leases various computer hardware and software with a carrying amount of GBP546,000 (2017: GBPnil) under finance leases expiring within two to three years. Under the terms of the leases, the Group has the option to acquire the leased assets for a nominal sum of GBP100 on expiry of the leases.

The finance leases are secured on the assets to which they relate.

Commitments in relation to finance leases are payable as follows:

 
                                         2018       2017 
                                      GBP'000    GBP'000 
----------------------------        ---------  --------- 
 Within one year                          277          - 
 Later than one year but not              310          - 
  later than five years 
 Minimum lease payments                   587          - 
----------------------------        ---------  --------- 
 Future finance charges                  (58)          - 
----------------------------        ---------  --------- 
 Total lease liability                    529          - 
----------------------------        ---------  --------- 
 

The present value of finance lease liabilities is as follows:

 
                                         2018       2017 
                                      GBP'000    GBP'000 
----------------------------        ---------  --------- 
 Within one year                          233          - 
 Later than one year but not              296          - 
  later than five years 
 Minimum lease payments                   529      - 
----------------------------        ---------  --------- 
 
   9   Share capital and premium 
 
                                              Number 
                                         of ordinary 
                                              shares         Share         Share 
                                          of GBP0.01       capital       premium         Total 
                                                each       GBP'000       GBP'000       GBP'000 
----------------------------------  ----------------  ------------  ------------  ------------ 
 Balance at 1 January 2017                83,082,887           831        37,099        37,930 
----------------------------------  ----------------  ------------  ------------  ------------ 
 Issued under share-based payment 
  plans                                      285,000             3           187           190 
----------------------------------  ----------------  ------------  ------------  ------------ 
 Balance at 31 December 2017              83,367,887           834        37,286        38,120 
----------------------------------  ----------------  ------------  ------------  ------------ 
 Balance at 31 December 2018              83,367,887           834        37,286        38,120 
----------------------------------  ----------------  ------------  ------------  ------------ 
 

The Company has one class of ordinary shares which carry no right to fixed income. The share capital of Brady plc consists only of fully paid ordinary shares with a nominal value of GBP0.01 per share. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at shareholders' meetings of Brady plc.

During the prior year, the Company issued 285,000 shares as a result of share options exercised with a weighted average exercise price of GBP0.67 per share for total cash consideration of GBP190,000.

   10   Treasury shares 

Treasury shares comprise own shares in Brady plc purchased and retained by the Company:

 
                                           Number 
                                      of ordinary 
                                           shares      Treasury 
                                       of GBP0.01        shares 
                                             each       GBP'000 
-----------------------------    ----------------  ------------ 
 Balance at 1 January 2017                  4,306             3 
 Balance at 31 December 2017                4,306             3 
-------------------------------  ----------------  ------------ 
 Balance at 31 December 2018                4,306             3 
-------------------------------  ----------------  ------------ 
 
   11   Other reserves 

The following table shows a breakdown of the balance sheet line item 'other reserves' and the movements in these reserves during the year. A description of the nature and purpose of each reserve is provided below the table.

 
                                                       Merger   Share-based                Foreign 
                                            Merger     relief       payment    Capital    exchange       Other 
                                           reserve    reserve       reserve    reserve     reserve    reserves 
                                           GBP'000    GBP'000       GBP'000    GBP'000     GBP'000     GBP'000 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Balance at 1 January 2017                     680        530           675          4     (3,777)     (1,888) 
 Exchange differences on retranslation 
  of foreign operations                          -          -             -          -     (1,419)     (1,419) 
 Exchange differences relating 
  to discontinued operations                     -          -             -          -        (57)        (57) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Total comprehensive loss 
  for the year                                   -          -             -          -     (1,476)     (1,476) 
 Credit for equity-settled 
  share-based payments                           -          -            11          -           -          11 
 Transfer for exercised & 
  forfeited share options                        -          -         (361)          -           -       (361) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Transactions with owners                        -          -         (350)          -           -       (350) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Balance at 31 December 2017                   680        530           325          4     (5,253)     (3,714) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Exchange differences on retranslation 
  of foreign operations                          -          -             -          -         272         272 
 Exchange differences relating 
  to discontinued operations                     -          -             -          -        (27)        (27) 
 Total comprehensive income 
  for the year                                   -          -             -          -         245         245 
 Release of credit for equity-settled 
  share-based payments                           -          -         (137)          -           -       (137) 
 Transfer for exercised & 
  forfeited share options                        -          -          (55)          -           -        (55) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Transactions with owners                        -          -         (192)          -           -       (192) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 Balance at 31 December 2018                   680        530           133          4     (5,008)     (3,661) 
---------------------------------------  ---------  ---------  ------------  ---------  ----------  ---------- 
 
   12   Changes in accounting policies 

This note explains the impact of the adoption of IFRS 9 and IFRS 15 on the Group's financial statements.

12.1 Impact on the financial statements

As a result of the changes in the entity's accounting policies, prior year financial statements had to be restated. IFRS 9 was generally adopted without restating comparative information. The reclassifications and the adjustments arising from the new impairment rules are therefore not reflected in the restated balance sheet as at 31 December 2017 but are recognised in the opening balance sheet on 1 January 2018. The following tables show the adjustments recognised for each individual line item. The adjustments are explained in more detail by standard below.

Consolidated income statement

For the year ended 31 December 2017

 
                          As originally reported                     Impact of IFRS 15                       Impact of IFRS 9                             Restated 
                 ---------------------------------------  --------------------------------------  --------------------------------------  --------------------------------------- 
                        Before                                   Before                                  Before                                  Before 
                  exceptionals   Exceptionals      Total   exceptionals   Exceptionals     Total   exceptionals   Exceptionals     Total   exceptionals   Exceptionals      Total 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
                      Reported       Reported   Reported                                                                                       Restated       Restated   Restated 
                          2017           2017       2017           2017           2017      2017           2017           2017      2017           2017           2017       2017 
                       GBP'000        GBP'000    GBP'000        GBP'000        GBP'000   GBP'000        GBP'000        GBP'000   GBP'000        GBP'000        GBP'000    GBP'000 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Revenue                22,926              -     22,926          (711)              -     (711)              -              -         -         22,215              -     22,215 
 Cost of 
  revenues            (10,018)          (267)   (10,285)            166              -       166              -              -         -        (9,852)          (267)   (10,119) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Gross profit           12,908          (267)     12,641          (545)              -     (545)              -              -         -         12,363          (267)     12,096 
 Operating 
  costs               (16,872)        (2,174)   (19,046)              -              -         -            134            540       674       (16,738)        (1,634)   (18,372) 
 Net impairment 
  losses                     -              -          -              -              -         -          (134)          (540)     (674)          (134)          (540)      (674) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Operating loss        (3,964)        (2,441)    (6,405)          (545)              -     (545)              -              -         -        (4,509)        (2,441)    (6,950) 
 Net finance 
  expense                 (22)              -       (22)              -              -         -              -              -         -           (22)              -       (22) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Loss before 
  tax                  (3,986)        (2,441)    (6,427)          (545)              -     (545)              -              -         -        (4,531)        (2,441)    (6,972) 
 Income tax                102              -        102             25              -        25              -              -         -            127              -        127 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Loss for the 
  year from 
  continuing 
  operations           (3,884)        (2,441)    (6,325)          (520)              -     (520)              -              -         -        (4,404)        (2,441)    (6,845) 
 Loss from 
  discontinued 
  operations           (1,922)              -    (1,922)              -              -         -              -              -         -        (1,922)              -    (1,922) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Loss for the 
  year 
  attributable 
  to 
  shareholders 
  of Brady 
  Plc                  (5,806)        (2,441)    (8,247)          (520)              -     (520)              -              -         -        (6,326)        (2,441)    (8,767) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Other 
 comprehensive 
 income 
 Exchange 
  differences 
  on 
  translation 
  of foreign 
  operations                                     (1,476)                                       -                                       -                                  (1,476) 
 Movement in 
  actuarial 
  valuation 
  of defined 
  benefit 
  pension 
  scheme                                             261                                       -                                       -                                      261 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Total other 
  comprehensive 
  income                                         (1,215)                                       -                                       -                                  (1,215) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 Total 
  comprehensive 
  income 
  for the 
  period                                         (9,462)                                   (520)                                       -                                  (9,982) 
                 -------------  -------------  ---------  -------------  -------------  --------  -------------  -------------  --------  -------------  -------------  --------- 
 

Consolidated statement of financial position restatement under IFRS 15

The statement of financial positions as at 1 January 2017 and 31 December 2017 have been restated due to the adoption of IFRS 15 and IFRS 9.

 
                                           Impact     Impact                           Impact     Impact 
                                               of         of                               of         of 
                                             IFRS       IFRS                             IFRS       IFRS 
                              Reported         15          9   Restated   Reported         15          9   Restated 
                                 1 Jan      1 Jan      1 Jan      1 Jan     31 Dec     31 Dec     31 Dec     31 Dec 
                                    17         17         17         17         17         17         17         17 
                               GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
---------------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Non-current assets 
 Intangible assets              35,999          -          -     35,999     26,091          -          -     26,091 
 Property, plant 
  and equipment                    978          -          -        978        487          -          -        487 
 Deferred tax asset                 58        398          -        456          -        423          -        423 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total non-current 
  assets                        37,035        398          -     37,433     26,578        423          -     27,001 
 Current assets 
 Trade and other 
  receivables 
   Trade receivables, 
    gross                        4,482          -          -      4,482      3,607          -          -      3,607 
   Bad debt provision            (142)          -          1      (141)      (799)          -          2      (797) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
   Trade receivables, 
    net                          4,340          -          1      4,341      2,808          -          2      2,810 
   Amounts recoverable 
    on contracts                 1,135    (1,135)          -          -        352      (352)          -          - 
   Other receivables               219          -      (219)          -        179          -      (179)          - 
   Prepayments                     832          -      (832)          -      1,027          -    (1,027)          - 
   Corporation tax 
    recoverable                    621          -      (621)          -         75          -       (75)          - 
   Other taxation 
    receivable                     150          -      (150)          -        180          -      (180)          - 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Trade and other 
  receivables                    7,297    (1,135)    (1,821)      4,341      4,621      (352)    (1,459)      2,810 
 Other current assets                -          -      1,822      1,822          -          -      1,461      1,461 
 Contract assets                     -      1,135        (1)      1,134          -        518        (2)        516 
 Cash and cash equivalents       7,343          -          -      7,343      4,089          -          -      4,089 
 Assets classified 
  as held for sale                   -          -          -          -      5,848          -          -      5,848 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total current assets           14,640          -          -     14,640     14,558        166          -     14,724 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total assets                   51,675        398          -     52,073     41,136        589          -     41,725 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Current liabilities 
 Trade and other 
  payables                    (12,669)      6,869          -    (5,800)   (10,734)      5,379          -    (5,355) 
 Contract liabilities                -    (8,617)          -    (8,617)          -    (7,838)          -    (7,838) 
 Provisions                          -          -          -          -      (350)          -          -      (350) 
 Liabilities held 
  for sale                           -          -          -          -    (1,384)          -          -    (1,384) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total current liabilities    (12,669)    (1,748)          -   (14,417)   (12,468)    (2,459)          -   (14,927) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Non-current liabilities 
 Deferred tax liabilities      (2,938)          -          -    (2,938)    (2,099)          -          -    (2,099) 
 Pension obligations           (2,732)          -          -    (2,732)    (2,494)          -          -    (2,494) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total non-current 
  liabilities                  (5,670)          -          -    (5,670)    (4,593)          -          -    (4,593) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total liabilities            (18,339)    (1,748)          -   (20,087)   (17,061)    (2,459)          -   (19,520) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Net assets                     33,336    (1,350)          -     31,986     24,075    (1,870)          -     22,205 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Equity attributable 
  to owners of the 
  parent company 
 Share capital                     831          -          -        831        834          -          -        834 
 Share premium                  37,099          -          -     37,099     37,286          -          -     37,286 
 Treasury shares                   (3)          -          -        (3)        (3)          -          -        (3) 
 Total other reserves          (1,888)          -          -    (1,888)    (3,714)          -          -    (3,714) 
 Retained earnings             (2,703)    (1,350)          -    (4,053)   (10,328)    (1,870)          -   (12,198) 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Equity attributable 
  to shareholders 
  of the Company                33,336    (1,350)          -     31,986     24,075    (1,870)          -     22,205 
                             ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

Consolidated cashflow statement restatement under IFRS 15

As a result of adoption of IFRS 15, certain reclassifications are required in relation to the composition of cashflows generated from/(used in) operations, however there is no overall change to the primary headings of the Consolidated cashflow statement.

   13   Statement by Directors 

While the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRSs') as adopted by the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs.

The financial information set out above, which was approved by the Board on 22 March 2019, is derived from the full unaudited Group accounts for the year ended 31 December 2018 and does not constitute the statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Board of Brady plc approved the release of this preliminary announcement on 22 March 2019.

The Annual Report for the year ended 31 December 2018 will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. The report will also be available on the investor relations page of the Group's website. Further copies will be available on request and free of charge from the Company Secretary.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR EASDLALNNEFF

(END) Dow Jones Newswires

March 25, 2019 03:01 ET (07:01 GMT)

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