Two weeks ago we commented on Brady’s progress in signing new contracts and positive view of 2014 (see More fuel for Brady’s slow burn). Today they presented a formal trading update which underlines the impact of timing of the receipt of orders and a shift to usage-based revenues, indicating revenues of £29.3m (up 4%) and adjusted EBITDA of £3.6m for the year to December 2013. Both these figures are well below earlier market estimates, but second half saw an improvement in the EBITDA trend. The shares have been poor performers throughout the year, down about 20%.
The transition to a new business model is continuing with recurring revenue increasing to 57% of the total. With an almost doubling of deferred revenue, the management talks of a strong platform for growth, with lower costs and a strengthened global sales team adding to their confidence. Additional positive pointers of 2014 are the move to larger contracts, the 13 new licence deals signed in 2013 and the restructured Brady Recycling operation.
Along with other companies bringing new propositions and delivery methods to market, Brady is not in control of how quickly its customers move to adopt these new ideas and change established business practices. The company has a strong position in its field, is building both portfolio and coverage and has cash in its balance sheet, but both management and shareholders will have to be patient before they see a return.