Brady reports 37.5% EBITDA growth and 2.2 pp EBITDA Margin growth from 9.0% to 11.1%

14 Mar 2017 • About Brady ($BRY) • By InTwits

Brady reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Brady doesn't have a profitable business model yet: FY2016 ROIC is -1.8%
EBITDA Margin is quite volatile: 11.1% in FY2016, 9.0% in FY2015, 21.1% in FY2014, 10.9% in FY2013, 19.7% in FY2012
Brady has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's in pair with industry average of 2.0%.
CAPEX is quite volatile: 1.7 in FY2016, 0.50 in FY2015, 3.6 in FY2014, 0.32 in FY2013, 1.5 in FY2012
The company has unprofitable business model: ROIC is at -1.8%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Brady ($BRY) key annual financial indicators

mln. £	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	28.136	29.355	31.015	27.374	30.269	10.6%
Gross Profit	18.073	18.236	20.038	16.507	18.403	11.5%
SG&A			16.864	17.935	15.035	-16.2%
EBITDA	5.556	3.191	6.537	2.450	3.368	37.5%
Net Income	0.459	1.117	0.459	-1.726	-1.853	7.4%
Balance Sheet
Cash	7.838	7.222	9.580	6.594	7.343	11.4%
Short Term Debt	0.000	0.000	0.000	0.000	0.000
Long Term Debt	0.000	0.000	0.000	0.000	0.000
Cash flow
Capex	0.427	0.497	0.618	0.624	0.612	-1.9%
Ratios
Revenue growth	46.9%	4.3%	5.7%	-11.7%	10.6%
EBITDA growth	50.2%	-42.6%	104.9%	-62.5%	37.5%
Gross Margin	64.2%	62.1%	64.6%	60.3%	60.8%	0.5%
EBITDA Margin	19.7%	10.9%	21.1%	9.0%	11.1%	2.2%
Net Income Margin	1.6%	3.8%	1.5%	-6.3%	-6.1%	0.2%
SG&A, % of revenue			54.4%	65.5%	49.7%	-15.8%
CAPEX, % of revenue	1.5%	1.7%	2.0%	2.3%	2.0%	-0.3%
ROIC	9.1%	0.4%	8.8%	-2.8%	-1.8%	1.0%
ROE	1.4%	2.8%	1.3%	-5.4%	-5.9%	-0.5%
Net Debt/EBITDA	-1.4x	-2.3x	-1.5x	-2.7x	-2.2x	0.5x

Revenue and profitability

Brady's Revenue surged on 10.6% in FY2016. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.2 pp from 9.0% to 11.1% in FY2016.

Gross Margin showed almost no change in FY2016. SG&A as a % of Revenue dropped on 15.8 pp from 65.5% to 49.7% in FY2016.

Net Income marign showed almost no change in FY2016.

Capital expenditures (CAPEX) and working capital investments

Brady's CAPEX/Revenue was 2.0% in FY2016. CAPEX/Revenue showed almost no change from FY2013 to FY2016. For the last three years the average CAPEX/Revenue was 2.1%.

Return on investment

The company operates at negative ROIC (-1.85%) and ROE (-5.90%). ROIC increased slightly on 0.97 pp from -2.8% to -1.8% in FY2016. ROE showed almost no change in FY2016.

Leverage (Debt)

The company has no debt. Cash surged on 11.4% in FY2016.

Appendix 1: Peers in Software & Computer Services

Below you can find Brady benchmarking vs. other companies in Software & Computer Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Coms ($COMS)		46.8%	763.3%	110.4%	36.1%
Centralnic Group ($CNIC)	15.9%	4.0%	98.9%	71.3%
Proactis Holdings ($PHD)		7.0%	26.2%	69.6%	12.5%
Progility ($PGY)				51.0%	3.2%
Galasys ($GLS)	14.3%	20.9%	311.1%	33.0%
Median (45 companies)	8.4%	6.6%	4.4%	4.1%	8.8%
Brady ($BRY)		4.3%	5.7%	-11.7%	10.6%

Top companies by Gross margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Lombard Risk Management ($LRM)	99.0%	98.8%	99.2%	98.6%	99.3%
Phoenix It Group ($PNX)	97.0%	97.2%	97.6%	97.9%
Wandisco ($WAND)	91.8%	80.3%	80.7%	93.2%	88.1%
Netcall ($NET)	88.2%	89.7%	91.0%	90.9%	91.2%
Idox ($IDOX)	90.4%	90.8%	89.4%	89.3%	86.8%
Median (38 companies)	61.4%	62.0%	57.8%	58.8%	62.6%
Brady ($BRY)	64.2%	62.1%	64.6%	60.3%	60.8%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Mail.Ru Group Ltd ($61HE)	43.1%	47.4%	50.5%	34.6%	35.2%
Dotdigital Group ($DOTD)	31.4%	39.4%	29.2%	32.0%	30.4%
Idox ($IDOX)	30.9%	26.1%	26.0%	28.6%	27.3%
Galasys ($GLS)	44.0%	83.6%	32.6%	28.5%
Oxford Metrics ($OMG)	15.7%	6.0%	14.7%	28.4%	23.1%
Median (45 companies)	13.3%	13.4%	11.1%	12.5%	11.0%
Brady ($BRY)	19.7%	10.9%	21.1%	9.0%	11.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Rapidcloud Intl ($RCI)	1.0%	23.1%	11.6%	19.6%
Coms ($COMS)	0.5%	0.9%	3.4%	7.5%	0.1%
Csf Group ($CSFG)	1.5%	4.0%	2.4%	7.1%	4.9%
Nasstar ($NASA)	17.9%		2.1%	5.2%
Unisys Corp ($USY)	2.1%	2.5%	4.1%	5.0%	3.0%
Median (45 companies)	1.5%	1.5%	1.9%	1.0%	1.2%
Brady ($BRY)	1.5%	1.7%	2.0%	2.3%	2.0%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Rm ($RM.)		48.6%	130.8%	289.2%	263.8%
Triad Group ($TRD)	4.1%	-3.8%	24.5%	61.5%	74.4%
Dotdigital Group ($DOTD)	26.4%	38.0%	28.5%	31.4%	28.9%
International Bus Mach Corp ($IBM)	36.1%	31.0%	28.1%	25.7%	18.7%
Galasys ($GLS)	58.7%	60.9%	40.8%	22.2%
Median (45 companies)	13.5%	11.6%	9.8%	7.7%	9.8%
Brady ($BRY)	9.1%	0.4%	8.8%	-2.8%	-1.8%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Progility ($PGY)	2.0x		1.8x	12.8x	6.8x
Parity Group ($PTY)	4.7x		4.9x	5.1x
Nasstar ($NASA)	-5.3x		0.0x	1.9x
Phoenix It Group ($PNX)	4.3x			1.9x
International Bus Mach Corp ($IBM)	0.9x	1.2x	1.4x	1.7x	2.2x
Median (35 companies)	-0.4x	-0.4x	-0.3x	-0.5x	-0.9x
Brady ($BRY)	-1.4x	-2.3x	-1.5x	-2.7x	-2.2x

Brady stock price chart

Brady financials

mln.	FY2010	FY2011	FY2012

Revenue	11.117	19.155	28.136
EBITDA	2.083	3.698	5.556
Net income	0.491	1.936	0.459
CAPEX	0.306	0.657	0.427
Debt	0.000	0.000	0.000
Cash	11.614	10.304	7.838

About Brady

Brady plc provides integrated trading, process, and risk management software solutions to the energy, metals, recycling, and soft commodities sectors worldwide. The company operates through three segments: Commodities, Energy, and Recycling. It offers energy solutions, including energy trading and risk management, energy logistics, energy data management, and energy settlement; and metals solutions, such as LME brokerage, metal derivative trading, metal hedging and risk management, physical metal trading, and concentrates and raw materials. The company also provides recycling solutions, such as commercial recycling solutions; contracts, pricing, and settlements; scales, shipping, and receiving; logistics, production, and inventory; integrated accounting; and brokerage, as well as softs and agricultural solutions comprising physical trading, financial trading and risk, logistics, inventory management, and trade finance. In addition, it offers professional services, including business analysis, project and program management, implementation, and configuration; customer support services; cloud services; and shelf courses, and training and customized services. The company serves banks; brokers; traders and merchants; hedge funds; fabricators; retailers; utilities; suppliers; portfolio managers; transmission system operators; miners, smelters, and producers; commercial recyclers; and industrial processors. Brady plc was founded in 1985 and is headquartered in Cambridge, the United Kingdom.