Brady announced H119 revenues of £9.5m, 9.5% down on H118 (£10.5m), due to a fall in client project work affecting both services and development revenue and licence revenue. H119 recurring revenue was stable at £7.8m (H118: £7.8m), representing 82% of sales (H118: 74%). Overall gross margin rose to 53% (H118: 51%) due to a reallocation of staff costs, while operating costs increased to £6.2m (H118: £5.8m) largely due to staff role changes. The EBITDA loss was £1.8m (H118: £1.5m) and the loss before tax was £2.5m (H118: £1.7m). Net cash fell to £1.0m from £4.6m at FY18, with £1.6m attributable to the previously disclosed Norwegian tax charge, and H118 benefiting from the proceeds from the sale of the recycling business.

Having completed its strategic product review, Brady has initiated a comprehensive new customer-centric strategic plan, focused on improving execution fundamentals and expanding the company’s reach. Additional funding to implement this revised strategy, would allow the experienced management team to deliver a more scalable, predictable and sustainable business to secure market leadership and allow the company to become the leading independent E/CTRM vendor.

Following the results, we maintain our FY19 revenue forecast of £19m. However, we now forecast an EBITDA loss of £3.8m (vs a £3.9m loss previously), with loss before tax and net debt fairly stable at £4.2m and £1.2m, respectively. We reiterate our view that when Brady demonstrates renewed sales momentum and returns to operating profitability, it should become an attractive investment, currently trading on an FY19e EV/sales multiple of 1.1x.