On Friday, Patrick and I took an analyst call from Brady PLC CEO Mr. Gavin Lavelle regarding the company’s annual results for 2013. Brady had 16 new contract wins in 2013 and 50% of them were outside of Europe. In fact, with 4 go lives in Asia and a number of deals in North america in the Recycling space particularly, it could be said that Brady has gone global as opposed to being the European player it has been historically. Mr. Lavelle was very upbeat and confident, in part, as a result of the fact that 2013 was a ‘strong booking year’ and the company now had a strong backlog despite the 4% revenue growth it reported in 2013. The good news from Brady’s point of view is that 2013 was a good year and the ‘not so good’ news was that much of the revenues resulting from a strong second half will only get recognized in 2014. Recurring revenues grew by almost 15% to 57% of turnover. The interesting subplots to this story for me are as follows;
1. Brady’s strong recurring revenue growth is down to offering products in the cloud and on a subscription or other recurring basis. To me, this verifies our view that what we termed ‘SaaS revenues’ are growing faster than the overall market (we said 15% versus 3-5% in our Market Sizing study) and it also verifies our findings in the CTRM in the Cloud report (kindly sponsored by Aspect Enterprise, Brady PLC and Generation 10) recently released. For Brady, strong recurring and predictable revenues are also good news of course.
2. Brady is no longer just a leading European CTRM vendor. It is now a global vendor of a broad range of CTRM and related software solutions and services and although its energy products are still European-focused, it now has strength in its traditional metals area supplement by the recycling products and into the agriculture and softs space as well.
3. Although it has taken a little longer than probably anticipated to settle and consolidate its energy acquisitions, the signs are there that Brady Energy is beginning to fire on all cylinders as it signed its first deals in Germany (outside of its historical area of focus in Scandinavia)and also sold its logistics solution to two German power companies. In Europe, logistics and being able to ‘connect to’ and communicate with the grids and pipes across the continent is essential.
Mr. Lavelle has plenty of cash on hand and ready access to investors to continue acquiring additional businesses and products in the future too and so we can expect to continue to see Brady grow both through acquisition and natural growth. Mr. Lavelle was also keen to point to the savings the Group has made in terms of its operating expenses expecting profitability to return to the ’20 percent’ mark in 2014 and beyond.
Brady is now established as a top 4-6 CTRM vendor with global reach but it still has a long way to go to match the annual revenues of the top two. It is, however, well positioned to provide a sustained challenge over the next few years we believe.
