New business has apparently dried up for Brady (BRY:AIM), the commodities and energy markets trading platform provider, and that means missing forecasts this year.
‘The board has concluded that full year revenue will be circa £19m, and this will have a consequent impact on EBITDA performance,’ the company said today. EBITDA is earnings before interest, tax, depreciation and amortisation.
Brady’s share price has been smashed, down 37% at 35.5p, valuing the business at less than £30m in market capitalisation terms.
HOW BIG IS THE MISS
Consensus estimates already anticipated declining sales, with Reuters’ figures showing £22.5m of revenue before today’s update, down about £700,000 on last year. Quite where this will leave EBITDA is anybody’s guess.
The company isn’t saying and, so far, we have seen no new analyst forecasts. It won’t be the £3.5m where consensus was pitched, and who knows, the company could be even looking at red ink on the EBITDA line.
There’s soothing talk of ‘positive engagements with existing customers,’ and that ‘recurring revenue is in line with expectations,’ but bigger questions need answering.
SLOWING GLOBAL GROWTH, MAYBE RECESSION
First, is the drought of new business merely a symptom of wider macro issues? There’s increasing talk of a slowing global economy and that would undoubtedly mean lower demand for core raw materials and energy consumption.
Brexit cannot be helping and it was interesting that BHP (BHP) yesterday, the world’s largest mining group, hinted at slowing demand in important places, China for one.
DOES BRADY HAVE THE SCALE?
The second issue is just how competitive is Brady given its increasingly tiny size, especially in the face of deep-pocketed rivals.
As Megabuyte’s Rob Warensjo points out, most of the big players in commodity/energy trading space (Allegro, Triplepoint, OpenLink and Aspect) are now under the ION umbrella, the private equity firm that has aggressively acquired over the past decade, including buying a stake in data provider Dealogic and the £1.5bn Fidessa, taking it into the equities and derivatives markets.
ION ‘can offer a wide variety of trading software and services that can cater to any client type and size,’ said Warensjo. Where this leaves Brady is unclear.
Brady will announce half year results on 23 September.
