Final Results

15 April 2009 ToLuna Plc (the "Group" or the "Company") Results for the year ended 31 December 2008 Expanding our global reach and services for the next phase of growth Highlights * Another year of strong growth for ToLuna * Revenue up 74 per cent. to £21.7 million (2007: £12.5 million); underlying growth 35 per cent. before acquisitions * Net cash from operating activities up 47 per cent. to £5.0 million (2007: £ 3.4 million) * Profit before tax up 48 per cent. to £4.7 million (2007: £3.2 million) * Total dividend increased 47 per cent. to 1.65 pence (2007: 1.12 pence) * Earnings per share up 46 per cent. to 9.63 pence (2007: 6.59 pence) * Common Knowledge acquisition strengthens US platform and ToLuna's global offering * Opening of Sydney office to support Asiapac growth strategy * Panel membership rises to 2.65 million, across 30 countries * Rapid growth in ToLuna "social voting" community activity - rising to 8 million votes a month * In Q1 2009 strong growth in revenue, on a proforma basis, compared to last year, reflecting the resilience of ToLuna's business model Further enquires: ToLuna plc Frederic-Charles Petit, Chief Executive Tel: 00336 33 08 03 91 Richard Bernstein, Non-Executive Director Tel: 020 7491 0770 John East & Partners Limited David Worlidge/Simon Clements Tel: 020 7628 2200 Notes to Editors ToLuna is a leading independent online panel and survey technology provider to the global market research industry. The company provides sample and custom panel building expertise to the world's leading organisations from offices across Europe, North America and Asia Pacific. ToLuna has built and manages a panel community of over 2.6 million active members across 30 countries. This has been extensively profiled into 16 specialist panels, reaching niche segments to provide premium quality survey research data. In addition, PanelPortal, a highly robust and scalable hosted technology platform enables research professionals to easily build, manage and run their own online panels and surveys. ToLuna was recently recognised by the French Chamber of Commerce in Great Britain as Exporter of the Year and was named France's fastest growing company in the four years to 2007 by the magazine l'Entreprise. Chairman's Statement I am pleased to report on a year of substantial further progress for ToLuna. In the face of a very difficult global financial situation, your company achieved notable advances geographically, technologically and financially. This is impressive testimony to the resilience of our business model in the most challenging economic conditions. Our strategy remains clear and straightforward. We aim to provide our clients with a comprehensive range of panel and technology services, ranging from the most basic questionnaire through to helping them build continuous online dialogue with their customers, all at a price which represents excellent value for money. This gives us confidence that we are well placed to ride out the downturn that has affected all the major global economies. Even if spending on global market research should be affected, we believe the online sector of the market will continue to grow, in keeping with the established pattern of recent years. Within the online sector, ToLuna's technology strengths and track record should enable us to participate fully in this growth. Our end-to-end solution, which we have advocated to the market for a long time, is building further momentum at a time when budgets are under scrutiny. During the year, we extended our global reach. Of particular importance was the strategic deal concluded in June 2008 for the acquisition of Common Knowledge Inc of Dallas, Texas, a pioneer of digital data collection. On 2 April 2009, Common Knowledge was renamed ToLuna, reflecting its successful integration within our Group in less than a year since the acquisition. ToLuna also expanded in the Asia Pacific region with the opening of its office in Sydney, Australia. Asia Pacific will be an important region for the Group in future years. While the immediate focus of the Group will be on consolidating and expanding our US operations following the acquisition of Common Knowledge, ToLuna will continue to extend its global offering of data collection and consumer dialogue solutions. Our panel network has expanded further and now extends to 2.65 million people spread over 30 countries. Our panel membership has doubled in two years and remains a critically important foundation of the quality and range of ToLuna's offering. At the same time as expanding our network, we are deepening our interaction with our panel community. Our online social voting community, toluna.com, first launched in October 2007, has been successfully extended to France, Germany, Spain, Italy, the Netherlands and Russia. We are preparing the launch of this successful model in other strategic markets. Social voting's popularity with our panel community is evident from the numbers. More than eight million votes are cast every month on our network compared to 2.5 million when toluna.com was operating solely in the UK. In the UK alone, toluna.com has more than 350,000 unique visitors per month. A significant percentage of our audience registers directly and unprompted, giving us access to a wide range of respondents. Social voting is a valuable way of strengthening our panels, improving response rates and the quality of data. It is also giving us the valuable ability to collect data in real time 24/7. The launch of ToLuna QuickSurveys in December 2008 is the first phase of our "survey solution as a service" offering. Results ToLuna achieved a further significant advance in revenue and profits in 2008. Currency gains were a factor in the advance, reflecting the fact that with offices in 7 countries and clients in 19 countries, the Company is now a global operator. Revenue for the year grew 74 per cent. to £21.7 million. Excluding the effects of acquisitions, underlying revenue growth was 35 per cent. Operating profits, before share based payments, rose 52 per cent. to £5.0 million. Operating profits include approximately £0.7 million of unrealised currency gains and take into account a one-off charge of £0.3 million linked to the Common Knowledge acquisition. Profit before tax rose 48 per cent. to £4.7 million (2007: £3.2 million). Profits after tax rose 47 per cent. to £3.5 million. Earnings per share increased 46 per cent. to 9.63 pence (2007: 6.59 pence). The Group maintained its strong cash flow, so that even after the immediate costs of the Common Knowledge acquisition, the Group had a net cash position of £1.0 million at the year end. The cash flow from operations is up by 47 per cent. to £5.0 million (2007: £3.4 million). Dividend Your board is recommending a final dividend of 1.15 pence per share (2007: 0.75 pence) payable on 20 June 2009 to shareholders on the register at 24 April 2009. This brings the total dividend for the year to 1.65 pence (2007: 1.12 pence), an increase of 47 per cent. over last year. Review of operations A key strategic focus is on the US market. US market research spend is estimated at $8.7 billion per year. Online market research spend is estimated to be $2.1 billion per year, equivalent to approximately one quarter of the US market research spend. In Europe, we continue to strengthen our core operations in France, the UK, Germany and the Netherlands as well as seeking growth opportunities in other European territories. In Asia Pacific, the establishment of our office in Sydney, Australia establishes an important platform for expansion in this region, which in recent years has been a powerhouse of global economic growth. Acquisition On 18 June 2008, ToLuna announced the purchase of the entire issued share capital of Common Knowledge Inc. for an initial $8.46 million in cash, with an additional deferred consideration of $2.2 million in cash, of which $1.275 million is payable on 18 June 2009 and $0.925 million payable on 18 June 2010. Within the US market, Common Knowledge Inc., established in 1988, is a well established provider of digital data collection services in the market research industry, with a customer list including many of the top 100 US market research firms. This is a critically important step forward in the US market for ToLuna. The combined US operation now has 72 staff in 7 locations. We are proud to confirm that ToLuna and Common Knowledge are now integrated in the US under the brand name ToLuna, reflecting our global branding. Custom panel software as a service offering ToLuna has pioneered the development of panels customised for specific clients through its AutomateSurvey and PanelPortal software as a service solution. Our first client custom panel was created in 2002 when online research was rarely perceived as a useful means of collecting data. Since then our portfolio of clients using our technology has grown to 80 leading customers. In 2008, we won significant accounts such as Debenhams, ITV and Easyjet. We expect this segment of the market to go from strength to strength as brand owners seek to initiate and nurture continuous dialogue with their customers. Our ability to service our clients goes far beyond the provision of our AutomateSurvey and PanelPortal solutions. In contrast to our competitors in this market sector, we provide clients with not only the software, but the capacity to recruit and manage their panel, access to our global sampling solutions worldwide and the expertise of our 260 staff members in panels and panellist relationship management. ToLuna QuickSurvey offering In December 2008, we launched our new solution, ToLuna QuickSurveys, allowing organisations to question our members directly and collect nationally representative data at the click of a button. Already we have attracted more than 20 clients, including British Airways. ToLuna QuickSurveys is the first stage in our strategy of democratising the use of research. Other products and solutions will follow allowing us to generate income by converting the exceptional traffic we enjoy on our communities into paid for research. Panel building We continue to grow our community of panellists, which now numbers more than 2.65 million people and spans 30 countries (2007: 1.8 million in 27 countries). Our panel membership has doubled in two years and grown more than sixfold since ToLuna was floated on AIM in 2005. We thank our panellists, who remain at the core of our business. The ability to offer access to 2.65 million customers or potential customers is a critical strength of the ToLuna model. We are delighted that our interaction with and understanding of our panellists continues to deepen. The introduction of "social voting" in October 2007 has proved widely popular with our panel community who vote, set their own questions and conduct their own polls in increasing numbers. Clients Our clients include some of the world's leading companies, media agencies and market research groups. Their number almost doubled during 2008, rising from 319 to 613. We particularly seek to build a long term relationship with clients and are pleased that repeat business accounted for 77 per cent. of our revenue (2007: 70 per cent.). Management and staff Our business relies heavily on the commitment and expertise of our staff across the world. We are pleased to report that 2008 was another year of first class service to our clients as evidenced by the high level of satisfaction reported in our customer surveys. The board wishes to thank all our staff for their continuing efforts in making ToLuna a great and special company. ToLuna was recently recognised by the French Chamber of Commerce in Great Britain as Exporter of the Year and was named France's fastest growing company in the four years to 2007 by the magazine l'Entreprise. Prospects We are keenly aware that the economic horizon is far from clear for the remainder of 2009 and beyond. It is encouraging that the serious problems of the financial system and the world economy are now widely recognised, but it is too early to be confident that they will be swiftly resolved. It is therefore encouraging that, in the first quarter of 2009, we have had a strong growth in revenue compared to last year on a like-for-like basis. Reflecting the increasingly global nature of our revenue base, we have continued to benefit from currency gains in addition to healthy underlying growth in our business. It is also encouraging that, for several years now, the sector in which we operate, online market research services, has been growing much faster than the market research industry as a whole. The advantages of the online sector in speed, cost and interactivity are sound reasons why this outperformance should continue in more adverse economic conditions. As companies everywhere strive to conserve costs and improve the effectiveness of their marketing, the competitive advantage of online market research becomes ever more apparent. Within the online sector, ToLuna has worked long and hard to provide a range of services to clients of all sizes, from the simplest questionnaire to intensive long term interaction with our panel community and specialist sub-sectors and interest groups. Our technology enables our clients, should they wish, to establish and monitor their own panel communities. This technology puts ToLuna at the leading edge of online panel management and we intend to stay there. As a result, while acknowledging the serious issues the global economy faces, we look forward to 2009 and beyond with confidence. George Kynoch Chairman 14 April 2009 Consolidated Income Statement Continuing operations Note Year ended Year ended 31 December 31 December 2008 2007 £'000 £'000 Revenue 2 21,728 12,462 Staff costs (9,578) (4,817) Other operating expenses (7,418) (4,611) Profit from operations 3 4,732 3,034 Finance income 128 152 Finance expense (130) (3) Profit before tax 4,730 3,186 Tax 4 (1,236) (816) Profit for the financial year 3,494 2,370 Earnings per share Basic 6 9.63p 6.59p Diluted 6 8.97p 6.14p Consolidated Balance Sheet Note 31 December 31 December 2008 2007 £'000 £'000 Non-current assets Goodwill 7 6,266 1,953 Other intangible assets 7,303 2,695 Property, plant and equipment 883 436 14,452 5,084 Current assets Trade and other receivables 8,462 4,161 Cash and cash equivalents 2,478 4,219 Tax assets 755 - 11,695 8,380 Total assets 26,147 13,464 Equity and liabilities Equity Share capital 365 360 Share premium account 5,993 5,437 Retained earnings 7,374 4,088 Translation reserve 2,484 132 Total equity 16,216 10,017 Current liabilities Trade and other payables 6,656 3,047 Bank overdraft 1,470 - Tax liabilities 469 91 Total current liabilities 8,595 3,138 Non-current liabilities: trade and other 474 - payables Deferred tax 862 309 Total equity and liabilities 26,147 13,464 Consolidated Cash Flow Statement Year ended Year ended 31 December 31 December 2008 2007 £'000 £'000 Operating activities Profit before tax 4,730 3,186 Adjustments for: Depreciation and amortisation 2,172 1,050 Share option grant costs 245 228 Other share based payments (charity) - 55 Loss on disposal of property, plant and - 5 equipment Exchange differences (319) 92 6,828 4,616 Tax paid (1,061) (930) Increase in receivables (2,920) (1,142) Increase in payables 2,116 1,021 Cash generated from operations 4,963 3,565 Net finance expense/(income) 2 (152) Net cash from operating activities 4,965 3,413 Investing activities Interest received 128 155 Interest paid (130) (3) Purchase of subsidiary undertakings (net of (4,313) (29) cash acquired) Purchase of intangible assets (3,260) (2,448) Purchase of property, plant and equipment (741) (376) Net cash from investing activities (8,316) (2,701) Cash (outflow)/inflow before financing (3,351) 712 Financing Dividends paid (453) (313) Issue of shares 561 18 Proceeds from finance leases entered into 235 170 Capital repayments of finance leases (192) (55) Net cash inflow/(outflow) from financing 151 (180) Foreign exchange differences (11) 82 (Decrease)/Increase in cash and cash (3,211) 614 equivalents in the year Net cash and cash equivalents at start of the 4,219 3,605 year Net cash and cash equivalents at end of the 1,008 4,219 year Net cash and cash equivalents 2,478 4,219 Bank overdraft (1,470) - Cash and cash equivalents 1,008 4,219 Statements of Changes in Equity Share Share Translation Retained Total capital premium reserve earnings account £'000 £'000 £'000 £'000 £'000 At 1 January 2007 359 5,365 (42) 1,803 7,485 Foreign exchange - - 174 - 174 differences Profit for the year - - - 2,370 2,370 Total recognised - - 174 2,370 2,544 income and expense Dividends paid - - - (313) (313) Share option grants - - - 228 228 Shares issued in the 1 72 - - 73 year At 31 December 2007 360 5,437 132 4,088 10,017 Foreign exchange - - 2,352 - 2,352 differences Profit for the year - - - 3,494 3,494 Total recognised - - 2,352 3,494 5,846 income and expense Dividends paid - - - (453) (453) Share option grants - - - 245 245 Shares issued 5 556 - - 561 At 31 December 2008 365 5,993 2,484 7,374 16,216 Notes to the Financial Statements 1 Publication of non-statutory accounts The financial information set out in this announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2007 has been extracted from the group's financial statements to that date which received an unmodified auditor's report and have been delivered to the Registrar of Companies. The financial information for the year ended 31 December 2008 has been extracted from the Group's financial statements to that date which have received an unmodified auditor's report but have not yet been delivered to the Registrar of Companies. 2 Segmental information All revenue relates to the supply of online data collection services to the market research industry. The directors regard this as a single class of business. Segmental information is therefore disclosed by reference to geographical locations as follows: Year to 31 December 2008 Europe Asia/Pacific America Total £'000 £'000 £'000 £'000 Revenue from origination 17,501 - 4,227 21,278 Revenue from customer location 13,850 384 7,494 21,278 Assets 14,737 347 11,063 26,147 Liabilities 6,141 277 2,651 9,069 Property, plant and equipment 589 99 195 883 Capital expenditure 3,575 23 403 4,001 Amortisation and depreciation 2,010 18 144 2,172 Year to December 2007 Europe Asia/Pacific America Total £'000 £'000 £'000 £'000 Revenue from origination 12,462 - - 12,462 Revenue by customer location 9,632 253 2,577 12,462 Assets 13,402 61 1 13,464 Liabilities 2,727 48 363 3,138 Property, plant and equipment 396 26 14 436 Capital expenditure 2,782 32 10 2,824 Amortisation and depreciation 1,039 6 5 1,050 Segment profit or losses cannot usefully be disclosed as the group incurs a significant level of costs which cannot reliably be allocated across the segments. 3 Profit from operations Profit from operations is stated after charging: Year ended Year ended 31 December 31 December 2008 2007 £'000 £'000 Exchange gains (946) (12) Amortisation of intangible assets 1,560 900 Depreciation of property, plant and equipment 612 150 Auditor's remuneration for audit services 60 38 Auditor's remuneration for non-audit services 49 28 Operating lease rentals 610 195 Share option grant costs 245 228 Loss on disposal of property, plant and - 5 equipment 4 Tax Year ended Year ended 31 December 31 December 2008 2007 £'000 £'000 Current tax UK tax 558 435 Foreign tax 125 51 683 486 Deferred tax - origination and reversal of 553 330 temporary differences Tax expense 1,236 816 Deferred tax relates to the utilisation of the deferred tax asset recognised on the acquisition of the ToLuna SAS in respect of accumulated tax losses and other timing differences arising in the period. Tax reconciliation Year ended Year ended 31 December 31 December 2008 2007 £'000 £'000 Profit before tax 4,730 3,186 Tax at 28.5 per cent. on profit before tax 1,348 956 (2007: 30 per cent.) Effects of: Non-deductible items/(non taxable income) (11) 146 Foreign tax rates 172 (9) Accumulated losses in foreign subsidiaries (148) - Other temporary differences 167 36 Research and development tax credit (292) (313) Tax expense 1,236 816 5 Dividends The Company paid a dividend of 0.75 pence per share on 20 June 2008 amounting to £271,000 and 0.5 pence per share on 22 October 2008 amounting to £182,000. 6 Earnings per share Earnings per share has been calculated on a profit after tax of £3,494,000 (2007: £2,370,000) and the weighted average number of shares in issue for the period of 36,296,010 (2007: 35,947,613). The diluted earnings per share are calculated on the assumption that all options granted were exercised. This would give rise to a total weighted average number of ordinary shares in issue for the period of 38,957,309 (2007: 38,629,905). Year ended 31 December Year ended 31 December 2008 2007 Basic Diluted Basic Diluted £'000 £'000 £'000 £'000 Profit for the financial 3,494 3,494 2,370 2,370 year Earnings per share 9.63p 8.97p 6.59p 6.14p 7 Goodwill Cost and net book amount 2008 2007 Goodwill Goodwill £'000 £'000 At 1 January 1,953 1,953 Business combination (note 8) 3,195 - Other additions 3 - Foreign exchange difference 1,115 - At 31 December 6,266 1,953 The goodwill carried in the balance sheet at 1 January 2008 of £1,953,000 arose on the acquisition of Toluna GmbH (formally Speedfacts Gesellschaft für Online Research GmbH). The Group tests goodwill annually for impairment or more frequently if there are indications that it might be impaired. The recoverable amounts are determined from value in use calculations covering a period of 5 years. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the business. This has been estimated at 5 per cent. per annum reflecting the prevailing cost of capital in Europe. The growth rates are based on industry growth forecasts and estimated at 11 per cent. per annum. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. The directors do not consider that any impairment arose during the year. 8 Acquisition of subsidiary undertakings On 18 June 2008 the Group purchased the entire issued share capital of Common Knowledge Inc. The total consideration was US$10,664,000 which, translated at the prevailing rate, is £5,464,000. Furthermore, acquisition costs of £351,000 were also incurred. Of this amount $8,464,000 which, translated at the prevailing rate, is £4,336,000, was paid on the date of acquisition with $1,275,000 which, translated at the prevailing rate, is £654,000, payable one year from acquisition and the remaining $925,000 which, translated at the prevailing rate, is £474,000, payable two years from acquisition. The acquisition was partly financed by drawing down £1,229,000 against a £3,000,000 revolving facility obtained during the period. The fair values of the assets and liabilities acquired are summarised below. The values have been assessed on a provisional basis at this stage and may be subject to subsequent revision should pertinent additional information come to light within 12 months of the acquisition. Book Value Fair value Fair value to Common Knowledge adjustment the Group Inc £'000 £'000 £'000 Non-Current assets Intangible assets 34 1,471 1,505 Property, plant and equipment 155 - 155 189 1,471 1,660 Current assets Trade and other receivables 1,381 - 1,381 Cash 374 - 374 1,755 - 1,755 Current liabilities Trade and other payables 761 - 761 Tax liabilities 34 - 34 Total current liabilities 795 - 795 Net current assets 960 - 960 Net assets 1,149 1,471 2,620 Goodwill 3,195 Total 5,815 Cash consideration 4,336 Deferred consideration 1,128 Acquisition costs 351 Total 5,815 A significant amount of the value of the acquired business is attributable to its workforce and sales knowhow. Also, the group anticipates significant operational and geographical synergies to be achieved from the integration of the existing and acquired businesses. As no assets can be recognised in respect of these factors, they contribute to the goodwill recognised on acquisition. Between 18 June 2008 and 31 December 2008, Common Knowledge contributed £ 868,000 of the consolidated profit before tax. Had the acquisition occurred on 1 January 2008, the turnover of the enlarged group would have been £24,758,000 and the profit before tax would have been £ 5,056,000. 9 Availability of Accounts Copies of the Report and Accounts will be sent to shareholders shortly and will be available from the registered office of the Company, 29 Curzon Street, London W1J 7TL and the Company's website www.toluna-group.com.

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