Interim Results

BrainJuicer Group PLC 13 September 2007 Press release 13 September 2007 BrainJuicer Group PLC ('BrainJuicer' or 'the Company') AIM: BJU Interim Results for the Six Months ended 30 June 2007 Reported under IFRS BrainJuicer Group PLC (AIM: BJU), a leading international online market research agency, today announces its Interim Results for the six months ended 30 June 2007. Highlights • Significant top-line organic growth with revenue up by 57% to £2,901,000 (2006: £1,849,000) • Operating profit increased by 13% to £147,000 (2006: £130,000), after investing heavily in client facing staff • Profit after tax increased by 77% to £113,000 (2006: £64,000) • Strong performance across all business units: UK revenues up 31%, Holland 177% and US 22% • Increased major client base from 10 to 12 of the world's top 50 companies • 84% of revenue from repeat business • Strong uptake of its new product, Predictive Markets, up from 3.6% for the first 6 months of 2006 to 9.5% for the same period in 2007 • Appointment of Ken Ford as non-executive Chairman, formerly Deputy Chairman of Teather & Greenwood Commenting on the results, John Kearon, Chief Executive of BrainJuicer Group PLC, said: 'Throughout 2007 we have built on the strong foundations we established in 2006, focusing on our clients, our innovation, and our technology; the Board has been delighted with the Company's progress so far this year. We are pleased to report continued strong organic growth, an increased list of very large satisfied clients, and strong performance across the business units. To support BrainJuicer's underlying growth, we are continuing to invest. Our client facing team has increased from 21 at the end of 2006, to 27, and our software development programme is on target in terms of both timing and budget. The Company's innovative new products, Predictive Markets and Creative Sixers have been well received in the market, and our new FaceTrace(TM) technique has recently been short listed for best methodology paper by the foremost industry event, ESOMAR. We are pleased with BrainJuicer's progress for the first half of 2007, and are excited about the Company's developments for the remainder of the year.' For further information, please contact: BrainJuicer Group PLC Tel: +44 (0)20 7043 1000 John Kearon, Chief Executive Officer john.kearon@brainjuicer.com James Geddes, Chief Financial Officer james.geddes@brainjuicer.com Landsbanki Securities (UK) Limited Tel: +44 (0)20 7426 9000 Fred Walsh / Simon Brown Media enquiries: Abchurch Communications Tel: +44 (0)20 7398 7700 Heather Salmond / Joanne Shears heather.salmond@abchurch-group.com Chief Executive Officer's Statement Introduction The Board is pleased to report that the Company's progress during the period has continued as planned, with strong growth which is entirely organic. Market conditions are buoyant, and the Company's emphasis on client relationships, product innovation, and technology development continues unabated; and each of the global offices has performed well. Financial Performance Revenue for the half-year increased by 57% to £2,901,000 (2006: £1,849,000), with gross margin continuing at levels of over 70%. Operating costs increased from £1,313,000 in the first half of 2006 to £2,021,000 this year as the Company continued to build its team; headcount increased from 38 at the end of 2006 to 44 at the end of June 2007. This increase is in client facing roles, and positions the business for further significant top-line growth. Operating profit rose from £130,000 in the first half of 2006 to £147,000 this year (an increase of 13%), and profit after taxation rose from £64,000 to £113,000 (up 77%). Earnings per share declined from 1.0p in 2006 to 0.9p, as a result of the 201% increase in the weighted average number of the Company's ordinary shares following the conversion of Unilever's convertible preference shares to ordinary shares, prior to the Company's listing last December. Fully diluted earnings per share increased from 0.7p in the first half of 2006 to 0.9p. The Company generated £208,000 cash from its operations and invested £148,000 on IT equipment and its software technology platform. It ended the period with a cash balance of £1,319,000, up from £1,233,000 at 31 December 2006. The Company has no debt. The Company paid an accrued preference dividend owed to Unilever of £106,000 on 29 August 2007. This dividend stream stopped accruing on conversion of the convertible preference shares to ordinary shares prior to the Company's listing. The Company has no plans to pay further dividends this year. Operations The Company's UK and Dutch businesses continue to grow profitably, and the Board anticipates that the new US business should be close to break-even this year, which will be its second full year of operations. Revenue in the UK grew by 31%, in Holland by 177% and in the US by 22%. Each business unit is staffed only by account management, and served centrally for all technical support, financial and administrative needs. The Board believes that the Company has a simple, proven, model that can be rolled out geographically in an efficient, revenue led, low investment manner, and this will facilitate the strategy to continue to expand the Company's geographic footprint. Clients BrainJuicer's clients are some of the largest and most professional research buyers in the world, and the Company's account teams are continually striving to deepen their relationships with them. By encouraging participation in experimental projects, the Company invites key players to join the innovation process. BrainJuicer is continuing to recruit high level and experienced market research professionals, and above all else is endeavouring to continually exceed expectations on each and every project. The focus on these areas continues to prove productive, as the Company increased its major client base from 10 to 12 of the world's top 50 companies over the first six months of the year. BrainJuicer's top 20 clients delivered 81% of the Company's total revenue; 55% of these accounts grew substantially, 30% were new during the period and only 15% declined. 84% of the total revenue was from repeat business, and 16% from new clients, which demonstrates the strength of the Company's existing relationships, as well as a healthy rate of securing new business. The Company is continuing to increase the size of the projects it is undertaking, and therefore the average profitability per project. The average revenue per project increased to £14,442 from £11,786 in the same period last year. The Board believes that this is a reflection of BrainJuicer's growing credibility, as clients utilise the Company's products for higher value research. Innovation The Company continues to place considerable emphasis on innovation, particularly in developing research techniques which address the difficult early phases of clients' product development cycle, the 'Fuzzy Front End'. Fuzzy Front End research is where clients currently have few if any global mandate arrangements with their existing research agencies and where the company has seen client interest in adopting BrainJuicer's innovative techniques on a global basis. At this early stage in the product development process, clients are trying to identify the most promising concepts, insights and ideas, and it is at this phase when BrainJuicer's fast, accurate and highly diagnostic services offer particularly high value. The Company launched its pioneering technique, Predictive Markets, last year, and this product has grown from 3.6% of revenue in the first six months last year, to 9.5% this year. Another new product launched in 2007, Creative Sixers (naturally gifted creative consumers identified using the BrainJuicer Creativity test), has seen strong client uptake with projects completed for 4 multi-national clients. There has been strong demand from clients to replicate the product internationally; this has led to the Company recruiting panels of Creative Sixers in USA and Germany, to add to the Company's UK panel of 300 Creative Sixers. A significant initiative launched over the last six months has been the development of a new way of measuring emotional engagement, 'FaceTrace(TM)'. As well as being the key tool in our new advertising screening product, it can also be used across all BrainJuicer products. The Board was delighted when FaceTrace(TM) was recently short-listed for Best Methodology Paper by ESOMAR, the global market research body. Technology The Company is currently building a new version of its proprietary software platform for the delivery of research. This will provide the business with further scalability and increased production efficiencies, and will position BrainJuicer for significant profitable growth over the coming years. The total cost of the new system will be £300,000, and to date the process is within budget and its timescale of one year. Board of Directors The Board had previously announced its intention to split the roles of Chairman and CEO in order to strengthen its governance and further comply with best practice. It is therefore with great delight that the Company welcomes Ken Ford onto the Board as non-executive Chairman, a position which he took up with effect from 1 September 2007. Ken has 36 years of corporate finance experience, latterly as Deputy Chairman of Teather & Greenwood, and brings a strong understanding of shareholder value, strategic planning and corporate transactions. Outlook Market conditions, and the Company's positioning within the market, continue to give the Board confidence in BrainJuicer's ability to deliver sustainable and profitable growth. John Kearon Chief Executive Officer CONDENSED CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000 ASSETS Non-current assets Property, plant and equipment 89 71 77 Intangible assets 4 119 1 1 Deferred tax asset 322 - 213 530 72 291 Current assets Inventories 27 1 45 Trade and other receivables 1,677 1,092 1,612 Cash and cash equivalents 1,319 61 1,233 3,023 1,154 2,890 Total assets 3,553 1,226 3,181 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 9 126 111 126 Share premium account 1,399 - 1,390 Merger reserve 477 458 477 Foreign currency translation reserve 1 3 (5) Other reserve 336 43 255 Retained earnings (145) (150) (277) Total equity 2,194 465 1,966 LIABILITIES Current liabilities Trade and other payables 1,001 607 944 Current income tax liabilities 250 50 163 Financial liabilities 108 - 108 1,359 657 1,215 Non-current liabilities Financial liabilities - 104 - Total liabilities 1,359 761 1,215 Total equity and liabilities 3,553 1,226 3,181 CONDENSED CONSOLIDATED INCOME STATEMENT FOR SIX MONTHS ENDED 30 JUNE 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000 Revenue 2,901 1,849 4,608 Cost of sales (733) (406) (1,189) Gross profit 2,168 1,443 3,419 Administrative expenses (2,021) (1,313) (3,296) Operating profit 147 130 123 Investment income 17 1 3 Finance costs - (17) (32) Profit before taxation 164 114 94 Income tax expense 6 (51) (50) (157) Profit/(loss) for the financial year 113 64 (63) Attributable to equity holders of the Company 113 64 (63) Earnings/(losses) per share attributable to the equity holders of the Company Basic earnings/(losses) per share 7 0.9p 1.0p (0.9)p Diluted earnings/(losses) per share 7 0.9p 0.7p 2.8p All of the activities of the group are classed as continuing. CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR SIX MONTHS ENDED 30 JUNE 2007 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000 Net cash generated from/(used by) operations 8 208 58 (167) Interest paid - - (1) Net cash generated from/(used by) operating activities 208 58 (168) Cash flows used by investing activities Purchases of property, plant and equipment (29) (74) (91) Purchases of intangible assets (119) (1) (1) Interest received 17 1 3 Net cash used by investing activities (131) (74) (89) Cash flows generated from financing activities Proceeds from initial public offering net of share issue - - 1,399 expenses Proceeds from other issue of ordinary shares 9 13 27 Net cash generated from financing activities 9 13 1,426 Net increase/(decrease) in cash and cash equivalents 86 (3) 1,169 Cash and cash equivalents at beginning of period 1,233 64 64 Cash and cash equivalents at end of period 1,319 61 1,233 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 30 JUNE 2007 Foreign currency Share Share premium Merger translation Other Retained capital account reserve reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2006 111 - 445 1 26 (214) 369 Exchange differences on consolidation - - - 2 - - 2 Profit for the period - - - - - 64 64 Total income / (expense) recognised for the period - - - 2 - 64 66 Shares issued in subsidiary - - 13 - - - 13 Share-based payment charge - - - - 17 - 17 - - 13 2 17 64 96 At 30 June 2006 111 - 458 3 43 (150) 465 Exchange differences on consolidation - - - (8) - - (8) Deferred tax credited to equity - - - - 207 - 207 Loss for the period - - - - - (127) (127) Total income / (expense) recognised for the period - - - (8) 207 (127) 72 Shares issued prior to Group reconstruction - - 8 - - - 8 Transfer of liability element of preferred shares to equity - - 11 - - - 11 Shares issued on IPO 14 1,486 - - - - 1,500 Share issue costs deducted from equity - (101) - - - - (101) Share options exercised subsequent to Group reconstruction 1 5 - - - - 6 Share-based payment charge - - - - 5 - 5 15 1,390 19 (8) 212 (127) 1,501 At 31 December 2006 126 1,390 477 (5) 255 (277) 1,966 Exchange differences on consolidation - - - 6 - - 6 Deferred tax credited to equity - - - - 55 - 55 Profit for the period - - - - - 113 113 Total income / (expense) recognised for the period - - - 6 55 113 174 Shares issued on exercise of share options - 9 - - - - 9 Exercise of share options - - - - (1) 19 18 Share-based payment charge - - - - 27 - 27 - 9 - 6 81 132 228 At 30 June 2007 126 1,399 477 1 336 (145) 2,194 1. General information BrainJuicer Group plc (formerly BrainJuicer Group Limited) ('the Company'), a United Kingdom resident, and its subsidiaries (together 'the Group') provide on-line market research services. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange ('AiM'). The address of the Company's registered office is 13-14 Margaret Street, London, W1W 8RN. The condensed consolidated interim financial information was approved by the board of directors on 12 September 2007. 2. Basis of preparation The condensed interim financial information for the half year ended 30 June 2007 has been prepared in accordance with IAS 34 'Interim financial reporting'. The interim condensed financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2006. The condensed consolidated financial information has been prepared under the historical cost convention. 3. Principal accounting policies The principal accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2006. In addition, the following new accounting policy has also been adopted: Intangible assets Expenditure on research activities is recognized as an expense in the period in which it is incurred. An internally-generated intangible asset arising from the Group's development activities is recognized only if all of the following conditions are met: • An asset is created that can be identified (such as software and new processes). • It is probable that the asset created will generate future economic benefits. • The development cost of the asset can be measured reliably. Internally-generated intangible assets are amortized on a straight-line basis over their useful economic lives. Where no internally-generated intangible asset can be recognized, development expenditure is recognized as an expense in the period in which it is incurred. Once completed and in use in the business, costs are amortised on a straight line basis at an annual rate of 25%. 4. Intangible assets The additions to Intangible Assets during the six month period ended June 30, 2007 relate to capitalized software development costs for the cost of building a brand new software platform for delivering our research. 5. Segment information The Group operates in one business segment, that of market research. Whilst there are a number of products within the business segment, management reporting is principally based on location of service delivery. Accordingly the Group presents its primary segment analysis on this basis: Six months ended 30 June 2007 Rest of the United Kingdom Europe World Group Total £'000 £'000 £'000 £'000 £'000 Total segment revenue 1,837 934 146 - 2,917 Inter segment revenue (16) - - - (16) Segment revenue 1,821 934 146 - 2,901 Segment result 576 309 (155) (583) 147 Six months ended 30 June 2006 Rest of the United Kingdom Europe World Group Total £'000 £'000 £'000 £'000 £'000 Total segment revenue 1,406 338 120 - 1,864 Inter segment revenue (15) - - - (15) Segment revenue 1,391 338 120 - 1,849 Segment result 440 128 (55) (383) 130 Year ended 31 December 2006 Rest of the United Kingdom Europe World Group Total £'000 £'000 £'000 £'000 £'000 Total segment revenue 3,065 1,198 375 - 4,638 Inter segment revenue (30) - - - (30) Segment revenue 3,035 1,198 375 - 4,608 Segment result 860 529 (66) (1,200) 123 Group costs include directors' remuneration and central costs which are not directly attributable to geographic segments. 6. Income tax expense Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Current tax 106 50 163 Deferred tax (55) - (6) 51 50 157 Income tax expense for the period differs from the standard rate of taxation as follows: Profit on ordinary activities before taxation 164 114 94 Profit on ordinary activities multiplied by standard 49 34 28 rate of taxation of 30% (2006: 30%) Difference between tax rates applied to Group's (1) (4) (8) subsidiaries Expenses not deductible for tax purposes 8 25 130 (Capital allowances for period in excess of - (5) (4) depreciation) / depreciation in excess of capital allowances Recognition / (utilisation) of tax losses 3 - 17 Deferred tax in respect of share option expense (8) - (6) Total tax 51 50 157 7. Earnings per share (a) Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average of ordinary shares in issue during the period. Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Profit/(loss) attributable to equity holders of the 113 64 (63) Company Listing expenses - - 354 Adjusted profit/(loss) before listing expenses 113 64 291 attributable to equity holders of the Company Weighted average number of ordinary shares in issue 12,560,516 6,242,496 7,196,792 Basic earnings/(loss) per share 0.9p 1.0p (0.9)p Adjusted basic earnings/(loss) per share before listing 0.9p 1.0p 4.0p expenses (b) Diluted Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential ordinary shares. For share options, a calculation is made in order to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated in this way is compared with the number of shares that would have been issued assuming the exercise of the share options. Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Profit/(loss) attributable to equity holders of the 113 64 (63) Company Interest expense on convertible preference shares - 17 31 Profit/(loss) used to determine diluted earnings per 113 81 (32) share Listing expenses - - 354 Adjusted profit/(loss) before listing expenses 113 81 322 attributable to equity holders of the Company Weighted average number of ordinary shares in issue 12,560,516 6,242,496 7,196,792 Assumed conversion of convertible preference shares - 4,817,041 4,014,201 Share options 689,320 478,856 364,377 Weighted average number of ordinary shares for diluted 13,249,836 11,538,393 11,575,370 earnings per share Diluted earnings/(loss) per share 0.9p 0.7p (0.9)p Adjusted diluted earnings/(loss) per share before 0.9p 0.7p 2.8p listing expenses 8. Cash generated from/(used by) by operations Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited £'000 £'000 £'000 Profit before taxation 164 114 94 Depreciation 17 2 14 Net finance costs (17) 16 29 Share-based payment expense 27 17 22 Decrease/(increase) in inventory 18 12 (32) Increase in receivables (65) (304) (824) Increase in payables 58 199 536 Exchange differences 6 2 (6) Net cash generated from/(used by) by operations 208 58 (167) 9. Share capital During the period, 14,853 share options were exercised at an exercise price of 62.3 pence for 14,853 shares with a par value of 1 penny. The total proceeds were £9,251, of which £149 was recognized as share capital, and £9,102 as share premium. In January 2007, 290,529 share options were granted to Directors and employees with an exercise price set at the market price on the date of grant (162.5 pence per share). 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