BST.L Regulatory News (BST)

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29 September 2017

Big Sofa Technologies Group plc

("Big Sofa" or the "Company")

Unaudited, Condensed Half-Year Results for the Six Months Ended 30 June 2017

Big Sofa (AIM: BST), a fast-growing international video analytics provider to consumer brands and market research agencies, announces results for the six months ended 30 June 2017.

Highlights

· Revenues of £0.5 million in H1 2017

· Signed further landmark strategic partnerships in H1 (including with Procter and Gamble and IPSOS) that are expected to underpin long-term revenue growth alongside other major partnerships (including Unilever)

o Agreements provide clear and transparent commercial foundation from which to leverage Big Sofa's video analytics expertise across these global groups

o Partnerships are exposing Big Sofa to many household brand clients

o Significant pipeline of proposals developing with high win-rate track record

o Enterprise-level partnerships will generate recurring revenues as these customers apply Big Sofa's technology globally to multiple categories, sectors and clients

o Long-term partnerships with the potential to yield significant year-on-year growth

· Ongoing investment in product development

o Establishment of R&D function to develop future analytics capabilities

o Regular addition of new features to optimise video workflow and enable video data analytics at scale

· Recruitment of key personnel

o Embedded over 30 new people in both the UK and US

o US contributed 64% of commercial opportunities in H1

Post period-end highlights

· Completed Placing to raise gross proceeds of £1.5 million by the issue of 8,108,108 new Ordinary Shares at 18.5 pence per share

o Enables the Company to take full advantage of the opportunities presented by current major customers, to embed Big Sofa across their global organisations and to cultivate these future revenue streams that the Company believes will underpin significant growth

· Revenues in H2 expected to significantly outweigh H1 as growth momentum continues

Simon Lidington, Chief Executive Officer of Big Sofa, commented:

"Big Sofa has made significant strides in H1 in formalising key partnerships with huge global organisations which have stress-tested our technology and selected Big Sofa to be providers of video analytics technology and services. This intense work undertaken in H1 to develop these longer sales-cycle relationships will underpin the revenue growth in the second half, which we expect to outpace the first half.

Pursuing a strategy of being embedded with organisations of the scale and reach of Big Sofa's clients offers us the ability to leverage their global footprints to grow the use of Big Sofa's technology. While the sales cycle attached to pursuing customers of this scale is longer than that involved in targeting small agency or client relationships, we believe it will produce significantly larger and higher quality earnings in the longer term."

Enquiries

About Big Sofa Technologies Group plc

Big Sofa is a B2B technology business servicing the marketing and consumer insight industries with video analytics.

Our software platform collates, analyses and organises large volumes of raw/unstructured video content enabling companies to perform detailed and sophisticated consumer insight analysis; and make genuine use of their video content.

Until recently, video has been difficult and expensive to capture, upload, store, manage and analyse as a consumer insight tool. However, proliferation of smart phones has empowered consumers to speak directly to brands resulting in an evolution of consumer insight and data analytics techniques, with video emerging as a key platform in a massive $33 billion consumer research market.

Big Sofa's shares are admitted to trading on the London Stock Exchange's AIM market under the ticker BST.L.

To find out more, visit www.bigsofatech.com

Follow us on twitter at @bigsofatech

Operational Review

Introduction

Big Sofa has made excellent strategic progress in the first half of the year which is expected to underpin revenue growth in the second half and beyond. Revenues for the period were £0.5 million and we continue to see a steady flow of requests for proposals from both major brands and consumer insight agencies, demonstrating the ongoing traction with the Company's video analytics technology.

We have focused during the first half of the year on securing global partnerships and agreements with a small number of key clients and further laying the necessary groundwork to cultivate these sizeable future income streams. We believe that Big Sofa is proving to be a highly compelling partner for a number of these organisations, including Procter and Gamble ("P&G"), IPSOS and Unilever, as we seek to leverage our ability to turn unstructured video and image-driven content into structured, quantifiable data that can be analysed.

We believe the combination of our experience, know-how and technology is truly market leading and is central to our ability to secure sizable global service agreements with major clients and partners.

Strategy

During the first half of the year, the Company refined its strategy to focus on seeking and securing long-term technology-enabled partnerships with a steadily increasing number of key global customers and partners. This approach typically involves a 9-18-month sales cycle from initial client/partner contact to the generation of material income.

This longer sales cycle will, the board believes, deliver significantly larger and higher quality earnings. The Company has, therefore, rebalanced the focus of its sales resource away from small agency/client relationships, which may be faster to put in place, but offer much lower overall revenues from a series of smaller projects, requiring disproportionate client service. With Big Sofa now well advanced in the sales cycle with IPSOS and P&G, the Company expects to generate attractive income from them in the second half of the financial year and beyond.

Our strong commercial base gives the board confidence in Big Sofa's ability to secure an increasing number of similar client agreements to those already signed, further enhancing our reputation as a leading global video analytics provider.

New Business

During the first six months of 2017, the Company started to implement its growth strategy successfully, securing several key agreements in addition to its existing partnership with Unilever, including:

· signing a global three-year Master Service Agreement with IPSOS which sets out the terms upon which the entire market research organisation and its affiliates are encouraged to co-brand with Big Sofa to deliver video analytics technology and services;

· signing a Supplier Service Agreement with Survey Sampling International ("SSI"), a leading global provider of data solutions and technology for consumer and business-to-business survey research, under which Big Sofa supplies SSI with sophisticated video capture and analytics technology and services for their digital surveys; and

· becoming an approved supplier to P&G on their global technology and research rosters, able to undertake projects that facilitate the acquisition and analysis of both new and existing video content for P&G worldwide.

By securing these global agreements in the first six months of the year, and putting in place a commercial framework upon which to mutually engage, Big Sofa can now focus on maximising the many commercial opportunities which these relationships provide.

Big Sofa continued to make good progress with IPSOS in the first half, writing co-branded proposals for approximately 30 potential new global clients. The Company was also invited to exhibit at two IPSOS marketing schools in Asia and the US enabling Big Sofa to present its analytics platform to over 800 key IPSOS people.

In addition to being formally admitted to two global rosters with P&G for Global Business Services and Consumer Marketing Knowledge respectively, the Company was appointed as P&G's global video partner for its knowledge management platform, First Stop Data Shop. This global service is expected to go live in H2 and will involve uploading video content from both new and existing projects. We were also invited as one of a select group of partners to exhibit at both P&G's European Supplier Conference in Geneva and its R&D Conference in Cincinnati, enabling our team to engage proactively with over 250 P&G-focused delegates.

Proposals worth over £0.5 million were written for P&G in May and June with circa 40% of that commissioned and delivered by the end of June; and almost all of which was designed to test Big Sofa's ability to deliver against P&G's global needs across all its product categories. Our success in delivering against P&G's requirements is testament to the excellent progress we continue to make with this partnership.

Furthermore, we established commercial partnerships with Market Logic Systems, a knowledge management company based in Germany, to provide video technology support and insight; as well as with KnowledgeHound, an insight activation technology provider, to support in the processing of raw, unstructured client data.

Our operations team is also actively exploring broader opportunities with video capture specialists to strengthen our ability to undertake observational video projects anywhere in the world.

Research and Development

Big Sofa has established an R&D function to develop future analytics capabilities. We continued to invest in product development throughout the first half of the year resulting in the regular release of new features to optimise video workflow and to enable video data analytics at scale.

US Hub

The US hub was fully in place by the start of 2017 and quickly started to make a significant impact, contributing 46% of all commercial opportunities in Q1 and 64% in H1 overall. With the Company's main US office located in Philadelphia, and with key personnel, Kevin Dermody in Chicago and Emily Grogan in Cincinnati, the board is confident that the US hub has the potential to secure material revenue from an increasing number of corporate clients whose global headquarters are in the US.

Strategic Advisory Appointments

Finally, we announced after the period end on 10 July 2017, the appointments of former Unilever plc director, Ralph Kugler, and market research expert, Simon Chadwick, as strategic advisors to the board. Both Simon and Ralph are strongly aligned with our belief that video will continue to transform the consumer insight industry and that Big Sofa is exceptionally well-placed to capitalise on this shift.

Outlook

We continue to see good demand for our video analytics technology and services, having now put in place a strong commercial platform from which to upsell. Our existing strategic partnerships provide a significant base from which to both market and sell our services globally with growing sales momentum expected in the second half of the year.

Our commercial teams, both in the UK and in our more recently formed US hub, have been highly successful in securing further new partnerships and strategic alliances with both brands and consumer insight providers. We believe our strategic focus on securing long-term commercial partnerships with global organisations that want to analyse large volumes of unstructured video content will provide Big Sofa with sustainable long-term annuity revenues.

We are in the final stages of negotiating another long-term contract with a major global manufacturer, which we expect to contribute material revenue in Q4 2017 and grow further in 2018.

We are also in advanced contractual discussions with 10 new potential global clients/partners in the pharmaceutical, automotive, financial services, consumer packaged goods, retail, consultancy and consumer insight sectors. We are confident that a number of these will translate into revenue in Q4 2017 and will grow into significant clients/partners for Big Sofa during 2018.

The board believes that the outlook for Big Sofa is positive with material revenue growth expected to be generated in the second half of the current financial year. Revenues in the second half are expected to significantly outweigh those in the first half. The Company's strong new business pipeline, robust technology platform and clear strategic focus leave us well placed to capitalise on a significant market opportunity.

Simon Lidington

Chief Executive Officer

28 September 2017

Financial Review

Revenue was only marginally up against the previous year's first half. This was a result of the change in strategy which saw the Company shift its focus from lower margin business that had, in the first half of 2016, accounted for a large portion of revenues, to that of cultivating higher quality revenues from the major global clients with whom strategic partnerships have been formed. This led to revenue from IPSOS almost quadrupling and revenue from P&G more than doubling. This trend is set to continue into the second half of 2017 and beyond. Gross profit increased by 30% to £356,000, demonstrating the scalability of the Company's proprietary technology as well as the payoff of focusing on higher margin projects.

The period under review follows the Company's admission to AIM in December 2016, the proceeds of which supported Big Sofa in the further development of our technology as well as the expansion of our product offering. During the period, significant resource and effort was expended on building commercial partnerships with key counterparties. The Company is building a client base with real long-term value as we embed ourselves into the processes of global blue-chip brands and consumer insight agencies.

We continue to invest in forging global partnerships and in developing our technology to maintain our market leading position. Our global reach puts us in a good position to anticipate continued, high-quality revenue growth from established global companies, whilst maintaining a tight control of expenses. The adjustment in our strategy during H1 is starting to yield more significant revenue from the global clients/partners already won; and continues to deliver meaningful new prospects that we expect will translate into material revenue during 2018.

Investment Initiatives

Following the signing of the P&G agreement, the board decided that further organic investment was required if Big Sofa is to both fully maximise the long-term potential offered by such major global clients, and to develop its new business opportunities with similar clients.

On 12 September 2017, we completed a placing to raise gross proceeds of £1.5 million by the issue and allotment by the Company of 8,108,108 new Ordinary Shares at a placing price of 18.5 pence per share. Cash reserves stood at approximately £0.4 million at 30 June 2017 and the placing proceeds provided additional working capital to service demand from the large, global brand and consumer insight agency clients referred to above. The board continues to manage the Company's cash reserves carefully, and monitor its expected cash flows, to ensure the Company has sufficient funding for its requirements and to take full advantage of the opportunities presented by both its existing client base and a growing pipeline of new business opportunities.

Joe MacCarthy

Chief Financial Officer

28 September 2017

Condensed Consolidated Statement of Comprehensive Income

For the period to 30 June 2017

Condensed Consolidated Statement of Financial Position

For the period to 30 June 2017

Condensed Consolidated Statement of Changes in Equity

For the period to 30 June 2017

Condensed Consolidated Statement of Cash Flows

For the period to 30 June 2017

Notes to the Condensed Half Year Report for the period to 30 June 2017

1. General Information

Big Sofa Technologies Group Plc is a company incorporated and domiciled in England and Wales. The Company is listed on the AIM market of the London Stock Exchange (ticker: BST).

The financial information set out in this Half Yearly report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The half yearly report has been prepared in accordance with IAS 34 'Interim Financial Reporting' and has not been audited by the group auditors. The group's statutory financial statements for the year ended 31 December 2016, prepared under International Financial Reporting Standards ("IFRS"), have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Sections 498(2) and 498 (3) of the Companies Act 2006.

Copies of the annual statutory accounts and the Half Yearly report can be found on the Company's website at http://www.bigsofatech.com/.

2. Basis of Preparation and Significant Accounting Policies

This Half Year report has been prepared using the historical cost convention, on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, using accounting policies which are consistent with those set out in the financial statements for the year ended 31 December 2016.

New and Amended Standards Adopted by the Group

There are no IFRSs or IFRIC interpretations that are effective for the first time in this financial period that would be expected to have a material impact on the group.

3. Earnings/(Loss) per Share

Basic earnings / (loss) per share is calculated by dividing the earnings attributable shareholders by the weighted average number of ordinary shares outstanding during the period.

Reconciliations are set out below:

Basic and diluted earnings per share are not the same, since where a loss is incurred the effect of outstanding share options and warrants is considered anti-dilutive and is ignored for the purpose of the loss per share calculation. As at 30 June 2017 there were 8,574,853 outstanding share options and 567,531 outstanding share warrants.

4. Share Capital

Issued share capital compromises:

During the six months to 30 June 2017, no ordinary shares were issued by the Company.

5. Post Balance Sheet Events

In September 2017, 8,108,108 new Ordinary Shares were issued at 18.5 pence per share, raising gross proceeds of £1.5 million.

6. Availability of Report

A copy of this half-year report is available on the Company's website at www.bigsofatech.com