System1 Group Regulatory News (SYS1)

10 Mar 2008 07:01

BrainJuicer Group PLC10 March 2008 Press release 10 March 2008 BrainJuicer Group PLC ("BrainJuicer" or "the Group") Audited Results for the Year ended 31 December 2007 Reported under IFRS BrainJuicer Group PLC (AIM: BJU), an innovative international online marketresearch agency, announces its audited results for the year ended 31 December2007. £'000 2003 2004 2005 2006 2007 Excluding Including Listing Listing expenses Expenses UK GAAP UK GAAP UK GAAP IFRS IFRS IFRS Revenue 1,032 2,614 2,936 4,608 4,608 6,566Operating Profit/(loss) (304) 187 2 477 123 844Profit/(loss) after Tax (301) 191 (38) 291 (63) 660 Highlights • Significant organic growth with revenue up by 42% to £6,566,000 (2006 £4,608,000) • Operating profit grew by 77% to £844,000 (2006: £477,000 before listing expenses) • Profit after tax increased by 127% to £660,000 (2006: £291,000 before listing costs) • Earnings per share - diluted and adjusted - increased by 79% to 5.0p (2006: 2.8p) • Cash increased by £642,000 to £1,875,000 (no borrowings) • All offices performed well, growing 63% in Holland, 38% in the UK and 14% in the US • Now working with 15 of the world's top 100 global companies (2006: 10 of the top 100) • Board strengthened by the appointment of Ken Ford as Chairman in September 2007 • Reputation for innovative research grew, winning the industry's 'Best Methodology' award for the 2nd time in 3 years (only agency to win twice in 20 years) Commenting on the results, John Kearon, Chief Executive of BrainJuicer GroupPLC, said: "The Board is delighted with the progress that the Group has made in2007, and we are pleased to report on our highly profitable growth. Therecognition that the Group has achieved in the industry has boosted ourreputation, and we are proud to now be working with 15 of the world's top 100global companies. The Board was strengthened in September 2007 with theappointment of Ken Ford as Chairman; Ken's support has been of great value tothe Board, and we look forward to his continuing involvement in the coming year.We have strengthened the account management teams across our global offices,and have appointed Susan Griffin as Vice President of Marketing and BusinessDevelopment based in New York in February 2008. "Revenue grew throughout 2007 in each of our business units, giving 42% growthoverall. In the coming year we intend to focus on geographic expansion, whichwill be driven by client demand, and to continue to work towards our goal ofbecoming a top 10 provider of market research. With the strong team that wehave in place and our reputation for innovation, we are well positioned toachieve this aim." For further information, please contact: BrainJuicer Group PLC Tel: +44 (0)20 7043 1000 John Kearon, Chief Executive Officerjohn.kearon@brainjuicer.comJames Geddes, Chief Financial Officerjames.geddes@brainjuicer.com Landsbanki Securities (UK) Limited Tel: +44 (0)20 7426 9000Nominated Adviser & BrokerFred Walsh / Simon Brown, Corporate Finance Media enquiries:Abchurch Communications Tel: +44 (0)20 7398 7700Heather Salmond / Joanne Shearsheather.salmond@abchurch-group.com CHAIRMAN'S STATEMENT The financial year to 31 December 2007 saw significant progress for the Group inits strategic ambition to consolidate its position as an innovative and crediblealternative to the large incumbent market research agencies. Global spend on research was approximately $25bn in 2007. The research markethas been growing consistently over the last decade and has seen explosive growthin online methodologies, in which BrainJuicer is a leading exponent. A largepercentage of the total market spend is from around 250 multinational consumergoods and service companies. They are very large, highly professional and attimes extremely demanding, buyers of market research. With the possibility of aforthcoming recession, it is also worth stating that their research spend tendsto be relatively stable through the economic cycle. These companies representthe Group's core target market. The Board believes the Group has a compelling service proposition, yet it is notcomplacent. We are therefore very pleased with the larger foothold the Grouphas forged within many of its clients. This has led to another year of strong,year-on-year organic growth in turnover, and with higher profits and margins,another year of proving out the Group's very attractive business model. BrainJuicer is an energetic and ambitious organisation and is also growing inmaturity and geographic reach, with offices in the UK, Holland and the US. Ithas long-term ambitions and is carefully putting in place the structures andcentralised infrastructure necessary to become a leading global market researchagency. I joined the business in September 2007, and find the Group's innovativeapproach, and the attractive high growth market backdrop, a compellingproposition for our clients and investors alike. The Group is well positioned,with its experienced team, growing shareholder base, and top clients, tocapitalise on the very significant potential at its disposal. Ken FordChairman CEO'S STATEMENT 2007, our first full year as a public company, has gone very much to plan. Thebusiness has grown substantially; we have strengthened the team, expandedgeographically, continued to innovate, won industry recognition and are nowworking with 15 of the world's top 100 companies. The Group has had another year of strong financial performance. Turnoverincreased by 42% to £6,566,000 (2006: £4,608,000). Operating profit rose 77% to£844,000 (2006: £477,000 before listing expenses), and profit after taxationrose 127% to £660,000 (2006: £291,000 before listing expenses). The Group's primary objective, put simply, is to develop into a top 10 globalprovider of market research, building on the foundations successfully laid overthe last eight years. Whilst we recognise that our aspirations are ambitiousand long-term, we believe the key requisites for success are in place. We have developed powerful new research techniques which address the innovationprocess of multinational consumer facing companies (the largest buyers ofresearch in the world). We focus on the difficult, strategic and high valueearly stage of our clients' innovation funnel. We have built a team of highly experienced researchers, operating from officesin the UK, Holland and the US, using our sophisticated technology platform. Allof our research is conducted on-line, and can be undertaken across the world.To date we have undertaken research in 54 countries, and 34 languages. Ourtechnology enables the Group to deliver innovative insightful research withinshorter time spans and at lower cost than traditional off-line techniques. Italso provides us with a profitable and scalable business model. Over the last financial year, we have continued to make significant progress onall fronts. Clients We are delighted with the manner in which our existing client relationships havecontinued to deepen, and with the new business we are winning against the largeincumbent agencies. We now have a number of very significant clients with whomwe are beginning to establish long-term relationships. We have deliveredresearch to 15 of the top 100 global companies over the 2007 financial year andhave been working with six of them for at least the last three financial years.We have a global mandate with one these companies, where we have beencommissioned on an on-going and global basis to test all their consumerinsights. This mandate was won in 2006 and is proving as significant asanticipated. BrainJuicer Labs BrainJuicer Labs, our R&D unit, consisting of a number of internal and externalresearch professionals, has continued to develop innovative new researchtechniques. We were particularly pleased to win ESOMAR's 'Best Methodology'award for FaceTracetm, a technique designed to measure emotional engagement.ESOMAR is one of the leading market research bodies in the world. Havingpreviously won ESOMAR's 'Best Methodology' award in 2005 for our PredictiveMarkets concept screening work, we believe we are the only agency to have wonthis award twice in the last 20 years. These awards demonstrate the growingcredibility of our research methods in the industry, and the success of ourinnovation program. FaceTracetm is now being used within a number of ourproducts. Board of Directors At the time of the Group's flotation on AIM in December 2006, the Boardrecognised the need to separate the roles of Chairman and Chief Executive inorder to further strengthen its governance and comply with best practice. Wewere therefore very pleased to welcome Ken Ford to the Board as non-executiveChairman. Ken was formerly Chief Executive and then Deputy Chairman of Teather& Greenwood, the investment bank, and brings a wealth of experience in corporatefinance and a strong understanding of shareholder value, strategic planning andcorporate transactions. Our Board of directors now comprises three experiencednon-executive directors, and two executive directors: myself and the ChiefFinancial Officer. The business is run by our management team consisting ofthree country managers as well as our Chief Financial Officer and myself. Team The team is continuing to grow steadily, building experienced account managementteams in each of our geographic locations and capable technical and corporatefunctions in the UK. I am very grateful to all for their hard work, dedicationand loyalty. John KearonChief Executive Officer BUSINESS AND FINANCIAL REVIEW The Business BrainJuicer is a full service market research agency, using its innovative,added value research approaches to compete internationally with the largetraditional market research providers who currently dominate the market. Thedistinctive, yet proven research approach is enabled by proprietary softwaretechnology which enables the Group to quickly and efficiently deliver predictivequantitative data together with added value, insightful and directivequalitative diagnostics. The Group serves its clients through account management teams comprisingexperienced market research professionals located in the UK, Holland and the US,who are supported by a tightly controlled centralised corporate and technicalinfrastructure. Objectives The Group's three key operational objectives are: • To deepen its client relationships by continuing to exceed expectations in each and every project it undertakes; • To continue to invent new, creative, added value online research techniques; • To continue to improve the sophistication of its technology and the quality and efficiency of its internal processes; We believe this will lead to significant revenue growth particularly from ourexisting client base, an increase in average project size, and increasedcapacity from our operations, which together will result in highly profitablegrowth on an ongoing basis. We are also looking to expand our geographic footprint, in a client-led low riskmanner. Performance Revenue grew in the year to 31 December 2007 in each of our business units: UK(38%), Holland (63%) and US (14%), giving 42% growth overall. Gross marginremained steady at 74% (74% in 2006). We served 115 clients, most of which are household names, and 15 are amongst thelargest 100 companies in the world. Repeat business continues to be high. Ourtop 20 clients delivered 76% or our revenue. 87% of our top twenty accountsgrew, 8% were new, and 5% declined (compared to 2006). Average headcount increased from 38 in 2006 to 45 in 2007, with almost all ofour headcount growth in account management. Our key productivity and efficiencymetric, gross margin per hour, grew by 13%, to £194 per hour (2006: £171 perhour). Revenue per headcount has also grown from £122,000 to £146,000. Administrative costs (excluding listing expenses) grew by 36% to £3,995,000,significantly below the rate of growth in revenue. Operating profit grew by 77% to £844,000 (2006: £477,000 before listing costs),and profit after tax by 127% to £660,000 (2006: £291,000, before listing costs).Adjusted diluted earnings per share increased from 2.8p to 5.0p. Our effective tax rate in FY2007 was 26% compared to 35% for FY2006 (beforedisallowable listing expenses). This is below the standard rate of 30% in theUK principally due to the recognition of US tax losses (previouslyunrecognised) and an effective tax rate of 25.5% applied to profits generated byour Dutch subsidiary. The Group generated cash from operations of £1,173,000 (£167,000 outflow in2006), invested £413,000 in our software technology, and repaid £108,000 offinancial liabilities (accrued preference dividends on Unilever Venture'spreference shares, prior to their conversion to ordinary shares). Cash balancesincreased by £642,000 to £1,875,000 at the year-end, with no borrowings. The Group has £669,000 in non-current assets, comprising £119,000 in computerhardware, fixtures and fittings, £328,000 in software technology and £222,000 indeferred tax assets, £202,000 of which relates to tax deductions available whenoption holders exercise their options. Trade and other receivables have grown from £1,612,000 to £2,630,000, but debtordays have remained steady at 86 days (2006: 82 days). Trade and other payables increased from £944,000 in 2006 to £2,092,000. Thisincrease was primarily due to an increase in deferred income from £80,000 to£551,000, and employee bonuses from £234,000 to £412,000. This is the second year for which the Group has prepared its accounts underInternational Financial Reporting Standards. It is worth highlighting theGroup's policy with regard to revenue recognition. Revenue is recognised onlyafter the final written debrief has been delivered to the client, except on therare occasion that a large project straddles a financial period end, and thatproject can be sub-divided into separate discrete deliverables; in suchcircumstances revenue is recognised on delivery of each separate deliverable. Prospects In conclusion, our business model is proving robust. Our client relationships,technology platform, innovative research products and experienced team, areproviding the highly profitable growth we had anticipated. Perhaps moreimportantly, we believe the Group's innovative positioning would be difficult toreplicate, and that our growth, therefore, is sustainable over the foreseeablefuture. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 2007 2006 £'000 £'000 ASSETS Non-current assetsProperty, plant and equipment 119 78Intangible assets 328 -Deferred tax asset 222 213 669 291 Current assetsInventories 16 45Trade and other receivables 2,630 1,612Cash and cash equivalents 1,875 1,233 4,521 2,890 Total assets 5,190 3,181 EQUITY Capital and reserves attributable to equity holders of the CompanyShare capital 126 126Share premium account 1,408 1,390Merger reserve 477 477Foreign currency translation reserve 51 (5)Other reserve 278 255Retained earnings 412 (277) Total equity 2,752 1,966 LIABILITIESCurrent liabilitiesTrade and other payables 2,092 944Current income tax liabilities 346 163Financial liabilities - 108 Total liabilities 2,438 1,215 Total equity and liabilities 5,190 3,181 CONSOLIDATED INCOME STATEMENT FOR YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000 Revenue 6,566 4,608 Cost of sales (1,727) (1,189) Gross profit 4,839 3,419 Administrative expenses (3,995) (2,942)Listing expenses - (354) Operating profit 844 123 Investment income 49 3Finance costs - (32) Profit before taxation 893 94 Income tax expense (233) (157) Profit/(loss) for the financial year 660 (63) Attributable to equity holders of the Company 660 (63) Earnings per share for profit attributable to the equity holders of the CompanyBasic earnings/(loss) per share 5.2p (0.9)p Diluted earnings/(loss) per share 5.0p (0.9)p All of the activities of the group are classed as continuing. CONSOLIDATED CASH FLOW STATEMENT FOR YEAR ENDED 31 DECEMBER 2007 2007 2006 £'000 £'000 Net generated from/(used by) operations 1,173 (167)Interest paid - (1)Tax paid (77) - Net generated from/(used by) operating activities 1,096 (168) Cash flows from investing activitiesPurchases of property, plant and equipment (83) (92)Purchase of intangible assets (330) -Interest received 49 3 Net cash used by investing activities (364) (89) Cash flows from financing activitiesProceeds from initial public offering net of share issue expenses - 1,399Proceeds from other issuance of Ordinary Shares 18 27Repayment of financial liabilities (108) - Net cash (used by)/ generated from financing activities (90) 1,426 Net increase in cash and cash equivalents 642 1,169 Cash and cash equivalents at beginning of year 1,233 64 Cash and cash equivalents at end of year 1,875 1,233 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2007 Foreign Share currency 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 - - - (6) - - (6) Loss for the financial year - - - - - (63) (63) Total income/(expenses) recognised for 2006 - - - (6) - (63) (69)Shares issued prior to Group reconstruction - - 21 - - - 21Transfer of liability element of preferred shares to equity - - 11 - - - 11Shares issued on IPO 14 1,486 - - - - 1,500Share issue costs deducted from equity - (101) - - - - (101)Share options exercised subsequent to Group reconstruction 1 5 - - - - 6Share-based payment charge - - - - 22 - 22Deferred tax credited to equity - - - - 207 - 207 15 1,390 32 - 229 - 1,666 At 31 December 2006 126 1,390 477 (5) 255 (277) 1,966 Exchange differences on consolidation - - - 56 - - 56Profit for the financial year - - - - - 660 660 Total income / (expense) recognised for 2007 - - - 56 - 660 716Exercise of share options - 18 - - (6) 6 18Unwinding of deferred tax on exercise of share options - - - - 2 23 25Share-based payment charge - - - - 54 - 54Deferred tax debited to equity - - - - (27) - (27) - 18 - - 23 29 70 At 31 December 2007 126 1,408 477 51 278 412 2,752 1. General Information BrainJuicer Group PLC ("the Company"), a United Kingdom resident, and itssubsidiaries (together "the Group") provide on-line market research services.The Company's shares are listed on the Alternative Investment Market of theLondon Stock Exchange ("AIM"). The address of the Company's registered officeis 13-14 Margaret Street, London, W1W 8RN. This preliminary financial information was approved by the Board of directors on7 March 2008. 2. Basis of Preparation The financial information set out above in respect of 31 December 2007 does notconstitute statutory accounts as defined in section 240 of the Companies Act.The financial information contained in this announcement has been extracted fromthe 2007 financial statements upon which the auditors' opinion is unqualifiedand does not include any statement under Section 237 of the Companies Act 1985. The preliminary announcement has been prepared under the historical costconvention. 3. Principal accounting policies The principal accounting policies adopted are consistent with those of theannual financial statements for the year ended 31 December 2006. In addition,the following new accounting policy has also been adopted: Intangible assets: Intangible assets are stated at cost less accumulated amortisation andaccumulated impairment losses. Acquired computer software licenses are capitalised at the cost of acquisition.These costs are amortised on a straight-line basis over their estimated usefuleconomic life of four years. Costs incurred in the development of identifiable and unique software productscontrolled by the group, and that will probably generate economic benefitsexceeding costs beyond one year, are recognised as intangible assets. Costsinclude professional fees and incremental employee costs required to bring thesoftware into working condition. Non-incremental costs are expensed under therelevant income statement heading. Furthermore, internally-generated software is recognised as an intangible assetonly if the group can demonstrate all of the following conditions (a) the technical feasibility of completing the intangible asset so that it will be available for use or sale.(b) its intention to complete the intangible asset and use or sell it.(c) its ability to use or sell the intangible asset.(d) how the intangible asset will generate probable future economic benefits. Among other things, the group can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.(e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.(f) its ability to measure reliably the expenditure attributable to the intangible asset during its development. Internally-generated intangible assets are amortised on a straight-line basisover their useful economic lives. Where no internally-generated intangible assetcan be recognised, development expenditure is recognised as an expense in theperiod in which it is incurred. Once completed and available for use in the business, internally developedsoftware is amortised on a straight line basis over its useful economic life of4 years. 4. Segment information The Group operates in one business segment, that of market research. Whilstthere are a number of products within the business segment, management reportingis principally based on location of service delivery. Accordingly the Grouppresents its primary segment analysis on this basis: Year ended 31 December 2007 United Rest of the Kingdom Europe World Group Total £ £ £ £ £ Total segment revenue 4,209 1,955 429 - 6,593Inter segment revenue (27) - - - (27) Segment revenue 4,182 1,955 429 - 6,566 Segment result 1,431 966 (194) (1,359) 844 Investment income 49 Profit before taxation 893 -Taxation (233) -Profit for the financial year 660 Segment assets 1,728 918 167 2,377 5,190 Segment liabilities (1,471) (498) (122) (347) (2,438) Net assets 257 420 45 2,030 2,752 Capital expenditure 86 37 10 280 413 Depreciation 39 3 3 - 45 Group costs include directors' remuneration and central project costs which arenot directly attributable to geographic segments. Group assets include centrally held cash at bank, intangible assets and deferredtax assets. Group liabilities include income tax liabilities. 4. Segment information (continued) Year ended 31 December 2006 United Rest of the Kingdom Europe World Group Total £'000s £'000s £'000s £'000s £'000s Total segment revenue 3,065 1,198 375 - 4,638Inter segment revenue (30) - - - (30) Segment revenue 3,035 1,198 375 - 4,608 Segment result 860 529 (66) (1,200) 123 Investment income 3Finance costs (32) -Profit before taxation 94 Taxation (157) Loss for the financial year (63) Segment assets 1,072 855 237 1,264 3,428 Segment liabilities (712) (179) (300) (271) (1,462) Net assets 360 676 (63) 993 1,966 Capital expenditure 86 3 3 - 92 Depreciation 13 1 - - 14 Group costs include Directors' remuneration and central project costs which arenot directly attributable to geographic segments. Group assets include centrally held cash at bank and deferred tax assets. Groupliabilities include income tax and financial liabilities. 5. Property, plant and equipment For the year ended 31 December 2007 Furniture, fittings and Computer equipment hardware Total £'000s £'000s £'000sAt 1 January 2007Cost 60 32 92Accumulated depreciation (7) (7) (14) Net book amount 53 25 78 Year ended 31 December 2007Opening net book amount 53 25 78Additions 19 64 83Depreciation charge for the year (15) (26) (41)Foreign exchange 1 (2) (1) Closing net book amount 58 61 119 At 31 December 2007Cost 80 94 174Accumulated depreciation (22) (33) (55) Net book amount 58 61 119 For the year ended 31 December 2006 At 1 January 2006Cost - - -Accumulated depreciation - - - Net book amount - - - Year ended 31 December 2006Opening net book amount - - -Additions 60 32 92Depreciation charge for the year (7) (7) (14)Foreign exchange - - - Closing net book amount 53 25 78 At 31 December 2006Cost 60 32 92Accumulated depreciation (7) (7) (14) Net book amount 53 25 78 6. Intangible assets Software development in Software progress Total £'000 £'000 £'000At 1 January 2007Cost - - -Accumulated amortisation - - - Net book amount - - - Year ended 31 December 2007Opening net book amount - - -Additions 50 280 330Depreciation charge for the year (4) - (4)Foreign exchange 2 - 2 Closing net book amount 48 280 328 At 31 December 2007Cost 52 280 332Accumulated depreciation (4) - (4) Net book amount 48 280 328 7. Earnings per share (a) Basic Basic earnings per share are calculated by dividing the profit attributable toequity holders of the Company by the weighted average of ordinary shares inissue during the year. 2007 2006 £'000 £'000 Profit/(loss) attributable to equity holders of the Company 660 (63)Listing expenses - 354 Profit/(loss) attributable to equity holders of the Company before listing expenses 660 291 Weighted average number of ordinary shares in issue 12,564,831 7,196,792 Basic earnings/(loss) per share 5.2p (0.9p) Adjusted basic earnings per share before listing expenses 5.2p 4.0p 7. Earnings per share (continued) (b) Diluted Diluted earnings per share is calculated by adjusting the weighted averagenumber of shares outstanding to assume conversion of all dilutive potentialordinary shares. For share options, a calculation is made in order to determinethe number of shares that could have been acquired at fair value (determined asthe average annual market share price of the Company's shares) based on themonetary value of the subscription rights attached to outstanding share options.The number of shares calculated in this way is compared with the number ofshares that would have been issued assuming the exercise of the share options. 2007 2006 £'000 £'000 Profit/(loss) attributable to equity holders of the Company 660 (63)Interest expense on convertible preference shares - 31 Profit/(loss) used to determine diluted earnings per share 660 (32) Listing expenses - 354 Adjusted profit used to determine adjusted diluted earnings per share 660 322 Weighted average number of ordinary shares in issue 12,564,831 7,196,792Assumed conversion of convertible preference shares - 4,014,201Share options 656,047 364,377 Weighted average number of ordinary shares for diluted earnings per share 13,220,878 11,575,370 Diluted earnings/(loss) per share 5.0p (0.9p) Adjusted diluted earnings per share before listing expenses 5.0p 2.8p The share options and convertible preference shares are considered to beanti-dilutive after listing expenses in 2006. 8. Cash used by operations 2007 2006 £'000 £'000 Profit before taxation 893 94Depreciation 45 14Net finance costs (49) 29Share-based payment expense 54 22Decrease/(increase) in inventory 29 (32)Increase in receivables (1,018) (824)Increase in payables 1,148 536Exchange differences 71 (6) Net cash generated from/(used by) operations 1,173 (167) 9. Share capital During the year 38,905 ordinary shares were issued for cash. The nominal valueof these shares was £389 and the consideration received was £19,142. This information is provided by RNS The company news service from the London Stock Exchange