Final Results

BrainJuicer Group PLC 10 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 market research agency, announces its audited results for the year ended 31 December 2007. £'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 6,566 Operating Profit/(loss) (304) 187 2 477 123 844 Profit/(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 Group PLC, said: 'The Board is delighted with the progress that the Group has made in 2007, and we are pleased to report on our highly profitable growth. The recognition that the Group has achieved in the industry has boosted our reputation, and we are proud to now be working with 15 of the world's top 100 global companies. The Board was strengthened in September 2007 with the appointment of Ken Ford as Chairman; Ken's support has been of great value to the 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 Business Development based in New York in February 2008. 'Revenue grew throughout 2007 in each of our business units, giving 42% growth overall. In the coming year we intend to focus on geographic expansion, which will be driven by client demand, and to continue to work towards our goal of becoming a top 10 provider of market research. With the strong team that we have in place and our reputation for innovation, we are well positioned to achieve this aim.' 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 Nominated Adviser & Broker Fred Walsh / Simon Brown, Corporate Finance Media enquiries: Abchurch Communications Tel: +44 (0)20 7398 7700 Heather Salmond / Joanne Shears heather.salmond@abchurch-group.com CHAIRMAN'S STATEMENT The financial year to 31 December 2007 saw significant progress for the Group in its strategic ambition to consolidate its position as an innovative and credible alternative to the large incumbent market research agencies. Global spend on research was approximately $25bn in 2007. The research market has been growing consistently over the last decade and has seen explosive growth in online methodologies, in which BrainJuicer is a leading exponent. A large percentage of the total market spend is from around 250 multinational consumer goods and service companies. They are very large, highly professional and at times extremely demanding, buyers of market research. With the possibility of a forthcoming recession, it is also worth stating that their research spend tends to be relatively stable through the economic cycle. These companies represent the Group's core target market. The Board believes the Group has a compelling service proposition, yet it is not complacent. We are therefore very pleased with the larger foothold the Group has 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 in maturity and geographic reach, with offices in the UK, Holland and the US. It has long-term ambitions and is carefully putting in place the structures and centralised infrastructure necessary to become a leading global market research agency. I joined the business in September 2007, and find the Group's innovative approach, and the attractive high growth market backdrop, a compelling proposition for our clients and investors alike. The Group is well positioned, with its experienced team, growing shareholder base, and top clients, to capitalise on the very significant potential at its disposal. Ken Ford Chairman CEO'S STATEMENT 2007, our first full year as a public company, has gone very much to plan. The business has grown substantially; we have strengthened the team, expanded geographically, continued to innovate, won industry recognition and are now working with 15 of the world's top 100 companies. The Group has had another year of strong financial performance. Turnover increased 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 taxation rose 127% to £660,000 (2006: £291,000 before listing expenses). The Group's primary objective, put simply, is to develop into a top 10 global provider of market research, building on the foundations successfully laid over the last eight years. Whilst we recognise that our aspirations are ambitious and long-term, we believe the key requisites for success are in place. We have developed powerful new research techniques which address the innovation process of multinational consumer facing companies (the largest buyers of research in the world). We focus on the difficult, strategic and high value early stage of our clients' innovation funnel. We have built a team of highly experienced researchers, operating from offices in the UK, Holland and the US, using our sophisticated technology platform. All of 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. Our technology enables the Group to deliver innovative insightful research within shorter time spans and at lower cost than traditional off-line techniques. It also provides us with a profitable and scalable business model. Over the last financial year, we have continued to make significant progress on all fronts. Clients We are delighted with the manner in which our existing client relationships have continued to deepen, and with the new business we are winning against the large incumbent agencies. We now have a number of very significant clients with whom we are beginning to establish long-term relationships. We have delivered research to 15 of the top 100 global companies over the 2007 financial year and have 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 been commissioned on an on-going and global basis to test all their consumer insights. This mandate was won in 2006 and is proving as significant as anticipated. BrainJuicer Labs BrainJuicer Labs, our R&D unit, consisting of a number of internal and external research professionals, has continued to develop innovative new research techniques. 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. Having previously won ESOMAR's 'Best Methodology' award in 2005 for our Predictive Markets concept screening work, we believe we are the only agency to have won this award twice in the last 20 years. These awards demonstrate the growing credibility of our research methods in the industry, and the success of our innovation program. FaceTracetm is now being used within a number of our products. Board of Directors At the time of the Group's flotation on AIM in December 2006, the Board recognised the need to separate the roles of Chairman and Chief Executive in order to further strengthen its governance and comply with best practice. We were therefore very pleased to welcome Ken Ford to the Board as non-executive Chairman. Ken was formerly Chief Executive and then Deputy Chairman of Teather & Greenwood, the investment bank, and brings a wealth of experience in corporate finance and a strong understanding of shareholder value, strategic planning and corporate transactions. Our Board of directors now comprises three experienced non-executive directors, and two executive directors: myself and the Chief Financial Officer. The business is run by our management team consisting of three country managers as well as our Chief Financial Officer and myself. Team The team is continuing to grow steadily, building experienced account management teams in each of our geographic locations and capable technical and corporate functions in the UK. I am very grateful to all for their hard work, dedication and loyalty. John Kearon Chief 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 large traditional market research providers who currently dominate the market. The distinctive, yet proven research approach is enabled by proprietary software technology which enables the Group to quickly and efficiently deliver predictive quantitative data together with added value, insightful and directive qualitative diagnostics. The Group serves its clients through account management teams comprising experienced market research professionals located in the UK, Holland and the US, who are supported by a tightly controlled centralised corporate and technical infrastructure. 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 our existing client base, an increase in average project size, and increased capacity from our operations, which together will result in highly profitable growth on an ongoing basis. We are also looking to expand our geographic footprint, in a client-led low risk manner. 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 margin remained steady at 74% (74% in 2006). We served 115 clients, most of which are household names, and 15 are amongst the largest 100 companies in the world. Repeat business continues to be high. Our top 20 clients delivered 76% or our revenue. 87% of our top twenty accounts grew, 8% were new, and 5% declined (compared to 2006). Average headcount increased from 38 in 2006 to 45 in 2007, with almost all of our headcount growth in account management. Our key productivity and efficiency metric, gross margin per hour, grew by 13%, to £194 per hour (2006: £171 per hour). 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 (before disallowable listing expenses). This is below the standard rate of 30% in the UK principally due to the recognition of US tax losses (previously unrecognised) and an effective tax rate of 25.5% applied to profits generated by our Dutch subsidiary. The Group generated cash from operations of £1,173,000 (£167,000 outflow in 2006), invested £413,000 in our software technology, and repaid £108,000 of financial liabilities (accrued preference dividends on Unilever Venture's preference shares, prior to their conversion to ordinary shares). Cash balances increased 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 computer hardware, fixtures and fittings, £328,000 in software technology and £222,000 in deferred tax assets, £202,000 of which relates to tax deductions available when option holders exercise their options. Trade and other receivables have grown from £1,612,000 to £2,630,000, but debtor days have remained steady at 86 days (2006: 82 days). Trade and other payables increased from £944,000 in 2006 to £2,092,000. This increase 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 under International Financial Reporting Standards. It is worth highlighting the Group's policy with regard to revenue recognition. Revenue is recognised only after the final written debrief has been delivered to the client, except on the rare occasion that a large project straddles a financial period end, and that project can be sub-divided into separate discrete deliverables; in such circumstances 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, are providing the highly profitable growth we had anticipated. Perhaps more importantly, we believe the Group's innovative positioning would be difficult to replicate, and that our growth, therefore, is sustainable over the foreseeable future. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 2007 2006 £'000 £'000 ASSETS Non-current assets Property, plant and equipment 119 78 Intangible assets 328 - Deferred tax asset 222 213 669 291 Current assets Inventories 16 45 Trade and other receivables 2,630 1,612 Cash 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 Company Share capital 126 126 Share premium account 1,408 1,390 Merger reserve 477 477 Foreign currency translation reserve 51 (5) Other reserve 278 255 Retained earnings 412 (277) Total equity 2,752 1,966 LIABILITIES Current liabilities Trade and other payables 2,092 944 Current income tax liabilities 346 163 Financial 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 3 Finance 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 Company Basic 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 activities Purchases 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 activities Proceeds from initial public offering net of share issue expenses - 1,399 Proceeds from other issuance of Ordinary Shares 18 27 Repayment 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 - - - 21 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 - - - - 22 - 22 Deferred 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 - - 56 Profit for the financial year - - - - - 660 660 Total income / (expense) recognised for 2007 - - - 56 - 660 716 Exercise of share options - 18 - - (6) 6 18 Unwinding of deferred tax on exercise of share options - - - - 2 23 25 Share-based payment charge - - - - 54 - 54 Deferred 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 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. This preliminary financial information was approved by the Board of directors on 7 March 2008. 2. Basis of Preparation The financial information set out above in respect of 31 December 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act. The financial information contained in this announcement has been extracted from the 2007 financial statements upon which the auditors' opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985. The preliminary announcement 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: Intangible assets are stated at cost less accumulated amortisation and accumulated 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 useful economic life of four years. Costs incurred in the development of identifiable and unique software products controlled by the group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include professional fees and incremental employee costs required to bring the software into working condition. Non-incremental costs are expensed under the relevant income statement heading. Furthermore, internally-generated software is recognised as an intangible asset only 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 basis over their useful economic lives. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Once completed and available for use in the business, internally developed software is amortised on a straight line basis over its useful economic life of 4 years. 4. 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: Year ended 31 December 2007 United Rest of the Kingdom Europe World Group Total £ £ £ £ £ Total segment revenue 4,209 1,955 429 - 6,593 Inter 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 are not directly attributable to geographic segments. Group assets include centrally held cash at bank, intangible assets and deferred tax 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 - 4,638 Inter segment revenue (30) - - - (30) Segment revenue 3,035 1,198 375 - 4,608 Segment result 860 529 (66) (1,200) 123 Investment income 3 Finance 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 are not directly attributable to geographic segments. Group assets include centrally held cash at bank and deferred tax assets. Group liabilities 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 £'000s At 1 January 2007 Cost 60 32 92 Accumulated depreciation (7) (7) (14) Net book amount 53 25 78 Year ended 31 December 2007 Opening net book amount 53 25 78 Additions 19 64 83 Depreciation charge for the year (15) (26) (41) Foreign exchange 1 (2) (1) Closing net book amount 58 61 119 At 31 December 2007 Cost 80 94 174 Accumulated depreciation (22) (33) (55) Net book amount 58 61 119 For the year ended 31 December 2006 At 1 January 2006 Cost - - - Accumulated depreciation - - - Net book amount - - - Year ended 31 December 2006 Opening net book amount - - - Additions 60 32 92 Depreciation charge for the year (7) (7) (14) Foreign exchange - - - Closing net book amount 53 25 78 At 31 December 2006 Cost 60 32 92 Accumulated depreciation (7) (7) (14) Net book amount 53 25 78 6. Intangible assets Software development in Software progress Total £'000 £'000 £'000 At 1 January 2007 Cost - - - Accumulated amortisation - - - Net book amount - - - Year ended 31 December 2007 Opening net book amount - - - Additions 50 280 330 Depreciation charge for the year (4) - (4) Foreign exchange 2 - 2 Closing net book amount 48 280 328 At 31 December 2007 Cost 52 280 332 Accumulated 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 to equity holders of the Company by the weighted average of ordinary shares in issue 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 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. 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 7,196,792 Assumed conversion of convertible preference shares - 4,014,201 Share 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 be anti-dilutive after listing expenses in 2006. 8. Cash used by operations 2007 2006 £'000 £'000 Profit before taxation 893 94 Depreciation 45 14 Net finance costs (49) 29 Share-based payment expense 54 22 Decrease/(increase) in inventory 29 (32) Increase in receivables (1,018) (824) Increase in payables 1,148 536 Exchange 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 value of 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

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