Press Release

20 September 2012

 

BrainJuicer Group PLC

("BrainJuicer" or "the Company")

 

Interim Results for the Six Months ended 30 June 2012

 

 

Innovative, international online market researcher, BrainJuicer Group PLC (AIM: BJU) today announces its Interim Results for the six months ended 30 June 2012.

 

Financial Highlights

é	14% revenue growth to £10,379,000 (H1 2011: £9,089,000)
é	14% growth in operating profit to £716,000 (H1 2011: £628,000)
é	14% increase in profit before tax to £717,000 (H1 2011: £630,000)
é	16% growth in fully diluted earnings per share to 3.7p (H1 2011: 3.2p)
é	13% growth in interim dividend to 0.85p (H1 2011: 0.75p)
é	216,361 shares bought back for £669,000 (H1 2011: 128,241 shares for £353,000)
é	£2,411,000 cash (30 June 2011: £2,057,000) and no debt

 

Operational Highlights

é	Strong growth in the United States, Switzerland, China and Brazil
é	Opened an office in Italy, now established in nine countries
é	Unique, market challenging "Juicy" products generated 66% of revenue (H1 2011: 53%)
é	Increased average headcount to 134 (H1 2011: 111)
é	85% increase in Labs product development team spend to promote future growth
é	13% increase in IT spend to continue building operational infrastructure
é	Won the ESOMAR congress 2012 Best Paper award

 

Commenting on the Company's results, John Kearon, Founder and Chief Juicer of BrainJuicer, said:

 "We are delighted to have continued our significant international growth in revenue and profit, all organic, despite these challenging economic times.

Our commitment to turning human understanding into business advantage is helping our clients achieve greater commercial success and delivering BrainJuicer an innovative reputation and significantly more business from many of the world's biggest companies.

Our game-changing Juicy products have grown as a percentage of our business and attract industry attention and client commitment.  We punch above our weight in the industry, and continue to gain traction with the major buyers of market research in the large and strategically important markets in which our clients operate. Continuing to invest in new offices, great talent, innovation, marketing and technology is how we delight our clients, grow our business profitability and deliver consistent growth in earnings and dividends for shareholders.  

During the first half of 2012 we opened a new office in Italy and saw very encouraging growth in the USA, Switzerland and our Brazil and China offices. As ever, revenue visibility is limited as we approach the seasonally important final quarter of the year.  Nevertheless the Board is confident that the Company will make further progress in the second half and we believe we are on track to meet market expectations for the year as a whole."

The company can be found at www.brainjuicer.com.

 

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
Canaccord Genuity Limited	Tel: +44 (0)20 7050 6500
Simon Bridges / Henry Fitzgerald-O'Connor sbridges@canaccordgenuity.com

Media enquiries:

Lauren Tilden, Senior Marketing Executive lauren.tilden@brainjuicer.com

Tel: +1 (425) 830 1904

 

Interim Statement

 

Introduction

 

With revenue and operating profit up 14% in both actual and constant currency terms, the first half of 2012 represented another period of strong organic growth.  We achieved this while continuing to strengthen our teams, broaden our geographic coverage, build our infrastructure and invest in product innovation.  Our average headcount increased to 134 full time equivalents, from 111 in H1 2011; we opened an office in Italy (to add to our offices in the UK, US, Switzerland, Germany, Netherlands, China, and Brazil, and our licence partner in Australia); we increased spend in our IT and operational infrastructure by 13%; and we increased our Labs product development team spend by 85%.  We remain focussed on our "Juicy" products - those that run counter to traditional research approaches, that challenge the notion that consumers are rational decision makers, and which instead use our own techniques based on emotion and behavioural economics.  Our clients, and in particular large multi-national companies, are continuing to respond: Juicy products accounted for 66% of revenue in the first half of the year (up from 53% in our 2011 financial year), and have been used by 9 of the world's 20 largest buyers of market research so far this year.

 

Financial Performance

 

Gross profit, our main internal financial performance indicator, grew 12%, which, whilst below our five year trend growth, is, in the Board's view, a good performance in the current climate.

 

We have continued to maintain tight control over our costs while investing in those areas necessary to facilitate future growth: geographic reach, operational capacity and efficiency, and the development and validation of new products.  Our expanded BrainJuicer Labs team, where we have increased spend significantly, is a good example of this, as is ongoing increases in our IT infrastructure (our biggest area of overhead cost).  Overall, revenue per employee has declined a little (H1 2012: £77,000; H1 2011: £82,000) but this has been offset by lower staff costs per employee, resulting in operating costs growing in line with gross profit growth (12%).

 

Operating profit rose by 14% to £716,000 (H1 2011: £628,000), and as interest income from our cash balances was again negligible, pre-tax profit also grew 14% to £717,000 (H1 2011: £630,000). Our effective tax rate was similar to last year at 33% (H1 2011: 34%), and profit after tax increased by 16% to £481,000 (H1 2011: £416,000).  Basic earnings per share grew by 15% to 3.8p (H1 2011: 3.3p) and fully diluted earnings per share by 16% to 3.7p (H1 2011: 3.2p).

 

The Company generated a small cash outflow from operations of £170,000, compared to a cash inflow of £268,000 in the first half of 2011.  This reflected a swing in working capital, partly due to the timing of payments to creditors, and partly due to a higher receivables balance following a higher percentage of revenue in May and June this year than last year (May and June 2012 revenue comprised 51% of H1 revenue whereas in 2011 May and June revenue comprised only 42% of H1 revenue).  Average debtor days were 65 compared to 68 at 30 June 2011.  We paid tax of £425,000 (H1 2011: £420,000), incurred £119,000 in capital expenditure, down from £242,000 in the first half of 2011, received a small amount of interest, leaving a £713,000 cash outflow before financing activities (H1 2011: £392,000 outflow).  We expect to return to positive cash inflow over the second half of the year.

 

The Company paid its 2011 final dividend of £283,000 in the first half of the year (H1 2011: £224,000).  We repurchased 216,361 shares relating to stock options that were exercised for £669,000 of which £389,000 was paid before half year end and £280,000 after.  By comparison, in the first half of 2011 we repurchased 128,241 shares relating to exercised options, for £353,000 (of which £161,000 was paid before half year end and £192,000 after).

 

The Company's cash balance at 30 June 2012 was £2,411,000 (30 June 2011: £2,057,000; 31 December 2011: £3,683,000).  BrainJuicer has no debt.

 

Our issued share capital remained constant over the first half of the year numbering 13,136,448 shares at 30 June 2012 of which treasury shares numbered 617,964 (31 December 2011: 657,195).  The Board is keen to minimise the dilutive impact of stock options.  The Company has therefore been continuing to use its cash to repurchase option shares as they have been exercised, and plans to continue to do so for as long as the Board believes in the Company's share price growth potential, the Company has sufficient cash resources, and providing it remains in compliance with its shareholder approved authorities and with AIM and other rules.  We had 965,420 outstanding stock options at 30 June 2012 down from 1,204,614 as at 31 December 2011.   There has been no change in the additional long-term incentive scheme for senior executives, which was set up in 2010 (and which is described in the remuneration report on page 16 of our 2011 annual report) other than the issue of a number of units to three new members of the management team and the recycling of lapsed units to existing participants within the scheme limits.

 

We are maintaining dividend growth broadly in line with earnings per share growth, and the Company will be paying an interim dividend of 0.85p, 13% higher than last year's interim payment.  This will be paid on 25 October 2012 to shareholders on the register on 28 September 2012, and the shares will become ex dividend on 26 September 2012.

 

Operations

 

Our two largest operations - in the UK and the US - grew revenue by 3% and 16% respectively.  The UK represented 37% of our H1 revenue and the US 33%, and so between them they generated more than two thirds of our revenue.  Our UK business is our most efficient and profitable, generating 41% of H1 operating profit (before allocation of central costs).  However, it is our longest serving operation and has the largest percentage of revenue from our older, slower growth, non-Juicy ("Twist") products.  We are in the process of transitioning our Twist revenue streams to Juicy wherever possible, and it is pleasing to report that Juicy revenue increased to 48% of the UK total in H1 2012 from 39% in the same period last year.

 

In the US we continue to make good progress and grow profitably.  Whilst not yet as profitable as the UK, our US business nonetheless generated 34% of our H1 operating profit (before allocation of central costs), and is growing more rapidly.  Ari Popper, the head of our US business, has decided to move on to set up his own innovation consultancy.  We are very grateful to Ari for the healthy business and strong team he has built over the last five and a half years.  We have promoted three of his senior team to jointly run the US operation, and are confident that they will continue to build on the successful platform which the Company has established in the world's largest and most competitive market research market.

 

Switzerland had another period of very strong growth (with revenue up 76%) following growth of 52% in H1 2011.  Our German revenue, however, was down 24% following very high (126%) growth in H1 2011, reflecting some of the intrinsic volatility in our business.  In aggregate these offices contributed 16% of total revenue and 17% of profit.

 

Revenues from our Dutch business declined significantly as the last remnants of business from its hitherto largest client fell away, following changing spending patterns within that client, and the business made a small operating loss.  The team has been restructured, and is now being managed by the head of our German operation.

 

Our newer offices in China and Brazil have made excellent progress, with combined H1 revenue growing to £1,144,000 from £210,000 in H1 2011, and combined H1 operating profits (before allocation of central costs) rising to £512,000 (H1 2011: £166,000 loss).  Whilst the economic backdrop in each of these two countries is very different from those in our European and US markets, we are selling the same Juicy products, often to the same multi-national clients, using the same centralised technology and operational processes as we do elsewhere.  The dynamics of these businesses are therefore similar to those operating in our other markets, and we are planning to build them in the same way also.

 

Our overseas offices enable us both to develop business with new, local clients and to better serve our multi-national clients.  We do not need to have offices wherever these multi-national clients operate, but it is helpful to have a presence in locations where they have their main market research buying points.  Our recently opened office in Milan, Italy is a good example of this.  We will continue to establish offices in new countries as opportunities arise, with India next.

 

All of our offices are continuing to focus on our Juicy products, and this has been helped by expanding our Juice Generation consultancy, where we help create (and not just test) new ideas, insights, concepts and marketing material for our clients.  This goes beyond the normal quantitative market research service, and helps to develop deeper and more meaningful client relationships earlier in their innovation processes.

 

Outlook

 

We remain confident in our long term growth potential, and we base that confidence on a number of factors, the prime one being our philosophical approach to research and the direction the industry is moving in.  The most important current trend in our industry involves understanding how people make decisions.  A growing body of evidence in psychology, neuroscience, sociology and behavioural economics undermines traditional assumptions that humans are rational, make conscious decisions, and can articulate why they make them - the bedrocks of traditional research.  People's choices are often unconscious and highly influenced by their social, personal and environmental context.  We humans are poor predictors of our own behaviour, and poor at explaining it too.  We rely instead on rationalisations of behaviour which may have nothing to do with the original triggers.  Research is changing as a result, with agencies like BrainJuicer and our offering of Juicy products in the vanguard.  The industry is conservative, but we believe the barriers will continue to come down as the weight of data and large-scale proof continue to validate products such as ours, and as the industry continues to recognise our approach with awards such as ESOMAR's Best Paper award at their recent annual congress.

 

However, we have to add our usual caveat when thinking about our financial year: we have limited revenue visibility and typically have a high percentage of our annual revenue in the final months of the year.  That said, the Board believes that the Company will make further progress over the second half of the year and is on track to meet market financial expectations for the year as a whole.

 

John Kearon                                                                James Geddes

Chief Executive Officer                                                Chief Financial Officer 

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED
30 JUNE 2012

 

 

	Note	Six months ended 30 June 2012 Unaudited	Six months ended 30 June 2011 Unaudited	Year ended 31 December 2011 Audited
		£'000	£'000	£'000
Revenue	4	10,379	9,089	20,713
Cost of sales		(2,381)	(1,969)	(4,650)
Gross profit		7,998	7,120	16,063
Administrative expenses		(7,282)	(6,492)	(13,305)
Operating profit	4	716	628	2,758
Investment income - bank interest		1	2	2
Profit before taxation	4	717	630	2,760
Income tax expense		(236)	(214)	(910)
Profit for the financial period		481	416	1,850
Attributable to equity holders of the Company		481	416	1,850
Earnings per share attributable to the equity holders of the Company
Basic earnings per share	5	3.8p	3.3p	14.8p
Diluted earnings per share	5	3.7p	3.2p	14.1p

 

 

All of the activities of the Group are classed as continuing.