Press Release

20 September 2013

 

BrainJuicer Group PLC

("BrainJuicer" or "the Company")

 

Interim Results for the Six Months ended 30 June 2013

 

 

Innovative, international online market researcher, BrainJuicer Group PLC (AIM: BJU) today announces its Interim Results for the six months ended 30 June 2013.

 

Highlights

é	4% revenue growth to £10,765,000 (H1 2012: £10,379,000)
é	6% gross profit growth to £8,455,000 (H1 2012: £7,998,000)
é	2% decline in overhead costs to £7,157,000 (H1 2012: £7,282,000)
é	81% growth in operating profit to £1,298,000 (H1 2012: £716,000)
é	81% increase in profit before tax to £1,298,000 (H1 2012: £717,000)
é	81% growth in fully diluted earnings per share to 6.7p (H1 2012: 3.7p)
é	6% growth in interim dividend to 0.9p (H1 2012: 0.85p)
é	£1,508,000 return of cash to shareholders via a special dividend of 12p per share
é	£5,460,000 cash (31 December 2012: £3,755,000) and no debt
é	Strong growth in the UK and US, the Company's largest operations
é	Opened an office in Singapore, now established in eleven countries

 

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

 "This has been an encouraging all round first half performance.  The combination of resumed revenue growth, against a strong comparative period, and lower costs has delivered a very strong profits increase. The Board's decision to return £1.5m to shareholders via a special dividend underlines the strong cash flow characteristics of our business.

Our biggest operations, the US and UK have been the main drivers of growth this year and we have seen good underlying progress in client acquisition, Juice Generation and in Brazil. We remain focused on helping our clients build famous brands by applying Behavioural Science to market research and brand building.  We feel well placed to achieve our growth ambitions.

Whilst, as always, we have limited revenue visibility, we believe we are on track to meet market profit expectations for the full year."

 

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

 

Interim Statement

 

Profit over the first half of 2013 bounced back after the sharp decline in 2012.  Operating profit has increased by 81%, and profit before tax, profit after tax and earnings per share all grew at a similar rate.  Revenue increased by 4% against a strong comparative period, and a slight increase in margin resulted in gross profit growth of 6%.  More significantly, we achieved this with a 2% reduction in overhead costs, reflecting our staff reduction in December last year.  With our high operational gearing, this small percentage increase in gross profit and small decline in costs gave rise to the very significant growth in profit.

 

BrainJuicer tends to turn most of its profit into cash, and cash flow in the first half of 2013 was particularly strong, due to favourable working capital movements.  We generated cash of £1,636,000 - and that was after paying £312,000 in dividends and stock option purchases - and finished the period with a £5,460,000 cash balance (31 December 2012: £3,755,000).  The group has no debt.

 

We have modest capital expenditure requirements, and do not currently envisage making acquisitions.  The Board has therefore decided to pay £1,508,000 to shareholders in the form of a special dividend of 12 pence per share, in addition to an interim dividend of £113,000 (0.9 pence per share) up from £107,000 (0.85 pence per share) in 2012.  You can find full details in note 6 of the financial information following this statement.

 

Are we sacrificing long term growth for the sake of short term profits and dividends?

In short: no.  Our cost cutting last December was more of a pruning exercise than a cutting back of investment.  Whilst we would not have chosen this course of action had it not been for the sharp profit decline at the tail end of last year, it provided an opportunity to re-prioritise.  It was not without cost at a human level, but the team have responded well, and the Company feels at least as well placed to pursue its growth objectives now as before.

 

We are in the process of entering two new markets, India and Singapore, and are developing our presence in our recently opened offices in Italy and France.  We now have offices in 11 countries.  We are further developing our successful Juice Generation business (more on what that is later), and continuing to develop and refine our products and the behavioural science underpinnings of our product portfolio. 

 

Average headcount over the first six months of the year was 137, down from 143 in H1 2012, but will likely increase over the second half of the year as we continue to build our client-facing account management teams.  For the year as a whole we continue to project cost growth (before bonus payments) in low single digits.

 

Where have we been most successful so far this year?

Our business is very much UK and US centric with most of our revenues, and even more of our profits, emanating from these two countries.  Over the first half of the year we had strong financial performances from both: revenue from our UK business, representing 40% of the group's total revenue, grew 12%, and revenue from our US business, 35% of total revenue, grew 9%.  Profit growth was, in aggregate, even stronger.   Operating profit (before allocation of central overheads) grew 31% in the UK, and 4% in the US, and between them they generated 88% of the group's profit (again, before allocation of central overheads).

 

Our offices in Continental Europe, collectively generating 15% of our total revenue, suffered a 16% decline in revenue.  The nature of our business in each country in this region is slightly different.  We have a strong franchise in Switzerland where our business is largely focussed on building relationships with regional or global head offices of very significant multinationals.  Our projects tend to be large and revenues lumpy, and we therefore can have lean periods.  We believe, however, that we have positive momentum and that growth will return.  Germany is proving a more challenging market for us.  Whilst large, it seems more conservative than elsewhere and it is taking time to prove out our methods and establish our presence within German clients.  Our business in Holland is small but stable, and we are beginning to develop our operations in Italy and France.

 

We are continuing to make progress in China and Brazil.  Whilst China revenue declined by 37%, this was in large part due to a large one-off project last year.  After stripping out that project from last year's numbers, revenue in China decreased by 6% and since the end of the half year, has moved back into growth.  Revenue in Brazil increased by 50%, after 151% growth in the first half of last year.  It's early days for our businesses in India and Singapore, but both are making a promising start.

 

It should be stressed that although our account teams are independently managed in each of our regional offices, and although the fortunes of each can differ widely, our operations across all of our offices are remarkably consistent.  We employ people with similar backgrounds and experience, within similarly structured teams, selling the same suite of products, in many cases to the same multinational clients.  We apply our operational processes consistently across each of our offices, and use the same centrally managed software platforms to run all of our research.  This is important as it enables us to deliver the same services to our large clients across their different geographies - even though we are very much smaller than they are - and positions us well to expand these relationships.  Currently we have a very small share of our large clients' market research spend, so there is a significant opportunity for our business.  However in many cases a significant amount of their spend is tied up in "mandates", where they mandate individual research suppliers to undertake all of a certain type of research across all of their divisions and all of their geographies.

 

As noted in the past, we have significant long-term organic growth ambitions, and scale is predicated on winning mandates.  That's why we've geared our business to this end: why we've opened our overseas offices and recruited a large senior team.

 

Did we win any new mandates in H1 2013?

No, unfortunately we didn't.  However, we were invited to bid for more of these types of opportunities than ever before and we did win lesser opportunities.  For example we won a tender to become one of two agencies to provide all ad hoc quantitative research in Northern Europe for a large multinational health care company.  The value of this will be in the hundreds of thousands of pounds per year rather than in the millions that you might expect from a typical mandate.  Nevertheless, wins of this type demonstrate meaningful progress.

 

True mandates can be very significant, and are often all or nothing, so we have to be realistic about the timing of likely success - and we have to be patient.  We will nevertheless persevere.

 

Meanwhile, we continue the hard work of building our credibility and reputation within the large multinationals, project by project.  At the same time, we are beginning to give more attention to smaller, higher growth companies where our impact is more visible to senior management, where traditional research methods are less ingrained, and where there is less risk-aversion toward our innovative approaches.

 

Have we had any significant product developments?

Our product portfolio is constantly evolving, and becoming ever-more entrenched in the behavioural science thinking that is now pervading the marketing world.  We have launched a new product for testing packaging, and upgraded our Concept Optimizer product (our second biggest selling product).  We have also begun undertaking behavioural consultancy services, which provide us with an opportunity to train, educate, and evangelise within key clients, as well as providing a new (albeit currently small) revenue generating service area in its own right.

 

Juice Generation, our collection of qualitative (as opposed to quantitative) research services, where we delve deeper into consumer behaviour and help clients generate (as opposed to validate) consumer marketing ideas, insights and concepts, continues to flourish.  This part of our business grew 27% in H1 and now represents 18% of our total revenue.  Our Juice Generation services fit our behavioural science, emotional, system 1 positioning as well as any of our products, and yet they don't challenge perceived wisdom as much as our quantitative products do.  Qualitative research is at the more creative end of market research, traditional prescribed methodologies are less pervasive, clients are more receptive to new techniques, and services do not tend to be mandated.  We, therefore, don't have to dislodge competitors in the same way we need to with our quantitative research, and client adoption of our innovative methods is easier to secure.

 

The success of our Juice Generation business is important, and not just because of the revenue it generates.  It is opening up new channels within clients, helping to validate our behavioural model, and helping clients ease into the use of our quantitative methods.  Although our quantitative products are in many ways a more challenging selling proposition, they still generate most of our revenue and are easier to deliver and scale.

 

Did we have any unusual or exceptional costs or other income?

Our growth continues to be entirely organic, and we have had no unusual or exceptional costs, charges or other income.  73% of our £7,157,000 overhead costs are people costs, and 67% of that are from revenue generating account management teams and 33% from our central functions such as IT, finance, marketing and Labs product development (H1 2012: 60% and 40% respectively).  Our account management team costs tend to grow in line with our revenues, so we don't envisage very much by way of scale economies here.  Our non-fee generating people costs, however, tend to grow at a slower pace, and in some cases are more discretionary.  Therefore, while we have always had a relatively high percentage of people cost in non-fee generating positions (compared to other fee earning consulting firms), we believe this percentage will gradually decline as we grow our revenues and account management teams.

 

Depreciation of £251,000 is only a small percentage of our overhead costs, and comprises in the main, depreciation of our software platform introduced in 2011, and was comparable to that in H1 last year (£252,000).  Capital expenditure was even lower than usual (£30,000; H1 2012: £119,000), and while this may increase a little, we do not anticipate any significant increase over the foreseeable future.  We earned negligible interest income on our cash balances (as in H1 last year) and our effective tax rate was similar to prior periods (33% of profit before tax; H1 2012: 33%).

 

Outlook

Our interims provide but a snap-shot of progress in what for us is a long term - on-going - mission.  Nevertheless we are encouraged by the way important clients continue to respond to our innovative methods and by our return to profitable growth.  Whilst, as always, we have little revenue visibility, we believe we are on track to meet market profit expectations for the year as a whole.

 

 

John Kearon                                                                            James Geddes

Chief Juicer                                                                              Chief Financial Officer

 

 

5 YEAR SUMMARY

 

(£000 unless specified otherwise)

 

Six months to 30 June	2013	2012	2011	2010	2009
Revenue	10,765	10,379	9,089	7,208	4,849
growth	4%	14%	26%	49%	22%
Gross Profit	8,455	7,998	7,120	5,636	3,658
growth	6%	12%	26%	54%	22%
Operating Profit	1,298	716	628	505	231
growth	81%	14%	24%	119%	18%
Pre-tax profit	1,298	717	630	506	243
growth	81%	14%	25%	108%	6%
Post-tax profit	870	481	416	345	184
growth	81%	16%	21%	88%	14%
EPS - diluted	6.7p	3.7p	3.2p	2.6p	1.3p
growth	81%	16%	23%	100%	8%
Dividend per share	0.9p	0.85p	0.75p	0.6p	0.6p
growth	6%	13%	25%	-	20%
Special dividend per share	12.0p	-	-	-	-
Cash flow pre financing	1,948	(713)	(392)	633	(442)

 

 

Year to 31 December		2012	2011	2010	2009
Revenue		20,822	20,713	16,360	11,814
growth		-	27%	38%	27%
Gross Profit		16,068	16,063	12,622	8,935
growth		-	27%	41%	30%
Operating Profit		1,513	2,758	2,216	1,645
growth		-45%	24%	35%	28%
Pre-tax profit		1,515	2,760	2,217	1,658
growth		-45%	24%	34%	21%
Post-tax profit		1,038	1,850	1,480	1,185
growth		-44%	25%	25%	23%
EPS - diluted		7.9p	14.1p	11.3p	9.0p
growth		-44%	25%	26%	22%
Dividend per share		3.1p	3.0p	2.4p	1.9p
growth		3%	25%	26%	27%
Special dividend per share		-	-	-	-
Cash flow pre financing		868	1,448	1,785	824

 

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED
30 JUNE 2013

 

 

	Note	Six months ended 30 June 2013 Unaudited	Six months ended 30 June 2012 Unaudited	Year ended 31 December 2012 Audited
		£'000	£'000	£'000
Revenue	4	10,765	10,379	20,822
Cost of sales		(2,310)	(2,381)	(4,754)
Gross profit		8,455	7,998	16,068
Administrative expenses		(7,157)	(7,282)	(14,555)
Operating profit	4	1,298	716	1,513
Investment income - bank interest		-	1	2
Profit before taxation	4	1,298	717	1,515
Income tax expense		(428)	(236)	(477)
Profit for the financial period		870	481	1,038
Attributable to equity holders of the Company		870	481	1,038
Earnings per share attributable to the equity holders of the Company
Basic earnings per share	5	6.9p	3.8p	8.3p
Diluted earnings per share	5	6.7p	3.7p	7.9p

 

 

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