Standards, amendments and interpretations in issue but not yet effective

The following standards, amendments and interpretations to existing standards, relevant to the financial statements of the Group, have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2015 or later periods, but the Group has not adopted them early:

 

IFRS 9, 'Financial Instruments' (effective 1 January 2018). In November 2009, the IASB issued IFRS 9 'Financial Instruments' as the first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces new requirements for classifying and measuring financial assets that must be applied (once endorsed by the EU). All equity investments within the scope of IFRS 9 are to be measured at fair value in the balance sheet, with value changes recognised in profit or loss, except for those equity investments for which the entity has elected to report value changes in 'other comprehensive income'. There will be no 'cost exception' for unquoted equities.

 

IFRS 15, 'Revenue from Contracts with Customers' (effective 1 January 2017).

IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities. IFRS 15 is effective for reporting periods beginning on or after 1 January 2017. Management consider that IFRS 15 will have no material impact upon these consolidated financial statements.

 

Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 December 2014.  Subsidiaries are all entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities.  The Group obtains and exercises control through voting rights.  The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.  Subsidiaries are fully consolidated from the date on which control is transferred to the Group.  They are de-consolidated from the date that control ceases.

 

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group.  The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.  Acquisition related costs are expensed as incurred.  Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquirer's net assets.

 

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

 

All transactions and balances are eliminated on consolidation. Unrealised gains on transactions between the Group and its subsidiaries are eliminated.  Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.  Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

 

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Depreciation is provided to write off the cost of all property, plant and equipment to its residual value on a straight-line basis over its expected useful economic lives, which are as follows:

 

Furniture, fittings and equipment            5 years

Computer hardware                                2 to 3 years

The residual value and useful life of each asset is reviewed and adjusted, if appropriate, at each balance sheet date.

 

Intangible assets

Software

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 two 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 directly-attributable employee costs required to bring the software into working condition.  Non-attributable 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;

(e) 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;

(f) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;

(g) 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 charged to administrative expenses 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 which varies between 2 and 7 years.

 

The Group's main research software platform, which it developed over a number of years, was brought into use on 1 January 2011 and is being amortised over its estimated useful economic life of 7 years.

 

Amortisation on all intangible assets is charged to administrative expenses.

 

Impairment of property, plant and equipment and intangible assets

At each balance sheet date the Group reviews the carrying amount of its property, plant and equipment and intangible assets for any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Intangible assets not available for use are tested for impairment on at least an annual basis.  The recoverable amount is the higher of the fair value less costs to sell and value in use. 

 

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and bank deposits available on demand.

 

Inventories - work in progress

Work in progress comprises directly-attributable external costs on incomplete market research projects and is held in the balance sheet at the lower of cost and net realisable value.

 

Income taxes

Current income tax liabilities comprise those obligations to fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement, except where it relates to items charged or credited to other comprehensive income or directly to equity.

 

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

 

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as a component of tax expense in the income statement, except where it relates to items charged or credited to other comprehensive income or directly to equity.

 

Operating lease agreements

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to the income statement net of any incentives received from the lessor on a straight-line basis over the period of the lease.

 

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.  Revenue is measured by reference to the fair value of consideration receivable, excluding sales taxes.

 

Cost of sales

Cost of sales includes external costs attributable to client projects including: respondent sample, data processing, language translation and similar costs.

 

Employee benefits

All accumulating employee-compensated absences that are unused at the balance sheet date are recognised as a liability.

 

The Group operates several defined contribution pension plans.  The Group pays contributions to these plans based upon the contractual terms agreed with each employee.  The Group has no further payment obligations once the contributions have been paid.  The contributions are recognised as employee benefit expense when they are due.

 

Share-based payment transactions

The Group issues equity-settled share-based compensation to certain employees (including directors). Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payment is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest. With the exception of market-based awards, these estimates are subsequently revised if there is any indication that the number of options expected to vest differs from previous estimates.   Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods.

 

The fair value of option awards with time vesting performance conditions are measured at the date of grant using the Hoadley Employee Stock Option Valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

The fair value of awards made with market-based performance conditions (for example, the entity's share price) are measured at the grant date using a Monte Carlo simulation method incorporating the market conditions in the calculations.  The awards made in respect of the Group's long term incentive scheme have been measured using such a method.

 

Social security contributions payable in connection with the grant of share options is considered integral to the grant itself, and the charge is treated as a cash-settled transaction.

 

Cash payments totalling £1,239,000 made in settlement of part of the Company's long term incentive plan during the year were accounted for as a repurchase of equity interests with the consideration paid debited to equity and disclosed in the Statement of Changes in Equity as 'Settlement of long term incentives'.

 

Provisions

Provisions for sabbatical leave and dilapidations are recognised when: the Group has a legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.  Where material, the increase in provisions due to passage of time is recognised as interest expense. The provision for sabbatical leave is measured using the projected unit credit method.  The provision for dilapidations is measured at the present value of expenditures expected to be required to settle those obligations.

 

Foreign currencies

Items included in the individual financial statements of each of the Group's subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates ('the functional currency').  The consolidated financial statements are presented in Sterling ('GBP'), which is the Company's functional and the Group's presentation currency.

 

Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses arising from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

 

The results and financial position of all Group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a)  assets and liabilities for each balance sheet presented are translated at the closing rate at the balance sheet date;

(b)  income and expenses for each income statement are translated at average exchange rates; and

(c)  all resulting exchange differences are recognised as a separate component of equity.

 

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are recognised in other comprehensive income.  When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

 

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the main decision-making body of the Company, which collectively comprises the Executive Directors.  The Executive Directors are responsible for allocating resources and assessing performance of the operating segments.

 

Financial instruments

Financial assets

The Group's financial assets comprise loans and receivables.  The Group does not possess assets held at fair value through profit or loss, held-to-maturity investments or available-for-sale financial assets. The classification is determined by management at initial recognition, being dependent upon the purpose for which the financial assets were acquired. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

 

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They are included in current assets.  The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.

 

Trade receivables are initially recorded at fair value, but subsequently at amortised cost using the effective interest rate method. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

 

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.

 

Financial liabilities

Financial liabilities are initially recognised at fair value, net of transaction costs, and subsequently carried at amortised cost using the effective interest rate method.  Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities.

 

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the income statement. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.  Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited directly to equity.

 

Trade payables

Trade payables are initially recorded at fair value, but subsequently at amortised cost using the effective interest rate method.

 

Share capital

Ordinary shares are classified as equity. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

 

Share premium

Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

 

Merger reserve

The merger reserve represents the difference between the parent company's cost of investment and a subsidiary's share capital and share premium. The merger reserve in these accounts has arisen from a group reconstruction upon the incorporation and listing of the parent company that was accounted for as a common control transaction.  Common control transactions are accounted for using merger accounting rather than the acquisition method.

 

Foreign currency translation reserve 

The foreign currency translation reserve represents the differences arising from translation of investments in overseas subsidiaries.

 

Treasury shares

Where the Company purchases the Company's equity share capital, the consideration paid is deducted from the total shareholders' equity and classified as treasury shares until they are cancelled. Where such shares are subsequently sold or re-issued, any consideration received is included in total shareholders' equity.  No gain or loss is recognised on the purchase, sale, issue or cancellation of the Company's own equity instruments.

 

Significant accounting estimates and judgements

Share-based payments

The fair value of options granted is determined using the Hoadley Employee Stock Option Valuation model (for the employee share option scheme) and a Monte Carlo simulation model (for the long term incentive scheme).

 

These models require a number of estimates and assumptions. The significant inputs into the models are share price at grant date, exercise price, historic exercise multiples, expected volatility and the risk free rate. Volatility is measured at the standard deviation of expected share prices returns based on statistical analysis of historical share prices.

 

During the year (and in previous years) the Company has often purchased shares arising from the exercise of share options in order to minimise shareholder dilution and create shareholder value.  In the current reporting period the Company also cash-settled part of its long term incentive plan.  Despite the repurchase of these equity interests the Company did not have an obligation to do so.  Furthermore, the Company does not have a formal policy in relation to equity interests and so no constructive obligation arises either.  As a result, the Company accounts for share-based payments as equity rather than cash-settled.

 

Employee benefits

The Group has a sabbatical leave scheme, open to all employees, that provides 20 days paid leave for each six years' of service. The carrying amount of the provision at the balance sheet date amounted to £557,000 (2013: £516,000). The provision for liabilities under the scheme is measured using the projected unit credit method. This model requires a number of estimates and assumptions. The significant inputs into the model are rate of salary growth and average staff turnover as explained in Note 12.

 

 

4      Segment information

 

When reviewing financial performance, key segmental information that management look at are revenue, gross profit, and operating profit before allocation of central overheads of the Group's geographic operating units ("Reportable Segments"), and the split of business by type of research solution.

Financial performance of	2014			2013
Reportable Segments:	Revenue	Gross margin	Operating profit**	Revenue	Gross margin	Operating Profit**
	£'000	£'000	£'000	£'000	£'000	£'000
United Kingdom	8,779	6,814	4,823	8,859	6,843	4,908
US	7,683	6,420	3,700	7,266	5,794	2,796
Continental Europe*	4,416	3,446	1,669	4,895	3,992	1,859
China & Singapore*	1,894	1,478	744	1,461	1,112	491
Brazil	1,580	1,031	283	1,806	1,206	507
India	293	221	59	170	140	41
	24,645	19,410	11,278	24,457	19,087	10,602

 

*2014 revenue for China & Singapore includes £415,000 from a large client that was serviced from our Continental Europe region in 2013.  Continental European revenue for 2013 included £449,000 from that client.

 

Revenue split by type of	2014			2013
research solution:	Juicy	Twist	Total	Juicy	Twist	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Quantitative Research	17,605	4,129	21,734	14,608	6,260	20,868
Juice Generation	2,392	-	2,392	3,337	-	3,337
Behaviour Change Unit	519	-	519	252	-	252
	20,516	4,129	24,645	18,197	6,260	24,457
Percentage of revenue	83%	17%		74%	26%

 

Juicy products are BrainJuicer's new methodologies that challenge traditional approaches to market research.  Twist products are industry standard quantitative research methods with an added BrainJuicer "twist".

 

Segmental revenue is revenue generated from external customers and so excludes intercompany revenue.

 

** Segmental operating profit excludes costs relating to central services provided by our Operations, IT, Marketing, HR and Finance teams and our Board of Directors.

 

4     Segment information (continued)

 

A reconciliation of total operating profit for Reportable Segments to total profit before income tax is set out below:

 

	2014	2013
	£'000	£'000
Operating profit for reportable segments	11,278	10,602
Central overheads	(6,977)	(7,052)
Operating profit	4,301	3,550
Gain on disposal of available for sale investments	-	14
Finance costs	(15)	(8)
Profit before income tax	4,286	3,556

Revenues are attributed to geographical areas based upon the location in which the sale originated.

Consolidated cash, trade receivable, property, plant and equipment and intangible asset balances are regularly provided to the executive directors but segment assets and segment liabilities are not, and accordingly the Company does not disclose segment assets and liabilities here.

 

BrainJuicer Group PLC is domiciled in the UK.  Revenue from external customers to the UK is £8,779,000 (2013: £8,859,000), and revenue from external customers to other countries is £15,866,000 (2013: £15,598,000).

 

Non-current assets other than financial instruments and deferred tax assets located in the UK is £920,000 (2013: £1,067,000), and these non-current assets located in other countries is £40,000 (2013: £45,000).

 

Revenues of £1,871,000 (2013: £2,315,000) are derived from the Group's largest single external customer, representing 8% (2013: 9%) of Group revenues.  Revenues by operating segment are as follows:

 

	2014	2013
	£	£
UK	1,121,000	1,284,000
China and Singapore	330,000	351,000
Continental Europe	260,000	349,000
US	160,000	271,000
Brazil	-	60,000
	1,871,000	2,315,000

 

5      Property, plant and equipment

 

For the year ended 31 December 2014

 

	Furniture, fittings and equipment	Computer hardware	Total
	£'000	£'000	£'000
At 1 January 2014
Cost	337	699	1,036
Accumulated depreciation	(299)	(625)	(924)
Net book amount	38	74	112
Year ended 31 December 2014
Opening net book amount	38	74	112
Additions	3	156	159
Depreciation charge for the year	(14)	(94)	(108)
Closing net book amount	27	136	163
At 31 December 2014
Cost	337	861	1,198
Accumulated depreciation	(310)	(725)	(1,035)
Net book amount	27	136	163

 

For the year ended 31 December 2013

 

	Furniture, fittings and equipment	Computer hardware	Total
	£'000	£'000	£'000
At 1 January 2013
Cost	335	636	971
Accumulated depreciation	(259)	(534)	(793)
Net book amount	76	102	178
Year ended 31 December 2013
Opening net book amount	76	102	178
Additions	4	66	70
Depreciation charge for the year	(41)	(95)	(136)
Foreign exchange	(1)	1	-
Closing net book amount	38	74	112
At 31 December 2013
Cost	337	699	1,036
Accumulated depreciation	(299)	(625)	(924)
Net book amount	38	74	112

 

 

6      Intangible assets

 

For the year ended 31 December 2014

 

	Software licenses	Software	Total
	£'000	£'000	£'000
At 1 January 2014
Cost	498	1,672	2,170
Accumulated amortisation	(415)	(755)	(1,170)
Net book amount	83	917	1,000
Year ended 31 December 2014
Opening net book amount	83	917	1,000
Additions	114	-	114
Amortisation charge	(88)	(229)	(317)
Closing net book amount	109	688	797
At 31 December 2014
Cost	609	1,672	2,281
Accumulated amortisation	(500)	(984)	(1,484)
Net book amount	109	688	797

 

For the year ended 31 December 2013

 

	Software licenses	Software	Total
	£'000	£'000	£'000
At 1 January 2013
Cost	429	1,672	2,101
Accumulated amortisation	(315)	(526)	(841)
Net book amount	114	1,146	1,260
Year ended 31 December 2013
Opening net book amount	114	1,146	1,260
Additions	69	-	69
Amortisation charge	(100)	(229)	(329)
Closing net book amount	83	917	1,000
At 31 December 2013
Cost	498	1,672	2,170
Accumulated amortisation	(415)	(755)	(1,170)
Net book amount	83	917	1,000

 

Software comprises the Group's main research software platform, which it developed over a number of years and introduced in 2011, at a cost of £1,604,000.  It is being amortised over 7 years and has a remaining amortisation period of 3 years.  The carrying amount of this asset at the balance sheet date was £688,000 (2013: £917,000).

 

7      Financial assets - available for sale investments

 

During the prior year the Company sold its minority investment in Slater Marketing Group Pty Limited for cash consideration of £97,000 realising a gain of £14,000.

 

8      Financial risk management

 

The Group's financial risk management policies and objectives are explained in the Directors' report, an extract of which is provided on page 46.

 

Credit risk

Credit risk is managed on a Group basis, arising from credit exposures to outstanding receivables and cash and cash equivalents.  Management regularly monitor receivables reports on a Group basis. Since the vast majority of the Group's clients are large blue-chip organisations, the Group has only ever suffered minimal bad debts. The Group has concentrations of credit risk as follows:

 

	2014	2013
	£'000	£'000
Cash and cash equivalents
HSBC Bank PLC	5,225	6,070
Deutsche Bank	79	65
UBS	26	38
Other banks	17	15
	5,347	6,188
Trade receivables
Largest customer by revenue	1,036	956

 

Financial instruments by category

At the balance sheet date the Group held the following financial instruments by category:

 

	2014	2013
	£'000	£'000
Assets as per balance sheet
Loans and receivables
Trade and other receivables (ex prepayments and accrued income)	6,304	6,758
Cash and cash equivalents	5,347	6,188
	11,651	12,946
Liabilities as per balance sheet
Other Financial liabilities carried at amortised cost
Trade payables	1,187	1,402
Accruals	3,733	4,334
	4,920	5,736

 

 

8          Financial risk management (continued)

 

The table below analyses the Group's financial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.  The amounts disclosed in the table are the contractual undiscounted cash flows.

 

	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years
	£'000	£'000	£'000
Other financial liabilities carried at amortised cost	4,920	-	-

 

These cash outflows will be financed from existing cash reserves and operating cash flows.

 

9      Inventory

 

	2014	2013
	£'000	£'000
Work in progress	195	238

 

10   Trade and other receivables

 

	2014	2013
	£'000	£'000
Trade receivables	6,137	6,544
Other receivables	167	214
Prepayments	420	586
	6,724	7,344

 

Trade and other receivables are due within one year and are not interest bearing. The maximum exposure to credit risk at the balance sheet date is the carrying amount of receivables detailed above. The Group does not hold any collateral as security. The Directors do not believe that there is a significant concentration of credit risk within the trade receivables balance.

 

As of 31 December 2014, trade receivables of £1,343,000 (2013: £1,595,000) were past due but not impaired.

 

The ageing of these trade receivables is as follows:	2014	2013
	£'000	£'000
Up to 3 months	1,109	944
3 to 6 months	234	651
	1,343	1,595

10    Trade and other receivables (continued)

 

As of 31 December 2014, trade receivables of £Nil (2013: £Nil) were impaired. Since the vast majority of the Group's clients are large blue-chip organisations, the Group rarely suffers a bad debt. 

 

The carrying amount of the Group's trade and other receivables are denominated in the following currencies:

 

	2014	2013
	£'000	£'000
US Dollar	2,680	2,168
Sterling	1,839	1,964
Euro	1,450	1,460
Swiss Franc	372	833
Brazilian Real	160	268
Chinese Yuan	135	259
Singapore Dollar	45	294
Canadian Dollar	-	25
Indian Rupee	35	63
Australian Dollar	8	-
	6,724	7,344

 

11   Share capital

 

The share capital of BrainJuicer Group PLC consists only of fully paid Ordinary Shares ("shares") with a par value of 1p each. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the Annual General Meeting.

 

Allotted, called up and fully paid Ordinary Shares	Number	£'000
At 1 January 2014 and 1 January 2013	13,136,448	131
Exercise of share options	5,419	-
At 31 December 2014	13,141,867	131

 

During the year the Company issued 5,419 shares on the exercise of employee share options for cash consideration of £619 of which £565 was credited to share premium and £54 to share capital. The Company transferred 234,541 shares out of treasury to satisfy the exercise of employee share options over 234,541 shares at a weighted average exercise price of 142 pence per share for total consideration of £334,000. The weighted average share price at exercise date was 454 pence per share. The Company subsequently repurchased 233,049 of these shares at a weighted average price of 443 pence per share.  The total consideration payable on repurchase (including stamp duty) amounted to £1,033,000.

 

 

During the year, upon settlement of the Company's long term incentive plan, options over 544,968 shares with an exercise price of £Nil, and 62,024 shares transferred from treasury were awarded to senior executives.  The Company settled the remainder of the long term incentive plan awards for cash consideration of £1,239,000.

 

Following these transactions, at the end of the year the number of shares was 13,141,867 (2013: 13,136,448) of which shares held in treasury numbered 509,268 (2013: 572,784). The treasury shares will be used to help satisfy the requirements of the Group's share incentive schemes.

 

Share options

Employee share option scheme

The Group issues share options to directors and to employees under an HM Revenue and Customs approved Enterprise Management Incentive (EMI) scheme and for awards which do not qualify for EMI, an unapproved scheme. Generally, with the exception of share options arising from the Company's long term incentive plan, the exercise price for share options is equal to the mid-market opening quoted market price of the Company's shares on the date of grant, and in general, they vest evenly over a period of one to three years following grant date. If share options remain unexercised after a period of ten years from the date of grant, the options expire. Share options are forfeited in some circumstances if the employee leaves the Group before the options vest, unless otherwise agreed by the Group.

 

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

 

	2014		2013
	Average exercise price per share	Options	Average exercise price per share	Options
	Pence	No	Pence	No
Outstanding at 1 January	127.2	835,166	127.4	900,215
Granted	-	544,968	-	-
Lapsed	11.4	(602)	94.0	(2,006)
Exercised	139.3	(239,960)	130.7	(63,043)
Outstanding at 31 December	63.6	1,139,572	127.2	835,166
Exercisable at 31 December	63.6	1,139,572	121.8	810,791

 

The weighted average share price at date of exercise of options exercised during the year was 452 (2013: 241.4) pence. The 544,968 options granted during the year were awarded in settlement of the Company's long term incentive plan. These options are exercisable on grant and expire on 28 May 2020.  No options were granted in 2013.

 

 

At 31 December, the Group had the following outstanding options and exercise prices:

 

	2014			2013
	Average exercise price per share	Options	Weighted average remaining contractual life	Average exercise price per share	Options	Weighted average remaining contractual life
Expiry date	Pence	No	Months	Pence	No	Months
2014	-	-	-	11.4	6,021	3.0
2015	-	-	-	62.3	35,826	16.0
2016	62.3	6,022	21.0	62.3	15,055	28.8
2017	162.5	150,533	25.0	162.5	150,533	37.0
2018	147.5	49,716	39.0	147.5	74,771	51.0
2019	94.0	54,902	49.0	94.0	135,368	61.0
2020	35.2	861,399	64.4	96.0	344,464	75.3
2021	286.0	17,000	82.0	296.3	45,064	92.1
2022	-	-	-	296.5	28,064	97.0
At 31 December	63.6	1,139,572	57.4	127.2	835,166	61.6

             

 

Long term incentive plan

In 2010 the Company established a long term incentive plan for senior executives.  All awards vested on 30 April 2014. Upon settlement of the plan, options over 544,968 shares with an exercise price of £Nil, and 62,024 shares transferred from treasury were awarded to senior executives. The Company settled the remainder of the long term awards for cash consideration of £1,239,000.

 

As a result of the settlement of the scheme no units were outstanding as at 31 December 2014 (2013: 10,000).

 

              Share-based payment charge

The total charge for the year relating to equity-settled employee share-based payment plans (for both the employee stock option plan and the senior executive long term incentive plan) was £67,000 (2013: £148,000).

 

 

 

12   Provisions

 

	Sabbatical provision	Dilapidation provisions	Total
	£'000	£'000	£'000
At 1 January 2013	189	80	269
Provided in the year	361	-	361
Utilised in the year	(33)	-	(33)
Exchange differences	(1)	-	(1)
At 31 December 2013	516	80	596
Provided in the year	99	-	99
Utilised in the year	(58)	-	(58)
At 31 December 2014	557	80	637
Of which:
Current	203	66	269
Non-current	354	14	368
	557	80	637

 

The Group has a sabbatical leave scheme, open to all employees. The scheme provides 20 days paid leave for each successive period of 6 years' service.

 

There is no proportional entitlement for shorter periods of service. The provision for the liabilities under the scheme is measured using the projected unit credit method.  The calculation of the provision assumes an annual rate of growth in salaries of 5% (2013: 7%), a discount rate of 2.5% (2013: 3%), based upon good quality 6-year corporate bond yields, and an average staff turnover rate of 15% (2013: 15%).  

 

Dilapidation provisions represent the Group's best estimate of costs required to meet its obligations under property lease agreements.

 

13   Trade and other payables

 

	2014	2013
	£'000	£'000
Trade payables	1,187	1,402
Social security and other taxes	623	600
Accruals and deferred income	3,733	4,334
	5,543	6,336

 

Trade and other payables are due within one year and are not interest bearing. The contractual terms for the payment of trade payables are generally 45 days from receipt of invoice.

 

14   Commitments

 

The Group leases offices under non-cancellable operating leases for which the future aggregate minimum lease payments are as follows:

 

	2014	2013
	£'000	£'000
No later than 1 year	375	409
Later than 1 but no later than 5 years	448	479
	823	888

 

Included within the amounts disclosed above, the Group has the benefit of seven months rent free for the first three years of a lease with an annual rental commitment of £163,000. At this and the comparative balance sheet date no rent free month was outstanding.  The benefit of the rent free months was spread over the period of the lease to the first break point in 2013.

 

15   Expenses by nature

 

	2014	2013
	£'000	£'000
Employee benefit expense	10,887	11,563
Depreciation and amortisation	426	465
Net foreign exchange losses	77	114
Other expenses	8,954	8,765
	20,344	20,907
Analysed as:
Cost of sales	5,235	5,370
Administrative expenses	15,109	15,537
	20,344	20,907

 

16   Profit before taxation

 

Profit before taxation is stated after charging:

 

	2014	2013
	£'000	£'000
Services provided by the company's auditor and its associates
Fees payable to the company's auditor and its associates for the audit of the parent company and consolidated financial statements	42	38
Fees payable to the company's auditor and its associates for other services:
Audit-related assurance services	19	3
Taxation compliance services	65	27
Tax advisory services	47	9
Other services	7	3
Operating lease expenses - Land and buildings	490	465
Depreciation and amortisation	426	465
Net loss on foreign currency translation	77	114

 

17   Employee benefit expense

 

The average number of staff employed by the Group during the financial year amounted to:

 

	2014	2013
	No	No
Number of administrative staff	152	138

 

The aggregate employment costs of the above were:

 

	2014	2013
	£'000	£'000
Wages and salaries	8,775	8,948
Social security costs	1,244	1,372
Pension costs - defined contribution plans	257	263
Long service leave cost	41	327
Share based remuneration	67	148
Redundancies	27	123
Medical benefits	476	382
	10,887	11,563

 

 

The directors have identified 6 (2013: 6) key management personnel, including three executive and three non-executive directors.  Compensation to key management is set out below:

 

	2014	2013
	£'000	£'000
Short-term employee benefits (salaries, bonuses and benefits in kind)	649	782
Post-employment benefits (pension costs - defined contribution plans)	32	31
Share-based payment	17	55
	698	868

 

Details of directors' emoluments are given in the Remuneration Report extract on page 44.

 

18   Finance income and costs

 

	2014	2013
	£'000	£'000
Bank interest receivable	-	1
Other interest payable	(15)	(9)
Net finance costs	(15)	(8)

 

19   Income tax expense

 

	2014	2013
	£'000	£'000
Current tax	1,298	1,298
Deferred tax	91	(177)
	1,389	1,121

 

 

 

Income tax expense for the year differs from the standard rate of taxation as follows:

 

	2014	2013
	£'000	£'000
Profit on ordinary activities before taxation	4,286	3,556
Profit on ordinary activities multiplied by standard rate of tax of 21.45% (2013: 23.2%)	919	825
Difference between tax rates applied to Group's subsidiaries	299	87
Expenses not deductible for tax purposes	74	9
Tax on intra-group management charges (Brazil and China)	161	204
Adjustment to current tax in respect of prior years	(11)	2
Credit on exercise of share options taken to income statement	(53)	(6)
	1,389	1,121

 

20   Deferred tax

 

The analysis of deferred tax assets and deferred tax liabilities is as follows:

 

	2014	2013
	£'000	£'000
Deferred tax assets:
- Deferred tax assets to be recovered after more than 12 months	445	476
- Deferred tax assets to be recovered within 12 months	409	226
	854	702
Deferred tax liabilities:
- Deferred tax liability to be recovered within 12 months	(40)	(32)
Deferred tax asset (net):	814	670

 

The gross movement in deferred tax is as follows:

 

	2014	2013
	£'000	£'000
At 1 January	670	293
Foreign exchange differences	2	(6)
Income statement credit	(91)	177
Tax credited directly to equity	233	206
At 31 December	814	670

 

 

The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

 

Deferred tax assets	Other provisions	Overseas tax losses	Share options	Dilapidation provisions	Sabbatical provision	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2014	8	85	476	13	120	702
Foreign exchange differences	-	(5)	6	-	2	3
Charged to income statement	(11)	(25)	(45)	-	(3)	(84)
Credited directly to equity	-	-	233	-	-	233
At 31 December 2014	(3)	55	670	13	119	854

 

Deferred tax liabilities		Accelerated capital allowances
		£'000
At 1 January 2014		(32)
Foreign exchange differences		(1)
Charged to income statement		(7)
At 31 December 2014		(40)

 

There are no unrecognised deferred tax assets.  Deferred tax assets are recognised only to the extent that their recoverability is considered probable. The deferred tax asset in respect of the Company's share option scheme relates to corporate tax deductions available on exercise of employee share options.

 

21   Earnings per share

 

(a)  Basic earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

 

	2014	2013
Profit attributable to equity holders of the Company (£'000)	2,897	2,435
Weighted average number of Ordinary Shares in issue	12,613,136	12,563,664
Basic earnings per share	23.0p	19.4p

 

 

 

(b)  Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding assuming conversion of all dilutive share options to Ordinary Shares.

 

	2014	2013
Profit attributable to equity holders of the Company and profit used to determine diluted earnings per share (£'000)	2,897	2,435
Weighted average number of Ordinary Shares in issue	12,613,136	12,563,664
Share options	978,342	426,759
Weighted average number of Ordinary Shares for diluted earnings per share	13,591,478	12,990,423
Diluted earnings per share	21.3p	18.7p

 

22   Dividends per share

 

	2014	2013
	£'000	£'000
Dividends paid on Ordinary Shares
Interim, 1 pence per share (2013: 0.9 pence per share)	126	112
Special dividend, 12 pence per share (2013: 12 pence per share)	1,512	1,508
	1,638	1,620
Final dividend relating to 2013, 3 pence per share (2013: 2.25 pence per share relating to 2012)	378	283
Total ordinary dividends paid in the year	2,016	1,903

 

The directors are proposing a final dividend in respect of the year ended 31 December 2014 of 3.3 pence per share. These financial statements do not reflect this proposed dividend.

 

23   Related party transactions

 

During the year the Company's long term incentive plan for senior executives vested. In settlement John Kearon received cash of £656,000 and both James Geddes and Alex Batchelor were each awarded options over 125,722 shares in the Company at an exercise price of £Nil per share.

 

Dividends paid to directors were as follows:

 

	2014	2013
	£'000	£'000
John Kearon	617,599	584,477
James Geddes	25,332	23,986
Alex Batchelor	16,296	15,431
Ken Ford	3,200	3,030
Robert Brand	4,800	4,545
Graham Blashill	800	758
	668,027	632,227

 

24   Net cash generated from operations

 

	2014	2013
	£'000	£'000
Profit before taxation	4,286	3,556
Depreciation	108	136
Amortisation	317	329
Gain on disposal of available for sale investments	-	(14)
Interest paid	15	8
Share-based payment expense	67	148
Decrease/(increase) in inventory	43	(187)
Decrease/(increase) in receivables	620	(1,519)
(Decrease)/increase in payables	(752)	2,890
Exchange differences on operating items	(32)	(4)
Net cash generated from operations	4,672	5,343

 

25   Seasonality of revenues

 

Group revenues tend to be higher in the second-half of the financial year than in the first six months.

 

For the year ended 31 December 2014, revenues for the second half of the year represented 55% of total revenues compared to 56% for the year ended 31 December 2013.

 

26   Audit exemption

 

BrainJuicer Limited, company number 03900547, is exempt from the requirements for the Companies Act 2006 relating to the audit of accounts under section 479A.