Big Sofa Technologies : Half-Year Results

RNS Number : 7015N

Big Sofa Technologies Group PLC

26 September 2019

Big Sofa Technologies Group plc

("Big Sofa Technologies" or the "Company")

Half-Year Results for the Six Months Ended 30 June 2019

Big Sofa (AIM:BST), an interna onal video analy cs provider to the consumer insight industry, announces results for the six months ended 30 June 2019.

Financial Highlights

• Revenues grew by 78% to £1,072,000 (H1 2018: £602,000)
• Work commissioned as at 30 June 2019 was approximately £1.7m (H1 2018: £1m), equal to the total revenue delivered in FY2018, and represents a 62% increase on commissions at the same time in the prior year
• Commissioned work not yet recognised as at 30 June 2019 was approximately £0.6m (H1 2018: £0.4m), providing increased visibility over revenues to be recognised in H2
• Gross profit increased by 81% to £690,000 (H1 2018: £382,000); Gross margin increased 1% to 64%
• Administra ve expenses reduced by 20% to £1.8m (H1 2018: £2.3m) as a result of the programme of annualised cost savings and technology efficiencies initiated in Q4 2018
• Loss for the period reduced 45% to £1.0m (H1 2018: £1.8m)
• Share subscription raised gross proceeds of £1 million in April 2019

Operational Highlights

• Repeat work undertaken for customers including Ipsos, Procter & Gamble and a large US-based mul na onal food and beverage company
• Subscription renewals by 84.51˚, Target Corporation, British Airways and Pernod Ricard
• New project work for a global US-based clothing manufacturer and retailer, worth more than $250,000
• New MSA wins and ini al project commissions with a global technology company based on the West Coast of the US and a global energy storage brand
• Growing trac on with Ipsos across a number of different global service lines; revenue from Ipsos grew by more than 250% to £0.35m (H1 2018: £0.1m) which accounted for 32% of revenues (H1 2018: 16%); launch of co- branded behavioural insight products
• Completed a second project with a large global data company and an ini al project for Procter & Gamble involving the automated extraction of data from video footage at scale, pushing forward the Company's AI and machine learning roadmap
• Successful pla orm integra ons into customer knowledge management systems and complementary technology platforms to facilitate deeper strategic integration at the partner or client level:
  o First Stop Data Shop - system used by Procter & Gamble
  o KnowledgeHound - technology platform for quantitative data and research o Ipsos - ongoing integrations across key service lines
• Ongoing pla orm improvements to stability, scalability, inges on capacity, machine learning capability and user experience
• Expanded global server-storage and processing capability to enable the pla orm to operate seamlessly and flexibly across the globe.

• Retained ISO27001 status and maintained GDPR-compliance

Post Period-End Highlights

• Awarded a service agreement with a second global technology company based on the West Coast of the US, along with an initial commission under that service agreement.

Kirsty Fuller, Chief Executive Officer, commented:

"We have made considerable progress in the first half: delivering significant revenue growth from our growing global client base at a higher margin on a smaller cost base.

Our client product offering has enabled us to embed ourselves further within Ipsos, our largest client and shareholder, and acquire new global brand-clients. Significantly, some of these new clients are global technology and data companies allowing us to demonstrate the applica ons of our proprietary technology pla orm beyond the insight sector and to open-up large new markets for Big Sofa Technologies, which forms a key part of our long-term strategy.

The focussed technological development that we have undertaken puts us in a strong posi on to con nue to drive innovation and analysis of video data at scale across a number of sectors."

Enquiries
Big Sofa Technologies Group plc	[phone]
Kirsty Fuller, CEO
Joe MacCarthy, CFO
Arden Partners plc (Nominated Adviser and Joint Broker)	[phone]
Paul Shackleton / Ben Cryer
Tim Dainton (Equity Sales)
Novum Securities (Joint Broker)	[phone]
Colin Rowbury

About Big Sofa Technologies Group plc

Big Sofa Technologies is an insight-led technology company. The design and development of our technology has been guided by expert understanding of the insight and analy cs industries and the needs, pressures and business questions of the clients they serve.

We uncover and analyse new-to-the-industry behavioural data sets in video, enabled by the power of our pioneering data capture and pla orm technology. We are innova ng both in how video-led projects and programmes are designed and in how the data is analysed, showcased, embedded and re-mined.

Our so ware pla orm collates, analyses and organises large volumes of raw/unstructured video enabling our clients, which include leading market research and data companies and major household brands, to perform detailed and sophisticated consumer insight analysis and make genuine use of video content.

Big Sofa Technologies' shares are admi ed to trading on the London Stock Exchange's AIM market under the cker BST.L.

To find out more, visit www.bigsofatech.com

Follow us on twitter at @bigsofatech

Operational Review

Strategy

When I took over as Chief Execu ve in November 2018, I ini ated a strategic review and iden fied three pillars to our 2019 strategic roadmap: further integra on with Ipsos, our largest customer and shareholder; building on our direct- to-client offering, Visual Insight System, and pushing forward our AI and machine learning roadmap to enable more automated data extrac on. I also iden fied areas for cost savings and efficiencies to make Big Sofa Technologies a stronger, leaner business. I am pleased to report ongoing progress against all of the strategic goals that were set.

Ipsos invested in Big Sofa Technologies in March 2018. Since then, we have benefited from increasing adop on across

a number of Ipsos service lines and global offices. Ipsos now makes up almost one-third of our revenues, up from less than 20% in the same period last year. H1 revenues from Ipsos increased by more than 250% to £0.35m compared to the same period in 2018 (H1 2018: £0.1m), driven mostly from an increase in average project values. We have worked closely with Ipsos to co-develop innova ve video-led behavioural insight products which were launched in May. We expect revenues to flow from these as they are adopted by Ipsos' underlying clients later in the year, along with revenues from ongoing broader integration programmes.

We have grown our direct-to-client revenues more than 40% to £0.7m compared to the same period last year (H1 2018: £0.5m). Within that, we have maintained all of our key clients including Procter & Gamble; 84.51˚, the consumer insights subsidiary of Kroger, and Target. And we have added new clients including a large US-based mul na onal food and beverage company (first projects commissioned in H2 2018), a global US-based clothing manufacturer, and two global technology companies based on the West Coast of the US.

We con nue to invest in R&D and to push forward our machine learning and AI capability. Since the end of 2018, we have completed a second project with a large global data company and an ini al project for Procter & Gamble involving the automated extrac on of data from video footage, showcasing the Big Sofa Technologies pla orm's capability to global clients who have the ability to engage at scale. While this is currently a small part of the revenue base, it represents a significant addi onal commercial opportunity for the business in the longer term with the potential for sustainable long-term annuity revenues.

As announced in the final results for the full year 2018, we completed a substan al pla orm architecture rebuild in late-2018 which, now it has been completed, enabled us to scale-down some of the technology costs in the business while maintaining strong R&D investment. Along with other cost-cu ng measures, we have been able to cut our overhead by £0.5m to £1.8m in H1.

Research and Development

We con nue to invest heavily in R&D and in the core technology pla orm. Although overall technology costs (including R&D, maintenance and infrastructure, included within administra ve costs) reduced in the period, capitalisa on of R&D increased 15% to £328,000. This demonstrates our commitment to best-in-class technology and has enabled us to move forward our enterprise capability and versatility, and our machine learning and AI capability.

We have successfully built pla orm integra ons with First Stop Data Shop, the knowledge management system used by Procter & Gamble; KnowledgeHound, a technology pla orm for quan ta ve data and research, and have various ongoing integra ons with Ipsos across a number of their service lines. We have also expanded our global server- storage and processing capability to enable the pla orm to operate seamlessly and flexibly across the globe; the pla orm is now be er able to deal with large volumes of video data in an a more efficient and compliant way than ever before.

Team and visual identity

In H1, we completed the restructuring of the team, moved to a more flexible London office and refreshed our visual identity. We are now a more streamlined, agile and focused business.

Outlook

The market for behavioural analysis using video remains strong as brands, businesses and their insight agencies strive to gain a compe ve edge. We con nue to see increasing adop on from our current clients and growing engagement from our target clients.

Our deliberate focus on large mul na onal organisa ons con nues to expose us to slow sales cycles. This will con nue to be the case while we become more embedded with our clients and remains a significant barrier to entry in our market.

We are excited about the poten al for the applica on of our technology - par cularly our machine learning and AI capabili es - outside the market research industry as evidenced by the successful pilot projects we have undertaken with global data and technology companies. This is a significant opportunity which will take me to build. To accelerate that process, an extremely highly regarded new business director with a track record in technology and insight has recently joined the team. He is already opening up new conversa ons and business opportuni es as well as injecting fresh ideas into our pitch and marketing.

Our revenues con nue to grow and we operate on a lower cost base. As planned, the company con nues to absorb cash, but at a decreasing rate. This will con nue for a number of months; the directors are at an advanced stage of arranging further funding necessary to sustain the business and support the growth strategy. With that in place, the board remains confident about the long-term prospects of the business and its ability to capitalise on a significant market opportunity.

Kirsty Fuller

Chief Executive Officer

25 September 2019

Financial Review

Revenues increased by 78% to £1.1 million (H1 2018: £0.6 million), the majority of which con nued to come from the

US. This represented progress against each of our three strategic pillars: revenue growth from Ipsos, from global brand clients and from large data companies.

Gross profit increased by 81%, reflec ng higher revenues and a slightly higher margin. Gross margin increased by 1% reflecting a focus on pricing and cost control.

Administra ve expenses reduced by 20% to £1.8m (H1 2018: £2.3m) as the benefit of annualised cost savings ini ated in the la er part of 2018 took effect. The full-year 2019 effect of these cost cuts is expected to be approximately £0.8m.

Increased revenues and gross profit, combined with reduced expenses, resulted in the loss for the period reducing by 45% to £1.0 million (H1 2018: £1.8 million).

	6 months to 30 June	6 months to 30 June 2018	Change
	2019	%
	£'000s	£'000s
Revenue	1,072	602	+78%
Gross Profit	690	382	+81%
Gross Margin	64%	63%	+1%
Administrative expenses	(1,823)	(2,282)	-20%
Operating Loss	(1,133)	(1,928)	-41%
Total comprehensive income	(1,005)	(1,833)	-45%

Net cash ou low from opera ons was £0.7m (H1 2018: £1.4m); R&D investment (included within 'purchase of

intangible assets' in the Consolidated Statement of Cash Flows) was £0.3m (H1 2018: £0.3m). Total cash ou low was

£1.0m (H1 2018: £1.7m). This was funded in large part by the net proceeds of fundraising of £0.9m (H1 2018: £2.4m).

At the period-end the Company had net assets of £3.0m (H1 2018: £2.7m).

Joe MacCarthy

Chief Financial Officer

25 September 2019

Big Sofa Technologies Group Plc

Condensed Consolidated Statement of Comprehensive Income

For the Six Months to 30 June 2019

	6 months to	6 months to	Year to
	30 June	30 June	31 December
	2019	2018	2018
	Unaudited	Unaudited	Audited
Continuing operations	£'000	£'000	£'000
Revenue	1,072	602	1,680
Cost of sales	(382)	(220)	(699)
	───────	───────	───────
Gross Profit	690	382	981
Administrative expenses	(1,823)	(2,282)	(4,654)
	───────	───────	───────
Operating loss	(1,133)	(1,900)	(3,673)
Finance costs	(-)	(28)	(28)
	───────	───────	───────
Loss before Income tax	(1,133)	(1,928)	(3,701)
Income tax	140	95	298
	───────	───────	───────
Loss for the period	(993)	(1,833)	(3,403)
	═══════	═══════	═══════
Exchange differences on retransla ng	(12)	-	(87)
foreign operation	───────	───────	───────
Total comprehensive income for the
period	(1,005)	(1,833)	(3,490)
	═══════	═══════	═══════

Total	comprehensive	income
a ributable to the owners of the
company			(1,005)	(1,833)	(3,490)
			═══════	═══════	═══════
			(1,005)	(1,833)	(3,490)
Loss per share		3
Basic & Diluted loss per share - pence	(0.66)	(2.45)	(3.75)
			═══════	═══════	═══════

Big Sofa Technologies Group Plc

Condensed Consolidated Statement of Financial Position

As at 30 June 2019

Notes	As at	As at	As at
	30 June	30 June	31 December
	2019	2018	2018
	Unaudited	Unaudited	Audited
ASSETS	£'000	£'000	£'000
Non-current assets			739
Intangibles	1,036	584
Property, plant & equipment	40	41	40
	───────	───────	───────
	1,076	625	779
CURRENT ASSETS	───────	───────	───────
		1,069
Trade and other receivables
932	870
	128
Contract assets
371	102
	816
Cash and cash equivalents
647	1,108
	───────	───────	───────
	1,950	2,080	2,013
	───────	───────	───────
TOTAL ASSETS	3,026	2,705	2,792
	═══════	═══════	═══════
EQUITY
Shareholders' Equity
4			4,163
Called up share capital	4,913	2,478
	9,545
Share premium
9,785	9,641
Reverse Acquisition reserve	(2,881)	(2,881)	(2,881)
Merger relief reserve	2,501	2,501	2,501
Other reserve			620
799	603
	(11,935)
Accumulated deficit
(12,928)	(10,365)
	───────	───────	───────
Total Equity	2,189	1,977	2,013
LIABILITIES	───────	───────	───────
Current liabilities