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 international video analytics 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%

·   Administrative 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 multinational 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 initial project commissions with a global technology company based on the West Coast of the US and a global energy storage brand

·   Growing traction 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 initial 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 platform integrations 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 platform improvements to stability, scalability, ingestion capacity, machine learning capability and user experience

·   Expanded global server-storage and processing capability to enable the platform 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 applications of our proprietary technology platform 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 position to continue to drive innovation and analysis of video data at scale across a number of sectors."

Enquiries

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 analytics 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 platform technology. We are innovating both in how video-led projects and programmes are designed and in how the data is analysed, showcased, embedded and re-mined.

Our software platform 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 admitted to trading on the London Stock Exchange's AIM market under the ticker 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 Executive in November 2018, I initiated a strategic review and identified three pillars to our 2019 strategic roadmap: further integration 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 extraction. I also identified 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 adoption 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 innovative 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 multinational 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 continue 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 initial project for Procter & Gamble involving the automated extraction of data from video footage, showcasing the Big Sofa Technologies platform'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 additional 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 substantial platform 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-cutting measures, we have been able to cut our overhead by £0.5m to £1.8m in H1.

Research and Development

We continue to invest heavily in R&D and in the core technology platform. Although overall technology costs (including R&D, maintenance and infrastructure, included within administrative costs) reduced in the period, capitalisation 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 platform integrations with First Stop Data Shop, the knowledge management system used by Procter & Gamble; KnowledgeHound, a technology platform for quantitative data and research, and have various ongoing integrations with Ipsos across a number of their service lines. We have also expanded our global server-storage and processing capability to enable the platform to operate seamlessly and flexibly across the globe; the platform is now better 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 competitive edge. We continue to see increasing adoption from our current clients and growing engagement from our target clients.

Our deliberate focus on large multinational organisations continues to expose us to slow sales cycles. This will continue 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 potential for the application of our technology - particularly our machine learning and AI capabilities - 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 time 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 conversations and business opportunities as well as injecting fresh ideas into our pitch and marketing.

Our revenues continue to grow and we operate on a lower cost base. As planned, the company continues to absorb cash, but at a decreasing rate. This will continue 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 continued 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%, reflecting higher revenues and a slightly higher margin. Gross margin increased by 1% reflecting a focus on pricing and cost control.

Administrative expenses reduced by 20% to £1.8m (H1 2018: £2.3m) as the benefit of annualised cost savings initiated in the latter 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).

Net cash outflow from operations 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 outflow 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

Big Sofa Technologies Group Plc

Condensed Consolidated Statement of Financial Position

As at 30 June 2019

Big Sofa Technologies Group Plc

Condensed Consolidated Statement of Changes in Equity

For the Six Months to 30 June 2019

Big Sofa Technologies Group Plc

Condensed Consolidated Statement of Cash Flows

For the Six Months to 30 June 2019

Big Sofa Technologies Group Plc

Notes to the Half Yearly Report

For the period to 30 June 2019

1.    General Information

 Big Sofa Technologies Group Plc is a company incorporated and domiciled in England and Wales. The company is listed on the AIM market of the London Stock Exchange (ticker: BST).

The financial information set out in this Half Yearly report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The group's statutory financial statements for the year ended 31 December 2018, prepared under International Financial Reporting Standards ("IFRS"), have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain statements under Sections 498(2) and 498 (3) of the Companies Act 2006.

Copies of the annual statutory accounts and the Half-Yearly report can be found on the Company's website at http://www.bigsofatech.com/.

2.    Basis of preparation and significant accounting policies

These interim financial statements and comparatives for the prior year have been prepared using the historical cost convention, on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union, using accounting policies which are consistent with those set out in the financial statements for the year ended 31 December 2018.

These interim financial statements have been prepared on a consistent basis and format. The Group has not applied IAS 34 'Interim Financial Reporting', which is not mandatory for AIM companies, in the preparation of these interim financial statements.

New and amended standards adopted by the group

IFRS 15

As per the financial statements for the year ended 31 December 2018, the directors have reviewed the revenue from contracts from customers and have determined that there is no material distinction in how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors in both the current and prior year, and therefore revenue has not been disaggregated.

There are no further IFRSs or IFRIC interpretations that are effective for the first time in this financial period that would be expected to have a material impact on the group.

Big Sofa Technologies Group Plc

Notes to the Half Yearly Report

For the period to 30 June 2019

3.    Earnings per Share

        Basic earnings per share is calculated by dividing the earnings attributable shareholders by the weighted average number of ordinary shares outstanding during the period.

        Reconciliations are set out below:

        Basic and diluted earnings per share are the same, since where a loss is incurred the effect of outstanding share options and warrants is considered anti-dilutive and is ignored for the purpose of the loss per share calculation. As at 30 June 2019 there were 24,186,093 outstanding share options and 3,011,649 outstanding share warrants.

Big Sofa Technologies Group Plc

Notes to the Half Yearly Report

For the period to 30 June 2019

4.   Share Capital

        Issued share capital compromises:

During the six months to 30 June 2019 the company issued 25,000,000 ordinary shares of £0.03 at £0.04 per share.

5.   Share Options

The fair value of equity settled share options granted under the Group's share option schemes is estimated as at the date of grant using the Black Scholes model. The following table lists the inputs and key output to the model:

The share price per share at 30/06/19 was £0.0455 (30/06/18: £0.11).

Expected volatility is based on a conservative estimate for an AIM listed entity. The expected life used in this model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations

6.   Post balance sheet events

No post balance sheet events occurred.

Big Sofa Technologies Group Plc

Notes to the Half Yearly Report

For the period to 30 June 2019

7.   Availability of Report

A copy of this half-year report is available on the Company's website at www.bigsofatech.com