Brainjuicer (LON:BJU) is more clearly focusing on driving its higher quality earnings streams in ad-testing, brand tracking and predictive markets. These areas of the business are growing faster, are more scalable and should drive higher margins than the one-off research projects and consultancy services that have formed much of the mix historically. The group has very strong cash generation and a debt free balance sheet. Proof that the shift in emphasis is paying off should help close the discount with other quoted market research companies.
Core System1 products growing well
The group has stated that it is moving to a March year-end as from the current year so will publish 15-month numbers to March 2017 in due course. Our forecasts remain for a December year-end as pro-forma figures are not yet available. This change helps remove the potential volatility of operating profits in a sector where clients backload their spending to the final weeks of the year. FY15 results showed strong growth in the System1-driven gross profit (emotional, intuitive reactions, as opposed to System2 rational responses), with core products growing at 17%, more than offsetting the decline in the more commoditised areas and the high-level but expensive-to-deliver consultancy. New initiatives such as the creative agency and broadened distribution should deliver incremental growth and margin.
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