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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Be Heard Group Plc | LSE:BHRD | London | Ordinary Share | GB00BT6SJV45 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.475 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Feb 2020 to Feb 2025
TIDMBHRD
RNS Number : 8040T
Be Heard Group PLC
25 March 2019
BE HEARD GROUP PLC
Final Results For The Year Ended 31 December 2018
"Good revenue growth with improved operational efficiencies"
Financial Highlights
-- Group revenue increased by 51% to GBP29.5m (2017: GBP19.6m) -- Like-for-like revenue growth of +15% -- Adjusted EBITDA (1) increased by 90% to GBP3.0m (2017: GBP1.6m) -- Adjusted operating Margin (2) increased by 2.1% to 10.3% (2017: 8.2%)
-- Loss from operations GBP(9.7)m after non-cash impairment charge of goodwill and intangibles of GBP8.4m and GBP1.7m of exceptional costs (2017: GBP(3.9m))
-- Cash generation improved by GBP2.4m with cash generated from continuing operation of GBP0.8m
-- Net debt at GBP(0.8)m (3) after earn-out payments (2017: net cash GBP2.1m) -- Earnout balance at GBP15.1m (December 2017: GBP19.9m)
Operational Highlights
-- Group delivers strong organic growth -- Marked improvement in H2 2019 with revenues of GBP15m and EBITDA of GBP2.4m -- Notable client wins include Vodafone, Enterprise, GSK, L'Occitane and Equifax -- Aligned cost base to appropriate and sustainable levels -- Improved operating margins -- 9 consecutive months of profitability to February 2019 -- Group management and operational capability strengthened
-- Agreement in principle to convert majority of 2019 earn-out liability to 3-year (renewable) loan notes.
David Morrison, Non-Executive Chairman of Be Heard Plc, commented:
"In spite of a difficult start to the year, which gave rise to senior management changes, the company has made considerable progress and finished the year strongly. The results for the second six months show a marked improvement when compared to the first half and reflect the focus of the new management team on operational effectiveness, profitability and cash generation.
The new financial year has started positively, against an unsettling market environment and the financial constraints of the Group. Assuming reasonable trading weather ahead, I expect to be able to report positive news as the year progresses."
Note 1
We define Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, restructuring of the Group, share-based payments and impairments.
Note 2
Operating Margins are Adjusted EBITDA divided by revenue.
Note 3
Net debt excludes GBP3,520k of convertible loan notes issued on 28 November 2017. The notes are convertible by the holder into ordinary shares of the Company at any time between the date of issue of the notes and their redemption date. The notes are convertible at 3.5 pence per share
The notes to the accounts are published in our Annual Report Accounts for 2018, available at https://beheardpartnership.com
Enquiries Be Heard Group plc +44 20 3828 6269 David Morrison, Non-Executive Chairman Simon Pyper, Chief Executive Officer N+1 Singer +44 20 7496 3000 Mark Taylor / Lauren Kettle Dowgate +44 20 3903 7715 James Serjeant / Colin Climie
Strategic Report: Non-Executive Chairman's Statement
In spite of a difficult start to 2018, which gave rise to senior management changes, the company has made considerable progress and finished the year strongly. The results for the second six months show a marked improvement when compared to the first half and reflect the focus of the new management team on operational effectiveness, profitability and cash generation.
Having joined the Group in April as Chief Financial Officer, Simon Pyper moved into the role of Chief Executive at the beginning of September and Ben Rudman, one of the founders of MMT Digital, the largest of the partner companies acquired by Be Heard, became Group Chief Operating Officer. I would like to thank them for stepping up, as they did, in difficult circumstances and for providing strong management and clear leadership since doing so.
Having focussed on increasing profitability and generating cash, I am pleased that the Company is now profitable (adjusted EBITDA), stable and soundly managed. Against a backdrop of market uncertainty, as Brexit rumbles on with no clear outcome, and substantive structural changes in the sectors in which Be Heard's partner companies operate, we have set ourselves what we believe to be achievable goals and realistic financial objectives, taking into account the financial constraints in which we operate, which are largely a function of earn-out payments negotiated at the time the partner companies were bought into the Group.
In particular, we believe that organic growth can be driven by capitalising on the range of skills that are to be found across the Group. The latter half of last year demonstrated the benefit of being able to offer clients a range of creative solutions involving more than one of the partner companies. Whilst considerable progress was made in the last few months of the year in eliminating duplication and reducing inefficiencies in the Group, there remain opportunities to run certain functions at Group level which to date, have been undertaken by each of the underlying businesses.
We also feel that there are chances to enter into joint ventures with companies outside the Group, which can provide leverage to our own areas of competence. Simon Pyper, in the Chief Executive's Report, considers these issues in more detail.
Board Changes
I have reported hitherto on senior management changes and, in particular, Peter Scott's resignation from the Board in September. I would like to thank Peter again for the role that he played in establishing Be Heard and for leading it in its most formative years.
Our Employees
Be Heard is totally dependent on its people and the turnaround in operating performance in the last few months of the year would not have been possible without their commitment. I would particularly like to thank the employees of the Group in all the partner companies for their efforts, as well as both my executive and non-executive colleagues on the Board.
Current Trading and Outlook
The new financial year has started positively, against an unsettling market environment and the financial constraints of the Group. Assuming reasonable trading weather ahead, I expect to be able to report positive news as the year progresses.
David Morrison
Non-Executive Chairman
25 March 2019
Strategic Report: Chief Executive's Report
The first task on appointment was to stabilise the business and to put the business on to a more robust financial footing. Our second half results reflect much of the work undertaken both at the centre and within the partner companies to reduce our cost base to a more appropriate and sustainable level. Moreover, we have for the new financial year set pragmatic and achievable financial objectives based on an honest assessment of our business, our capabilities and, as importantly, based on prudent levels of revenue growth.
Key Performance Indicators
The key performance indicators selected are used by the Executive Directors to monitor the Group's performance and progress.
Hot Features
Premium
Revenue Adjusted Adjusted EBITDA Net Debt/
EBITDA Margin Net Cash
========================= ========= ========= ================ ==========
2018 GBP29.5m GBP3.0m 10.3% GBP(0.8m)
========= ========= ================ ==========
2017 GBP19.6m GBP1.6m 8.2% GBP2.1m
========= ========= ================ ==========
% Growth or GBPm Change +50.7% +89.9% +2.1% GBP(2.9)m
========= ========= ================ ==========
Adjusted EBITDA as EBITDA adjusted for costs associated with acquisitions, restructuring of the Group, share-based payments and impairments.
Net Debt is short and long-term borrowings (excluding earnouts and convertible loan note) less cash and cash equivalents.
The Group was founded with the intention of buying and building a "partnership" of marketing services companies fit for the digital age. The main components for such a Group are broadly in place and the emphasis is now on organising and managing the partner companies to maximise their potential. Whilst it remains a work in progress, the Group has four constituent parts: Creative, led by The Corner and Kameleon. Media led by agenda21.Technology, led by MMT and Data Analytics from Freemavens. The benefits of having these skill sets under one roof began to be realised in the course of last year as, increasingly, mandates were won as a direct result of the breadth and flexibility of Be Heard's offering. However, it will take the remainder of the current year to refine the offering and to achieve the required level of operating integration.
Group Performance 2018
Note: Partner contribution is equal to Group adjusted EBITDA before central overheads of GBP2.2 million (2017: GBP1.8 million)
Freemavens: (acquired in February 2017):
Revenues GBP3.0 million, 41% ahead of last year
Contribution GBP1.0 million, 2017 GBP0.5 million (for the eleven months of ownership)
Analytics and insight business which makes use of customer, audience and market data to provide critical insights to blue chip clients. Freemavens is our only partner company which regularly engages with client-side senior executives. Growth has come from both increased engagements from its top clients and from notable new business wins.
MMT Digital:
Revenues GBP13.9 million, 48% ahead of last year Contribution GBP2.9 million, 2017 GBP1.9 million
Delivering award winning websites and software MMT, works with clients to transform their digital performance. The results for 2018 reflect MMT's focus on delivering quality solutions for clients to timetable and to budget. Growth has come from both existing clients and a number of client referrals.
Kameleon:
Revenues GBP2.0 million, 97% ahead of last year Contribution GBP0.2 million, 2017 GBP(0.8) million
Kameleon is a unique data-driven content agency which specialises in creating content solutions that deliver better engagement and effectiveness across all digital channels. In many respects Kameleon was the star performer of 2018 recording a significant increase in revenues and a near GBP1.0m improvement in contribution.
The Corner (acquired in December 2017):
Revenues GBP5.6 million, (15%) below last year (on pro-forma basis)
Contribution GBP1.0 million, 2017 GBP0.2 million (for the one month of ownership)
A brand and creative company which helps clients become more relevant to their audience through new thinking and new ideas. A disappointing first year for The Corner, with revenue and contribution run rates lower than their pre-acquisition average. Much of the decline can be ascribed to market uncertainty, but some if not a significant part is down to the fact that the business did not respond in time and in an appropriate manner to the client-led changes to the revenue model, from "retainer" to "project" led engagements.
agenda21:
Revenues GBP5.0 million, (23%) below last year Contribution GBP0.1 million, 2017 GBP1.5 million
agenda21 is a media planning and buying business which optimises media and content across connected devices. Along with losing its largest client, the business was slow to adapt to market changes such as client "in-housing" or competitors providing capabilities such as media buying at rates marginally ahead of input cost. The business has been restructured with a new Managing Director in place from the end of January 2019.
New Clients
Notable client wins include Vodafone, Enterprise, GSK, L'Occitane and Equifax.
Impairment of Goodwill
The Group has taken a non-cash impairment charge to goodwill of GBP7.2 million. Of this GBP6.4 million relates to the carrying value of agenda21, GBP0.7 million relates to The Corner, and despite an improved trading performance, GBP0.2 million of the impairment charge relates to Kameleon.
Earnout liability 2019
As at 31 December 2018 the Group had circa GBP15.1m of earn out liabilities (excluding Freemavens) of which GBP9.9m is payable in cash. The Group is in negotiations to migrate the majority of the 2019 liability (cash and shares) to 3-year renewable loan notes which will attract a modest rate of interest above LIBOR.
Cash Generation
Cash generation improved by GBP2.4 million, with cash generated from continuing operations of GBP0.8m (2017: cash consumed from continuing operations of GBP1.6m).
Net Debt
Net Debt excluding the GBP3.5m convertible loan notes, increased to GBP(0.8)m as at 31 December 2018 (2017: Net Cash of GBP2.1m). This increase principally reflects GBP3.1m paid to satisfy earn-outs.
Covenants
The Group operates under a number of covenants relating to the convertible loan note and the Group's banking facilities. During the year the Group became aware that it was likely to breach a number of covenants relating to the convertible loan note managed by Gresham House Asset Management LLP and consequently sought and received the necessary waivers and amended covenants. Similarly, the Group became aware that it was in technical breach of a number of covenants relating to the banking facilities provided by Barclays Bank plc.
As a consequence of the technical breach of the Barclays covenants, we have shown as at December 31 the GBP2.0m term loan as a current liability. The Group has subsequent to the Balance Sheet date (31 December 2018) received the appropriate waivers for the 2018 financial year. Additionally, the directors have, subject to legal documentation, agreed revised covenants with Barclays Bank plc to those which better reflect Group's cash requirements and working capital cycle. Consequently, the Group expects that for the 2019 financial year the term loan will be re-classified to non-current liabilities.
Strategic Priorities
The challenge ahead, given the financial constraints of the Group and the less than consistent performance of the partner companies, is how best to deliver profitable growth over the medium to long-term. If we are to achieve growth without recourse to additional capital then the most appropriate approach is to; more fully leverage our proposition, to further improve our operational effectiveness, and where appropriate to enter into capital-light joint ventures with businesses operating within or adjacent to our competitive footprint.
Leveraging our Proposition
We are on many levels a successful business, winning a number of new client engagements and achieving revenue growth from several existing clients. Despite some notable successes, we, like many of our competitors, have seen a general reduction in the volume and value of new business which in part reflects the impact on marketing budgets brought about by the continued economic and political uncertainty in the United Kingdom. Aligned with the softening of new business, we have also found that the pitch process has become more competitive, with prolonged client decision timeframes and furthermore, with procurement playing an ever-greater part in the client's decision-making mix.
Moreover, in response to demand-side structural changes, many marketing services firms are re-engineering their business model. We have seen a number of our competitors moving to a "single provider model", whereby individual brands are no longer as relevant as the competencies and services being offered. Whilst other companies have invested further in the "holding company" model, where the individual agencies with minimal support from the parent deliver client solutions. We at Be Heard believe that a more flexible approach is needed, one which recognises that "one size" does not fit all and that the key to success is in providing clients with creative solutions to real commercial challenges. Our business model allows us to present ourselves as a single provider with deep expertise in a number of areas, or to act as an individual agency, or to provide multiple service combinations from two or more partner companies.
Leveraging Operational Effectiveness
Be Heard's five different partner companies had historically been run independently with separate operations and discrete processes. Little thought had previously been given to the benefits which could accrue by sharing certain functions and responsibilities. Ben Rudman, Group Chief Operating Officer, has made good progress in:
-- Implementing common processes particularly around resource planning; -- Standardising reporting processes and output; and -- Implementing cost reduction initiatives
Joint Ventures
The capital constraints within which the Group operates have led us have to take a more creative yet pragmatic approach towards growth. The Group is currently in negotiations with two sub-scale businesses that operate in our competitive footprint. Both opportunities are "capital light" with Be Heard offering access to infrastructure, business processes and client fulfilment capabilities in exchange for new routes to market and a broadening of our prospective client base.
The Market
There seems little doubt that the uncertain economic and political climate will continue to have an adverse impact on client spending decisions over the near to medium-term. This uncertainty coupled with the demand-led structural changes within the marketing services sector presents both challenges and opportunities. Challenges we aim to overcome, and opportunities which agile and responsive firms such as ours are well placed to exploit.
Priorities
Our immediate priorities remain unchanged; to focus on better leveraging our proposition and operational effectiveness and moreover, to build a business which delivers sustainable long-term profitable growth.
Simon Pyper
Chief Executive Officer
25 March 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2018
Year ended Year ended
31 31 December
December 2017
2018
Notes GBP'000 GBP'000
Billings 2 49,720 34,666
Cost of sales (20,261) (15,116)
--------------- ---------------
NET REVENUE 29,459 19,550
Administrative expenses (39,156) (23,434)
--------------- ---------------
OPERATING LOSS (9,697) (3,884)
--------------------------------------- ------ ---------------- ----------------
Operating profit before non-recurring
and non-cash items (adjusted EBITDA) 3,040 1,601
Depreciation (183) (107)
Amortisation (2,976) (2,604)
Impairment of intangibles (1,159) (1,493)
Impairment of goodwill (7,221) (2,269)
Movement in deferred and contingent
consideration (104) 2,269
Revaluation of convertible loan 662 -
note
Acquisition costs (50) (937)
Termination payments (1,398) (109)
Legacy adjustments (297) -
Share based payments (11) (235)
--------------------------------------- ------ ---------------- ----------------
LOSS FROM OPERATIONS 3 (9,697) (3,884)
Finance costs 6 (602) (66)
--------------- ---------------
LOSS BEFORE TAXATION (10,299) (3,950)
Taxation 7 884 1,536
--------------- ---------------
LOSS AFTER TAX (9,415) (2,414)
Loss and Total Comprehensive Expense
attributable to:
Non-controlling interest 413 (162)
Equity holders of the parent (9,828) (2,252)
--------------- ---------------
(9,415) (2,414)
======= =======
LOSS PER SHARE
Basic 8 GBP (0.01) GBP (0.00)
Diluted 8 GBP (0.01) GBP (0.00)
======= =======
All of the above losses after taxation arise from continuing operations.
There was no other comprehensive income for the year. Total comprehensive expense for the year ended 31 December 2018 is GBP9,415k (2017: GBP2,414k).
The notes to the accounts are published in our Annual Report Accounts for 2018, available on our website.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2018
2018 2017
Notes GBP'000 GBP'000 GBP'000 GBP'000
ASSETS:
NON-CURRENT ASSETS
Property, plant and equipment 9 391 324
Intangible assets 10 33,876 45,232
--------------- ---------------
TOTAL NON-CURRENT ASSETS 34,267 45,556
CURRENT ASSETS
Trade and other receivables 13 12,540 10,423
Cash and cash equivalents 2,167 3,107
--------------- ---------------
TOTAL CURRENT ASSETS 14,707 13,530
LIABILITIES:
CURRENT LIABILITIES
Trade and other payables 14 (19,071) (14,984)
Bank and other loans 15 (3,000) (1,000)
--------------- ---------------
TOTAL CURRENT LIABILITIES (22,071) (15,984)
NON-CURRENT LIABILITIES
Other payables 14 (3,150) (682)
Bank and other loans 15 (3,520) (4,014)
Deferred tax liability 17 (395) (1,093)
Provision for liabilities 18 (3,220) (13,212)
--------------- ---------------
TOTAL NON-CURRENT (10,285) (19,001)
LIABILITIES
TOTAL LIABILITIES (32,356) (34,985)
--------------- ---------------
TOTAL NET ASSETS 16,618 24,101
======= =======
CAPITAL AND RESERVES:
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
Share capital 19 10,407 9,819
Share premium reserve 20 13,208 13,224
Merger relief reserve 20 8,038 6,689
Retained earnings 20 (15,350) (5,533)
--------------- ---------------
Equity attributable to
owners of parent company 16,303 24,199
Non-controlling interests 21 315 (98)
--------------- ---------------
TOTAL EQUITY 16,618 24,101
19
======= =======
The notes to the accounts are published in our Annual Report Accounts for 2018, available on our website.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
2018 2017
OPERATING ACTIVITIES GBP'000 GBP'000 GBP'000 GBP'000
Loss before taxation (10,299) (3,950)
Adjustments for:
Depreciation 183 107
Amortisation 2,976 2,604
Impairment of intangibles 1,159 1,493
Impairment of goodwill 7,221 2,269
Movement in deferred and contingent
consideration 104 (2,269)
Revaluation of loan note (662) -
Share based payment expense 11 235
Finance costs 602 66
--------------- ---------------
11,594 4,505
--------------- ---------------
Cash generated from operations
before changes 1,295 555
in working capital and provisions
(Increase)/decrease in trade
and other receivables (1,835) 45
Increase/(decrease) in trade
and other payables 997 (2,614)
--------------- ---------------
(838) (2,569)
--------------- ---------------
Cash generated from/(consumed
by) operations 457 (2,014)
Net tax received 296 458
--------------- ---------------
Cash flow from/(used in) operating
activities 753 (1,556)
INVESTING ACTIVITIES
Purchase of property, plant
and equipment (253) (251)
Consideration paid on acquisition
of
subsidiaries - (6,675)
Deferred consideration paid (3,063) (2,330)
Payment to buy out shareholders - (175)
Cash with subsidiaries over
which control
has been obtained - 2,378
Expenditure on development
costs - (45)
--------------- ---------------
Cash flow used in investing
activities (3,316) (7,098)
FINANCING ACTIVITIES
Issue of ordinary shares - 4,283
Share issue expenses (16) (305)
Bank loan drawn 2,000 1,000
Loan notes issued - 4,000
Finance costs (361) (29)
--------------- ---------------
Cash flow from financing activities 1,623 8,949
--------------- ---------------
(DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (940) 295
Cash and cash equivalents
at 1 January 3,107 2,812
--------------- ---------------
Cash and cash equivalents
at 31 December 2,167 3,107
======= =======
Cash available on demand 2,167 3,107
======= =======
The notes to the accounts are published in our Annual Report Accounts for 2018, available on our website.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2018 (continued)
Reconciliation of net cashflow to movement in 2018 2017
net debt:
GBP'000 GBP'000
Net (decrease)/increase in cash and cash equivalents (940) 295
Revolving credit facility drawn - (1,000)
Term loan drawn (2,000) -
Convertible loan notes issued - (4,000)
Interest accrued on convertible loan notes (488) (14)
Interest paid on convertible loan notes 320 -
Revaluation of share option component of convertible 662 -
loan notes
--------------- ---------------
Movement in net debt in the year (2,446) (4,719)
Net debt at 1 January (1,907) 2,812
--------------- ---------------
Net debt at 31 December (4,353) (1,907)
======= =======
There were no significant non-cash transactions.
The notes to the accounts are published in our Annual Report Accounts for 2018, available on our website.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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March 25, 2019 03:01 ET (07:01 GMT)
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