07:00 Mon 25 Mar 2019
Be Heard Group PLC - Final Results For The Year Ended 31 December 2018
Final Results For The Year Ended
"Good revenue growth with improved operational efficiencies"
Financial Highlights
· Group revenue increased by 51% to
· Like-for-like revenue growth of +15%
· Adjusted EBITDA (1) increased by 90% to
· Adjusted operating Margin (2) increased by 2.1% to 10.3% (2017: 8.2%)
· Loss from operations
· Cash generation improved by
· Net debt at
· Earnout balance at
Operational Highlights
· Group delivers strong organic growth
· Marked improvement in H2 2019 with revenues of
· 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
· Group management and operational capability strengthened
· Agreement in principle to convert majority of 2019 earn-out liability to 3-year (renewable) loan notes.
"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
The notes to the accounts are published in our Annual Report Accounts for 2018, available at https://beheardpartnership.com
Enquiries |
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+44 20 3828 6269 |
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N+1 Singer |
+44 20 7496 3000 |
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Dowgate |
+44 20 3903 7715 |
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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,
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
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.
Board Changes
I have reported hitherto on senior management changes and, in particular,
Our Employees
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.
Non-Executive Chairman
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.
|
Revenue |
Adjusted EBITDA
|
Adjusted EBITDA Margin |
Net Debt/
|
2018 |
|
|
10.3% |
|
2017 |
|
|
8.2% |
|
|
|
|
|
|
% Growth or £m Change |
+50.7% |
+89.9% |
+2.1% |
|
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
Group Performance 2018
Note: Partner contribution is equal to Group adjusted EBITDA before central overheads of
Freemavens: (acquired in
Revenues
Contribution
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
Contribution
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
Contribution
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
The Corner (acquired in
Revenues
Contribution
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
Contribution
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
New Clients
Notable client wins include Vodafone, Enterprise, GSK, L'Occitane and Equifax.
Impairment of
The Group has taken a non-cash impairment charge to goodwill of
Earnout liability 2019
As at
Cash Generation
Cash generation improved by
Net Debt
Net Debt excluding the
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
As a consequence of the technical breach of the Barclays covenants, we have shown as at
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
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
Leveraging Operational Effectiveness
· 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
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.
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended
|
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Year ended 31 |
Year ended |
|
Notes |
£'000 |
£'000 |
|
|
|
|
Billings |
2 |
49,720 |
34,666 |
Cost of sales |
|
(20,261) |
(15,116) |
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|
--------------- |
--------------- |
NET REVENUE |
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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 note |
|
662 |
- |
Acquisition costs |
|
(50) |
(937) |
Termination payments |
|
(1,398) |
(109) |
Legacy adjustments |
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(297) |
- |
Share based payments |
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(11) |
(235) |
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|
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LOSS FROM OPERATIONS |
3 |
(9,697) |
(3,884) |
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Finance costs |
6 |
(602) |
(66) |
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--------------- |
--------------- |
LOSS BEFORE TAXATION |
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(10,299) |
(3,950) |
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Taxation |
7 |
884 |
1,536 |
|
|
--------------- |
--------------- |
LOSS AFTER TAX |
|
(9,415) |
(2,414) |
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Loss and Total Comprehensive Expense attributable to: |
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Non-controlling interest |
|
413 |
(162) |
Equity holders of the parent |
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(9,828) |
(2,252) |
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--------------- |
--------------- |
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(9,415) |
(2,414) |
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|
======= |
======= |
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LOSS PER SHARE |
|
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Basic |
8 |
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Diluted |
8 |
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|
|
|
======= |
======= |
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
The notes to the accounts are published in our Annual Report Accounts for 2018, available on our website.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at
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2018 |
2017 |
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Notes |
£'000 |
£'000 |
£'000 |
£'000 |
ASSETS: |
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NON-CURRENT ASSETS |
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Property, plant and equipment |
9 |
|
391 |
|
324 |
Intangible assets |
10 |
|
33,876 |
|
45,232 |
|
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|
--------------- |
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--------------- |
TOTAL NON-CURRENT ASSETS |
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34,267 |
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45,556 |
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
Trade and other receivables |
13 |
12,540 |
|
10,423 |
|
Cash and cash equivalents |
|
2,167 |
|
3,107 |
|
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--------------- |
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--------------- |
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TOTAL CURRENT ASSETS |
|
|
14,707 |
|
13,530 |
|
|
|
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|
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LIABILITIES: |
|
|
|
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CURRENT LIABILITIES |
|
|
|
|
|
Trade and other payables |
14 |
(19,071) |
|
(14,984) |
|
Bank and other loans |
15 |
(3,000) |
|
(1,000) |
|
|
|
--------------- |
|
--------------- |
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TOTAL CURRENT LIABILITIES |
|
(22,071) |
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(15,984) |
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NON-CURRENT LIABILITIES |
|
|
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Other payables |
14 |
(3,150) |
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(682) |
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Bank and other loans |
15 |
(3,520) |
|
(4,014) |
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Deferred tax liability |
17 |
(395) |
|
(1,093) |
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Provision for liabilities |
18 |
(3,220) |
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(13,212) |
|
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|
--------------- |
|
--------------- |
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TOTAL NON-CURRENT |
|
(10,285) |
|
(19,001) |
|
LIABILITIES |
|
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|
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TOTAL LIABILITIES |
|
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(32,356) |
|
(34,985) |
|
|
|
--------------- |
|
--------------- |
TOTAL NET ASSETS |
|
|
16,618 |
|
24,101 |
|
|
|
======= |
|
======= |
CAPITAL AND RESERVES: |
|
|
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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 19 |
|
24,101 |
|
|
|
======= |
|
======= |
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
|
2018 |
2017 |
||
OPERATING ACTIVITIES |
£'000 |
£'000 |
£'000 |
£'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 Bank loan drawn |
(16) 2,000 |
|
(305) 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
Reconciliation of net cashflow to movement in net debt: |
2018 |
2017 |
|
£'000 |
£'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 loan notes |
662 |
- |
|
--------------- |
--------------- |
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.
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