Final Results

18 April 2018

Be Heard Group plc

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017

Connected, digital offering delivering organic revenue growth

Be Heard, the digital marketing services group, today announces its full year results for the year ended 31 December 2017.

Highlights

· Strong revenue growth

o 25% increase in organic net revenue

· Profit in line with guidance announced in January

· Connected offering extended by two acquisitions

o The Corner (integrated creative agency) and Freemavens (data and analytics)

· Increasing demand for integrated, end-to-end marketing services

o 13 clients using two or more of our partner companies; four clients use three or more

o 30% of revenue coming from clients using two or more Be Heard partners

· Good new business momentum

o 46 client wins, including first using all Be Heard partners

· Management structure strengthened to drive the next phase of growth

Headline financial results

Peter Scott, Chief Executive, said:

"2017 was only our second year as Be Heard. Phase one of our strategy is well advanced - building an integrated, end-to-end platform to offer connected, digital marketing services. We now have 330 digital experts covering data and analytics, integrated creative, media, content and UX, design and build. We continue to see an immense opportunity ahead for Be Heard, as the traditional holding groups scramble to adapt to changing client needs.

"The Group's focus is now shifting to the next phase of our strategy - driving organic revenue growth by maximising collaboration across our partner agencies. Against a backdrop of weakness in the sector, we have seen strong new business momentum in 2018 to date, at both Group and partner company levels, after some existing clients were slow out of the blocks in the first quarter. We are optimistic of further progress in the year ahead as we help clients navigate the digital customer journey."

Enquiries

Be Heard Group plc +44 20 3828 6269

Peter Scott, Group Chief Executive

N+1 Singer +44 20 7496 3000

Mark Taylor / Lauren Kettle

Dowgate +44 20 3903 7715

James Serjeant

FTI Consulting +44 203 727 1000

Jamie Ricketts / Niamh Fogarty

About Be Heard

Be Heard (AIM: BHRD) is a digital marketing services group helping clients solve the challenges they face in the connected world. Our five partner companies are:

agenda21, a digital media and analytics agency, which became a partner on admission in November 2015 www.agenda21digital.com

MMT, a user experience ("UX"), design and build agency, which became a partner in May 2016 www.mmtdigital.co.uk

Kameleon, a content marketing agency, which became a partner in December 2016 www.kameleon.co.uk

Freemavens, a data-driven analytics and insight consultancy, which became a partner in February 2017 www.freemavens.com

The Corner, an integrated creative agency based in London, which became a partner in November 2017 www.thecornerlondon.com

www.beheardgroup.com

@Be_Heard_Group

Notes

1. Represents Operating Profit (adjusted) prior to central group costs

2. Adjusted to exclude non-recurring and non-cash items

Strategic Review

Building a leading, integrated digital marketing services group

From a standing start little more than two years ago, Be Heard has built a connected group that offers end-to-end marketing services.

Be Heard's defining characteristic is its agile, forward-looking, connected business model.

This is what sets us apart from the traditional marketing holding groups that are - increasingly - struggling to adapt to the needs of the digital age.

Be Heard has been designed and built for the needs of today's marketers. No legacy conflicts, no legacy structure. Instead, a pure focus on helping clients solve one of the major challenges of our age: making the most of the digital customer journey.

This is why Be Heard exists - and now has 330 digital experts, covering data and analytics, integrated creative, media, content and UX, design and build.

As part of our buy-and-build strategy, we extended our connected offering in 2017 through the acquisition of data and insights consultancy Freemavens and integrated creative agency The Corner.

Digital transformation is driving market growth

Business growth is increasingly driven by digital channels and services. Marketers are increasing investment in digital channels to drive brand growth as well as direct marketing. Two data points illustrate this trend. First, global internet advertising overtook broadcast TV spend in 2017. Second, mobile devices are projected to account for 94% of net growth in global advertising expenditure over the next three years.

Increasing demand for our integrated, end-to-end marketing services model

The convergence of technology, data and creative is changing client needs.

There is a growing opportunity for an agile mid-size player - as clients seek new thinking, integrated solutions and transparency.

Be Heard's connected approach is attracting new clients and generating additional revenue. We have 13 clients served by two or more Group companies, and four clients served by three or more; 30% of our 2017 net revenue was generated by multi-company clients compared to just 1% in 2016.

We enjoyed strong new business performance in 2017, with 46 client wins and our first Group wins (where clients chose to enlist the services of all five of our partner agencies).

In recognition of the opportunity for more collaboration and cross-fertilisation between Be Heard partner agencies, we expect to announce the co-location of our London teams in the second half of 2018.

Management structure strengthened to drive the next phase of growth

Having laid the foundations for a connected digital market group, our focus now shifts to the next phase of our strategy - driving organic revenue growth through collaboration across our partner agencies.

To oversee this phase, and support the demands of an enlarged Group, we have completed a strengthening of the management structure in recent months.

At board level, Peter Scott was appointed Group Chief Executive on 4th January 2018, having created the Group in 2015 and driven the first phase of acquisition-led growth in his previous role as Executive Chairman. Peter's focus has shifted to the integration and development of Be Heard's operations and offering.

On the same date, recognising the requirements of a growing, AIM-listed company, David Morrison was appointed as Non-Executive Chairman, having served as a Non-Executive Director since August 2017. David has a wealth of experience building and developing growth companies.

Simon Pyper was appointed Group Chief Financial Officer on 9th April 2018. Simon adds significant experience to the Be Heard board, from senior leadership roles over the past three decades in the media sector and consumer industries.

Following Peter's appointment as Group Chief Executive, and with Simon's imminent arrival, the Board decided to share COO responsibilities between them, and accordingly Robin Price decided to step down from the Board on 9th April 2018. Ian Maude stepped down from the Board, also with effect from 9th April 2018.

To drive growth and collaboration across Be Heard's partner agencies, Richard Costa D'Sa was appointed Group Development Director in December 2017, having joined Be Heard as Chief Growth Officer in July 2017. In a short period he has made a strong impact on collaboration and culture across the Group.

Operations review

Revenue growth was strong at Group level, with organic net revenue up 25%, including double digit growth at MMT, Freemavens and agenda21, and good progress at The Corner which joined the Group in December 2017. Kameleon had a challenging first half of the year but recovered well and enjoyed good new business success in the second half of the year. Group profitability grew at a lower rate due to one-off issues late in the year, albeit trading EBITDA was up 50% to £3.6m.

Mapping the digital customer journey, Be Heard comprises five partner agencies. The leadership group of these companies is closely aligned with Be Heard, through a combination of equity, earn outs and a commitment to a joint vision, endeavour and culture.

MMT Digital

Be Heard's Group's UX, design and build operation creates digital solutions that transform business performance.

MMT Digital enjoyed rapid growth driven by its expansion into digital transformation and UX and increasing collaboration with agenda21 - both through existing relationships and new client wins (including cross-referrals). As outlined on 4th January 2018, margin was impacted by the increase in contractors that were required to support rapid topline growth. Given growth rates, MMT Digital has found recruiting and retaining developers challenging due to the widely recognised UK skills shortage but nevertheless has continued to recruit, and now has c.100 developers.

MMT Digital is increasingly competing with large consultancies and the 'big four' holding groups, as it moves up the client food chain. It is now the leading global partner for Kentico (the website content management system firm) and has expanded the range of CMS platforms it supports. MMT Digital designed and built TOBi, the UK's first AI powered e-commerce enabled chatbot for a UK telecoms company.

Freemavens

Be Heard's data and analytics business is a data-driven growth consultancy. Freemavens has flourished since joining the Group in February 2017, with like-for-like revenue up 39%. In recognition of its important role within Be Heard's connected offering, Freemavens is moving to a more central role within the Group to drive insights, strategy and product development, and relocated to Frith Street in April 2018 to share the same building as agenda21 and Kameleon.

During the year, new client wins included GSK, Diageo, Mastercard and Sainsbury's. Freemavens continued as a core insights partner for Unilever People Data Centre (PDC).

agenda21

Be Heard's digital media planning and buying agency is a media agency engineered for the digital age. agenda21 performed well in 2017, with revenues up 11% following rapid growth in 2016.

New client wins included Addison Lee, Travis Perkins and Vodafone Enterprise, offsetting some client volatility with Casumo (the online gaming firm) taking its media planning and buying in-house during the year. agenda21's data driven media planning and buying has shown tangible results - for example, increasing Addison Lee's return on investment from its app by 48%.

Be Heard stands apart from the crowd in its ability to add media to creative and analytics - in simple terms, putting 'the band back together'. agenda21 is central to this connected offering.

During the year agenda21 launched its proprietary Content Compass platform, onboarding a number of clients, and rolled out a new AI powered media offering.

Kameleon

Kameleon is a content marketing agency where data meets creativity.

It was a challenging first year with the Group for Kameleon, largely for reasons out of its control as three major clients all but ceased activity and spend on marketing - the UK government, NCS and Lee Cooper.

It is a testament to the leadership of co-founder Richard Armstrong, and talent of his team, that Kameleon returned to profitability in the final quarter of 2017.

Kameleon had some impressive client achievements in 2017, winning and then developing and implementing social marketing strategies for all Coca-Cola brands in the UK in a three month period.

But the year overall was disappointing with Kameleon suffering a revenue decline of 52%, resulting in trading EBITDA loss of £0.7m. As part of the swift and decisive remedial action to get Kameleon back on track, the CEO exited Kameleon and had his share of the earnout cancelled. During the year, Kameleon relocated into Frith Street, helping to drive good new business conversion in the first quarter.

The Corner

The Corner is a modern, integrated creative agency for modern times.

The Corner joined the Group in December 2017 - the creative element within Be Heard's connected offering, alongside media and analytics.

Year-on-year revenue was up 18%, with normalised EBITDA of £1.3m in 2017.

Since joining the Group, The Corner created and co-led the new business pitch for blu global. We see multiple opportunities with Group companies as The Corner moves to the centre of our connected offering.

The Corner's market-leading capability was recognised by winning Marketing Week's Campaign of the Year for its Jigsaw 'Heart Immigration' campaign and figuring in The Sunday Times' Best 100 Small Companies to work for.

Expanding the new business pipeline

Be Heard has seen good success in converting new business at partner agency and Group level in 2018 to date.

This reflects a greater focus on developing the Be Heard offering and converting 'low hanging fruit'.

New business opportunities at partner agency level have been led by founders and business development teams. This has benefitted from cross referrals from other Group companies and Company specific opportunities (inbound, via intermediaries, and outbound).

New business opportunities at Group level have been led by the Group Development Director, Richard Costa D'Sa. He is leading a focus and drive for greater collaboration and integration to convert 'low hanging fruit' from existing clients, creating new Be Heard opportunities, improving Group intermediary relationships and partnerships and reinvigorating Group marketing and communications.

Summary and outlook

Be Heard is two years into its journey. Phase one of our strategy is well advanced - building an integrated, end-to-end platform to offer connected, digital marketing services. The Group now has 330 digital experts covering data and analytics, integrated creative, media, content and UX, design and build, and continues to see an immense opportunity ahead as the traditional holding groups scramble to adapt to changing client needs.

Our focus is now shifting to the next phase of the strategy - driving organic revenue growth by maximising collaboration across our partner agencies. Against a backdrop of weakness in the sector, we have seen strong new business momentum in 2018 to date, at both Group and partner company levels, after some existing clients were slow out of the blocks in the first quarter. We are optimistic of further progress in the year ahead as we help clients navigate the digital customer journey.

FINANCIAL REVIEW

The group now has five partner companies that offer complementary skills and competencies across the digital marketing spectrum, with their clients increasingly using more than one of the companies to meet their digital needs.

Partner companies

The results for the year comprise the trading of the Partner companies as follows:

Headline results

Group Billings for the year were £34.67m (2016: £28.85m). Group Net Revenue for the year was £19.6m (2016: £9.5m). Operating profit before non-recurring and non-cash items was £1.6m (2016: £0.8m).

Non-recurring and non-cash items of £5.4m (2016: £4.4m) comprised:

resulting in an operating loss of £3.9m (2016: £3.6m)

Key performance indicators

Key performance indicators used within the Group are:

Trading EBITDA

This is determined prior to the charging of Group central costs to operating profit before non-recurring and non-cash items. With Group central costs of £2.0m (2016: £1.6m), trading EBITDA for the year was £3.6m (2016: £2.4m).

Trading EBITDA margin

This is measured against Net Revenue and on a Group basis gives a margin for the year of 18% (2016: 25%). This is below the Board's threshold target of 20% and accordingly analysis is ongoing at Partner companies under the control of Group finance to identify areas for improvement.

Net Revenue growth

Average Net Revenue growth across Partner companies in comparison to prior years, a proportion of which were pre- acquisition by the Group, was 25% in 2017 (2016: 16%).

Clients served across Partner companies

13 of the Group's clients are served by 2 or more Partner companies; four clients are served by 3 or more Partner companies. 30% of Group Net Revenue came from multi-company clients (2016: 2%).

Net Revenue per employee

The range of net revenues per employee across the Group* during the year was £91k to £109k (2016: £81k to £106k). (* excluding Kameleon where this was £46k as they rebuilt after the loss of key clients in the first part of the year).

Taxation

Due to reliefs as detailed in Note 7 of the accounts, available to the Group there is no charge to corporation tax for the year (2016: nil).

Earnings per share

Earnings per share for the year were £(0.00) (2016: £(0.01)).

Dividends

The Board is not proposing to pay a dividend for 2017 (2016: £nil).

Cash Flow

Net cash outflows from operating activities was £1.6m (2016: outflow £1.6m) and net funds raised by the issue of shares on AIM and Convertible Loan Notes issued were £7.95m (2016: £7.65m).

Net cash outflows on acquisition-related payments (inclusive of working capital and loan note payments) totalled £9.2m (2016: £14.6m).

Liquidity & financial position

In June 2017 the Group entered into an agreement with Barclays Bank in respect of a £3m Revolving Credit Facility maturing in June 2020.

The Group had cash balances of £3.1m at 31 December 2017 (2016: £2.8m) with a drawn-down balance of £1.0m (2016: nil) owing on the Revolving Credit Facility.

Acquisitions

On 9 February 2017, the Group acquired a 75% stake in Freemavens Limited, a marketing analytics and innovation consultancy specialising in the use of big data, for an initial consideration of £0.9m plus assumed debt of £0.8m. The management of Freemavens between them hold 9.3m shares in Be Heard Group plc and retain the remaining 25% holding in Freemavens that is subject to put & call options, not to be exercised before 1 January 2021, that are subject to a maximum value of £6.0m. The transaction was funded by the placement of shares in the market to the value of £2.1m at 3.6p per share.

On 2 November 2017 The Corner Communications (London) Limited ('The Corner'), an integrated creative agency based in London, was acquired by the Group for an initial consideration of £7.95m and potential earnout payments based on their results to December 2020 that could raise this to a maximum of £12.7m. The management of The Corner between them hold 80.4m shares in Be Heard Group plc. The transaction was funded by the raising of gross proceeds of £6.2m through placement of shares in the market to the value of £2.2m at 2.8p per share and the raising of £4.0 million through the issue of Convertible Loan Notes.

Operational developments

Under the leadership of the CEO, an Operations Board has been established that meets every six weeks to connect the senior management of Partner companies to discuss and manage the key strategic and operational issues.

In February 2018 the Group held its first awayday for the second-tier management across the Group that proved immensely valuable in connecting people and providing a cross Group understanding of the different skill sets and capabilities.

The financial capabilities of the Group have been enhanced by the recruitment of an experienced Chief Financial Officer and bringing in additional senior contractual resource to develop reporting systems and provide commercial support to Partner Company finance teams. Moving to a single location will afford the opportunity to consolidate appropriate parts of the financial operations across the Group.

The recruitment of an experienced Group Development Director, initially on a six-month contract basis, and full time since December 2017, has had a significant effect upon the development of cross-group opportunities that will result in three significant clients signing up to Group Master Service Agreements, under which all Group companies will be able to operate. By combining resources our partners can work seamlessly across broader briefs to deliver faster and more effective solutions to clients.

As the Group grows we believe more and more opportunities will present themselves where we can, as a Group, add significant value to our clients.

It remains our intention to co-locate our London-based businesses as soon as an appropriate location becomes available. In the meantime, three of the businesses and the Group team now share space in the same building, with a fourth company located close by. This interim level of co-location is already proving valuable in developing new business opportunities and working practices across the Group and confirms the rationale for a full-scale move.

With the assistance of outside professional resource we are conducting a Group-wide general data protection regulation review to ensure all Partner companies have a consistent and compliant approach.

Peter Scott

Chief Executive Officer

17 April 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2017

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 2017 is £2,414k (2016: £2,899k).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 31 December 2017

The financial statements were approved by the Board of Directors and authorised for issue on 17 April 2018

and were signed on its behalf by:

Peter Scott David Wilkinson

Director Director

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2017

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2017

There were no significant non-cash transactions. 

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2017

1. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS

Be Heard Group plc is incorporated in England and Wales. The Company is domiciled in the UK. The Company is a public limited company which is listed on the Alternative Investment Market ("AIM"). The address of its registered office is 10 Norwich Street, London, England EC4A 1BD.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International Accounting Standards Board as adopted by the European Union ("IFRSs") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRSs. The consolidated financial statements have been prepared under the historical cost convention and on a going concern basis.

The financial statements are presented in pounds sterling (the functional currency) and rounded to the nearest thousand (£'000).

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group ("the Group") have adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion the Directors have considered the financial position of the Group, its cash, liquidity position and borrowing facilities together with its forecasts and projections for 18 months from the reporting date that take into account reasonably possible changes in trading performance. The going concern basis of accounting has therefore continued to be adopted in preparing the financial statements

Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

Business combinations

The consolidated financial statements incorporate the results of business combinations using the acquisition method of accounting other than disclosed above. In the consolidated statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. Acquisition-related costs are expensed as occurred. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Non-controlling interests in acquired companies are measured at the non-controlling interests' proportionate share of the acquiree's identifiable net assets.

Critical judgements and estimates

There are areas in which Group management has exercised its judgement in the application of the Group's accounting policies and making estimates about the future. These include:

· Depreciation rates - fixed assets are depreciated over their expected useful economic life.

· Amortisation rates - the Group applies a reasonable industry standard to amortise acquired intangibles over a 3-year period.

· Impairment of goodwill - the Group assesses the discounted future cashflows of acquired companies using reasonable measures of discount factors and growth rates, in line with industry standards.

· Bad debt provision - debts outstanding over 90 days will usually be provided against, unless there is evidence of imminent recovery.

Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given, liabilities assumed, and equity instruments issued.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the statement of comprehensive income.

Any gains on acquisition are recognised in the statement of comprehensive income on the date of acquisition.

Impairment tests on goodwill are undertaken at least annually or more frequently if events or changes in circumstance indicate a potential impairment.

Impairment of non-financial assets

Impairment tests on goodwill are undertaken annually on 31 December and on other non-financial assets whenever events or changes in circumstances indicate that their carrying value may not be reasonable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Impairment charges are included in the administrative expenses line item in the consolidated statement of comprehensive income, except to the extent that they reverse gains previously recognised in the consolidated statement of recognised comprehensive income. Any impairment loss for goodwill is not reversed.

Intangible assets (other than goodwill)

Intangible assets are recognised on business combinations if they are separable from the acquired entity or arise from other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. Intangible assets principally related to brand names and customer lists which were valued by discounting estimated future net cashflows from the asset.

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. Cost includes all directly attributable costs of acquisition. The amortisation expense is included within the administration expense line in the consolidated statement of comprehensive income. Externally acquired intangible assets are amortised over their useful economic life of 3 years.

Intangible assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is identified as the Group Board who are responsible for allocating resources and assessing the performance of the operating segments. The Group is organised into six operating segments based on individual entities within the Group.

Billings

Billings represent the total amounts receivable from clients, exclusive of VAT, in respect of services provided.

Net revenue

Net revenue is recognised when it is probable that future economic benefits will flow to the Group and the revenue can be reliably measured. Net revenue is measured at the fair value of the consideration received or receivable from customers, net of trade discounts, VAT, and other sales related taxes. Net revenue is recognised as follows:

· Net revenue from commissions on digital media placements is recognised on a straight-line basis over the digital campaign year. Where a campaign has run but not yet billed by the balance sheet date, income is accrued. Where amounts are received in advance of the campaign running, income is deferred.

· Net revenue derived from retainer fees is recognised on a straight-line basis across the retainer year in accordance with the terms of the contractual arrangements.

· Net revenue from creative services is recognised using the percentage completion method, determined on the proportion of the service provided at the balance sheet date. When services have been delivered but not yet billed by the balance sheet date, income is accrued. Where amounts are received in advance of delivery, income is deferred based on the percentage of services not yet completed.

· Net revenue from user experience ("UX") delivery contracts is recognised on a time and materials basis. Services delivered but not billed at the balance sheet date are accrued.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.

Depreciation is provided on all items of property, plant and equipment to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates:

· Land and buildings leasehold - 33% per annum on a straight-line basis

· Fittings and equipment - 33% per annum on a straight-line basis

· Computers - 33% per annum on a straight-line basis

Leased assets

Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an "operating lease"), the total rentals payable under the lease are charged to the statement of comprehensive income on a straight-line basis over the lease term.

The land and buildings elements of property leases are considered separately for the purposes of lease classification.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on:

· the initial recognition of goodwill;

· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit; and

· investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the differences can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities, and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

Pensions 

The pension schemes operated by the Group are defined contribution schemes. The pension cost charge represents the contributions payable by the Group.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are retranslated at the rates ruling at the date of the statement of financial position. Exchange differences arising are recognised in the statement of comprehensive income.

Research and development costs

Expenditure on internally developed products is capitalised if it can be demonstrated that:

· it is technically feasible to develop the product for it to be available for use or sold;

· adequate technical, financial and other resources are available to complete the development;

· there is an intention to complete and sell or use the product;

· there is an ability for the Group to sell the product;

· sale of the product will generate future economic benefits; and

· expenditure on the project can be measured reliably.

Capitalised development costs are amortised over three years. The amortisation expense is included within the administrative expenses line in the statement of comprehensive income. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the statement of comprehensive income as incurred.

Financial assets

The Group classifies its assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:

Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise through the provision of goods and services to customers (trade receivables). They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The effect of discounting on these financial instruments is not considered to be material.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Where possible, credit insurance is sought against the credit risk associated with trade receivables.

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group's accounting policy for each category is as follows:

Other financial liabilities include the following:

· Trade payables and other short term monetary liabilities, which are recognised at amortised cost.

· Loan notes are recognised at amortised cost (other than convertible loan notes which are detailed below).

Convertible loan note

Convertible loan notes are considered to be a hybrid financial instrument comprising a financial liability (loan) and an embedded derivative (share option). At the date of issue, both elements were included in the balance sheet as liabilities held at fair value. The fair value of the loan element was estimated using the prevailing market interest rate for a similar non-convertible debt. This amount is recorded as a liability on an amortised cost basis until extinguished upon conversion at the instrument's maturity date. The fair value of the option element was estimated using the Black Scholes option pricing model with subsequent changes in fair value being recognised in the income statement.

On conversion of the loan note to equity, the fair value of the equity will be calculated based on a pre-agreed share price. The difference between the fair value of the equity issued and the carrying value of the loan note immediately prior to conversion will be recognised within finance costs in the income statement.

Investments

Investments in subsidiaries are held at cost less impairment.

Shared based payment

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting year. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting year is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting year.

Standards and amendments and interpretations to published standards not yet effective

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting years beginning on or after 1 January 2018 or later years and which the Group has decided not to adopt early are:

Amendments to IFRS 2 Share-Based Payment (effective for accounting years beginning on or after 1 January 2018)

IFRS 9 Financial Instruments (effective for accounting years beginning or after 1 January 2018).

IFRS 15 Revenue from Contracts with Customers (effective for accounting years beginning on or after 1 January 2018)

IFRS 16 Leases (effective for accounting years beginning on or after 1 January 2019)

The implementation of these standards is not expected to have any material effect on the Group's financial statements, with the exception of IFRS 16. Specifically, the Group has assessed the impact of implementing IFRS 15 and the impact on the financial statements for the current or prior years is £nil.

The impact that the implementation IFRS 16 will have on the financial statements is currently being assessed.

Details of transactions with related parties of the Directors are given in note 26.

5. DIRECTORS' EMOLUMENTS, INTERESTS AND SERVICES CONTRACTS

The value of all elements of remuneration received by each Director in the year was as follows:

The Executive Directors have service contracts with the Company which are terminable by the Company, or the relevant Director, on twelve months' notice.

The Directors of the Company on 17 April 2018 and at the statement of financial position date, and their interest in the issued ordinary share capital of the Company as at that date of 31 December 2017 were as follows:

Details of the options over the Company's shares are as follows:

On 9 April 2018, Robin Price and Ian Maude resigned as Directors of the Company. At that date their options over the Company's shares lapsed.

note (i) such number of Ordinary Shares as is equal to two per cent of the lower of:

a) the Company's entire issued share capital on the date the Option is exercised; and

b) such number of Ordinary Shares as would constitute the Company's entire issued share capital if the total share capital (including share premium) of the Company was £37 million (on the assumption that the amount of share premium paid on each Ordinary Share is equal to the mean average amount of share premium paid on each Ordinary Share in issue immediately prior to the time at which such number is calculated).

The performance condition applicable to these options is that the mid-market closing price per Ordinary Share must be at least £0.10 for each day during a year of twenty consecutive business days.

note (ii) such number of Ordinary Shares as is equal to two per cent of the lower of:

a) the Company's entire issued share capital on the date the Option is exercised; and

b) such number of Ordinary Shares as would constitute the Company's entire issued share capital if the total share capital (including share premium) of the Company was £37 million (on the assumption that the amount of share premium paid on each Ordinary Share is equal to the mean average amount of share premium paid on each Ordinary Share in issue immediately prior to the time at which such number is calculated).

The performance condition applicable to these options is that the mid-market closing price per Ordinary Share must be at least £0.125 for each day during a year of twenty consecutive business days.

note (iii) such number of Ordinary Shares as is equal to two per cent of the lower of:

a) the Company's entire issued share capital on the date the Option is exercised; and

b) such number of Ordinary Shares as would constitute the Company's entire issued share capital if the total share capital (including share premium) of the Company was £37 million (on the assumption that the amount of share premium paid on each Ordinary Share is equal to the mean average amount of share premium paid on each Ordinary Share in issue immediately prior to the time at which such number is calculated).

The performance condition applicable to these options is that the mid-market closing price per Ordinary Share must be at least £0.15 for each day during a year of twenty consecutive business days.

Peter Scott is not permitted to transfer, charge, assign or dispose any Ordinary Shares issued to him in satisfaction of the exercise of any of these options until 23 November 2018 (save to family members, in the event of a takeover of the Company or to sell to cover the tax arising in connection with his acquisition of those Ordinary Shares).

The following information is relevant to the determination of the fair value of the options detailed in (i), (ii) & (iii) as above:

The expected volatility is based on a statistical analysis of daily share prices of a similar stock to Be Heard Group plc over a 12-month year prior to the date of the grant.

Based on the results of the stochastic model, the modal vesting time (excluding instances in which vesting does not occur) is between 4.5 and 5 years from the date of grant.

The performance condition applicable to the EMI options is that the mid-market closing price per Ordinary Share must be at least £0.08 for each day during a year of twenty consecutive business days.

The market price of the shares at 31 December 2017 was £0.0285, with a quoted range during the year of £0.0275 to £0.0415.

The following information is relevant to the determination of the fair value of the options:

The expected volatility is based on a statistical analysis of daily share prices of a similar stock to Be Heard Group plc over a 12-month year prior to the date of the grant.

The market vesting conditions have been factored into the calculation by applying an appropriate discount to the fair value of equivalent share options without the specified vesting conditions.

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows:

Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the year. The weighted average number of equity shares in issue was 812,812,081 (2016: 553,597,753).

The diluted earnings per share is the same as the earnings per share due to the consolidated Group loss.

Development costs relate to Amplify and Content Compass; data analytics tools developed in-house by Agenda21.

Amortisation of £2,604k and impairment of £3,762k are included in administrative expenses in the year.

The Group tests intangible assets biannually for impairment or more frequently if there are indications of impairment. A discounted cashflow analysis is computed to compare the discounted future cashflows to the net carrying value of goodwill and other intangible assets for each operating segment as appropriate.

11. GOODWILL AND IMPAIRMENT

Details of the carrying amount of goodwill allocated to cash generating units (CGUs) is as follows: