Half-year Report

18 September 2018

For Release

BE HEARD GROUP PLC

Unaudited Interim Report For The Six Months Ended 30 June 2018

Operational Highlights

· Continued strong organic growth

· Centralisation of business development teams focused on winning and growing larger clients

· Group management and operational capability strengthened

· Centralisation of business functions continues, including HR, Finance, IT and Marketing

· Annualised cost savings of £2.0 million secured

Financial Highlights

· Group revenue increased by 70% to £14.2m (2017: £8.3m) and by 18% on a like-for-like basis

· Adjusted EBITDA (1) increased to £0.7m (2017: £0.1m)

· Loss from operations £(3.5)m (2017: £(3.0)m)

· Net debt at £(0.5)m (2) after earnout payments (2017: net cash £1.2m)

· Earnout balance at £15.1m (December 2017: £19.9m)

David Morrison, Non-Executive Chairman of Be Heard Plc, commented:

"The Group has, from a revenue perspective, performed well during the first half of the year, delivering good absolute and like-for-like growth. Additionally, the Group secured a number of new client wins during the period, which is not only encouraging given prevailing market conditions, but also supportive of the growing relevance of the Be Heard proposition.

In our press release on 4th September 2018, Peter Scott founder and CEO of Be Heard Group Plc announced his decision to leave the Group. The Board and I recognise Peter's substantial contribution to the Be Heard story; it was Peter's vision, drive and effort which created Be Heard.

To support the next stage of Be Heard's development, the new executive team, in addition to completing the efficiency and centralisation programme will be conducting a full operating review of the business. The Group's focus for the near to medium term will now be to leverage our proposition more fully and to improve our operational effectiveness, which in time should improve cashflow, margins and profitability".

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

Net debt excludes £4,098k 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.

Enquiries

Chairman's Statement

The first half of this year has seen robust revenue growth on a like-for-like basis, which is a testament to the quality of the services being offered by the operating companies within the Group and the increasing relevance of the Be Heard proposition. When set against a backdrop of an overall reduction in both the volume and value of new client engagements, driven, in part, by political and economic uncertainties and witnessed by several of our competitors, this revenue growth is good. However, extended pitch processes and procurement-led pressure on pricing have had an impact on margins and profitability. Simon Pyper, in his review, comments more fully on this and the actions taken within the Group to increase profitability, the full benefits of which we will see in 2019 and beyond.

Board Changes

There have been notable changes to the Board of Be Heard in the past few months, Rakhi Goss-Custard retired from the Board in August and Peter Scott, the founder and CEO, stepped down in September. Be Heard is a testament to Peter's foresight and determination, without which the Group would not exist. It is the intention of all of us working in the business, or associated with it, to see Peter's vision realise its full potential.

As detailed in our announcement dated 4th September 2018, I am delighted that Simon Pyper has agreed to become, on an interim basis, the CEO of the Group. Simon has broad experience in the media and consumer industries, from senior leadership roles over the past three decades. Most recently, he was on the Board of Globaldata plc, the AIM-listed data and analysis business, where he served as Chief Financial Officer from 2016 to 2017. Under Simon's leadership, Globaldata plc was admitted to AIM in 2010 and grew to a market capitalisation in excess of £500 million.

I am also pleased that Ben Rudman, co-founder of MMT Digital (a Be Heard company), has agreed to join the Board as Chief Operating Officer. He has extensive experience of running and growing digital agencies, having spent almost 20 years at MMT Digital. Ben's focus will be on implementing process change across the Group and centralising a number of key functions.

Our Employees

Be Heard is a people business, working together for the benefit of our clients; our employees being the Group's key differential and our most valuable asset. I personally would like to thank all of our employees for their professionalism, dedication and hard work.

Current Trading and Outlook

Despite market conditions remaining challenging, the Board is confident that the Group will continue to deliver revenue growth in the second half of the financial year, as a result of continued client wins and focus on providing relevant services from across the Group to our clients.

The Group's focus for the near to medium term will now be to leverage our proposition more fully and to improve our operational effectiveness, which, in time, should improve cashflow, margins and profitability.

David Morrison

Non-Executive Chairman

18th September 2018

Operational Review

Be Heard is a collective of over 300, technology, media, data and creative specialists, who work collaboratively to help our clients unlock growth. Moreover, Be Heard is a business which is more than the sum of its parts, and a business which recognises that "none of us are as smart as all of us".

Our first half results are a positive step in the right direction. Our strong revenue growth, both absolute and like-for-like, is given the economic and political environment within which we operate, a testament to the growing relevance of the Be Heard proposition.

The challenge for Be Heard going forward is to translate higher percentage of our revenue growth into earnings growth.

Leveraging our Proposition

Despite winning a number of new client engagements 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. Coupled with this softening of new business, we have also found that the pitch process has become somewhat drawn out with procurement playing, to the detriment of margins, an ever-greater part in the client's decision-making mix.

To address these structural challenges, the Group will have to become more responsive and flexible in addressing client needs. We need to become more "relevant, authentic and distinct" and leverage our proposition more fully with both existing and new clients. Under a project titled 'Be Heard 2.0', we have already started this process:

· Continuing to develop the Be Heard story and proposition with intermediaries, existing and new clients;

· Bringing together and enlarging the Group's business development teams, focused on attracting larger blue-chip clients;

· Emphasis on client "cross pollination", whereby we provide more services, in more depth, from across the Group;

· Repositioned analytic resources; and

· Forsake low margin business, to focus on higher-margin, cash generating opportunities.

Leveraging Operational Effectiveness

Be Heard is a collection of five different agencies. To date, while there has been a concerted effort to present a united front in client pitches which has resulted in several notable Group business wins, the respective agencies run semi-autonomously with little thought given to benefits which could accrue by centralising certain functions and responsibilities. Ben Rudman, Group Chief Operating Officer, has started to:

· Centralise HR, Finance, IT and Marketing;

· Implement common processes particularly around resource planning;

· Standardise reporting processes and output;

· Formalise incentive schemes ensuring correct behaviours and outcomes are being rewarded; and

· Cost reduction initiatives

There is much to be done but we are better placed than ever to improve our operational effectiveness and margins over the medium term. In addition to the cost review and centralisation of business functions that are either complete or in train, we are conducting an operational review of the whole business to ensure Be Heard is ready for its next phase of development.

Group Performance

The 5 partner agencies which collectively make-up Be Heard are:

MMT: Revenues of £6.8 million, 61% ahead of Last Year

A user experience and design business which creates digital solutions that transform business performance. The good first half performance of MMT largely resulted from leveraging more business from existing client relationships and some notable new business wins.

The Corner: Revenues of £2.9 million (acquired in Dec 2017, so no prior year comparative under Be Heard ownership)

A brand and creative company which helps clients become more relevant to their audience through new thinking and new ideas. From a revenue perspective, The Corner performed broadly in line with expectations during the first half of the year, though new business wins have been somewhat muted reflecting uncertainty around client budgets.

agenda21: Revenues of £2.5 million, 17% below Last Year

agenda21 is a media planning and buying business which optimises media and content across connected devices. The first half was difficult for agenda21 with its results adversely affected by the loss in December of last year of its largest client who "in housed" a number of work streams. The business has had some success in winning new business, but not at a rate sufficient to compensate or deliver year on year growth.

Freemavens: Revenues of £1.1 million, 61% ahead of Last Year

An analytics and insight business which makes use of customer, audience and market data to provide cortical insights to blue chip clients. A strong first half for Freemavens driven by increased engagements from its top clients and some new notable new business wins.

Kameleon: Revenues of £0.8 million, 112% ahead of Last Year

A content marketing and production business which encourages better engagement between clients and their customers. The management team of Kameleon should be congratulated on turning the business around, securing a number of new client wins and increasing revenue spend from existing clients.

New Clients

Notable client wins included; Vodafone Enterprise, Aviva, GSK, L'Occitane and Equifax.

Centralisation of Business Functions

We have started to centralise a number of business functions and reduce both overheads and inefficiency. The expected annualised saving of this programme of work is circa £2.0m, the benefits of which will begin to be seen in the second half of this year, with the full benefits being realised in 2019.

The Market

We are operating in uncertain economic and political times, and we, like many companies in our space, have seen and continue to see this having an adverse impact on client spending decisions.

The large holding company model would appear to be out of favour and the future, for now at least, seems to be biased towards agile and responsive agencies such as ours. We are confident that there is growth to be had, we need to be better at finding it and converting a higher proportion of our pitches to engagements.

Priorities

Our immediate priorities are to focus on better leveraging our proposition and operational effectiveness, and to build a business which delivers sustainable long-term profitable growth.

We need to, and can achieve more with what we have, it is as simple as that, though simple doesn't always equate to easy.

Simon Pyper

CEO

18th September 2018

INTERIM CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2018

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2018

(unaudited)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2018

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2018

NOTES TO THE INTERIM REPORT

for the six months ended 30 June 2018 

1. Corporate information

The interim consolidated financial statements of the group for the period ended 30 June 2018 were authorised for issue in accordance with a resolution of the directors on 17 September 2018. Be Heard Group plc is a Public Limited Company listed on AIM, registered in England and Wales and domiciled in the UK.

The interim consolidated financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006, and should be read in conjunction with the 2017 annual financial statements. The statutory audited accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies in England and Wales. The auditors' report on these accounts was unqualified and did not contain statements under section 498 of the Companies Act 2006.

2. Statement of Accounting policies

2.1 Basis of Preparation

The interim consolidated financial statements of the group for the period ended 30 June 2018 have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the group's annual financial statements for the year ended 31 December 2017, which were prepared in accordance with IFRS's as adopted by the European Union.

The directors are satisfied that, at the time of approving the consolidated interim financial statements, it is appropriate to continue to adopt a going concern basis of accounting.

2.2 Accounting Policies

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the group's annual financial statements for the year ended 31 December 2017.

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.

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 periods beginning on or after 1 July 2018 or later periods and which the group has decided not to adopt early are:

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

Amendments to IFRS 3 Business Combinations (effective for accounting periods beginning on or after 1 January 2019)

Amendments to IAS 12 Income Taxes (effective for accounting periods beginning on or after 1 January 2019)

Amendments to IAS 19 Employee Benefits (effective for accounting periods beginning on or after 1 January 2019)

Amendments to IAS 23 Borrowing Costs (effective for accounting periods beginning on or after 1 January 2019)

The impact that the implementation of the above standards will have on the financial statements is currently being assessed.

NOTES TO THE INTERIM REPORT

for the six months ended 30 June 2018

3. Segment Information

The Group's primary reporting format for segment information is business segments which reflect the management reporting structure in the Group.

There were no clients accounting for more than 10% of the Group's turnover in the period.

4. Earnings per share 

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 994,036,220.

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

NOTES TO THE INTERIM REPORT

for the six months ended 30 June 2018

The development costs relate to Amplify and Content Compas, data analytics tools developed in-house by Agenda21.

6. Share capital

At 30 June 2018 the number of shares covered by option agreements amounted to 58,752,033.

Shares issued in the period:

NOTES TO THE INTERIM REPORT

for the six months ended 30 June 2018

7. Related party transactions

During the period, the Group paid brokers fees of £20k (H1 2017: nil; FY 2017: £79k) to Dowgate Capital Stockbrokers Limited. David Poutney, a Director of the Company, is Chairman of Dowgate Capital Stockbrokers Limited. At 30 June 2018 £nil (30 June 2017: £nil) was due to Dowgate Capital Stockbrokers Limited.

8. Seasonality

From a revenue perspective there are no clearly identifiable trends suggesting a bias in favour of one reporting period over another. With regards to earnings ('EBITDA Adjusted") there will be a bias in favour of the second half of the year reflecting the cost reduction/ restructure programme implemented in May of this year.

9. Post Balance Sheet Events

On 4 September 2018 Peter Scott left his role as CEO of the company and Simon Pyper was appointed interim CEO.

Further copies of this document are available both at the registered office of the Company and from the offices of the Company at 53 Frith Street, London W1D 4SN. The statement will also be available to download on the Company's website.