Be Heard Group PLC is an AIM listed holding company focussed on digital marketing. The group consists of five agencies which combine marketing, data and technology to create simple agile ways for companies to connect with their customers. The group was founded in November 2015 through the acquisition of Agenda 21 and has since gone on to complete four further acquisitions as it seeks to bring a broad range of digital marketing services together under one organisation. The idea behind this acquisition led strategy is that by building an integrated, end-to-end platform combining the different agencies, each agency is in a stronger position as they are able to collaborate and cross sell between each other. This approach also allows the group to provide a full suite of services allowing clients to use Be Heard for all their digital marketing needs.
Since completing the acquisition of The Corner in November 2017 the board now feels that the group has a full suite of marketing services and have now progressed from their initial buy and build phase onto the second phase of their strategy. The main focus is now on driving organic revenue through increasing collaboration across the partner agencies. With this new focus in mind the company is taking several steps to increase collaboration including co locating all agencies into a single London office. With management no longer looking to make further acquisitions, the risk of investing in the shares is now substantially reduced. Not only is all the risks that come with future acquisitions now gone further dilution should also be kept to a minimum as the company should be self financing going forward. With earnings visibility now greatly improved and the company showing strong organic growth, could now the time to hop on board.
What resurfaced Be Heard to my attention was the company’s most recent trading update, whilst overall it was a positive update it was received poorly by the market and the shares have dropped over 50% since the update was announced. The update reported 70% overall revenue growth against last year boosted by acquisitions but more importantly going forward organic revenue came in with a healthy 15% increase, driven by new client wins and expanding activity with existing clients. But what disappointed the market is the board reported that they now expect adjusted EBITDA for the year ending 31st December 2018 to come in somewhere between £3 and £3.3 million due to margins reflecting the increased costs associated with winning new business, uncertainty around contract timing and client spend volatility. The company has responded to the drop in margins by taking volume related and structural cost measures which will improve margins going forward. The drop in EBITDA represents a 24.6% drop from previous expectations, a 50% share price drop from a 24.6% reduction in EBITDA seems like somewhat of an over reaction even more so when we take into consideration the steps management is taking to address the issue.
With analysts now forecasting earnings per share of 0.2p for 2018 and the shares currently hovering around an all time low of 0.94p, the shares are trading at a very undemanding forward p/e ratio of 4.7. What’s more earnings per share are forecast to hit 0.3p for 2019 giving a p/e of 3.1. With such a low p/e ratio and organic revenues growing at 15% now looks like it could be the perfect time to hop on board for canny investors.