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Be Heard enters 2018 with strong pipeline after deferral of some contracts

The deferral of certain contracts from the last quarter of 2017 to the first quarter of 2018, means that the group enters the new year with a strong pipeline
Digital marketing
The agency was blind-sided by some contract deferrals late in the year

Digital marketing services group Be Heard Group PLC (LON:BHRD) had mixed news on Wednesday, reporting strong revenue growth but lowering profits guidance.

Across the group, the organic revenue growth of the operating companies in 2017 was up 24% on 2016. Despite that, profitability for 2017 is expected to be below market expectations due to a number of unexpected factors.

READ: Be Heard expects content marketing agency Kameleon to return to profitability in final quarter

The MMT, agenda21 and Freemavens units experienced a reduction in activity towards the end of the year and some deferral of existing and new contracts to 2018. 

These developments occurred very late in the year, leaving the group little or no time to adjust costs, which meant lower revenue resulted in lower margins. In addition, MMT suffered cost overruns on a substantial contract and although this has now been addressed, it may result in a write-off of certain non-recoverable costs in 2017.

As mentioned last month, the group’s Kameleon unit has continued its recovery and was profitable in the final quarter of 2017. Be Heard expects Kameleon to trade profitably through 2018.

“The deferral of certain contracts from the last quarter of 2017 to the first quarter of 2018, means that the group enters the new year with a strong pipeline and management remain confident about the trading outlook for 2018,” Be Heard’s trading statement said.

Management

On the subject of management, founder and executive chairman Peter Scott is to become group chief executive with immediate effect, focusing on the integration and development of Be Heard’s operations and offering.

Non-executive director David Morrison has been appointed non-executive chairman.

The board has decided to separate the roles of chief financial officer (CFO) and chief operating officer, and thus is on the look-out for a CFO; in the meantime, Robin Price will continue in both roles.

"Whilst we expect profitability in 2017 to be below expectations, Be Heard's new business momentum is proof of the demand for fast-moving, agile digital specialists operating seamlessly to deliver a better service to clients in today's increasingly complex market place. We see this trend gathering pace and remain confident of further progress in 2018," said David Morrison.

Shares in Be Heard opened at 2.48p, down from 2.83p overnight.

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