- Annual revenue up 13 per cent to £35.7mn
- Adjusted pre-tax profit up 38 per cent to £3.6mn
- Underlying EPS up 18 per cent to 0.29p
- Closing net cash of £6.8mn (0.53p)
London-based social and digital media group Brave Bison (BBSN:2.6p) had already flagged up better than expected annual results in a pre-close trading update (‘Brave Bison’s rally is far from over', 12 February 2024).
The step change in profit mainly reflects the £7.7mn cash acquisition (part-funded by a £4.75mn placing at 2.3p in February 2023) of Social Chain, a market-leading social media and influencer marketing agency, which ramped up the group's exposure to the social media advertising sector, the fastest-growing subsection in the wider industry.
Following integration of Social Chain with Brave Bison’s smaller social and influencer division, the business was rebranded and relaunched to good effect. A raft of client wins followed in the second half of 2023, including John Lewis, LinkedIn and Holland & Barrett with the focus leaning towards the higher-margin influencer segment. That’s because clients are increasingly looking to target younger, more niche audiences that do not use the more intent-led digital channels such as Google and Facebook. In fact, the group recorded a record number of new client wins as it capitalised on the appetite of global advertisers to invest in social media.
Brave Bison’s performance division performed well, too, despite the overall slowdown in the marketing sector. This side of the business buys digital media on platforms such as Google, Facebook, TikTok and YouTube as well as providing search engine optimisation and digital PR services. New developments include an AI tool, called Scribe, powered by OpenAI and used for search engine optimisation (SEO). It can automatically update retailers’ web pages for thousands of products to include keywords that elevate them in search results. Analyst Andrew Renton at house broker Cavendish notes that this process would previously have been manual, or likely not carried out at all, but is providing an immediate impact for some of Brave Bison’s largest clients.
True, the group’s media network division is more exposed to weaker market advertising rates, but it is still delivering good results for clients. The business generates more than 1bn monthly views across a portfolio of sports and entertainment channels on YouTube, Facebook, Snap, TikTok and Instagram. Brave Bison announced contract renewals and extensions with clients including PGA Tour, US Open and Le Mans.
Scope for earnings-accretive acquisitions to drive upgrades
In terms of the short-term industry outlook, Renton notes that a recovery in economic growth and central banks pivoting towards lowering interest rates are potential catalysts for higher advertising spend. Also, more companies are likely to increase the mix of adverting spend towards brand awareness, a positive for Social Chain, the group’s largest division.
Current trading is ahead of last year, albeit Cavendish is cautiously looking for relatively flat cash profit of £4.2mn on slightly higher revenue of £36.5mn. That said, with the group’s cash pile set to build to £9.1mn (0.7p) by the year-end, there is scope for earnings-accretive acquisitions to drive upgrades, a factor that is not embedded in a 12-month trailing price/earnings (PE) ratio of 8.7.
The share price has risen 43 per cent since I initiated coverage (‘Alpha Research: A social marketing profit play for the digital age’, 10 May 2022) and there is decent upside to Cavendish’s 3.4p target. Buy.
■ Special offer. Simon Thompson's books Successful Stock Picking Strategies and Stock Picking for Profit can be purchased online at www.ypdbooks.com at the special discounted price of £5 per book plus UK P&P of £4.95, or £10 for both books plus UK P&P of £5.75, subject to stock availability.
They include case studies of Simon’s market beating Bargain Share Portfolio companies outlining the characteristics that made them successful investments. Simon also highlights many other investment approaches and stock screens he uses to identify small-cap companies with investment potential. Full details of the content of the books can be viewed on www.ypdbooks.com.
