- Annual revenue up 46 per cent to £31.7mn, or 9 per cent above market forecasts
- Pre-tax profit up 86 per cent to £2.6mn, or 20 per cent above analysts’ estimates
- EPS of 0.24p exceeds forecast by 20 per cent
Brave Bison (BBSN:2.75p), a London-based social and digital media group that has undergone a dramatic transformation since a boardroom clear-out three years ago, has released forecast-busting annual results.
The ongoing outperformance partly reflects a restructuring that has materially lowered the cost base, but also upside from acquisitions that have scaled up the business, and a digital focus that is driving organic growth. The group operates two business models: the provision of digital advertising and technology services to global blue-chip companies; and a network of social and digital media channels.
Fee-based digital advertising and technology services include social media advertising, influencer marketing, paid media services, search engine optimisation services, ecommerce software integration and system design. Customers in this segment include New Balance, Muller, Primark and Asus. Buoyed by a combination of organic growth and the contribution from bolt-on acquisitions, divisional revenue increased by 169 per cent to £19.7mn and gross profit tripled to £14mn, well above analyst forecasts.
The other part of the group owns and operates a network of more than 650 social and digital media channels which principally exist on platforms such as YouTube, Snapchat, Facebook, TikTok and Instagram. It publishes content on these channels to attract views and serve advertising. For instance, Brave Bison is now one of the largest tennis publishers on YouTube, managing both the Australian and US Open Grand Slams, while in golf it manages the Ryder Cup, DP World Tour and the PGA Tour.
Last year, the unit generated 1.3bn views and delivered a marginally lower gross profit of £2.9mn on revenue of £11.9mn, a reflection of the more challenging macroeconomic conditions.
Solid finances support acquisition strategy
Importantly, the group retains a rock-solid balance sheet, holding net cash of around £4.8mn (0.4p a share) following the post-period-end acquisition of Social Chain, a market-leading social media and influencer marketing agency. It is the third acquisition since the new management team took charge in 2020 and has boosted Brave Bison’s exposure to the fastest-growing subsection of the industry (annual growth rate of 15 per cent). Amazon, TikTok, Arla, KFC and Apple Beats are some of Social Chain’s clients.
Strategically, it will enable Brave Bison to cross-sell its products to a bigger roster of blue-chip clients, provides a presence in the US, and offers scope to improve Social Chain’s profits by stripping out duplicated administration and operational costs and sub-letting the group’s London office space.
Forecasts well underpinned
The contribution from Social Chain underpins analysts’ expectations that current-year revenue will rise from £31.7mn to £42.9mn on a stable cash profit margin of 9.5 per cent, a result expected to drive pre-tax profit up by a fifth to £3.1mn. The directors are comfortable with these forecasts, taking into account that trading has become more difficult as customer budgets come under pressure.
Furthermore, even after factoring in the £7.7mn initial cash consideration on the acquisition, part-funded by February’s £4.75mn placing of shares at 2.3p, house broker Cenkos Securities expects closing net cash of £6.3mn (0.6p) to be little changed year on year, a reflection of the group’s positive cash generation.
On this basis, Brave Bison’s shares are rated on a cash-adjusted price/earnings (PE) ratio of 8.6, a modest rating that suggests that the shares, which have produced a 57 per cent gain since I initiated coverage (‘Alpha Research: A social marketing profit play for the digital age’, 10 May 2022), have further upside. Buy.
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