Great Scott! Ad veteran aims for £100m at digital start-up
PETER Scott has form. Now 69, he has been in the advertising industry for almost 40 years, during which time he has built up a string of small businesses into huge, international enterprises.
In 1979, he co-founded WCRS, one of the fastest-growing agencies of the 1980s. Ten years later, he took part of that business and developed it into Aegis, ultimately sold for £3.2billion to a Japanese company. And in 2004 he created marketing business Engine Group, which was sold for £100million a decade later.
Now he is hoping to repeat past success at Be Heard Group, an agency focused exclusively on the digital world. Its services range from designing websites to helping firms steer through the complex world of online advertising. The shares are 3.05p but should rise substantially as Scott expands the company.
The business was founded last autumn, since when it has made two acquisitions – digital media agency agenda21 and website specialist MMT Digital. Scott expects to make three to four acquisitions a year, building revenue up to £100million by 2020.
The target sounds ambitious, but the advertising world is changing fast as consumer habits evolve and people increasingly turn to the internet to buy anything from food to electrici t y. Independent research suggests that global online purchases will more than double from £1.1 trillion in 2014 to more than £2.5 trillion in 2020. And, even if consumers ultimately go into shops to buy goods, research is often conducted online, while they increasingly share their opinions about what they have bought on social media. Not surprisingly then, companies are rapidly rethinking how they choose to market themselves and their products. Over the next four years, internet advertising is expected to overtake that of television, with predicted spending of more than £185billion. Many advertising giants, such as WPP in Britain and Omnicom in the US, have developed digital arms to cope with this shift. Numerous small, independent agencies have also sprung up in recent years, often focusing on certain fields, such as website design or social media advertising. Scott’s intention is to turn Be Heard into something slightly different – a marketing company that specialises in all things digital. As such, the group will buy businesses in the sector and bring them together so they can offer customers a wide range of digital services, rather than one or two niche areas. The idea has won support from large investors, such as asset managers Schroders and Henderson Global, as well as entrepreneur Nigel Wray. Companies increasingly like dealing with digital specialists too, often appointing small, up-and-coming agencies specifically to handle internet-based work.
Be Heard’s board is impressive, filled with experts from the worlds of marketing, advertising and the internet, including Rakhi GossCustard, who spent 12 years at Amazon, ultimately becoming director of UK media. This team helps Be Heard to punch above its weight when it comes to attracting new customers, while the group’s network of contacts also gives it early access to potential acquisitions.
Talks are under way with numerous potential targets, but Scott is taking a cautious approach, only choosing to buy firms after spending several months analysing their business, their sector and their people. As a further precaution, acquisitions will always include a proportion of Be Heard shares, to incentivise management once they become part of the group.
Progress to date has been good and customers already include Vodafone, the AA and utility group SSE. Over time Scott is keen to expand into the US but again, a measured approach will be taken.
Be Heard releases its first-half figures on September 15 and they should be encouraging. For the full year, brokers expect sales of £9.1million and profits of £700,000, rising to £13.2million and £1.5million respectively in 2017.
Midas verdict: Digital advertising is multi-faceted. Companies have to think about website design, e-commerce and social media, not to mention where to advertise across the internet and how to ensure they are noticed. Be Heard has been set up to help them address these issues. Scott has been successful throughout his career and should be able to do it again. At 3.05p, the shares could go far.