REG - S4 Capital PLC - Fourth Quarter Trading Update

S4 CapitalAnnouncement

28/01/2025 07:00

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RNS Number : 8636U  S4 Capital PLC  28 January 2025

S(4) Capital PLC

28 January 2025

S(4) Capital plc

Fourth Quarter Trading Update

("S(4) Capital", "the Company" or "the Group")

 

Fourth quarter in line with expectations and anticipated 2024 full year
results slightly ahead of current consensus, with liquidity and net debt
significantly better than expected

 

 

S(4) Capital plc (SFOR.L) confirms that trading in the fourth quarter was in
line with the expectations outlined on 7th November and 2024 is expected to be
slightly above current consensus of net revenue at £746 million and
operational EBITDA of £84 million.  Fourth quarter like for like net revenue
showed a sequential improvement over the first three quarters. The Company
anticipates like for like net revenue will be down approximately 11% and
operational EBITDA margin in the range of 11-12% for the year. Operational
EBITDA improved as a result of significant cost reductions, which continued
throughout the fourth quarter. Net debt will be significantly below current
consensus of £185 million and below the lower end of the previously indicated
range of £150-190 million, following a strong focus on working capital. The
net debt to EBITDA ratio at the end of 2024 is expected to be approximately
1.6x versus current consensus of 2.2x and a targeted range of 1.5-2.0x.

 

Reflecting trading conditions in the second half of 2024 and the subsequent
medium term outlook, the Company expects a non-cash impairment charge to be
included in exceptional items in the full year results for 2024.

 

The annual results for 2024 will be announced on 24 March 2025. at which point
the Company will provide more detailed targets for 2025. Current indications
are for net revenue and operational EBITDA to be broadly similar in 2025 to
2024.

 

 

Sir Martin Sorrell, Executive Chairman of S(4)Capital plc said:

 

"Trading in the fourth quarter improved over the first three, with stronger
like for like net revenues performance and operational EBITDA margins.
However, our industry continued to reflect the trends seen earlier in the
year. Tech clients, accounting for approximately half of our revenue,
continued to invest significantly in capital expenditure to build AI capacity
rather than marketing operating expenditure. Global macro-economic conditions
remained challenging and interest rates relatively high and there was some
underperformance, when compared to our markets. In addition our Technology
Services practice continued to be affected by a reduction in one of our larger
relationships. Despite this challenging environment, the Company successfully
improved its cost base and protected operating margins. Liquidity and net debt
was significantly better  due to improved profitability in the fourth quarter
and tight working capital control, coming in below the lower end of our net
debt range.

 

Although it is early in the year, there is still some macro-economic
uncertainty, interest rates remain high and clients are likely to remain
cautious. That said, the headwind we experienced in Technology Services is
likely to ease and initial indications are for net revenue and operational
EBITDA to be broadly similar in 2025 to 2024. We will maintain our focus on
cost efficiency for the year ahead.

 

We continue to focus on our larger, scaled relationships with leading
enterprise clients, while driving margin improvement through greater
efficiency, utilisation, billability and pricing. We remain confident in our
strategy, business model and talent, which together with scaled client
relationships position us well for growth in the longer term. We continue to
capitalise on our prominent AI positioning and see multiple AI related
assignments."

 

 

Enquiries to:

 S(4)Capital plc                          +44 (0)20 3793 0003
 Sir Martin Sorrell (Executive Chairman)
 Sodali (PR Advisor)                      +44 (0)79 3535 1934
 Elly Williamson/ Pete Lambie

 

 

 

About S(4)Capital

 

Our strategy is to build a purely digital advertising and marketing services
business for global, multinational, regional, and local clients, and
millennial-driven influencer brands. This will be achieved by integrating
leading businesses in two synchronised practices: Marketing services and
Technology services, along with an emphasis on 'faster, better, cheaper, more'
execution in an always-on consumer-led environment, with a unitary structure.

The Company now has approximately 7,200 people in 33 countries with
approximately 80% of net revenue across the Americas, 15% across Europe, the
Middle East and Africa and 5% across Asia-Pacific. The longer-term objective
is a geographic split of 60%:20%:20%. At the Group's last full year results
Content accounted for approximately 60% of net revenue, Data&Digital Media
25% and Technology Services 15%.

 

Sir Martin was CEO of WPP for 33 years, building it from a £1 million 'shell'
company in 1985 into the world's largest advertising and marketing services
company, with a market capitalisation of over £16 billion on the day he left.
Prior to that Sir Martin was Group Financial Director of Saatchi & Saatchi
Company Plc for nine years.

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