REG - S4 Capital PLC - AGM Statement

S4 CapitalAnnouncement

06/06/2024 12:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240606:nRSF4334Ra&default-theme=true

RNS Number : 4334R  S4 Capital PLC  06 June 2024

6 June 2024

S(4)Capital plc

AGM Statement

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

 

 

Full year targets maintained reflecting like-for-like net revenue(2) down on
the prior year and a broadly similar overall level of operational EBITDA(1,3)
to 2023 reflecting cost actions and customary significant second half
weighting

 

S(4)Capital plc (SFOR.L), the tech-led, new age, new era digital advertising,
marketing and technology services company is announcing that at the Annual
General Meeting of the Company being held now, at 12 noon, Sir Martin Sorrell,
Executive Chairman of the Company, is making the following statement:

 

"2023, our fifth full year, was a difficult year with slower market growth and
continuing macroeconomic uncertainty. The first half saw a mixed performance
with less momentum and an anticipated second half seasonal uplift, which did
not materialise amidst continuing client caution together with economic and
geopolitical challenges. Overall, we saw clients very much focused on the
short term, particularly in relation to larger transformation projects, which
resulted in longer sales cycles, along with lower regional and local
opportunities. Our stated 'whopper' strategy of building broad-scaled
relationships with leading enterprise clients continues to drive our business,
ending the year with 10 against our target of 20 such relationships. We remain
focused on a disciplined approach to costs, number of Monks and operational
cash generation.

 

Trading in the first four months continues to reflect the impact of volatile
global macroeconomic conditions, general client caution, continuing amongst
technology clients and a reduction in activity with some of our larger
Technology Services clients, although there has been some improvement in the
profitability of the Content Practice during this period. We continue to
develop our larger, scaled relationships with leading enterprise clients and
are increasing our focus on margin improvement through greater efficiency,
utilisation, billability and pricing. We maintain our targets for the full
year and, as in prior years, financial performance will be significantly
second half weighted reflecting both our normal seasonality and an expected
improvement in market conditions.

 

We want to take this opportunity to remind everyone of our Company's
definitive and differentiated strategy, which continues to be based on four
core principles - digital only; data driven; faster, better, cheaper and more;
and unitary. We say "our Company", as it is both your Company as our
shareowners and our Company, as your management team. We are still tightly
aligned with you - with around 40% of our share capital connected to our Monks
and/or Directors. We are purely digital, because that is where the growth is,
even more so in a post Covid-19, 24/7 always-on digital world fuelled by AI.
Our data-driven, business model derives insights from first party data and
platform signals, which fuel the creation, production and distribution of
digital advertising and marketing content through our data&digital media
planning and buying, programmatic and performance executions. We continue to
expand our capabilities in Technology Services to fully provide digital
marketing transformation services for our clients. The transformational shift
to Artificial Intelligence (AI) is incorporated into our strap line of
"faster, better, cheaper and more" to reflect our enhanced ability, to
integrate AI across our uniquely, unitary operations.

 

We remain confident in our strategy, business model and talent. These together
with scaled client relationships position us well for growth in the longer
term, with an emphasis on deploying free cash flow, as and when appropriate,
to improve shareowner returns, particularly now that all significant merger
payments have been made.

 

New business activity continues at healthy levels, particularly with the
current focus on hyper-personalisation or personalisation at scale,
accelerated by AI. Marketeers are starting to split their activities into two
areas or levels - upper funnel, strategic, big idea creative, which is in turn
then activated by a lower funnel creative content platform or factory. This
involves significant organisational change and is being embraced by clients
that are both successful and those facing disruptive change - all being
accelerated by the deprecation of third party cookies. New business wins in
the first four months include Burger King, Panasonic, FanDuel, AliExpress,
Decathlon, Santander and ICBC. In addition, the Company continues to
capitalise on its strong AI positioning winning multiple exploratory
assignments as clients experiment and explore applications and develop use
cases. These are currently focused on visualisation and copywriting,
hyper-personalisation at scale, media planning and buying, general
client/agency efficiency and democratisation of knowledge.

 

Since our last AGM in June of 2023, our Company has reduced the number of
Monks in the Company to around 7,600 compared to around 8,600 at this time
last year, a reduction of circa 1,000, reflecting the ongoing progress made in
aligning our cost base with the demand we are seeing from our clients. We will
maintain a disciplined approach to managing our cost base, with an increasing
focus on driving efficiency across the Company as well as utilisation,
billability and pricing.

 

For 2024 at a Practice level, we continue to expect Content to show a
profitability improvement reflecting the benefit of cost reductions made in
2023 and in 2024. Data&digital Media will show a similar top and
bottom-line performance to the prior year with some modest margin improvement,
while the outlook for Technology Services remains challenging and the
performance will be lower, following a significant reduction in activity with
some key clients. For the Company as a whole, given the current outlook for
Technology Services and wider market uncertainty, we continue to target
like-for-like net revenue to be down on the prior year with a broadly similar
overall level of operational EBITDA as 2023(3), as a result of cost
improvements made last year. The comparatives with 2023 will continue to be
relatively harder in the first half and will ease in the second half.

 

We continue to expect the year to be heavily second half weighted, with
improving end markets and our normal seasonality. Our net debt is expected to
fall in the second half of 2024 reflecting positive free cash flow and
significantly lower combination payments. Our targeted range for the year end
remains £150 million to £190 million. We continue to aim for financial
leverage of around 1.5 times operational EBITDA over the medium term (our key
covenant is 4.5 times). Over the medium to longer term we continue to expect
our growth to outperform our markets and operational EBITDA margins to return
to historic levels of around 20%.

 

Our talented people have responded positively to the challenging trading
conditions and our drive for efficiency. We have continued to make progress in
the three areas of our ESG strategy: People Fulfilment, Our Responsibility to
the World and One Brand.  We are grateful for the ongoing support of our
shareowners and remain confident in our strategy, business model and talent,
which together with scaled client relationships position us well for growth in
the longer term.

 

As announced on 27 March 2024 and to continue aligning our governance to a
more traditional board composition, Christopher S. Martin, Victor Knaap, Wes
ter Haar and Scott Spirit will all be retiring from the Board at the
conclusion of today's AGM, with Wes ter Haar becoming a Board observer. They
will retain their current roles within the Company, including any involvement
in the Executive Committee. In addition, as announced on 29 April 2024, Paul
Roy will also step down from the Board at the conclusion of the AGM, as part
of reducing his commitments to commercial and corporate interests. Finally, in
consideration of the Board structure as well as her time commitments, Naoko
Okumoto will not seek re-election from shareowners at today's AGM, and step
down from the Board at the conclusion of the AGM. We take this opportunity to
publicly thank all of our retiring directors, both executive and non-executive
for their contribution and commitment to S(4)Capital during their tenure on
the Board."

 

As the AGM is a hybrid, shareowners will have received instructions for
electronic access via the Lumi AGM app, including details of voting and
Q&A functions. Details are set out in the Notice of Annual General
Meeting. Guest access to the AGM without voting or a Q&A facility is
available as a webcast at https://brrmedia.news/SFOR_AGM24
(https://brrmedia.news/SFOR_AGM24) .

 

 

Enquiries to:

 S(4)Capital plc                          +44 (0)20 3793 0003
 Sir Martin Sorrell (Executive Chairman)
 Powerscourt (PR Advisor)                 +44 (0)7970 246 725
 Elly Williamson/ Pete Lambie

 

Notes (in this document):

 

1. Operational EBITDA is operating profit or loss adjusted for acquisition
related expenses, non-recurring items (primarily acquisition payments tied to
continued employment, amortisation of business combination intangible assets
and restructuring and other one-off expenses) and recurring items (share-based
payments) and includes right-of-use assets depreciation. It is a non-GAAP
measure management uses to assess the underlying business performance.
Operational EBITDA margin is operational EBITDA as a percentage of net
revenue.

2. Net revenue is revenue less direct costs.

3. This is a target and not a profit forecast

 

 

About S(4)Capital

S(4)Capital plc (SFOR.L) is the tech-led, new age/new era digital advertising,
marketing and technology services company, established by Sir Martin Sorrell
in May 2018.

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 three practices: Content, Data&digital Media 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 S(4)Capital Board includes Rupert Faure Walker, Daniel Pinto, Sue
Prevezer, Elizabeth Buchanan, Margaret Ma Connolly, Miles Young and Colin Day
as Non-Executive Directors.

The Company now has approximately 7,600 people in 32 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%. Content currently accounts for
approximately 60% of net revenue, Data&digital Media 25% and Technology
Services 15%. The long-term objective for the practices is a split of
50%:25%:25%.

 

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.

 

Disclaimer

This announcement includes 'forward-looking statements'. All statements other
than statements of historical facts included in this announcement, including,
without limitation, those regarding the Company's financial position, business
strategy, plans and objectives of management for future operations (including
development plans and objectives relating to the Company's services) are
forward-looking statements.

 

Forward-looking statements are subject to risks and uncertainties and
accordingly the Company's actual future financial results and operational
performance may differ materially from the results and performance expressed
in, or implied by, the statements. These factors include but are not limited
to those described in the Company's prospectus dated 8 October 2019 which is
available on the news section of the Company's website. These forward- looking
statements speak only as at the date of this announcement. S(4)Capital
expressly disclaims any obligation or undertaking to update or revise any
forward-looking statements contained herein to reflect actual results or any
change in the assumptions, conditions or circumstances on which any such
statements are based unless required to do so.

 

No statement in this announcement is intended to be a profit forecast and no
statement in this announcement should be interpreted to mean that earnings per
share of the Company for the current or future years would necessarily match
or exceed the historical published earnings per share of the Company.

 

Neither the content of the Company's website, nor the content on any website
accessible from hyperlinks on its website for any other website, is
incorporated into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any such
content be relied upon in reaching a decision as to whether or not to acquire,
continue to hold, or dispose of, shares in the Company.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  AGMDZGGVLVNGDZG