REG - S4 Capital PLC - Interim Results for 2024
19/09/2024 07:00
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RNS Number : 7974E S4 Capital PLC 19 September 2024
S(4)Capital plc
("S(4)Capital" or "the Company" or "the Group")
Interim Results for 2024
Like for like full year profit targets unchanged with net revenue down on the
prior year and previous indications, a broadly similar overall level of
operational EBITDA(5,9) as 2023 reflecting both significant cost reductions
and second half weighting
Net revenue(2) reduction of 15.6%, 13.5% like-for-like(3)
Operational EBITDA(5) £30.1 million, as expected, down 17.5% on a reported
basis, down 8.2% like-for-like
Net debt(7) at £182.9 million, reflecting first share buy-back and
combination payments as planned, together with improved free cashflow
Major new AI-driven client account win
£ millions six months ended six months ended change Reported change change
Like-for-like(3)
Pro-forma(4)
30 June 2024 30 June 2023
Restated(8)
Billings(1) 908.9 925.4 (1.8%) 0.8% 0.8%
Revenue 422.5 517.1 (18.3%) (16.2%) (16.2%)
Net revenue(2) 376.1 445.5 (15.6%) (13.5%) (13.5%)
Operational EBITDA(5) 30.1 36.5 (17.5%) (8.2%) (8.2%)
Operational EBITDA margin(5) 8.0% 8.2% (20bps) 50bps 50bps
Adjusted operating profit(6) 24.8 30.6 (19.0%)
Adjusting items(6) (28.5) (37.0) 23.0%
Operating loss (3.7) (6.4) 42.2%
Loss for period (13.7) (21.8) 37.2%
Basic loss per share (pence) (2.0) (3.5) 1.5
Adjusted basic earnings per share(6) (pence) 1.2 1.3 (0.1)
Number of Monks 7,553 8,551 (11.7%)
Net debt(7) (182.9) (109.4)
Financial highlights
¤ Billings(1) £908.9 million, down 1.8% on a reported basis, up 0.8%
like-for-like(3), reflecting stronger digital media planning and buying
activity.
¤ Revenue £422.5 million, down 18.3% reported and 16.2% like-for-like.
¤ Net revenue(2) £376.1 million, down 15.6% reported and 13.5%
like-for-like, reflecting both continued global macroeconomic uncertainty and
high interest rates, client caution particularly amongst some of our large
technology clients, along with the expected significant lower transformation
activity in one of our larger Technology Services clients.
¤ Operational EBITDA(5) £30.1 million, as expected, down 17.5% reported
and 8.2% like-for-like.
¤ Operational EBITDA margin of 8.0%, up 50bps on a like-for-like basis.
¤ Operating loss £3.7 million, an improvement of £2.7 million on the
prior year, due to lower combination related expenses and lower share-based
payments.
¤ Basic loss per share of 2.0p, compared to 3.5p basic loss per share in
the first half of 2023.
⁄ Adjusted basic earnings per share(6), which excludes adjusting items
after tax, of 1.2p per share, compared to 1.3p per share in the first half of
2023.
¤ Net debt(7) ended the period at £182.9 million, or 2.2x net
debt/pro-forma 12 month operational EBITDA. In the first half combination
related payments of £9.7 million were made. Our expectation for year-end net
debt remains at £150-£190 million.
¤ The balance sheet has sufficient liquidity and long-dated debt
maturities to facilitate future growth.
Strategic and operational highlights
¤ Our strategy remains the same. We continue to build a purely digital
advertising and marketing services business for
global, multinational, regional, and local clients, and millennial-driven
influencer brands. The Company's unitary, purely digital transformation model,
based on first-party data fuelling the creation, production and distribution
of digital advertising content, distributed by digital media and built on
technology platforms to ensure success and efficiency, resonates with clients.
¤ We continue to streamline and integrate our businesses. We have
recently rebranded to just Monks and we are focusing all our current
capabilities into two practices: Marketing Services and Technology Services.
Our tagline 'faster, better, cheaper, more' or 'speed, quality, value, more'
and a unitary structure both appeal strongly to clients, even more so in
challenging economic times. Client behaviour and budgets are changing, driven
by Artificial Intelligence (AI) and new ways of working and we believe we are
well positioned to take advantage of the opportunities all this provides and
are encouraged by recent wins that leverage our AI tools and capabilities.
¤ All Practices have seen some impact from the net revenue reductions,
most evident in Technology Services reflecting anticipated lower
transformation revenue from one client. Profitability by Practice in the first
half reflects significant improvements in margins in both Content and
Data&Digital Media, due to the actions taken on costs, whilst Technology
Service's profitability is lower, as expected, due to revenue reduction. We
continue to maintain a disciplined and active approach to cost management,
including headcount and discretionary costs. These controls have resulted in
the number of Monks at the half year of 7,553, down around 12% from over 8,500
at this time last year. The Group continues to take cost action, especially in
Content and Technology Services, as the market is expected to remain
challenging and will reduce costs further in the second half in order to
protect profitability.
¤ New business activity continues at significant levels, particularly
with a focus on AI driven hyper-personalisation at scale. New business wins in
the first half include General Motors, Qiddiya, Marriot, Burger King,
Panasonic, FanDuel, AliExpress, Decathlon, Santander, SC Johnson, PepsiCo and
ICBC. The Company continues to capitalise on its strong AI positioning, which
has been key to some of these wins, in particular General Motors, which will
be our latest "Whopper". We are also winning multiple exploratory AI
assignments as clients experiment with applications and develop use cases.
These are currently focused on visualisation and copywriting,
hyper-personalisation at scale, media planning and buying, general client and
agency efficiency and democratisation of knowledge. Momentum has built
particularly in the first two areas and in general client and agency
efficiency. Developments around media planning and buying and democratisation
of knowledge are starting to build.
¤ Our talented people have responded positively to the challenges of the
first half and we have continued to make progress in the three areas of our
ESG strategy: zero impact workspaces, sustainable work, and diversity, equity
and inclusion (DE&I). We are delighted to confirm that we have achieved
B-Corp status, recognising our achievements in environmental, social and
DE&I, that we are accountable to all stakeholders, not just shareowners
and that we are transparent in terms of our reporting.
Outlook
¤ We maintain our profit target for the year. For the Company as a whole,
given the current outlook for Technology Services and wider market
uncertainty, we target like-for-like net revenue to be down on the prior year,
but to a greater extent than that assumed in May 2024 in our last trading
update. However, we continue to expect a broadly similar overall level to the
like-for-like operational EBITDA(9) of 2023, as a result of cost reductions
made last year and a continued focus on our cost base, where we have taken
further action. We continue to expect the year to be heavily second half
weighted, affected by seasonality and supported by further cost saving
actions.
¤ At a Practice level, we expect Content to continue to show
profitability improvement. Data&Digital Media is expected to show a
similar performance to the prior year with some modest margin improvement,
while the outlook for Technology Services remains challenging and the
performance will be lower, as previously highlighted, following a reduction in
activity with one key client.
¤ Our targeted range for the year end net debt remains £150 to £190
million. We continue to aim for financial leverage of around 1.5 times
operational EBITDA over the medium term. 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%(9).
Sir Martin Sorrell, Executive Chairman of S(4)Capital plc said:
"As highlighted previously, trading in the first half reflects the continuing
impact of both challenging global macroeconomic conditions and high interest
rates. This particularly impacted marketing spend by some technology clients
and our Technology Services practice was affected by a reduction in one of our
larger relationships. There has been improvement in Content Practice first
half margins, reflecting the actions taken on the cost base both last year and
this year. We continue to develop our larger, scaled relationships with
leading enterprise clients and are maintaining our focus on margin improvement
through greater efficiency, utilisation, billability and pricing. We maintain
our profit target for the full year and, as in prior years, financial
performance will be significantly second half weighted. 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, with an emphasis
on deploying free cash flow to improve shareowner returns, now all significant
combination payments have been made. In addition to a very significant new
account, we continue to capitalise on our prominent AI positioning and we
continue to see multiple initial AI related assignments as clients start to
use our MonksFlow tools and our experience to implement applications."
Notes:
1. Billings is unaudited gross billings to client including pass
through costs.
2. Net revenue is revenue less direct costs.
3. Like-for-like is a non-GAAP measure and relates to 2023 being
restated to show the unaudited numbers for the previous period of the existing
and acquired businesses consolidated for the same months as in 2024 applying
currency rates as used in 2024.
4. Pro-forma numbers relate to unaudited non-statutory and non-GAAP
consolidated results at half year in constant currency as if the Group had
existed in full for the six month period and have been prepared under
comparable GAAP with no consolidation eliminations in the pre-acquisition
period.
5. 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.
6. Adjusted figures are adjusted for non-recurring and recurring items
as defined above.
7. Net debt excludes lease liabilities.
8. The prior period figures have been restated to account for the
recognition of deferred tax balances related to certain business combinations
in the prior periods.
9. This is a target and not a profit forecast.
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.
Results webcast and conference call
A webcast and conference call covering the results will be held today at 09:00
BST, followed by another webcast and call at 08:00 EDT/ 13:00 BST. Both
webcasts of the presentation will be available at www.s4capital.com
(http://www.s4capital.com) during the event.
09:00 BST webcast (watch only) and conference call (for Q&A):
Webcast:
https://brrmedia.news/SFOR_IRUK_24 (https://brrmedia.news/SFOR_IRUK_24)
Conference call:
UK: +44 (0) 33 0551 0200
US: +1 786 697 3501
08:00 EDT / 13:00 BST webcast (watch only) and conference call (for Q&A):
Webcast:
https://brrmedia.news/SFOR_IRUS_24 (https://brrmedia.news/SFOR_IRUS_24)
Conference call:
UK: +44 (0) 33 0551 0200
US: +1 786 697 3501
Enquiries to
S(4)Capital
plc
Sir Martin Sorrell, Executive Chairman
+44 (0)20 3793 0003/+44 (0)20 3793 0007
Mary Basterfield, Chief Financial Officer
Scott Spirit, Chief Growth Officer
Sodali & Co (PR Advisor)
Elly Williamson
+44 (0)7970 246
725
Pete Lambie
Interim results statement overview
As previously highlighted trading in the first half reflects both continued
uncertainty around global macroeconomic conditions and high interest rates.
Client caution persisted particularly in some of our large technology clients,
along with the expected lower transformation activity in one of our larger
Technology Services clients. Billings were £908.9 million down 1.8% reported
and up 0.8% like-for-like, reflecting stronger digital media planning and
buying activity. Revenue was down 18.3% reported to £422.5 million, down
16.2% like-for-like. Net revenue declined 15.6% on a reported basis, or 13.5%
like-for-like against strong comparatives last year.
Operational EBITDA in the first half reflects improvement in margins in
Content and Data&Digital Media due to the actions taken on costs, whilst
Technology Services operational EBITDA reflects the anticipated lower revenue.
We continue to maintain a disciplined and active approach to cost management,
including the number of Monks and discretionary costs. The number of Monks at
the half year was 7,553, down around 12% from over 8,500 at this time last
year.
Performance by practice
The Company currently reports in three Practices. We have recently rebranded
to Monks and are now streamlining all our current capabilities into two
Practices: Marketing Services and Technology Services. We plan to initiate
organisational and reporting structures for this new services model in 2025.
Net revenue for the Content practice was down 9.3% like-for-like, with
Data&Digital Media down 7.7% like-for-like and Technology Services down
36.6% like-for-like.
Content's first half net revenue growth was disappointing, reflecting ongoing
caution and lower activity with some of our larger technology clients in
particular. However, Content's operational EBITDA improved to £16.2 million
(H1 2023: £6.8 million), reflecting the benefits of the action taken on
costs. Content's operational EBITDA margin also improved to 6.9%, compared to
2.6% in the first half of 2023.
Data&Digital Media performed as expected in the first half, managing its
costs to match activity levels. Operational EBITDA improved to £17.7 million
(H1 2023: £16.3 million). Operational EBITDA margin was 18.5%, compared to
15.3% in the first half of 2023.
Technology Services performance reflected the anticipated lower revenue from
one key client, as well as longer sales cycles for new business reflecting the
challenging ongoing macroeconomic conditions and high interest rates.
Operational EBITDA was down sharply to £5.7 million (H1 2023: £26.5 million)
and operational EBITDA margin was 12.4%, compared to 35.7% in the first half
of 2023.
The Company's revenue from technology clients remained at 44% in the first
half of 2024.
Performance by geography
On a like-for-like basis, the Americas net revenue was down 14.9% and now
accounts for 78% of the Company's net revenue, EMEA accounting for 16% was
down 7.9% and Asia Pacific, accounting for the remaining 6% was down 8.6%.
New business and AI
We are seeing our AI initiatives improve visualisation and copywriting
productivity, deliver considerably more effective and economic
hyper-personalisation (better targeted content at greater scale), more
automated and integrated media planning and buying, improving general client
and agency efficiency and democratisation of knowledge. MonksFlow is our AI
product solution that automates marketing workflows, and we are continuing to
add applications and expand its capabilities. Our 10+ MonksFlow product suites
enable our clients to more easily implement AI solutions, particulary in
visualisation and copywriting, in hyper-personalisation at scale, in real time
focus groups and linking media planning and buying.
We are seeing significant opportunities for new business, particularly driven
by our AI tools and capability. New business wins in the first half include
General Motors, as their foundational agency, Qiddiya, Marriot, Burger King,
Panasonic, FanDuel, AliExpress, Decathlon, Santander, SC Johnson, PepsiCo and
ICBC. We are also winning multiple exploratory assignments as clients
experiment and explore AI applications and develop AI use cases.
Balance Sheet
Net debt(7) ended the first half at £182.9 million, or 2.2x net
debt/pro-forma 12 month operational EBITDA. This compared to £180.8 million
at the year end and £206.0 million at the end of the first quarter reflecting
a reduction in working capital. In the first half we made combination payments
of £9.7 million, which are the last significant combination payments. The
trailing 12 months pro-forma EBITDA was £85.0 million. The balance sheet has
sufficient liquidity and long-dated debt maturities to facilitate growth and
our key covenant, being net debt not to exceed 4.5x the 12 month pro-forma
EBITDA.
ESG
We continue to focus on the three areas of our ESG strategy: zero impact
workspaces, sustainable work, and diversity, equity and inclusion. We continue
to focus on our external reporting and compliance and our reporting tools to
help us move towards increased transparency and effective reporting and to
comply with future regulatory requirements including CSRD.
Across the Company, we continue to donate hours to support community and
charity services and our For Good projects. We focused on our people and
people experience with our DE&I platform, Diversity in Action, which
touches all aspects of our business. Embedding a greater understanding of
diversity and cultural fluency into the Company is also a top priority.
We are delighted to confirm that we have achieved B-Corp status, this
certification recognises our achievements in environmental, social and
DE&I, that we are accountable to all stakeholders, not just shareowners,
and that we are transparent in terms of our reporting.
Summary and outlook
We maintain our profit target for the year. At a Practice level, we expect
Content to continue to show improved profitability reflecting the benefit of
cost reductions made in 2023 and in 2024. Data&Digital Media is expected
to show a similar performance to the prior year with some margin improvement,
while the outlook for Technology Services remains challenging and the
performance will be lower, following a reduction in transformation activity
with one key client.
For the Company as a whole, given the current outlook for Technology Services
and wider market uncertainty, we target like-for-like net revenue to be down
on the prior year, but to a greater extent than assumed in May 2024, in our
last trading update. However, we continue to expect a broadly similar overall
level of like-for-like operational EBITDA(9) to 2023, as a result of cost
reductions made last year and a continued focus on our cost base, where we
have taken further action. We continue to expect the year to be heavily second
half weighted, affected by seasonality and supported by further cost saving
actions.
Our targeted range for the year end net debt remains £150 to £190 million.
We continue to target financial leverage of around 1.5 times operational
EBITDA over the medium term. 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%(9).
The strategy of S(4)Capital remains the same. The Company's unitary, purely
digital transformation model, based on first-party data fuelling the creation,
production and distribution of digital advertising content, distributed by
digital media and built on technology platforms to ensure success and
efficiency, resonates with clients.
We continue to streamline and integrate our businesses, we have recently
rebranded to Monks and are focusing all our current capabilities into two
practices: Marketing Services and Technology Services. Our tagline 'faster,
better, cheaper, more' or 'speed, quality, value, more' and a unitary
structure both appeal strongly, even more so in challenging economic times.
Financial review
Summary of results
£ millions six months ended six months ended change Reported change change
Like-for-like(3)
Pro-forma(4)
30 June 2024 30 June 2023
Restated(8)
Billings(1) 908.9 925.4 (1.8%) 0.8% 0.8%
Revenue 422.5 517.1 (18.3%) (16.2%) (16.2%)
Net revenue(2) 376.1 445.5 (15.6%) (13.5%) (13.5%)
Operational EBITDA(5) 30.1 36.5 (17.5%) (8.2%) (8.2%)
Operational EBITDA margin(5) 8.0% 8.2% (20bps) 50bps 50bps
Adjusted operating profit(6) 24.8 30.6 (19.0%)
Adjusting items(6) (28.5) (37.0) 23.0%
Adjusted operating profit margin(6) 6.6% 6.9% (30bps)
Net finance expenses and loss on net monetary position (13.5) (16.8) 19.6%
Adjusted result before income tax(6) 11.3 13.8 (18.1%)
Adjusted Income tax expenses(6) (3.4) (5.6) (39.3%)
Adjusted result for the period(6) 7.9 8.2 (3.7%)
Adjusted basic earnings per share(6) (pence) 1.2 1.3 (0.1)
A full list of alternative performance measures and non-IFRS measures together
with reconciliations to IFRS or GAAP measures is set out in the Alternative
Performance Measures.
Financial summary
Trading as expected in the first half reflects both continued challenging
global macroeconomic conditions and high interest rates, clients' caution
persisted particularly in some of the large technology clients, along with the
expected lower activity in one of our larger Technology Services clients.
Despite all this, we have continued to enhance our financial processes and
controls, including through our finance transformation programme. Following
the changes made in 2022 the finance reporting team has performed well during
2023 and 2024. We continue to focus on operational EBITDA margin, tight cost
controls and driving cash generation centred around working capital. We will
continue to focus on all of these areas throughout the second half of 2024 to
support the Company in delivering its targets for the year.
Billings were £908.9 million, down 1.8% on a reported basis, up 0.8% on a
like-for-like basis reflecting stronger digital media planning and buying
activity.
Revenue was £422.5 million, down 18.3% from £517.1 million on a reported
basis, down 16.2% like-for-like basis.
Net revenue was £376.1 million, down 15.6% reported, down 13.5%
like-for-like.
Operational EBITDA was £30.1 million compared to £36.5 million in the prior
year, a reported decrease of 17.5% and down 8.2% on a like-for-like basis. We
have continued to maintain a disciplined and active approach to cost
management, including headcount and discretionary costs. These controls have
resulted in the number of Monks at the half year being around 7,550, down
around 12% from over 8,500 at this time last year.
Operational EBITDA margin was 8.0%, down 20 basis points versus 8.2% in the
first half of 2023 and up 50 basis points like-for-like, reflecting primarily
the improved profitability in Content and in Data&Digital Media, although
this was partly offset by the anticipated reduction in revenue in Technology
Services. Our ambition remains to return full year margins to historic levels,
around 20%(9), over the longer term.
Adjusted operating profit was down 19.0% on a reported basis to £24.8 million
from £30.6 million, before adjusting items of £28.5 million. The reduction
in adjusting items is largely due to lower combination costs (which are tied
to continued employment) and a reduction in share-based payment expense.
Adjusting items also includes restructuring costs, primarily related to
headcount and amortisation of business combination intangible assets.
The reported operating loss of £3.7 million, was £2.7 million lower than in
2023, reflecting a reduction in the acquisition and restructuring expenses.
The loss for the period was £13.7 million (30 June 2023: £21.8 million).
Adjusted basic earnings per share was 1.2p, versus adjusted basic earnings per
share of 1.3p in the first half of 2023.
Practice and Geographic Performance
£ millions six months ended six months ended change Reported change change
Like-for-like(3)
Pro-forma(4)
30 June 2024 30 June 2023
Content 234.3 264.7 (11.5%) (9.3%) (9.3%)
Data&Digital Media 95.7 106.6 (10.2%) (7.7%) (7.7%)
Technology Services 46.1 74.2 (37.9%) (36.6%) (36.6%)
Net revenue(2) 376.1 445.5 (15.6%) (13.5%) (13.5%)
Americas 294.0 353.7 (16.9%) (14.9%) (14.9%)
EMEA 59.8 66.1 (9.5%) (7.9%) (7.9%)
Asia-Pacific 22.3 25.7 (13.2%) (8.6%) (8.6%)
Net revenue(2) 376.1 445.5 (15.6%) (13.5%) (13.5%)
Content 16.2 6.8 138.2% 165.6% 165.6%
Data&Digital Media 17.7 16.3 8.6% 12.0% 12.0%
Technology Services 5.7 26.5 (78.5%) (76.2%) (76.2%)
S(4) central (9.5) (13.1) 27.5% 26.9% 26.9%
Operational EBITDA(5) 30.1 36.5 (17.5%) (8.2%) (8.2%)
Content 6.9% 2.6% 430bps 450bps 450bps
Data&Digital Media 18.5% 15.3% 320bps 330bps 330bps
Technology Services 12.4% 35.7% (2,330bps) (2,050bps) (2,050bps)
Operational EBITDA margin(5) 8.0% 8.2% (20bps) 50bps 50bps
Practice performance
Content practice operational EBITDA was £16.2 million, up 138.2% on a
reported basis versus the first half of 2023, up 165.6% on a like-for-like
basis. The Content practice operational EBITDA margin improved to 6.9%,
compared to 2.6% in the first half of 2023, reflecting the reduction in number
of Monks as compared to 2023. Continued control on hiring has further reduced
the number of Monks during 2024 and will affect the second half. We continue
to focus on integration and improving the operating model for Content.
Data&Digital Media practice operational EBITDA was £17.7 million, up 8.6%
on a reported basis from the last year, up 12.0% on a like-for-like basis.
Data&Digital Media practice operational EBITDA margin was 18.5%, compared
to 15.3%, reflecting the cost reduction actions taken in 2023 and ongoing
focus on costs during 2024.
Technology Services practice operational EBITDA of £5.7 million was down
78.5% on a reported basis from the prior period, down 76.2% like-for-like and
delivered an operational EBITDA margin of 12.4% compared to 35.7% in the first
half of 2023. This primarily relates to the anticipated reduction in
transformation revenue from one large client, as well as longer sales cycles
for new business. Operational EBITDA was significantly impacted by the
reduction in revenue and, given the scale of the reduction in revenue, this
has impacted the margin overall.
Geographic performance
The Americas net revenue was £294.0 million (78% of total), down 16.9% on a
reported basis from last year. On a like-for-like basis the Americas net
revenue was down 14.9%, reflecting lower revenue in one large Technology
Services client and ongoing client caution particularly in our technology
clients.
EMEA net revenue was £59.8 million (16% of total), down 9.5% from last year
on a reported basis. On a like-for-like basis EMEA net revenue was down 7.9%
primarily reflecting slower growth and client caution.
Asia Pacific net revenue was £22.3 million (6% of total), down 13.2% on a
reported basis. On a like-for-like basis Asia Pacific net revenue was down
8.6% reflecting local market conditions.
Cash flow
£ millions six months ended six months ended
30 June 2024 30 June 2023
Restated(1)
Operational EBITDA 30.1 36.5
Capital expenditure(2) (4.1) (5.1)
Interest and facility fees paid (15.2) (12.8)
Interest received 1.2 -
Income tax paid (7.5) (10.7)
Restructuring and other one-off expenses paid (5.6) (3.2)
Change in working capital(3) 4.2 (6.4)
Free cashflow 3.1 (1.7)
Mergers & Acquisitions (9.7) (0.3)
Share buybacks (2.5) -
Other 7.0 2.8
Movement in net debt (2.1) 0.8
Opening net debt (180.8) (110.2)
Net debt (182.9) (109.4)
The table reflects how the business is managed and this is a non-statutory
cash flow format.
1. The prior period figures have been
restated to account for the recognition of deferred tax balances related to
certain business combinations in the prior periods.
2. Includes purchase of intangible
assets, purchase of property, plant and equipment and security deposits.
3. Working capital primarily includes
movement on receivables, payables, principal elements of lease payments and
depreciation of right-of-use assets.
Free cashflow for the period was £3.1 million, an improvement of £4.8
million compared to the first half of 2023, with a working capital inflow,
partially offset by increased cash interest costs reflecting higher interest
rates.
Cash paid in relation to combinations (M&A) increased £9.4 million versus
the prior period to £9.7 million, reflecting the timing of planned M&A
payments in the first half of the year.
Treasury and net debt
six months ended six months ended
30 June 2024 30 June 2023
Net debt reconciliation
£ millions
Cash and cash equivalents 135.0 213.3
Loans and borrowings (excluding bank overdrafts) (317.9) (322.7)
Net debt (182.9) (109.4)
The half year net debt was £182.9 million (30 June 2023: £109.4 million) or
2.2x net debt/12 month pro-forma operational EBITDA. The balance sheet has
sufficient liquidity and long dated debt maturities. During the period
S(4)Capital Group complied with the covenants set in its loan agreement. The
pro-forma 12 month operational EBITDA for the period to 30(th) June 2024 was
£85.0 million.
S(4)Capital Group's key covenant is that the net debt should not exceed 4.5:1
of the pro-forma earnings before interest, tax, depreciation and amortisation,
measured at the end of any relevant period of 12 months ending each
semi-annual date in a financial year, as defined in the facility agreement. As
at 30 June 2024, the net debt/pro-forma EBITDA, as defined by the facilities
agreement, was 2.0x.
The duration of the facilities agreement is seven years in relation to the
Term Loan B, therefore the termination date is August 2028, and five years in
relation to the RCF, therefore the termination date is August 2026. The RCF
remains undrawn as at 30 June 2024.
Interest and tax
Consolidated net finance costs were £13.5 million (30 June 2023: £16.8
million), a decrease of £3.3 million due to higher interest income and FX
benefit partially offset by higher interest payable. The profit or loss tax
credit for the half year was £3.5 million (30 June 2023: £1.4 million
credit).
Balance sheet
Overall the Group reported net assets of £877.9 million as at 30 June 2024,
which is a decrease of £14.0 million compared to 31 December 2023, driven
mainly by changes in foreign exchange rates and amortisation of intangible
assets.
Acquisitions
No acquisitions were made in the six months ended 30 June 2024.
Responsibility Statement
The directors confirm that these unaudited consolidated interim financial
statements have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a fair
review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
¤ an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
¤ material related-party transactions in the first six months and
any material changes in the related-party transactions described in the last
annual report.
The maintenance and integrity of the S(4)Capital plc website is the
responsibility of the directors; the work carried out by the authors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that might have occurred to the interim
financial statements since they were initially presented on the website. The
directors of S(4)Capital plc are listed in the S(4)Capital plc Annual Report
and Accounts for the year ended 31 December 2023, with the exception of the
following changes in the period: Christopher S. Martin, Victor Knaap, Wes ter
Haar, Scott Spirit, Paul Roy and Naoko Okumoto retired from the Board at the
AGM. A list of current directors is maintained on the S(4)Capital plc website:
www.s4capital.com (http://www.s4capital.com) .
By order of the Board
Sir Martin
Sorrell
Mary Basterfield
Chairman
Chief Financial Officer
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.
Unaudited consolidated interim statement of profit or loss
For the six month period ended 30 June 2024
Six months Six months
ended ended
30 June 2024 30 June 2023
Restated(1)
£m £m
Note
Revenue 7 422.5 517.1
Direct costs (46.4) (71.6)
Net revenue 7 376.1 445.5
Personnel costs (301.1) (358.8)
Other operating expenses (41.6) (48.7)
Acquisition, restructuring and other one-off expenses (1.7) (5.7)
Depreciation, amortisation and impairment (35.5) (38.8)
Share of profit of joint ventures 0.1 0.1
Total operating expenses (379.8) (451.9)
Operating loss (3.7) (6.4)
Adjusted operating profit 24.8 30.6
Adjusting items(2) (28.5) (37.0)
Operating loss (3.7) (6.4)
Finance income 1.5 1.1
Finance costs (14.4) (18.6)
Net finance costs (12.9) (17.5)
(Loss)/gain on the net monetary position (0.6) 0.7
Loss before income tax (17.2) (23.2)
Income tax credit 3.5 1.4
Loss for the period (13.7) (21.8)
Attributable to owners of the Company (13.7) (21.8)
Attributable to non-controlling interests - -
(13.7) (21.8)
Loss per share is attributable to the ordinary equity holders of the Company
Basic loss per share (pence)
(2.0) (3.5)
Diluted loss per share (pence) (2.0) (3.5)
Notes:
1. The comparatives for the six month period ended 30 June
2023 have been restated to account for the recognition of deferred tax
balances related to certain business combinations in the prior periods (see
Note 2).
2. Adjusting items comprises amortisation and impairment of
£23.0 million (H1 2023: £24.2 million), acquisition expenses of £2.1
million gain (H1 2023: £2.1 million cost), share-based payments of £3.8
million (H1 2023: £7.1 million) and restructuring and other one-off expenses
of £3.8 million (H1 2023: £3.6 million).
The results for the period are wholly attributable to the continuing
operations of the Group.
Unaudited consolidated interim statement of comprehensive income
For the six month period ended 30 June 2024
Six months Six months
ended ended
30 June 2024 30 June 2023
Restated(1)
£m £m
Loss for the period (13.7) (21.8)
Other comprehensive expense
Items that may be reclassified to profit or loss
Foreign operations - foreign currency translation differences (5.1) (39.5)
Other comprehensive expense (5.1) (39.5)
Total comprehensive expense for the period (18.8) (61.3)
Attributable to owners of the Company (18.8) (61.3)
Attributable to non-controlling interests - -
(18.8) (61.3)
Notes:
1. The comparatives for the six month
period ended 30 June 2023 have been restated to account for the recognition of
deferred tax balances related to certain business combinations in the prior
periods (see Note 2).
Unaudited consolidated interim balance sheet
As at 30 June 2024
30 June 31 December
2024 2023
Restated(1)
Note £m £m
Assets
Goodwill 8 685.5 691.3
Intangible assets 357.8 381.6
Right-of-use assets 42.4 45.8
Property, plant and equipment 19.7 21.9
Interest in joint ventures 0.3 0.2
Deferred tax assets 26.1 24.7
Other receivables 9.6 13.7
Non-current assets 1,141.4 1,179.2
Trade and other receivables 366.2 407.5
Current tax assets 7.7 4.9
Cash and cash equivalents 135.0 145.7
Current assets 508.9 558.1
Total assets 1,650.3 1,737.3
Liabilities
Deferred tax liabilities (20.0) (24.1)
Loans and borrowings (313.1) (320.9)
Lease liabilities (32.7) (35.8)
Contingent consideration and holdbacks 9 (5.3) (7.3)
Provisions (2.8) (2.7)
Non-current liabilities (373.9) (390.8)
Trade and other payables (378.8) (418.1)
Contingent consideration and holdbacks 9 (4.9) (18.2)
Loans and borrowings (0.2) (0.2)
Lease liabilities (12.2) (13.2)
Provisions (0.7) (1.0)
Current tax liabilities (1.7) (3.9)
Current liabilities (398.5) (454.6)
Total liabilities (772.4) (845.4)
Net assets 877.9 891.9
Equity
Share capital 153.5 145.9
Share premium 155.9 80.4
Other reserves(2) 80.3 162.7
Foreign exchange reserves (11.2) (6.1)
Retained earnings 499.3 508.9
Attributable to owners of the Company 877.8 891.8
Non-controlling interests 0.1 0.1
Total equity 877.9 891.9
Notes:
1. The comparatives as at 31 December
2023 have been restated to account for the recognition of deferred tax
balances related to certain business combinations in the prior periods (see
Note 2).
2. During the period the Group completed
a share buy-back scheme and purchased 6,000,000 shares for £2.5 million.
Unaudited consolidated interim statement of changes in equity
For the six month period ended 30 June 2024
Share capital(1) Share premium Other reserves(2) Foreign exchange reserves Retained earnings/ (accumulated losses) Attributable to owners of the Company Non-controlling interests Total equity
£m £m £m £m £m £m £m £m
At 1 January 2023 142.0 5.9 175.2 48.5 478.4 850.0 0.1 850.1
Deferred tax restatement(3) - - - - 35.1 35.1 - 35.1
Hyperinflation restatement - - 2.4 - - 2.4 - 2.4
Adjusted 142.0 5.9 177.6 48.5 513.5 887.5 0.1 887.6
opening balance
Comprehensive loss for the period
Loss for the period(3) - - - - (21.8) (21.8) - (21.8)
Other comprehensive income - - - (39.5) - (39.5) - (39.5)
Total comprehensive loss - - - (39.5) (21.8) (61.3) - (61.3)
for the period
Transactions with owners of the Company
Business combinations 3.1 61.7 (38.3) - - 26.5 - 26.5
Share-based payments - - 0.4 - 6.9 7.3 - 7.3
Treasury shares - - - - - - - -
At 30 June 2023(3) 145.1 67.6 139.7 9.0 498.6 860.0 0.1 860.1
Hyperinflation restatement - - 0.2 - - 0.2 - 0.2
Adjusted 145.1 67.6 139.9 9.0 498.6 860.2 0.1 860.3
opening balance
Comprehensive income/(loss) for the period
Profit for the period(3) - - - - 7.5 7.5 - 7.5
Other comprehensive income - - - (15.1) - (15.1) - (15.1)
Total comprehensive income/(loss) - - - (15.1) 7.5 (7.6) - (7.6)
for the period
Transactions with owners of the Company
Business combinations 0.8 12.8 22.6 - - 36.2 - 36.2
Share-based payments - - 0.2 - 2.8 3.0 - 3.0
Treasury shares - - - - - - - -
At 31 December 2023(3) 145.9 80.4 162.7 (6.1) 508.9 891.8 0.1 891.9
Hyperinflation restatement - - 3.5 - - 3.5 - 3.5
Adjusted 145.9 80.4 166.2 (6.1) 508.9 895.3 0.1 895.4
opening balance
Comprehensive loss for the period
Loss for the period - - - - (13.7) (13.7) - (13.7)
Other comprehensive - - - (5.1) - (5.1) - (5.1)
income
Total comprehensive loss - - - (5.1) (13.7) (18.8) - (18.8)
for the period
Transactions with owners of the Company
Business combinations 7.6 75.5 (83.7) - 0.6 - - -
Share-based payments - - 0.3 - 3.5 3.8 - 3.8
Treasury shares - - (2.5) - - (2.5) - (2.5)
At 30 June 2024 153.5 155.9 80.3 (11.2) 499.3 877.8 0.1 877.9
Notes:
1. At the end of the reporting period, the issued and paid up share
capital of S(4)Capital plc consisted of 613,789,301 (H1 2023: 580,147,552,
2023: 583,064,256) Ordinary Shares having a nominal value of £0.25 per
Ordinary Share.
2. Other reserves primarily includes the deferred equity consideration
arising from business combinations of £72.5 million (H1 2023: £133.5
million), made up of the following: TheoremOne for £26.4 million, Raccoon for
£17.4 million, XX Artists for £25.3 million, Zemoga £3.4 million, the
treasury shares issued in the name of S(4)Capital plc to an employee benefit
trust for the amount of £0.9 million (H1 2023: £1.4 million), share
buy-backs of £2.5 million (H1 2023: £nil) and hyperinflation restatement in
Argentina of £11.0 million (H1 2023: £7.4 million).
3. The comparatives as at 30 June 2023, 31 December 2023 and 1 January
2023 have been restated to account for the recognition of deferred tax
balances related to certain business combinations in the prior periods (see
Note 2).
Unaudited consolidated interim statement of cashflows
For the six month period ended 30 June 2024
Six months Six months
Note ended ended
30 June 2024 30 June 2023
Restated(1)
£m £m
Cash flows from operating activities
Loss before income tax (17.2) (23.2)
Net finance costs 12.9 17.5
Depreciation, amortisation and impairment 35.5 38.8
Share-based payments 3.8 7.1
Acquisition, restructuring and other one-off expenses 1.7 5.7
Employment linked contingent consideration paid (2.9) -
Restructuring and other one-off expenses paid (5.6) (3.2)
Share of profit in joint venture (0.1) (0.1)
Gain/(loss) on the net monetary position 0.6 (0.7)
Other non-cash items 1.2 -
Decrease in trade and other receivables 31.3 60.6
Decrease in trade and other payables (27.6) (67.1)
Cash flows from operations 33.6 35.4
Income taxes paid (7.5) (10.7)
Net cash flows from operating activities 26.1 24.7
Cash flows from investing activities
Purchase of intangible assets (1.9) (1.1)
Purchase of property, plant and equipment (2.6) (3.8)
Acquisition of subsidiaries, net of cash acquired(2) 6, 9 (6.8) (0.3)
Amounts withdrawn from/(paid into) security deposits 0.4 (0.2)
Interest received 1.2 -
Cash flows used in investing activities (9.7) (5.4)
Cash flows from financing activities
Share buybacks (2.5) -
Proceeds from issuance of shares - 0.2
Principal element of lease payments (6.6) (8.5)
Repayments of loans and borrowings (0.1) (0.1)
Interest and facility fees paid (15.2) (12.8)
Cash flows used in financing activities (24.4) (21.2)
Net movement in cash and cash equivalents (8.0) (1.9)
Cash and cash equivalents beginning of the year 145.7 223.6
Exchange loss on cash and cash equivalents (2.7) (8.4)
Cash and cash equivalents at the end of the period 135.0 213.3
Notes:
1. The comparatives for the period ended 30 June 2023 have been
reclassified (see Note 2).
2. Comprises contingent consideration and holdback payments, net
of cash released from escrow accounts of £3.5 million (H1 2023: £0.3
million).
Notes to the unaudited consolidated interim financial statements
For the six month period ended 30 June 2024
1. General information
S(4)Capital plc ('S(4)Capital' or 'Company') is a public limited company
incorporated on 14 November 2016 in the United Kingdom. The Company has its
registered office at 12 St James's Place, London, SW1A 1NX, United Kingdom.
Its shares are listed on the London Stock Exchange. The new UK Listing Rules,
which came into force on July 29 2024, have removed the distinction between
standard and premium listing categories, which are now categorised as equity
shares commercial companies (ESCC). As at the date of approval of the
unaudited consolidated interim financial statements, S(4)Capital plc is in the
Transition category.
The unaudited consolidated interim financial statements represent the results
of the Company and its subsidiaries (together referred to as 'S(4)Capital
Group' or the 'Group').
S(4)Capital Group is a new age/new era digital advertising and marketing
services company.
2. Basis of preparation
A. Statement of compliance
This report is to be read in conjunction with the Annual Report and Accounts
of S(4)Capital plc for the year ended 31 December 2023 and has been prepared
in accordance with UK adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
The unaudited consolidated interim financial statements for the 6 months
period ended 30 June 2024 are a condensed set of financial information and
have been prepared on the basis of the policies set out in the 2023 annual
financial statements and in accordance with UK adopted IAS 34 and the
Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial
Conduct Authority.
The Group has undertaken a detailed going concern assessment, reviewing its
current and projected financial performance and position. The Directors
believe that the Group's forecasts have been prepared on a prudent basis.
Considering the Group's bank covenant and liquidity headroom and cost
mitigation actions which could be implemented, the Directors have concluded
that the Group will be able to operate within its facilities and comply with
its banking covenants for the foreseeable future and therefore believe it is
appropriate to prepare the financial statements of the Group on a going
concern basis and that there are no material uncertainties which gives rise to
a significant going concern risk. Given its debt maturity profile and
available facilities, the Directors believe the Group has sufficient liquidity
to match its requirements for the foreseeable future.
The unaudited consolidated interim financial statements were authorised for
issue by the Board of Directors on 18 September 2024.
B. Restatement and re-presentation
Deferred tax related to business combinations
The Group has restated the comparative financial statements to account for the
recognition of deferred tax balances related to certain business combinations
in the prior periods. This adjustment represents deferred tax assets
recognised in respect of future tax deductions expected to be allowed for tax
goodwill amortisation related to the payments of employment linked contingent
consideration and acquisition expenses recognised in the post acquisition
period on certain business combinations. We have also recognised deferred tax
liabilities in respect of amortisation of goodwill for tax purposes expected
to be allowed in certain jurisdictions. These restatements result in the
recognition on a net basis of deferred tax assets in each of the restated
periods as noted below.
The impact of the above adjustment on total equity as at 1 January 2023 is an
increase of £35.1 million.
The following tables detail the impact on the consolidated statement of profit
or loss for the half year ended 30 June 2023 and year ended 31 December 2023:
30 June 2023
As reported Deferred tax adjustment As restated
£m £m £m
Income tax credit/(expense) 3.5 (2.1) 1.4
Loss for the period (19.7) (2.1) (21.8)
Attributable to the owners of the Company (19.7) (2.1) (21.8)
Basic loss per share (pence) (3.2) (0.3) (3.5)
Diluted loss per share (pence) (3.2) (0.3) (3.5)
31 December 2023
As reported Deferred tax adjustment As restated
£m £m £m
Income tax credit/(expense) 7.9 (8.3) (0.4)
Loss for the year (6.0) (8.3) (14.3)
Attributable to the owners of the Company (6.0) (8.3) (14.3)
Basic loss per share (pence) (0.9) (1.3) (2.2)
Diluted loss per share (pence) (0.9) (1.3) (2.2)
The following table details the impact on the consolidated balance sheet as at
31 December 2023:
31 December 2023
As reported Deferred tax adjustment As restated
£m £m £m
Non-current assets
Deferred tax assets 7.3 17.4 24.7
Non-current liabilities
Deferred tax liabilities (32.7) 8.6 (24.1)
Equity
Currency translation reserves (5.3) (0.8) (6.1)
Retained earnings 482.1 26.8 508.9
Reclassification of statement of cash flows
The statement of cash flows for the period ended 30 June 2023 has been
reclassified to provide consistency with
the presentation of amounts for the period ended 30 June 2024.
30 June 2023
As reported Reclassification As restated
£m
£m £m
Cash flows from operating activities:
Restructuring and other one-off expenses paid - (3.2) (3.2)
Decrease in trade and other payables (70.3) 3.2 (67.1)
Cash flows from operations 35.4 - 35.4
Cash flows from financing activities:
Principal element of lease payments (9.7) 1.2 (8.5)
Interest and facility fees paid (11.6) (1.2) (12.8)
Cash flows used in financing activities (21.2) - (21.2)
C. Functional and presentation currency
The unaudited consolidated interim financial statements are presented in Pound
Sterling (GBP or £), the Company's functional currency. All financial
information in Pound Sterling has been rounded to the nearest million unless
otherwise indicated.
D. Principal risks and uncertainties
The principal risks and uncertainties facing the Group at the 2023 year end
are set out in detail on pages 28 to 30 of the Annual Report and Accounts
2023. The principal risks and uncertainties facing the Group at the 30 June
2024 remain the same and relate to the following:
¤ Macroeconomic headwinds
¤ Operational decision making
¤ Talent lifecycle
¤ Governance and compliance
¤ Artificial intelligence
¤ Integration of acquisitions
¤ Key customers
¤ Reputation risk
¤ Information security and data privacy
¤ Competitive environment
3. Significant accounting policies
The unaudited consolidated interim financial statements have been prepared on
a consistent basis with the accounting policies of the Group which were set
out on pages 154 to 164 of the Annual Report and Accounts 2023, excluding the
impact of amended standards as detailed below.
The following amended standards became applicable for the current reporting
period. These are as follows:
Presentation of Financial Statements (Amendments to IAS 1)
In January 2020, the IASB issued amendments to IAS 1 (Presentation of
Financial Statements) to clarify the meaning of 'settlement' for the purpose
of classifying a liability as current or non-current and the classification of
liabilities as current or non-current. Both amendments are applicable for
annual reporting periods beginning on or after 1 January 2024. The Group
adopted these amendments as of 1 January 2024. The adoption of this had no
material impact on the Groups unaudited consolidated interim financial
statements.
Leases (Amendments to IFRS 16)
In September 2022, the IASB issued amendments to IAS 16 (Leases) to clarify
how a seller-lessee subsequently measures sale and leaseback transactions. The
amendments are applicable for annual reporting periods beginning on or after 1
January 2024. The Group adopted these amendments as of 1 January 2024. The
adoption of this had no material impact on the Groups unaudited consolidated
interim financial statements.
Supplier Finance Arrangements (Amendments to IFRS 7 and IAS 7)
In June 2021, the IASB issued amendments to IAS 7 (Statement of Cash Flows)
and IFRS 7 (Financial instruments) to introduce new disclosure requirements
for supplier finance arrangements to enhance transparency. The amendments are
applicable for annual reporting periods beginning on or after 1 January 2024.
The Group adopted these amendments as of 1 January 2024. The adoption of
this had no material impact on the Groups unaudited consolidated interim
financial statements.
4. Critical accounting judgements and estimates
In preparing these unaudited consolidated interim financial statements, the
critical accounting judgements and estimates made by management in applying
the Group's accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the Annual Report and Accounts 2023.
5. Statutory information and independent review
The condensed unaudited consolidated interim financial statements for the six
months period ended 30 June 2024 do not constitute statutory accounts within
the meaning of section 434 of the Companies Act 2006. The statutory accounts
for the year ended 31 December 2023 have been delivered to the Registrar of
Companies and received an unqualified auditors' report, did not include a
reference to any matters to which the auditors drew attention by way of an
emphasis of matter and did not contain a statement under sections 498 (2) or
(3) of the Companies Act 2006. The condensed consolidated interim financial
statements are unaudited but have been reviewed by the auditors and their
report is set out on the last page.
6. Acquisitions
Current period acquisitions
There were no acquisitions during the six month period ended 30 June 2024.
Prior period acquisitions
XX Artists
During the period, the Group settled the remaining holdback of £1.3 million
from escrow as the business had achieved the post acquisition EBITDA targets
for the 12 month period ended 31 December 2022.
TheoremOne
Included within other reserves as at 30 June 2024 is £26.4 million, comprised
of £26.4 million recognised as deferred equity consideration in 2023.
At 30 June 2024, £6.1 million of holdbacks remain relating to amounts held
back due to cover and indemnify the Group against certain acquisition costs
and damages. The Group currently expects to settle the maximum holdback
amount. The amount payable would be dependent on the amount of these
acquisition costs and damages, with the minimum amount payable being £nil.
4Mile
As a result of partially achieving post acquisition EBITDA targets for the 12
month period ended 31 December 2022, £6.8 million and £2.5 million were paid
to the Sellers during the period in relation to performance linked and
employment linked contingent consideration respectively.
During the period, £2.2 million of holdbacks were paid from escrow, with a
£2.5 million gain recognised in the consolidated statement of profit or loss
through contingent considerations as remuneration. The remaining balance of
holdbacks as at 30 June 2024 was therefore £nil.
Zemoga Group (Zemoga)
At 30 June 2024, £0.9 million of holdbacks remain relating to amounts held
back to cover and indemnify the Group against certain acquisition costs and
damages. The Group currently expects to settle the maximum holdback amount.
The amount payable is dependent on the amount of these acquisition costs and
damages, with the minimum amount payable being £nil.
7. Segment information
A. Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker (CODM). The CODM has
been identified as the Board of Directors of S(4)Capital Group.
During the period, S(4)Capital Group has three reportable segments as follows:
· Content practice: Creative content, campaigns, and assets at a
global scale for paid, social and earned media - from digital platforms and
apps to brand activations that aim to convert consumers at every possible
touchpoint.
· Data&Digital Media practice: Full-service campaign management
analytics, creative production and ad serving, platform and systems
integration and transition, training and education.
· Technology Services practice: digital transformation services in
delivering advanced digital product design, engineering services and delivery
services.
The customers are primarily businesses across technology, FMCG and media and
entertainment. Any intersegment transactions are based on commercial terms.
The Board of Directors monitor the results of the reportable segments
separately for the purpose of making decisions about resource allocation and
performance assessment prior to charges for tax, depreciation and
amortisation.
The Board of S(4)Capital Group uses net revenue rather than revenue to manage
the Company due to the fluctuating amounts of direct costs, which are
recharged as part of revenue.
The following is an analysis of the Group's net revenue and results by
reportable segments:
Data&Digital Media Technology services
Six months ended 30 June 2024 Content £m £m Total
£m £m
Revenue 279.4 96.9 46.2 422.5
Net revenue 234.3 95.7 46.1 376.1
Segment profit(1) 16.2 17.7 5.7 39.6
Overhead costs (9.5)
Adjusted non-recurring and acquisition related expenses(2) (5.5)
Depreciation and amortisation(3) (28.3)
Net finance costs and gain on net monetary position (13.5)
Loss before income tax (17.2)
Data&Digital Media Technology services
Six months ended 30 June 2023 Content £m £m Total
£m £m
Revenue 334.8 108.1 74.2 517.1
Net revenue 264.7 106.6 74.2 445.5
Segment profit(1) 6.8 16.3 26.5 49.6
Overhead costs (13.1)
Adjusted non-recurring and acquisition related expenses(2) (12.8)
Depreciation and amortisation(3) (30.1)
Net finance costs and loss on net monetary position (16.8)
Loss before income tax (23.2)
Notes:
1. Including £7.2 million (H1 2023: £8.7 million) depreciation on
right-of-use assets.
2. Comprised of acquisition and restructuring expenses of £1.7 million (H1
2023: £5.7 million) and share-based payment costs of £3.8 million (H1 2023:
£7.1 million).
3. Excluding £7.2 million (H1 2023: £8.7 million) depreciation on
right-of-use assets.
Segment profit represents the profit earned by each segment without allocation
of the share of loss of joint ventures, central administration costs including
Directors' salaries, finance income, non-operating gains and losses, and
income tax expense. This is the measure reported to the Group's Board of
Directors for the purpose of resource allocation and assessment of segment
performance.
B. Information about major customers
One (H1 2023: one) customer accounted for more than 10% of the Group's revenue
during the period, contributing £73.3 million (H1 2023: £92.6 million). The
revenue from this customer was attributable to both the Content and
Data&Digital Media segments.
8. Goodwill
Six months Year ended
ended 31 Dec 2023
30 June 2024
£m £m
At the start of the period 691.3 718.8
Acquired through business combinations - 0.2
Foreign exchange differences (5.8) (27.7)
At the end of the period 685.5 691.3
Goodwill represents the excess of consideration over the fair value of the
Group's share of the net identifiable assets of the acquired subsidiary at the
date of acquisition.
9. Financial instruments
Financial instruments by category
Six months Year
ended ended
Financial assets 30 June 2024 31 Dec 2023
£m £m
Financial assets held at amortised cost 135.0 145.7
Cash and cash equivalents
Trade receivables 295.8 346.8
Accrued income 33.7 28.2
Other receivables 25.7 33.1
Total 490.2 553.8
Six months Year
Financial liabilities ended ended
30 June 2024 31 Dec 2023
£m £m
Financial liabilities held at amortised cost
Trade and other payables (319.3) (348.9)
Loans and borrowings (313.3) (321.1)
Lease liabilities (44.9) (49.0)
Financial liabilities held at fair value through profit and loss
Contingent consideration and holdbacks (10.2) (25.5)
Total (687.7) (744.5)
The following table categorises the Group's financial liabilities held at fair
value on the unaudited consolidated interim balance sheet. There have been no
transfers between levels during the period (2023: none).
Six months Six months Year Year
ended ended ended ended
Financial liabilities 30 June 2024 30 June 2024 31 Dec 2023 31 Dec 2023
Fair value Level 3 Fair value Level 3
£m £m £m £m
Contingent consideration and holdbacks (10.2) (10.2) (25.5) (25.5)
Total (10.2) (10.2) (25.5) (25.5)
The following table shows the movement in contingent consideration and
holdbacks.
Performance Employment
linked linked
contingent contingent
Contingent consideration and holdbacks consideration consideration Holdbacks(1) Total
£m £m £m £m
Balance at 1 January 2023 (10.9) (151.7) (26.0) (188.6)
Acquired through business combinations (0.4) - - (0.4)
Recognised in consolidated statement of profit or loss(2) 1.6 4.1 5.8 11.5
Cash paid - 77.7 5.9 83.6
Equity settlement - 62.3 0.4 62.7
Exchange rate differences 0.7 4.6 0.4 5.7
Balance at 31 December 2023 (9.0) (3.0) (13.5) (25.5)
Acquired through business combinations - - - -
Recognised in consolidated statement of profit or loss(2) - (0.3) 2.5 2.2
Cash paid 6.8 2.9 3.5 13.2
Equity settlement - - 0.2 0.2
Exchange rate differences (0.2) (0.1) - (0.3)
Balance at 30 June 2024 (2.4) (0.5) (7.3) (10.2)
Included in current liabilities (8.6) (3.0) (6.6) (18.2)
Included in non-current liabilities (0.4) - (6.9) (7.3)
Balance at 31 December 2023 (9.0) (3.0) (13.5) (25.5)
Included in current liabilities (2.4) (0.5) (2.0) (4.9)
Included in non-current liabilities - - (5.3) (5.3)
Balance at 30 June 2024 (2.4) (0.5) (7.3) (10.2)
Notes:
1. Holdback payments of £3.5 million (2023: £5.9 million) includes £3.5
million (2023: £3.3 million) of cash paid out escrow accounts.
2. Includes a charge of £0.3 million (2023: £13.2 million) relating to
employment linked contingent consideration and holdback deemed remuneration, a
credit of £2.5 million relating to a fair value gain (2023: £24.7 million
credit) and a charge of £nil (2023: £nil million) relating to the impact of
discounting.
Where the contingent consideration conditions have been satisfied,
consideration that is payable as equity is recognised within other reserves as
deferred equity consideration.
The fair value of the performance linked contingent consideration has been
determined based on management's best estimate of achieving future targets to
which the consideration is linked. The most significant unobservable input
used in the fair value measurements is the future forecast performance of the
acquired business. The fair value is assessed and recognised at the
acquisition date, and reassessed at each balance sheet date thereafter, until
fully settled, cancelled or expired. Any change in the range of future
outcomes is recognised in the consolidated statement of profit or loss. During
the period ended 30 June 2024, £nil (2023: £1.6 million gain) was recognised
in the consolidated statement of profit or loss.
The fair value of the employment linked contingent consideration has been
determined based on management's best estimate of achieving future targets to
which the consideration is linked. The most significant unobservable input
used in the fair value measurements is the future forecast performance of the
acquired business. The fair value is assessed at the acquisition date, and
systematically accrued over the respective employment term. Any changes in the
range of future outcomes are recognised in the consolidated statement of
profit or loss. During the six month period ended 30 June 2024, a £0.3
million charge (2023: £4.1 million gain) was recognised in the consolidated
statement of profit or loss comprising of a systematic accrual charge of the
employment linked contingent consideration of £0.3 million (2023: £13.2
million) and £nil in relation to fair value gain (2023: £17.3 million gain).
Holdbacks relate to amounts held by the Group to cover and indemnify the Group against certain acquisition costs and damages. The fair value of the holdbacks has been determined based on management's best estimate of the level of the costs incurred and damages expected to which the holdback is linked, which is the most significant unobservable input used in the fair value measurement. During the six month period ended 30 June 2024, £2.5 million gain (2023: £5.8 million gain) has been recognised in the consolidated statement of profit or loss.
10. Net debt reconciliation
The following table shows the reconciliation of net cash flow to movements in
net debt:
Net Debt including Lease Liabilities
Borrowings and overdrafts Cash Net Debt Leases £m
£m £m £m £m
Net debt as at 1 January 2023 (333.8) 223.6 (110.2) (58.4) (168.6)
Financing cash flows 0.1 (2.0) (1.9) 8.5 6.6
Acquired through business combinations - - - - -
Lease additions - - - (5.1) (5.1)
Foreign exchange adjustments 9.7 (8.3) 1.4 1.5 2.9
Interest expense (10.4) - (10.4) (1.2) (11.6)
Interest payment 11.7 - 11.7 1.2 12.9
Other - - - (0.6) (0.6)
Net debt as at 30 June 2023 (322.7) 213.3 (109.4) (54.1) (163.5)
Financing cash flows 0.1 (65.0) (64.9) 6.6 (58.3)
Acquired through business combinations - - - (0.2) (0.2)
Lease additions - - - (8.9) (8.9)
Foreign exchange adjustments (2.9) (2.6) (5.5) (0.4) (5.9)
Interest expense (12.3) - (12.3) (1.1) (13.4)
Interest payment 11.4 - 11.4 2.3 13.7
Other (0.1) - (0.1) 6.8 6.7
Net debt as at 31 December 2023 (326.5) 145.7 (180.8) (49.0) (229.8)
Financing cash flows (0.1) (8.0) (8.1) 6.6 (1.5)
Acquired through business combinations - - - - -
Lease additions - - - (0.8) (0.8)
Foreign exchange adjustments 8.7 (2.7) 6.0 0.8 6.8
Interest expense (12.3) - (12.3) (1.2) (13.5)
Interest payment 12.3 - 12.3 1.2 13.5
Other - - - (2.5) (2.5)
Net debt as at 30 June 2024 (317.9) 135.0 (182.9) (44.9) (227.8)
11. Related party transactions
Details of compensation for key management personnel for the 12 months to 31
December 2023 are disclosed on pages 109 to 128 of the Annual Report and
Accounts 2023. Apart from the key management personnel compensation and the
interest in S4S Ventures detailed in the Annual Report and Accounts 2023,
S(4)Capital Group did not have any other related party transactions during the
financial period (2023: nil).
12. Events occurring after the reporting period
There were no material post balance sheet events, that require adjustment or
disclosure, occurring between the reporting period and the 18 September 2024.
Appendix- Alternative Performance Measures
The Group has included various unaudited alternative performance measures
(APMs) in its unaudited consolidated interim financial statements. The Group
includes these non-GAAP measures as it considers these measures to be both
useful and necessary to the readers of these unaudited consolidated interim
financial statements to help them more fully understand the performance and
position of the Group. The Group's measures may not be calculated in the same
way as similarly titled measures reported by other companies. The APMs should
not be viewed in isolation and should be considered as additional
supplementary information to the IFRS measures. Full reconciliations have been
provided between the APMs and their closest IFRS measures.
The Group has concluded that these APMs are relevant as they represent how the
Board assesses the performance of the Group and they are also closely aligned
with how shareholders value the business. They provide like-for-like,
year-on-year comparisons and are closely correlated with the cash inflows from
operations and working capital position of the Group. They are used by the
Group for internal performance analysis and the presentation of these measures
facilitates comparison with other industry peers as they adjust for
non-recurring factors which may materially affect IFRS measures. Adjusting
items for the Group include amortisation of acquired intangibles, acquisition
related expenses costs, share-based payments, employment-related acquisition
costs and restructuring costs. Whilst adjusted measures exclude amortisation
of intangibles, acquisition costs and restructuring costs they do include the
revenue from acquisitions and the benefits of the restructuring programmes and
therefore should not be considered a complete picture of the Group's financial
performance, that is provided by the IFRS measures.
The adjusted measures are also used in the calculation of the adjusted
earnings per share and banking covenants as per our agreements with our
lenders.
Closest IFRS measure Adjustments to reconcile to IFRS Measure
APM Reason for use
Unaudited consolidated interim statement of profit or loss
Controlled Billings Revenue Includes media spend contracted directly by clients with media providers and It is an important measure to help understand the scale of the activities that
pass-through costs (see reconciliation A1 below) Group has managed on behalf of its clients, in addition to the activities that
are directly invoiced by the Group.
Billings Revenue Includes pass through costs (see reconciliation A1 below) It is an important measure to understand the activities that are directly
invoiced by the Group to its clients.
Net Revenue Revenue Excludes direct costs (see reconciliation A2 below) This is more closely aligned to the fees the Group earns for its services
provided to the clients. This is a key metric used by the Group when looking
at the Practice performance.
Operational EBITDA Operating profit Excludes acquisition related expenses, non-recurring items (primarily Operational EBITDA is Operating profit or loss before the impact of adjusting
acquisition payments tied to continued employment, amortisation of business items, amortisation of intangible assets and PPE depreciation. The Group
combination intangible assets and restructuring and other one-off expenses) considers this to be an important measure of Group performance and is
and recurring share-based payments, and includes right-of-use assets consistent with how the Group is assessed by the Board and investment
depreciation. (see reconciliation A3 below) community.
Like-for-Like Revenue and operating profit Is the prior period comparative, in this case 2023, restated to include Like-for-like is an important measure used by the Board and investors when
acquired businesses for the same months as 2024, and restated using same FX looking at Group performance. It provides a comparison that reflects the
rates as used in 2024 (see reconciliations A4 below) impact of acquisitions and changes in FX rates during the year.
Closest IFRS measure Adjustments to reconcile to IFRS Measure
APM Reason for use
Pro-forma Revenue and operating profit Is the period consolidated results in constant currency and for acquisitions Pro-forma figures are used extensively by management and the investment
as if the Group had existed in full for the period (see reconciliations A5 community. It is a useful measure when looking at how the Group has changed
below) in light of the number of acquisitions that have been completed and to
understand the performance of the Group.
Adjusted basic earnings per share Basic earnings per share Excludes amortisation of intangible assets, acquisition related expenses, Adjusted basic earnings per share is used by management to understand the
share-based payments and restructuring and other one-off expenses (see earnings per share of the Group after removing non-recurring items and those
reconciliation A6 below) linked to combinations.
Adjusted (loss)/profit period (Loss)/Profit for the period Excludes amortisation of intangible assets, acquisition related expenses, Adjusted (loss)/profit for the period is used by management to understand the
share-based payments and restructuring and other one-off expenses (see (loss)/profit for the Group after removing non-recurring items and those
reconciliation A6 below) linked to combinations.
Unaudited consolidated interim balance sheet
Net debt None Net debt is cash less gross bank loans (excluding transaction costs and lease Net debt is a commonly used metric to identify the debt obligations of the
liabilities). This is a key measure used by management and in calculations for Group after utilising cash in bank.
bank covenants (see reconciliation A7 below)
Unaudited consolidated interim statement of cashflows
Free cash flow Net cash (used in)/from operating activities Net cash flow from operating activities adjusted for investments in Free cash flow is a commonly used metric used to identify the amount of cash
intangibles and property, plant and equipment, lease liabilities, interest and at the disposal of the Group.
facility fees paid, security deposits and employment linked contingent
consideration paid.
Six months Six months Year
ended ended ended
30 June 2024 30 June 2023 31 Dec 2023
Billings and Controlled billings (A1) £m £m £m
Revenue 422.5 517.1 1,011.5
Pass-through expenses 486.4 408.3 859.0
Billings(1) 908.9 925.4 1,870.5
Third party billings direct to clients 1,531.8 1,352.8 3,152.3
Controlled billings(2) 2,440.7 2,278.2 5,022.8
Notes:
1. Billings is gross billings to clients including pass-through expenses.
2. Controlled billings are billings we influenced.
Six months Six months Year
ended ended ended
30 June 2024 30 June 2023 31 Dec 2023
Net Revenue (A2) £m £m £m
Revenue 422.5 517.1 1,011.5
Direct costs (46.4) (71.6) (138.3)
Net Revenue 376.1 445.5 873.2
Six months Six months
ended ended
30 June 2024 30 June 2023
Reconciliation to Operational EBITDA (A3) £m £m
Operating loss (3.7) (6.4)
Amortisation and impairment of intangible assets 23.0 24.2
Acquisition expenses (2.1) 2.1
Share-based payments 3.8 7.1
Restructuring and other one-off expenses(1) 3.8 3.6
Depreciation of property, plant and equipment 5.3 5.9
Operational EBITDA 30.1 36.5
Notes:
1. Restructuring and other one-off expenses relates to restructuring costs
of £1.7 million (H1 2023: £3.2 million), transformation costs of £2.1
million (H1 2023: £0.4 million).
Like-for-Like (A4)
Data&Digital Media Technology Services
Like-for-like revenue Content Total
Six months ended 30 June 2023 £m £m £m £m
Revenue 334.8 108.1 74.2 517.1
Impact of acquisitions - - 0.4 0.4
Impact of foreign exchange (8.4) (3.0) (1.9) (13.3)
Like-for-like revenue(1) 326.4 105.1 72.7 504.2
% like-for-like revenue change (14.4%) (7.8%) (36.5%) (16.2%)
Notes:
1. Like-for-like is a non-GAAP measure and relates
to 2023 being restated to show the unaudited numbers for the previous period
of the existing and acquired businesses consolidated for the same months as in
2024, applying currency rates as used in 2024.
Data&Digital Media Technology Services
Like-for-like net revenue Content Total
Six month period ended 30 June 2023 £m £m £m £m
Net revenue 264.7 106.6 74.2 445.5
Impact of acquisitions - - 0.4 0.4
Impact of foreign exchange (6.5) (2.9) (1.9) (11.3)
Like-for-like net revenue(1) 258.2 103.7 72.7 434.6
% like-for-like net revenue change (9.3%) (7.7%) (36.6%) (13.5%)
Notes:
1. Like-for-like is a non-GAAP measure and relates to 2023 being restated to
show the unaudited numbers for the previous period of the existing and
acquired businesses consolidated for the same months as in 2024, applying
currency rates as used in 2024.
Like-for-like Operational EBITDA Total
Six month period ended 30 June 2023 £m
Operational EBITDA 36.5
Impact of acquisitions (0.3)
Impact of foreign exchange (3.4)
Like-for-like operational EBITDA(1) 32.8
% like-for-like operational EBITDA change (8.2%)
Notes:
1. Like-for-like is a non-GAAP measure and relates to 2023 being restated to
show the unaudited numbers for the previous period of the existing and
acquired businesses consolidated for the same months as in 2024, applying
currency rates as used in 2024.
Pro-forma (A5)
Data&Digital Media Technology Services
Content £m £m Total
Pro-forma revenue £m £m
HY24 Revenue 279.4 96.9 46.2 422.5
Impact of acquisitions - - - -
HY24 Pro-forma revenue(1) 279.4 96.9 46.2 422.5
HY23 Revenue 334.8 108.1 74.2 517.1
Impact of acquisitions - - 0.4 0.4
Impact of foreign exchange (8.4) (3.0) (1.9) (13.3)
HY23 Pro-forma revenue(1) 326.4 105.1 72.7 504.2
% pro-forma revenue change (14.4%) (7.8%) (36.5%) (16.2%)
Data&Digital Media Technology Services
Content £m £m Total
Pro-forma net revenue £m £m
HY24 net revenue 234.3 95.7 46.1 376.1
Impact of acquisitions - - - -
HY24 Pro-forma net revenue(1) 234.3 95.7 46.1 376.1
HY23 net revenue 264.7 106.6 74.2 445.5
Impact of acquisitions - - 0.4 0.4
Impact of foreign exchange (6.5) (2.9) (1.9) (11.3)
HY23 Pro-forma net revenue(1) 258.2 103.7 72.7 434.6
% pro-forma net revenue change (9.3%) (7.7%) (36.6%) (13.5%)
Total
Pro-forma Operational EBITDA £m
HY24 operational EBITDA 30.1
Impact of acquisitions -
HY24 Pro-forma operational EBITDA(1) 30.1
HY23 Operational EBITDA 36.5
Impact of acquisitions (0.3)
Impact of foreign exchange (3.4)
HY23 Pro-forma operational EBITDA(1) 32.8
% pro-forma operational EBITDA change (8.2%)
Notes:
1. Pro-forma relates to unaudited non-statutory
and non-GAAP consolidated results in constant currency as if the Group had
existed in full for the period and have been prepared under comparable GAAP
with no consolidation eliminations in the pre-acquisition period.
Adjusted basic earnings per share (A6)
Restructuring
Acquisition expenses(2) Share-based payments and other one-off expenses(3)
£m
£m
£m
Reported Amortisation and impairment(1) Adjusted
Six month period ended 30 June 2024 £m £m £m
Operating (loss)/profit (3.7) 23.0 (2.1) 3.8 3.8 24.8
Net finance costs (12.9) - - - - (12.9)
Loss on net monetary position (0.6) - - - - (0.6)
(Loss)/profit before income tax (17.2) 23.0 (2.1) 3.8 3.8 11.3
Income tax credit/(expense) 3.5 (6.9) - - - (3.4)
(Loss)/profit for the period (13.7) 16.1 (2.1) 3.8 3.8 7.9
Notes:
1. Amortisation and impairment relates to the intangible assets recognised
as a result of the acquisitions.
2. Acquisition expenses relate to acquisition
related advisory fees of £0.1 million, contingent consideration as
remuneration of £0.3 million and remeasurement gain on contingent
considerations of £2.5 million.
3. Restructuring and other one-off expenses relate
to restructuring costs of £1.7 million and transformation costs of £2.1
million.
Acquisition expenses(2) Share-based payments Restructuring and other one-off expenses(3)
Reported Amortisation and impairment(1)
Adjusted
Six month period ended 30 June 2023 £m £m £m £m £m £m
Operating (loss)/profit (6.4) 24.2 2.1 7.1 3.6 30.6
Net finance costs (17.5) - - - - (17.5)
Gain on net monetary position 0.7 - - - - 0.7
(Loss)/profit before income tax (23.2) 24.2 2.1 7.1 3.6 13.8
Income tax credit/(expense)(4) 1.4 (6.2) - - (0.8) (5.6)
(Loss)/profit for the period (21.8) 18.0 2.1 7.1 2.8 8.2
Notes:
1. Amortisation and impairment relates to the
intangible assets recognised as a result of the acquisitions.
2. Acquisition expenses relate to acquisition
related advisory fees of £1.0 million, bonuses of £nil, contingent
consideration as remuneration of £14.2 million and remeasurement gain on
contingent considerations of £13.1 million.
3. Restructuring and other one-off expenses relate
to restructuring costs of £3.2 million and transformation costs of £0.4
million.
4. The comparatives for the six month period ended
30 June 2023 have been restated to account for the recognition of deferred tax
balances related to certain business combinations in the prior periods (see
Note 2).
Adjusted basic result per share Six months Six months
ended ended
30 June 2024 30 June 2023
Adjusted profit attributable to owners of the Company (£m) 7.9 8.2
Weighted average number of ordinary shares for the purpose of basic EPS 671,233,751 615,663,576
(shares)
Adjusted basic earnings per share (pence) 1.2 1.3
Notes:
1. The comparatives for the six month period
ended 30 June 2023 have been restated to account for the recognition of
deferred tax balances related to certain business combinations in the prior
periods (see Note 2).
Net debt (A7)
Six months Year
ended ended
30 June 2024 31 Dec 2023
£m £m
Cash and bank 135.0 145.7
Loans and borrowings(1) (317.9) (326.5)
Net debt (182.9) (180.8)
Lease liabilities (44.9) (49.0)
Net debt including lease liabilities (227.8) (229.8)
Notes:
1. Excluding transaction costs of £4.7
million (2023: £5.4 million).
Free cash flow (A8)
Six months Six months
ended ended
30 June 2024 30 June 2023
£m £m
Net cash inflow from operating activities 26.1 24.7
Employment linked contingent consideration paid 2.9 -
Interest and facility fees paid (15.2) (12.8)
Interest received 1.2 -
Purchase of intangible assets (1.9) (1.1)
Purchase of property, plant and equipment (2.6) (3.8)
Security deposits 0.4 (0.2)
Principal element of lease payments (6.6) (8.5)
Other non-cash items (1.2) -
Free cash flow 3.1 (1.7)
Independent review report to S(4)Capital plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed S(4)Capital plc's condensed consolidated interim financial
statements (the "interim financial statements") in the S(4)Capital plc Interim
results for 2024 of S(4)Capital plc for the 6 month period ended 30 June 2024
(the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the unaudited consolidated interim balance sheet as at
30 June 2024;
· the unaudited consolidated interim statement of profit or loss and
unaudited consolidated interim statement of comprehensive income for the
period then ended;
· the unaudited consolidated interim statement of cashflows for the
period then ended;
· the unaudited consolidated interim statement of changes in equity
for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the S(4)Capital plc Interim
Results for 2024 of S(4)Capital plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the S(4)Capital plc Interim
Results for 2024 and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the interim financial
statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The S(4)Capital plc Interim Results for 2024, including the interim financial
statements, is the responsibility of, and has been approved by the directors.
The directors are responsible for preparing the S(4)Capital plc Interim
Results for 2024 in accordance with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the S(4)Capital plc Interim Results for 2024, including the interim
financial statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the S(4)Capital plc Interim Results for 2024 based on our
review. Our conclusion, including our Conclusions relating to going concern,
is based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion paragraph of this report. This report,
including the conclusion, has been prepared for and only for the company for
the purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
18 September 2024
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