REG - S4 Capital PLC - Results for first half 2022
21/09/2022 07:01
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RNS Number : 0619A S4 Capital PLC 21 September 2022
S4 Capital plc
("S(4)Capital" or "the Company")
Results for first half 2022
Strong like-for-like 28% gross profit/net revenue growth ahead of digital
markets
Two and three half year stacks up 77% and 89%
Further client conversion at scale
Focus on management infrastructure and balanced cost base required to continue
growth
Revised revenue and operational EBITDA(5) targets unchanged
£ millions Six months ended Six months ended change Reported change change
Like-for-like(3)
Pro-forma(4)
30 June 2022 30 June 2021(2)
Billings(1) 765.6 547.5 39.8% 22.2% 22.5%
Revenue 446.4 279.3 59.8% 30.7% 30.9%
Gross profit/net revenue 375.3 236.7 58.6% 27.8% 28.2%
Operational EBITDA(5) 30.1 34.3 -12.4% -41.2% -34.7%
Operational EBITDA margin(5) 8.0% 14.5% -650bps -940bps -900bps
Adjusted(6) operating profit 25.4 31.3 -18.7% -47.0% -39.6%
Operating loss (75.4) (16.6) -354.2% -17.1% -1.3%
Loss for period (82.4) (23.0) -258.5% -9.9% 1.7%
Basic net loss per share (pence) (14.5) (4.2) -10.3p -0.7p 1.5p
Adjusted(6) basic earnings per share (pence) 2.1 3.4 -1.3p -3.6p -3.5p
Number of people 9,041 5,691
Net Debt (135.5) 6.6
Financial highlights
¤ Billings £765.6 million, up 39.8% reported and 22.2% like-for-like.
¤ Revenue £446.4 million, up 59.8% reported and 30.7% like-for-like.
¤ Gross profit/net revenue £375.3 million, up 58.6% reported, and 27.8%
like-for-like as the Company continued to outperform the digital advertising
and transformation markets. Two year and three year stacks (half year organic
growth for the last two and three years) for the first half are 77% and 89%.
¤ Operational EBITDA(5) £30.1 million, down 12.4% reported and 41.2%
like-for-like reflecting continued investment in hiring for expansion, which
ran further ahead of gross profit/net revenue growth in the first half than
expected.
¤ Operating loss £75.4 million, which includes £100.8 million of
primarily combination payments, some linked to continued employment, and the
associated expense and amortisation totalling £93.9 million versus £41.6
million in the first half of 2021.
⁄ Adjusted basic earnings per share, which excludes adjusting items after
tax, of 2.1p per ordinary share, down 1.3p versus 3.4p per share in the first
half of last year. Basic loss per share of 14.5p, down 10.3p versus 4.2p loss
per share in the first half of 2021.
¤ Net debt ended the period at £135.5 million, or 1.2x net
debt/operational EBITDA, reflecting combination payments made during the first
half, principally for TheoremOne. Net debt was below the bottom end of the
guidance range of £140 - 190 million reflecting better working capital
management. The balance sheet remains strong with sufficient liquidity and
long-dated debt maturities. Pro-forma Operational Earnings Before Interest,
Taxes, Depreciation and Amortisation for the latest twelve months to 30 June
2022 was £113.6 million.
Strategic and operational highlights
¤ We have secured two new "whopper" clients, both of which will be fully
operational in 2023, making a total of eight. Five more clients, making a
potential total of 13, are trending towards "whopper" status (i.e. revenue of
over $20 million per annum). This year 14 other clients have been identified
as potential "whoppers" over the 2022-24 three year planning period to reach
the 20(2) objective (20 clients with revenue of $20 million per annum).
¤ Significant cost management measures, including a brake on hiring and
discretionary cost controls have been implemented in the second quarter and
half of the year. Tight cost management is having the desired effect, with the
number of people in the Company stabilising at around 9,100 (including recent
combinations) over the past month or so.
¤ The Company continues to invest in financial controls, treasury, risk and
governance. Several experienced finance professionals have been appointed
within the Group and Practice finance teams. Significant progress is being
made on processes to support future growth, balancing revenue growth and the
investment in human capital. Work is ongoing and this remains a key priority
for the second half.
¤ The Content practice posted 26% like-for-like gross profit/net revenue
growth, with Data&Digital Media up 23% and Technology Services up 89%.
However, hiring ahead of the revenue curve particularly in the first quarter
impacted profitability at both the Content and to a lesser extent the
Data&Digital Media practices.
¤ In January 2022 the Group's Data&Digital Media practice combined
with 4Mile Analytics, a leading data consultancy specialising in custom data
experiences powered by the Looker platform. In May, the Technology Services
practice made a large and significant combination with TheoremOne, a leader in
agile, full stack innovation, engineering and design, which helps major
enterprises achieve strategic digital transformation.
¤ In July, post the half year end, the Content practice combined with XX
Artists, a Los Angeles-based digital marketing agency.
¤ Colin Day was appointed as a Non-Executive Director and Chairman of the
Audit Committee and Christopher S. Martin as Chief Operating Officer in August
2022.
Outlook
¤ Full year like-for-like gross profit/net revenue growth target remains
unchanged at 25%.
¤ The Group continues to expect a significantly stronger second half
performance with a weighting to the fourth quarter. Pipeline remains strong in
comparison to last year.
¤ For the full year expected operational EBITDA target remains unchanged
at approximately £120 million(9).
Sir Martin Sorrell, Executive Chairman of S(4)Capital Plc said:
"Our top line growth continues to outperform the digital advertising and
transformation markets. This momentum is underlined by the increasing
recognition of the success of our new age/new era model in industry surveys
such as the Forrester Waves (the guide for buyers considering their purchasing
options in a technology marketplace) and increasing conversion of client
relationships at scale as we land more "whoppers". In the first half of 2022,
we continued to invest in increased human capital ahead of further top line
advances and in management infrastructure, which impacted our Operational
EBITDA. In the second half, we are focused on a better balance between top and
bottom-line growth to ensure we reach our revised targets for the year.
Combinations remain a key part of our growth strategy, however, for the time
being we are focused on organic growth and maximising value from our existing
businesses, where momentum remains strong. Whilst the global economy faces
many significant challenges in areas such as climate change, a lengthy war on
Continental Europe, rising inflation and interest rates, energy shortages,
fractious US/China and Western/Russia relationships and with Iran, the
prospects for digital advertising and transformation remain relatively bright,
whilst traditional media languish, and there is evidence that demand
accelerates during periods of economic uncertainty as we saw with Covid in
2020, when we performed strongly".
Notes (in this document):
1. Billings is gross billings to client including pass through
costs.
2. Restated for the initial accounting for the business combination
of Staud Studios and Raccoon as required by IFRS 3. Details are disclosed in
Note 5.
3. Like-for-like is a non-GAAP measure and relates to 2021 being restated
to show the unaudited numbers for the previous year of the existing and
acquired businesses consolidated for the same months as in 2022 applying
currency rates as used in 2022.
4. Proforma numbers relate to unaudited full year non-statutory and
non-GAAP consolidated results in constant currency as if the Group had existed
in full for the year and have been prepared under comparable GAAP with no
consolidation eliminations in the pre-acquisition period.
5. Operational EBITDA is EBITDA adjusted for acquisition related expenses,
non-recurring items and recurring 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 Gross Profit/net revenue.
6. Adjusted for acquisition related expenses, non-recurring items
and recurring share-based payments.
7. Restated for the initial accounting for the business combination
of Orca, Brightblue, Metric Theory, Decoded, Tomorrow, Staud Studios, Jam3,
Raccoon as required by IFRS 3. Details for Orca, Brightblue, Metric Theory and
Decoded are provided in note 4 on page 127 of the Annual Report and Accounts
2021. Other details are disclosed in Note 5 below.
8. Restated for the initial accounting for the business combination of
Raccoon, Cashmere and Maverick as required by IFRS 3. Details are disclosed in
Note 5.
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. S4Capital 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 in London, 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://stream.brrmedia.co.uk/broadcast/630f190eda906b287e9a249c
Conference call:
UK: +44 (0)330 165 4012
Freephone: 0800 279 6877
Confirmation code: 2608950
08.00 EDT / 1pm BST webcast (watch only) and conference call (for Q&A):
Webcast: https://stream.brrmedia.co.uk/broadcast/630f1a7eda906b287e9a257c
Conference call:
UK: +44 (0)330 165 4012
US: +1 646-828-8073
Confirmation code: 5157196
Enquiries to
S(4)Capital
Plc
Sir Martin Sorrell, Executive Chairman
+44 (0)20 3793 0003/ +44 (0)2037930007
Mary Basterfield, Chief Financial Officer
Scott Spirit, Chief Growth Officer
Dowgate Capital Limited (Joint Corporate Broker to S(4)Capital
plc)
James Serjeant
+44 (0)20 3903 7715
David Poutney
Jefferies International Limited (Joint Corporate Broker to S(4)Capital plc)
Tony White
+44 (0)207 029 8000
Harry Le May
Morgan Stanley & Co. International plc (Joint Corporate Broker to
S(4)Capital plc)
Paul Baker
+44 (0)207 425 8000
Alex Smart
Powerscourt (PR Advisor)
Elly Williamson
+44 (0)781 765
7528
Ollie Simmonds
Business overview
Introduction
In the first half of 2022, we continued to grow ahead of our guided gross
profit/net revenue run rates, gained major new clients, maintained high key
people retention rates, upgrading our financial processes and improving
working capital management. In contrast, there were the results delays earlier
in the year, and the first half 2022 profits turned out below the Board's
expectations with the consequent impact on the full year outlook. We are
focussing intently on correcting these issues and have made good progress in
recent months. Underpinning our confidence in the medium and long term are
client demand for digital services and the solid foundations of the Company's
Content, Data&Digital Media and Technology Services practices, centred on
our 9,100 people and "whopper", "whoppertunities" and local hero clients and
having the right data-driven strategy in the right functional and geographic
markets.
The Company grew strongly in the first half, with a like-for-like gross
profit/net revenue growth rate of 28%, above the targeted 25%. Two year and
three year first half like-for-like stacks are 77% and 89%. First quarter and
second quarter gross profit/net revenue like for like growth rates were 35%
and 23% with two and three year stacks at 67%, and 88% and 86% and 95%. We
remain confident of outperforming the digital advertising and transformation
markets. We maintain our 25% gross profit/net revenue target for 2022.
Momentum was reinforced by the addition of two further "whopper" clients
making a total of eight against the target of 20, one through pitch and one
through combination, both of which will be fully effective in 2023. We also
secured important new client wins with Adobe, Brewdog, Tiktok, Diageo,
Booking.com, Tim Horton's, Duolingo, Ekaterra, Golden Goose, Riot Games and
the US media account of a large NDA'd FMCG which will become a leading account
in 2023. In addition, we continue to extend our remits with all our existing
major clients. This represents a strong start to achieving the Company's
2022-24 three-year plan of doubling its size on a like-for-like basis and
reaching the same targets for the 2020-22 and 2021-23 plans, having achieved
them in the period 2019-21. We are about to start our three year planning
process for 2023 - 25 and budgets for 2023.
Our profit performance in the first half was, however, disappointing. While
gross profit/net revenue growth was strong, our Operational EBITDA and
Operational EBITDA margin performance were below our expectations. This was
due to profit underperformance mainly in our Content and Data&Digital
Media practices, where growth in costs ran ahead of growth in gross profit/net
revenue. We began taking action to correct this at the end of the period and
this continues into the second half. Our focus is on tight cost management and
commercials, such as pricing. We are starting to see an improved performance
and expect this to continue through the second half of 2022 and into 2023, as
we build a stronger platform. This however will result in an even more skewed
second half Operational EBITDA performance than in prior years.
We have also invested in our finance teams and processes. Changes have already
been implemented at the Board, Company and Content practice levels in
financial reporting and control, internal audit, governance, risk and
compliance. This remains a key priority for the company for the second half
and we expect to see ongoing investment in our team and systems over the next
few years to support the business as it continues to grow.
Strategic progress
Corporate activity continued in the first half, with the Data&Digital
Media practice announcing the combination with 4Mile in the United States in
January. The Technology Services practice combined with TheoremOne in May.
This is a larger and important combination that has scaled our Technology
Services practice. After the period end in July, the Content practice
announced a combination with XX Artists. Our combinations have generated
significant revenue synergies through development of existing and new client
opportunities across all three practices and geographies. Combinations remain
a key part of our growth strategy, however for the time being we are focused
on organic growth and maximising value from our existing business, where the
organic momentum remains strong.
We reported our Carbon Neutral status through obtaining official certification
for 2021 in May 2022 achieving our carbon neutrality ambitions well ahead of
our 2024 target. We are assessing the feasibility of setting Science Based
Targets (SBTi) and continue our ESG risk assessments and reporting, for
example CDP, the gold standard for environmental reporting, for which we are
maturing our ESG data gathering processes. We are both reducing our emissions
in our own operations as well as through sustainable design for our clients
while we are creating more inclusive cultures and experiences. Our longer-term
ambition remains to become B Corporation certified.
Whilst GDP growth is a driver of our four addressable markets - global media,
marketing services, trade budgets and digital marketing transformation - the
key trend for S(4)Capital is that the digital segments of these markets, as
opposed to the analogue, are still forecast to continue to grow significantly.
Despite the changes in the economic outlook, digital advertising is still
forecast to grow by 10-15% inside the United States and strongly outside,
whilst analogue growth will be anaemic. Our own analysis of analysts' current
forecasts (Morgan Stanley, Evercore ISI, eMarketer 2022) indicates that the
top 8 global digital platforms are forecast to grow advertising revenues by
13% in 2023, which represents an acceleration from around 10% in 2022.
Advertising as a proportion of US GDP is still forecast to rise from under 1%
to approximately 1.4%, closer to its historical level, purely because of the
continued rise of digital advertising at around 10-15% per annum to a share of
70% in 2025 against 62% last year. Other addressable markets are projected to
grow at significantly higher rates such as cloud platform growth (31%),
marketing technology software (19%) and digital transformation spend (17%),
all contribute to our confidence around our gross profit/net revenue target
and three year plans. In addition, as we saw in 2020 with the pandemic, the
client demand for digital marketing transformation intensifies as GDP growth
slows and organic volume gains for clients lessen and become more difficult.
Board update
In January 2022 we were pleased to welcome Mary Basterfield as our new Group
Chief Financial Officer and Director, Mary has over 20 years of extensive
financial experience and, since joining, Mary has appointed several
experienced finance professionals within the Group and Practice finance teams.
The team is strengthening processes to support our future growth and we have
made significant progress.
After the period end, on 2 August 2022, Colin Day was appointed to
S(4)Capital's Board as a Non-Executive Director including as the new Chair of
the Audit and Risk Committee, as part of our previously indicated plans to
invest in and tighten its financial control, risk and governance processes at
the Board level. Colin has decades of experience in both management and
governance roles. The previous Chair is Senior Independent Director, Rupert
Faure Walker, who remains a member of the Audit and Risk Committee and the
Nomination and Remuneration Committee.
The Audit and Risk Committee's role is to assist the Board with the discharge
of its responsibilities in relation to external audits and controls, including
reviewing financial statements, considering the scope of the work undertaken
by external auditors and reviewing the effectiveness of the internal control
systems in place within the Group.
In addition, Christopher S. Martin, one of the founders of MightyHive Inc.
with extensive experience at Yahoo Inc. in post-merger integration, has been
appointed Chief Operating Officer, to scale the Company's organisational
structure and processes.
We will now have a Board of 15 directors, nine non-executive directors of
which four are women and five are men, and six executive directors.
Financial review
Summary of result
£ millions Six months ended Six months ended change Reported change change
Like-for-like(3)
Pro-forma(4)
30 June 2022 30 June 2021(2)
Billings(1) 765.6 547.5 39.8% 22.2% 22.5%
Revenue 446.4 279.3 59.8% 30.7% 30.9%
Gross profit/net revenue 375.3 236.7 58.6% 27.8% 28.2%
Operational EBITDA(5) 30.1 34.3 -12.4% -41.2% -34.7%
Operational EBITDA margin(5) 8.0% 14.5% -650bps -940bps -900bps
Adjusted(6) operating profit 25.4 31.3 -18.7% -47.0% -39.6%
Adjusted(6) operating profit margin 6.8% 13.2% -640bps -960bps -920bps
Net finance expenses and loss on net monetary position (10.2) (3.2) -214.6% -119.4% -129.4%
Adjusted(6) result before income tax 15.2 28.1 -45.8% -64.9% -55.6%
Adjusted(6) Income tax expenses (3.2) (9.8) 66.5% 74.1% 73.8%
Adjusted(6) result for the period 12.0 18.3 -34.8% -61.1% -49.3%
Adjusted(6) basic earnings per share (pence) 2.1 3.4 -1.3p -3.6p -3.5p
Reconciliation to non-GAAP measures of performance
£ millions Six months ended 30 June 2022 Six months ended
30 June 2021(2)
Operating loss (75.4) (16.6)
Amortisation(*) 24.2 18.0
Acquisition and set-up related expenses(**) 69.7 23.6
Share based compensation 6.9 6.3
Adjusted(6) operating profit 25.4 31.3
Net finance expenses and loss on net monetary position (10.2) (3.2)
Adjusted(6) result before income tax 15.2 28.1
Income tax credit/(expense) 3.2 (3.1)
Tax on adjusting items (6.4) (6.7)
Adjusted(6) result for the period 12.0 18.3
* Amortisation relates to the amortisation of intangible assets identified
as part of the purchase price allocation exercise as a result of the
acquisitions.
** Acquisition and set-up related expenses relate to acquisition related
advisory fees of £3.6 million, contingent consideration as remuneration of
£67.8 million and remeasurement gain on contingent considerations of £1.7
million.
Revenue
Billings were £765.6 million, up 39.8% on a reported basis, 22.2% on a
like-for-like basis and 22.5% on a pro-forma basis.
Revenue was £446.4 million, up 59.8% from £279.3 million on a reported
basis, 30.7% on a like-for-like basis and 30.9% on a pro-forma basis.
Reported gross profit/net revenue was £375.3 million, up 58.6% from
£236.7million for the comparable period in 2021, 27.8% like-for-like and
28.2% pro-forma.
Practice performance and net revenue by geography
£ millions Six months ended Six months ended change Reported change change
Like-for-like(3)
Pro-forma(4)
30 June 2022 30 June 2021(2)
Content 250.2 157.1 59.3% 25.7% 25.7%
Data&Digital media 100.7 79.6 26.4% 23.1% 23.5%
Technology Services 24.4 - 100.0% 89.2% 57.9%
Gross profit/net revenue 375.3 236.7 58.6% 27.8% 28.2%
Americas 279.4 168.8 65.5% 26.0% 26.6%
EMEA 66.9 48.3 38.6% 36.0% 36.0%
Asia-Pacific 29.0 19.6 48.1% 27.6% 27.6%
Gross profit/net revenue 375.3 236.7 58.6% 27.8% 28.2%
Content 14.0 16.7 -16.7% -49.9% -49.9%
Data&Digital media 17.4 22.4 -22.6% -29.3% -28.9%
Technology Services 8.8 - 100.0% 147.1% 71.1%
S4 Central (10.1) (4.8) -107.6% -107.9% -107.9%
Operational EBITDA 30.1 34.3 -12.4% -41.2% -34.7%
Gross profit, Operational EBITDA and Operational EBITDA margins by practice
Content practice gross profit/net revenue was £250.2 million (67% of total
gross profit), up 59.3% on a reported basis from last year, on a like-for-like
basis up 25.7% and 25.7% on pro-forma basis.
Data&Digital Media practice gross profit/net revenue was £100.7 million
(27% of total gross profit), up 26.4%, from last year on a reported basis, on
a like-for-like basis up 23.1% and on a pro-forma basis was 23.5%.
Technology Services gross profit/net revenue was £24.4 million (6% of total
gross profit/net revenue), on a like for like basis up 89.2% and on a
pro-forma basis was 57.9%.
Content practice operational EBITDA was £14.0 million, down 16.7% on a
reported basis verses last year, and down 49.9% on a like-for-like basis and
down 49.9% on a pro-forma basis, reflecting a significant, increased
investment in talent. The Content practice operational EBITDA margin was 5.6%,
compared to 10.7% last year, reflecting increased investment in human capital
in the first half of the year to staff "whoppers" and prepare for a stronger
second half. This investment in hiring ran further ahead of gross profit/net
revenue growth in the first half than expected.
Data&Digital Media practice operational EBITDA was £17.4 million, down
22.6% on a reported basis from last year and down 29.3% on a like-for-like
basis and 28.9% on a proforma basis. Data&Digital Media practice
operational EBITDA margin was 17.2%, compared to 28.2% last year, reflecting
the increased investment in human capital to drive future growth and an
increase in travel, office and other operating expenses post covid 19.
The Technology Services practice which now includes Zemoga and TheoremOne has
performed strongly with operational EBITDA of £8.8 million representing an
EBITDA margin of 36.1%.
Gross profit/net revenue by Geography
Americas (74% of total) was £279.4 million, up 65.5% on a reported basis from
last year. On a like-for-like basis Americas gross profit/net revenue was up
26.0% and up 26.6% on a pro-forma basis reflecting continued out performance
of the market and growth in our "whoppers" and major clients.
EMEA (18% of total gross profit/net revenue) was £66.9 million, up 38.6% from
last year on a reported basis. On both a like-for-like and pro-forma basis
EMEA gross profit/net revenue was up 36.0% primarily reflecting "whopper"
growth in the key markets.
Asia Pacific (8% of total) was £29.0 million, up 48.1% on a reported basis.
On both a like-for-like and pro-forma basis Asia Pacific gross profit/net
revenue was up 27.6% reflecting continued strong organic growth.
Financial performance
Reported Operational Earnings Before Interest Taxes Depreciation and
Amortisation ('EBITDA') was £30.1 million versus £34.3 million, a decrease
of 12.4%, reflecting continued investment in hiring for expansion and some
post covid normalisation of travel and office costs. Operational EBITDA was
down 41.2% on a like-for-like basis and down 34.7% on a pro-forma basis,
primarily reflecting increased hiring to support growth. In the first half we
saw hiring run further ahead of gross profit/net revenue growth and as a
result we have implemented cost control measures including a break in hiring
and discretionary costs controls to support the anticipated stronger profit
delivery in the second half.
Adjusted operating profit was down 18.7% from £31.3 million to £25.4 million
on a reported basis, before adjusting items of £100.8 million, including
non-recurring items, primarily acquisition payments tied to continued
employment, share-based compensation, and amortisation of business combination
intangible assets. Like-for-like adjusted operating profit was down 47.0% and
pro-forma adjusted operating profit was down 39.6%, primarily reflecting the
increase in like-for-like number of people in the company, as the hiring
exceeded the gross profit net revenue growth in the first half.
Adjusted result before income tax was £15.2 million, down 45.8% versus £28.1
million in the comparable period last year reflecting the reduction in
adjusted operating profit and higher finance costs due to the term loan (which
was not in place in the first half of 2021). On a like-for-like basis adjusted
result before income tax was down 64.9% and down 55.6% on a pro-forma basis.
Adjusted result for the period was £12.0 million, down 34.8% on a reported
basis, down 61.1% on a like-for-like basis and down 49.3% on a pro-forma
basis.
Operating loss £75.4 million, which includes £100.8 million of primarily
combination payments, some linked to continued employment, and the associated
expense and amortisation totalling £93.9 million versus £41.6 million in the
first half of 2021.
Basic and diluted loss per share was 14.5p versus 4.2p loss in 2021.
Adjusted basic earnings per share was 2.1p, versus adjusted basic earnings per
share of 3.4p in the first half of 2021. The weighted average number of
shares as of 30 June 2022 was 567,714,015 (2021: 544,589,568).
The Board has decided that there will be no interim dividend declared for the
first half of 2022.
Balance sheet liquidity
Liquidity remains strong with half-year end net debt around £135 million or
1.2x net debt/operational EBITDA, below the lower end of the guidance range of
£140-£190 million, reflecting combination payments made during the first
half, principally for TheoremOne and improvement in working capital
management. Further combination payments in the second half of £21 million
are anticipated by 2022 year end and net debt is expected to be in the range
of £130 - £170 million.
Outlook
The global economy is in a difficult place. Since the beginning of 2022, many
political and economic challenges have been added to climate change,
diversity, equity and inclusion - the war in Ukraine and Russian expansion,
rising inflation, increasing interest rates, fracturing US/China relations,
Iran amongst others. Despite all these uncertainties, revised growth forecasts
for digital advertising and digital transformation continue to significantly
outperform analogue segments.
For example, digital advertising in the United States is forecast to grow by
10-15% per annum over the next three years, with advertising as a proportion
of US GDP forecast to grow from under 1% to 1.4%, solely due to growth in
digital segments, whilst analogue or linear remains flat or declining. Digital
transformation growth forecasts are even stronger and there is evidence, for
example during the pandemic in 2020, that when GDP growth falters, client
demand for digital advertising and transformation intensifies. Our targets
from the end of July for 2022 remains unchanged and we continue to expect to
outperform our addressable markets in 2023 and beyond.
About S(4)Capital
S(4)Capital plc (SFOR.L) is the tech-led, new age/new era digital advertising
and marketing services company, established by Sir Martin Sorrell in May 2018.
Its strategy is to build a purely digital advertising and marketing services
business for global, multinational, regional, local clients, and
millennial-driven influencer brands. This will be achieved by integrating
leading businesses in three practice areas: Content, Data&Digital Media
and Technology Services, along with an emphasis on "faster, better, more
efficient" executions in an always-on consumer-led environment, with a unitary
structure.
Digital is by far the fastest-growing segment of the advertising
market. S(4)Capital estimates that in 2021 digital accounted for over 60% or
$420-450 billion of total global advertising spend of $700-750 billion
(excluding over $500 billion of trade promotion marketing, the primary target
of the Amazon advertising platform) and projects that by 2022 total global
advertising spend will expand to $770-850 billion and digital's share will
grow to approximately 65% and by 2024 to approximately 70%, accelerated by
the impact of covid-19.
In 2018, S(4)Capital combined with MediaMonks, the leading AdAge A-listed
creative digital content production company led by Victor Knaap and Wesley ter
Haar and then with MightyHive, the market-leading digital media solutions
provider for future thinking marketers and agencies, led by Peter Kim and
Christopher S. Martin.
Since then, MediaMonks and MightyHive have combined with more than 25
companies across Content, Data&Digital Media and Technology Services. For
a full list, please see the S4Capital website.
In August 2021, S(4)Capital launched its unitary brand by merging MediaMonks
and MightyHive into Media.Monks, represented by a dynamic logo mark that
features MightyHive's iconic hexagon. As the operational brand, Media.Monks
underpins S4Capital's agility, digital knowledge and efficiency and is the
next step in delivering on its foundational promise to unify
Content, Data&Digital Media and Technology Services.
Victor Knaap, Wesley ter Haar, Christopher Martin, Scott Spirit and Mary
Basterfield all joined the S(4)Capital Board as Executive Directors.
The S(4)Capital Board also includes Rupert Faure Walker, Paul Roy, Daniel
Pinto, Sue Prevezer, Elizabeth Buchanan, Naoko Okumoto, Margaret Ma Connolly,
Miles Young and Colin Day.
The Company has 9,100 people in 32 countries with approximately 70% of revenue
across the Americas, 20% across Europe and 10% across the Middle East and
Africa and Asia-Pacific. The longer-term objective is a split of 60%:20%:20%.
Content currently accounts for approximately 60% of revenue, Data&Digital
Media 30% and Technology Services 10%. The long-term objective is a split of
50%:25%:25%.
Unaudited consolidated interim statement of profit or loss
for the six month period ended 30 June 2022
Six months ended Six months ended Year
30 June 2022 30 June 2021(2) ended
31 Dec 2021
Notes £000 £000 £000
Revenue 6 446,439 279,288 686,601
Cost of sales (71,162) (42,626) (126,338)
Gross profit 6 375,277 236,662 560,263
Personnel costs (308,812) (183,003) (412,537)
Other operating expenses (36,108) (20,674) (49,829)
Acquisition and set-up related expenses 15 (69,698) (23,615) (83,496)
Depreciation and amortisation (36,013) (25,960) (56,456)
Total operating expenses (450,631) (253,252) (602,318)
Operating loss (75,354) (16,590) (42,055)
Adjusted operating profit 25,453 31,324 94,808
Adjusting items 15 (100,807) (47,914) (136,863)
Operating loss (75,354) (16,590) (42,055)
Finance income 768 413 1,032
Finance expenses (10,372) (3,663) (13,283)
Net finance expenses (9,604) (3,250) (12,251)
Loss on the net monetary position (620) - (1,344)
Loss before income tax (85,578) (19,840) (55,650)
Income tax credit/(expense) 3,181 (3,147) (1,065)
Loss for the period (82,397) (22,987) (56,715)
Attributable to owners of the Company (82,397) (22,987) (56,715)
Attributable to non-controlling interests - - -
(82,397) (22,987) (56,715)
Loss per share is attributable to the ordinary equity holders of the Company
Loss per share (pence) 8 (14.5) (4.2) (10.3)
Diluted loss per share (pence) 8 (14.5) (4.2) (10.3)
Unaudited consolidated interim statement of comprehensive income
for the six month period ended 30 June 2022
Six months ended Six months Year
30 June 2022 ended ended
30 June 2021(2) 31 Dec 2021
£000 £000 £000
Loss for the period (82,397) (22,987) (56,715)
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Foreign operations - foreign currency translation differences 70,364 (16,618) (6,358)
70,364 (16,618) (6,358)
Total comprehensive loss for the period (12,033) (39,605) (63,073)
Attributable to owners of the company (12,033) (39,605) (63,073)
Attributable to non-controlling interests - - -
(12,033) (39,605) (63,073)
Unaudited consolidated interim balance sheet
as at 30 June 2022
As at 30 June 2022 As at 30 June 2021 As at
Restated(7) 31 Dec 2021
Restated(8)
Notes £000 £000 £000
Assets
Non-current assets
Intangible assets 9 1,189,535 859,033 981,326
Right-of-use assets 49,215 30,747 36,608
Property, plant and equipment 29,781 16,311 21,548
Deferred tax assets 10,492 3,466 6,526
Other receivables 11,228 3,680 3,185
1,290,251 913,237 1,049,193
Current assets
Trade and other receivables 10 349,731 233,985 335,498
Cash and cash equivalents 193,118 119,566 301,021
542,849 353,551 636,519
Total assets 1,833,100 1,266,788 1,685,712
Liabilities
Non-current liabilities
Deferred tax liabilities 67,152 57,460 68,627
Loans and borrowings 11 315,333 41,430 308,571
Lease liabilities 40,167 24,978 31,423
Contingent consideration and holdbacks 14,885 31,482 31,749
Other payables 2,940 2,033 2,845
440,477 157,383 443,215
Current liabilities
Trade and other payables 12 318,311 225,971 324,059
Contingent consideration and holdbacks 142,005 50,921 86,632
Loans and borrowings 11 5,400 70,813 2,523
Lease liabilities 15,109 9,371 10,545
Tax liabilities 19,874 18,215 17,500
500,699 375,291 441,259
Total liabilities 941,176 532,674 884,474
Net assets 891,924 734,114 801,238
Equity
Share capital 139,021 137,102 138,827
Reserves 752,803 596,912 662,311
Attributable to owners of the company 891,824 734,014 801,138
Non-controlling interests 100 100 100
Total equity 891,924 734,114 801,238
Unaudited consolidated interim statement of cash flows
for the six month period ended 30 June 2022
Six months ended Six months ended Year
30 June 2022 30 June 2021(2) ended
31 Dec 2021
Notes £000 £000 £000
Cash flows from operating activities 13 (2,333) 17,191 68,496
Income taxes paid (7,383) (7,862) (13,874)
Net cash (used)/generated from operating activities (9,716) 9,329 54,622
Cash flows from investing activities
Investments in intangible assets (497) (411) (3,458)
Investments in property, plant and equipment (10,231) (3,562) (11,119)
Acquisition of subsidiaries, net of cash acquired (93,245) (46,942) (86,604)
Tax paid as result of acquisition - - (5,116)
Financial fixed assets 502 (391) (323)
Net cash used in investing activities (103,471) (51,306) (106,620)
Cash flows from financing activities
Proceeds from issuance of shares - - 1,143
Additional borrowings during the year 11 - 24,057 342,994
Payment of lease liabilities (7,601) (5,401) (10,903)
Repayments of loans and borrowings (166) - (110,895)
Transaction costs paid on borrowings (288) - (8,379)
Interest paid (6,585) (1,765) (5,530)
Net cash (used)/generated from financing activities (14,640) 16,891 208,430
Net (decrease)/increase in cash and cash equivalents (127,827) (25,086) 156,432
Cash and cash equivalents beginning of the year 299,122 142,052 142,052
Exchange gain on cash and cash equivalents 17,060 2,600 638
Cash and cash equivalents at end of period 188,355(*) 119,566 299,122(**)
Note:
* Including bank overdrafts of £4.8 million.
** Including bank overdrafts of £1.9 million
Unaudited consolidated interim statement of changes in equity
for the six-month period ended 30 June 2022
Equity Number of shares Share capital Share premium Merger reserves Other reserves(*) Foreign exchange reserves Accumulated losses Total Non-controlling interests Total equity
£000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2021 542,065,458 135,516 364,195 205,717 29,275 (15,845) (3,181) 715,677 100 715,777
Comprehensive income or (loss) for the period
Loss for the period(2) - - - - - - (22,987) (22,987) - (22,987)
Foreign currency translation differences - - - - - (16,618) - (16,618) - (16,618)
Total comprehensive loss for the period - - - - - (16,618) (22,987) (39,605) - (39,605)
Transactions with owners of the company
Business combinations 6,343,254 1,586 31,880 - 18,164 - - 51,630 - 51,630
Employee share schemes - - - - - - 6,312 6,312 - 6,312
Balance as at 30 June 2021(2) 548,408,712 137,102 396,075 205,717 47,439 (32,463) (19,856) 734,014 100 734,114
Comprehensive income or (loss) for the period
Loss for the period - - - - - - (33,728) (33,728) - (33,728)
Foreign currency translation differences - - - - - 10,260 - 10,260 - 10,260
Total comprehensive income or (loss) for the period - - - - - 10,260 (33,728) (23,468) - (23,468)
Hyperinflation revaluation - - - - 1,633 - - 1,633 - 1,633
Transactions with owners of the company
Issue of Ordinary Shares - - - - - - - - - -
Business combinations 6,898,860 1,725 50,835 - 27,692 - - 80,252 - 80,252
Employee share schemes - - - - (110) - 8,817 8,707 - 8,707
Balance as at 31 December 2021 555,307,572 138,827 446,910 205,717 76,654 (22,203) (44,767) 801,138 100 801,238
Comprehensive income or (loss) for the period
Loss for the period - - - - - - (82,397) (82,397) - (82,397)
Foreign currency translation differences - - - - - 70,364 - 70,364 - 70,364
Total comprehensive income or (loss) for the period - - - - - 70,364 (82,397) (12,033) - (12,033)
Hyperinflation revaluation - - - - 1,753 - - 1,753 - 1,753
Transactions with owners of the company
Business combinations 777,894 194 2,887 - 91,005 - - 94,086 - 94,086
Employee share schemes - - - - 315 - 6,565 6,880 - 6,880
Balance as at 30 June 2022 556,085,466 139,021 449,797 205,717 169,727 48,161 (120,599) 891,824 100 891,924
*Other reserves include the deferred equity consideration of £168.0 million,
made up of the following: TheoremOne £56.2 million, Raccoon for £49.1
million, Decoded for £47.9 million, Cashmere for £6.9 million, Zemoga for
£5.4 million, 4Mile for £2.3 million and Destined for £0.2 million (2021:
£77.0 million), the treasury shares issued in the name of S(4)Capital Group
to an employee benefit trust for the amount of £2.2 million (2021: £2.5
million), and hyperinflation impact in Argentina of £3.4m (2021: £1.6m).
Notes to the unaudited consolidated interim financial statements
for the six-month period ended 30 June 2022
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.
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'). An overview of the subsidiaries is provided in note 14
on page 140 of the Annual Report and Accounts 2021.
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 2021 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 2022 are a condensed set of financial information and
have been prepared on the basis of the policies set out in the 2021 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 and
have also considered the impact of future acquisitions. On 6 August 2021,
S(4)Capital Group signed a new facility agreement, consisting of a Term Loan B
of EUR 375 million (expiring August 2028) and a multicurrency Revolving Credit
Facility (RCF) of £ 100 million (expiring August 2028). 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 authorized for
issue by the Board of Directors on 21 September 2022.
B. 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 thousand unless
otherwise indicated.
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 113 to 123 of the Annual Report and Accounts 2021. No changes
have been made to the Group's accounting policies in the period ended 30 June
2022.
A number of amended standards became applicable for the current reporting
period. The Group did not have to change its accounting policies or make
retrospective adjustments as a result of adopting these amended standards.
4. Statutory information and independent review
These condensed consolidated half year financial statements do not constitute
statutory financial statements within the meaning of section 434 of the
Companies Act 2006. The statutory accounts for the year ended 31 December 2021
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
consolidated interim financial statements are unaudited but have been reviewed
by the auditors and their report is set out on the last page.
5. Acquisitions
Business Combinations
Details of the provisional fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill of the subsidiaries acquired in
the period ended 30 June 2022 are as follows:
4Mile TheoremOne Total
£000 £000 £000
Intangible assets - Customer relationships 7,725 81,102 88,827
Intangible assets - Brand names 366 1,881 2,247
Intangible assets - Order Backlog 822 7,023 7,845
Intangible assets - Software 325 - 325
Property, plant and equipment 42 553 595
Cash and cash equivalents 2,334 5,238 7,572
Trade and other receivables 1,674 11,293 12,967
Other non-current assets 1 140 141
Trade and other payables (1,525) (2,225) (3,750)
Other non-current liabilities (258) 3 (255)
Net assets 11,506 105,008 116,514
Goodwill 13,574 39,157 52,731
Total purchase consideration 25,080 144,165 169,245
Cash 6,964 77,975 84,939
Deferred consideration 2,264 56,188 58,452
Contingent consideration 12,450 - 12,450
Holdback obligations 3,402 10,002 13,404
Total purchase consideration 25,080 144,165 169,245
Cash purchase consideration 6,964 77,975 84,939
Cash and cash equivalents acquired 2,334 5,238 7,572
Cash outflow on acquisition (net of cash acquired) 4,630 72,737 77,367
With all combinations 100% of the voting equity interest has been acquired.
Content Practice
During the period ending 30 June 2022 there were no businesses combined with
the Content practice.
Data & Digital Media practice
¤ On 11 January 2022, S(4)Capital Plc announced the business
combination between MediaMonks and 4 Mile Analytics, a California-based leader
in data analytics, data engineering, data governance, software engineering, UX
design and project & product management, for an expected total
consideration, including contingent consideration, of approximately £25.1
million. Since the acquisition date, 4Mile contributed £4.4 million to the
Group's revenue and £1.0 million profit for the six-month ended 30 June 2022.
Once the opening balance sheet is finalised the purchase price allocation can
be concluded and therefore the assets and liabilities remain provisional.
During the measurement period, S(4)Capital plc will obtain the information
necessary to identify and measure the assets and liabilities and
retrospectively adjust the provisional amounts recognised at the acquisition
date.
Technology Services practice
¤ On 16 May 2022, S(4)Capital Plc announced the business combination
between TheoremOne and Media.Monks, a California-based leader in agile,
full-stack, innovation, engineering, and design and helps major enterprises
achieve strategic digital transformation, for an expected total consideration,
including contingent consideration, of approximately £144.2 million. Since
the acquisition date, TheoremOne contributed £9.3 million to the Group's
revenue and £3.9 million profit for the six-month ended 30 June 2022. Once
the opening balance sheet is finalised the purchase price allocation can be
concluded and therefore the assets and liabilities remain provisional. During
the measurement period, S(4)Capital plc will obtain the information necessary
to identify and measure the assets and liabilities and retrospectively adjust
the provisional amounts recognised at the acquisition date.
The total consideration, including contingent consideration, for the above two
transactions is expected to be approximately £169.2 million.
At the end of the reporting period the purchase price allocation for 4 Mile
Analytics and TheoremOne have not been fully completed and therefore the
acquisition accounting and resulting goodwill recognised remains provisional.
During the measurement period in 2022, S(4)Capital Group will obtain the
information necessary to identify and measure the identifiable intangible
assets and retrospectively adjust the provisional amounts recognised at the
acquisition date.
Goodwill and financial statement line items
The goodwill represents the potential growth opportunities and synergy effects
from the acquisitions. The goodwill for 4Mile and TheoremOne is potentially
deductible for tax purposes. Trade receivables, net of expected credit losses,
acquired are considered to be fair value and are expected to be collectable in
full. The gross contractual amounts receivable of the acquired companies at
the acquisition date are £8.9 million and the best estimate at the
acquisition date of the contractual cash flows not expected to be collected is
£2 million, which is adjusted in the acquisition workings.
Contingent consideration arising from business combinations is fair valued,
with key inputs including the probability of success of the combinations
achieving target, consideration of potential delays and the expected levels of
future revenues. The contingent consideration is contingent on the acquired
companies achieving their 2022 results and, in some cases their 2023 results,
as forecasted upon acquiring the subsidiary. The contingent considerations are
included for the maximum amount of the consideration expected to be paid which
is in line with management's estimate of expected pay-out. In 2022, the
contingent consideration arising from business combinations is £12.5 million.
The contingent consideration can be materially lower in case the acquired
companies do not reach their forecasted results. Contingent consideration
classified as a liability is subject to remeasurement at each reporting date
until its ultimate settlement date. Any change in the fair value of the
liability due to events that occur after the acquisition date would be
recognised in the profit or loss.
Deferred considerations are commonly expected to be paid on the second-year
anniversary of the acquisition date. Holdbacks, as part of the purchase
consideration are in some cases held in third party escrow accounts and are
expected to be released within four years of the acquisition date. As at 30
June 2022, the third party escrow balances are reported under non-current
other receivables and current other receivables in line with the expected
release dates.
The contingent consideration of £126.7 million and holdbacks of £30.2
million as at 30 June 2022 includes £73.2million of employment linked
payables. During the reporting period, an amount of £15.9 million of
contingent consideration and holdbacks have been paid.
The total acquisition costs of £3.6 million (2021: £1.7 million) have been
recognised under acquisition and set-up related expenses in the statement of
profit or loss.
Since the acquisition date, the acquired companies, 4 Mile Analytics and
TheoremOne, contributed £13.7 million to the Group's revenue and £5.0
million into the Group's profit for the half year period ended 30 June 2022.
If the acquisitions had occurred on 1 January 2022, the Group's revenue would
have been £469.0 million and the Group's loss for the year would have been
£107.7 million.
Restatements
As stated on page 18 of the Group's interim report for the period ended 30
June 2021, the initial accounting for the business combination of Tomorrow,
Jam3, Staud Studios and Raccoon, were incomplete by the end of the six-month
reporting period ended 30 June 2021. Therefore, the assets and liabilities
acquired were not fully identified, were consequently not fully measured, and
were therefore not fully deducted from goodwill as at 30 June 2021.
In the second half of 2021, S(4)Capital Group obtained the information
necessary to identify and measure the identifiable assets and liabilities for
the business combinations of Tomorrow, Jam3, Staud Studios and Raccoon and has
adjusted its assets and liabilities as of 30 June 2021, as required by IFRS 3,
as follows:
30 June 2021 Adjustment 30 June 2021
reported restated
Restatement Note £'000 £'000 £'000
Intangible assets - Customer relationships 22,038 17,067 39,105
Intangible assets - Brand names 654 657 1,311
Intangible assets - Order backlog 1,321 338 1,659
Intangible assets - Software 661 168 829
Property, plant and equipment, ROU assets 5,264 (570) 4,694
Cash and cash equivalents 4,026 122 4,148
Trade and other receivables 12,706 (2,698) 10,008
Other non-current assets 48 - 48
Trade and other payables (6,509) (211) (6,720)
Current taxation (7,360) (30) (7,390)
Lease liabilities (3,150) 54 (3,096)
Other non-current liabilities (773) (25) (798)
Deferred taxation (6,367) 3,520 (2,847)
Net assets 22,559 18,392 40,951
Goodwill 73,431 (22,302) 51,129
Total purchase consideration 95,990 (3,910) 92,080
Payment in kind (common stock) 21,740 - 21,740
Cash 36,218 (1,332) 34,886
Deferred consideration 18,164 (1,329) 16,835
Contingent consideration 19,037 (1,130) 17,907
Holdback obligations 831 (119) 712
Total purchase consideration 95,990 (3,910) 92,080
Purchase consideration - cash 36,218 (1,332) 34,886
Cash and cash equivalents 4,026 122 4,148
Cash outflow on acquisition (net of cash acquired) 32,192 (1,454) 30,738
In addition to the above, the Group's balance sheet as at 30 June 2021 was
also restated for the fair value adjustments for the business combinations in
2020 which include Orca, Brightblue, Metric Theory and Decoded. Details are
provided in note 4 on page 127 of the Annual Report and Accounts 2021.
The profit and loss account for the period ended 30 June 2021 was restated for
the amortisation (£0.5 million charge) and related tax (£1.4 million charge)
as a result of the above restatements.
As stated on page 124 of the Group's 2021 annual accounts report, the initial
accounting for the business combination of Cashmere, Maverick and Raccoon,
were incomplete by the end of the reporting period ended 31 December 2021. As
required by IFRS 3, the following adjustments have been made to deferred tax
and consideration based on the information obtained post 31 December 2021,
which had no material impact on the profit and loss statement.
31 Dec 2021 Adjustment 31 Dec 2021
reported restated
Restatement Note £'000 £'000 £'000
Intangible assets - Customer relationships 86,552 - 86,552
Intangible assets - Brand names 2,804 - 2,804
Intangible assets - Order backlog 3,547 - 3,547
Intangible assets - Software 829 - 829
Property, plant and equipment, ROU assets 8,849 - 8,849
Cash and cash equivalents 15,839 - 15,839
Trade and other receivables 20,918 - 20,918
Other non-current assets 703 - 703
Trade and other payables (21,897) - (21,897)
Current taxation (8,439) - (8,439)
Lease liabilities (6,354) - (6,354)
Other non-current liabilities (2,288) - (2,288)
Deferred taxation (16,337) (160) (16,497)
Net assets 84,726 (160) 84,566
Goodwill 134,975 416 135,391
Total purchase consideration 219,701 256 219,957
Payment in kind (common stock) 56,236 - 56,236
Cash 77,204 - 77,204
Deferred consideration 28,444 - 28,444
Contingent consideration 57,817 256 58,073
Total purchase consideration 219,701 256 219,957
Purchase consideration - cash 77,204 - 77,204
Cash and cash equivalents 15,839 - 15,839
Cash outflow on acquisition (net of cash acquired) 61,365 - 61,365
6. Segment information
Revenue from operations
Six months ended Six months ended Year
30 June 2022 30 June 2021 ended
31 Dec 2021
£000 £000 £000
Services 446,439 279,288 686,601
Total 446,439 279,288 686,601
Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision maker has been identified as the Directors and executive management
of S⁴Capital Group.
During the reporting period, S⁴Capital Group has been active in three
segments:
¤ 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 and training and education.
¤ Technology Services: Digital transformation services in providing
advanced digital product design, engineering services and delivery services.
The customers are primarily businesses across technology, FMCG and media &
entertainment. Any intersegment transactions are based on commercial terms.
The Board of Directors monitor the results of the operating segments
separately for the purpose of making decisions about resource allocation and
performance assessment prior to charges for tax, depreciation and
amortisation.
Operating segment information under the primary reporting format is disclosed
below:
Content Data & Technology Services Total
Six months ended 30 June 2022 Digital Media
£000 £000 £000 £000
Gross profit 250,180 100,664 24,433 375,277
Segment profit(*) 13,950 17,362 8,831 40,143
Overhead cost (10,050)
Adjusted non-recurring and acquisition related expenses (76,578)
Depreciation and amortisation(**) (28,869)
Net Finance expenses and gain on net monetary position (10,224)
Loss before income tax (85,578)
* Including £7.1 million depreciation on right-of-use assets.
** Excluding £7.1 million depreciation on right-of-use assets.
Six months ended 30 June 2021 Content Data & Total(2)
Digital Media
£000 £000 £000
Gross profit 157,047 79,615 236,662
Segment profit(*) 16,750 22,437 39,187
Overhead cost (4,840)
Adjusted non-recurring and acquisition related expenses (29,927)
Depreciation and amortisation(**) (21,010)
Net Finance expenses (3,250)
Loss before income tax (19,840)
* Including £5.0 million depreciation on right-of-use assets.
** Excluding £5.0 million depreciation on right-of-use assets.
Year ended 31 December 2021 Content Data & Technology Services Total
Digital Media
£000 £000 £000 £000
Gross profit 385,552 167,079 7,632 560,263
Segment profit(*) 52,286 55,024 3,087 110,397
Overhead cost (9,410)
Adjusted non-recurring and acquisition related expenses (97,372)
Depreciation and amortisation(**) (45,670)
Net finance expenses and loss on net monetary position (13,595)
Loss before income tax (55,650)
* Including £10.8 million depreciation on right-of-use assets
** Excluding £10.8 million depreciation on right-of-use assets
7. Income tax
Six months ended Six months ended Year
30 June 2022 30 June 2021(2) ended
31 Dec 2021
£000 £000 £000
Current tax for the year (6,325) (7,377) (12,638)
Adjustments for current tax of prior years - 462 620
Total current tax (6,325) (6,915) (12,018)
Movement in deferred tax liabilities 6,174 3,525 6,594
Movement in deferred tax assets 3,332 243 4,359
Income tax credit/(expense) 3,181 (3,147) (1,065)
8. Earnings per share
Six months ended Six months ended Year
30 June 2022 30 June 2021(2) ended
31 Dec 2021
Loss attributable to owners of the Company (£'000) (82,397) (22,987) (56,715)
Weighted average number of ordinary shares 567,714,015 544,589,568 551,752,618
Basic loss per share (pence) (14.5) (4.2) (10.3)
Diluted loss per share (pence) (14.5) (4.2) (10.3)
Earnings per share is calculated by dividing the net result attributable to
the shareowners of the S(4)Capital Group by the weighted average number of
Ordinary Shares in issue during the period.
9. Intangible assets
Goodwill Customer relationships Brands Order Backlog Other Total
£000 £000 £000 £000 £000 £000
Cost 498,113 307,120 18,557 11,794 11,207 846,791
Accumulated amortisation - (32,243) (3,121) (7,604) (2,757) (45,725)
Net book value at 1 January 2021 498,113 274,877 15,436 4,190 8,450 801,066
Acquired through business combinations 73,431 22,038 654 1,321 661 98,105
Additions - - - - 411 411
Amortisation charge for the period - (11,965) (1,316) (2,945) (1,303) (17,529)
Foreign exchange differences (13,480) (6,846) (471) (76) (162) (21,035)
Total transactions during the period 59,951 3,227 (1,133) (1,700) (393) 59,952
Cost 558,064 321,310 18,652 12,751 12,344 923,121
Accumulated amortisation - (43,206) (4,349) (10,261) (4,287) (62,103)
Net book value at 30 June 2021(*) 558,064 278,104 14,303 2,490 8,057 861,018
Restatement(7) (20,916) 17,900 650 203 178 (1,985)
Net book value at 30 June 2021 537,148 296,004 14,953 2,693 8,235 859,033
Acquired through business combinations 82,460 46,614 1,500 2,023 (10) 132,587
Additions - - - - 3,047 3,047
Amortisation charge for the period - (14,797) (1,996) (3,435) (1,734) (21,962)
Foreign exchange differences 5,018 3,056 40 48 48 8,210
Total transactions during the period 87,478 34,873 (456) (1,364) 1,351 121,882
Cost 624,626 389,040 20,883 14,987 15,203 1,064,739
Accumulated amortisation - (58,163) (6,386) (13,658) (5,617) (83,824)
Net book value at 31 December 2021 624,626 330,877 14,497 1,329 9,586 980,915
Restatement(8) 411 - - - - 411
Net book value at 31 December 2021 625,037 330,877 14,497 1,329 9,586 981,326
Acquired through business combinations 52,731 88,827 2,247 7,845 325 151,975
Additions - - - - 557 557
Amortisation charge for the period - (16,835) (2,327) (3,250) (1,818) (24,230)
Foreign exchange differences 49,466 28,717 942 152 630 79,907
Total transactions during the period 102,197 100,709 862 4,747 (306) 208,209
Cost 727,234 511,386 24,724 23,923 17,226 1,304,493
Accumulated amortisation - (79,800) (9,365) (17,847) (7,946) (114,958)
Net book value at 30 June 2022 727,234 431,586 15,359 6,076 9,280 1,189,535
* Goodwill has been restated for the initial accounting for the business combination of Orca, Brightblue, Metric Theory, Decoded amounting to £19.2 million. (
)
10. Trade and other receivables
Six months ended Six months ended Year
30 June 2022 30 June 2021 ended
31 Dec 2021
£000 £000 £000
Trade receivables 271,611 199,142 271,747
Prepayments 16,708 6,724 14,516
Accrued income 43,337 18,130 36,870
Other receivables 18,075 9,989 12,365
Total 349,731 233,985 335,498
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables. A provision for expected credit loss of £5.8 million was
recognised on the Group's trade receivables at the end of the period (30 June
2021 £4.7 million, 31 December 2021 £5.3 million).
11. Loans and borrowings
Loans and borrowings Bank loans Senior secured term loan B (TLB) Transaction costs Total
Loan
interest
£000 £000 £000 £000 £000
Balance as at 1 January 2021 91,285 - (844) - 90,441
Additions 24,057 - - - 24,057
Acquired through business combinations 424 - - - 424
Charged to profit-or-loss - - 92 - 92
Exchange rate differences (2,797) - 26 - (2,771)
Balance as at 30 June 2021 112,969 - (726) - 112,243
Additions 575 318,938 (8,379) - 311,134
Acquired through business combinations 2,336 - - - 2,336
Loans waived (1,592) - - - (1,592)
Repayments (110,895) - - (5,530) (116,425)
Charged to profit-or-loss - - 1,191 6,169 7,360
Exchange rate differences (67) (3,833) (47) (15) (3,962)
Balance as at 31 December 2021 3,326 315,105 (7,961) 624 311,094
Additions 2,864 - (288) - 2,576
Acquired through business combinations 258 - - - 258
Loans waived (266) - - - (266)
Repayments (166) - - (6,117) (6,283)
Charged to profit-or-loss - - 517 6,115 6,632
Exchange rate differences 114 6,720 (127) 15 6,722
Balance as at 30 June 2022 6,130 321,825 (7,859) 637 320,733
Repayment obligations coming 12 months 4,763 - - 637 5,400
Non-current balance as at 30 June 2022 1,367 321,825 (7,859) - 315,333
Facility agreement
On 6 August 2021, S(4)Capital Group signed a new facility agreement,
consisting of a Term Loan B (TLB) of EUR 375 million and a multicurrency
Revolving Credit Facility (RCF) of £100 million. The interest on the
facilities is the aggregate of the variable interest rate (EURIBOR, LIBOR or,
in relation to any loan in GBP, SONIA) and a margin based on leverage (between
2.25% and 3.75%). The duration of the facility agreement is seven years in
relation to the TLB, therefore the termination date is August 2028, and five
years in relation to the RCF, therefore the termination date is August 2026.
S(4)Capital Group has pledged the assets of its companies as security for this
facility. During the reporting period the RCF remained fully undrawn.
The average interest rate of the outstanding loans amounts to 3.58% (six-month
period ending 30 June 2021 1.38%, 12-month period ending 31 December 2021
2.96%). The average effective interest rate for the outstanding loans is 3.58%
(six-month period ending 30 June 2021 1.34%, 12-month period ending 31
December 2021 2.93%) and during the period interest expense of £6.6 million
(six-month period ending 30 June 2021 £0.8 million, 12-month period ending 31
December 2021 £6.2 million) was recognised.
The facility agreement imposes certain covenants on the Group. The loan
agreement states that (subject to certain exceptions) S(4)Capital Group will
not provide any other security over its assets and receivables and will ensure
that the net debt will not exceed 4.50:1 of the proforma 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.
During the year S(4)Capital Group complied with the covenants set in the loan
agreement.
12. Trade and other payables
Six months ended Six months ended Year
30 June 2022 30 June 2021(7) ended
31 Dec 2021
£000 £000 £000
Trade payables 178,876 147,117 204,985
Accruals 71,603 51,962 51,446
Deferred income 56,841 26,892 58,887
Other payables 10,991 - 8,741
Total 318,311 225,971 324,059
13. Cashflow from operations
The following table shows the items included in the cash flows from
operations.
Six months ended 30 June 2022 Six months ended 30 June 2021(2) Year ended 31 Dec 2021
£000 £000 £000 £000 £000 £000
Cash flows from operating activities
Loss before income tax (85,578) (19,840) (55,650)
Financial income and expenses 9,604 3,250 12,251
Depreciation and amortisation 36,013 25,960 56,456
Share based compensation 6,880 6,312 13,876
Acquisition and set-up related expenses 69,698 23,615 83,496
Contingent consideration paid(*) (32,331) (3,402) (9,985)
37,367 20,213 73,511
Loss on the net monetary position 620 - 1,344
Increase in trade and other receivables 40,882 (38,657) (131,662)
Increase in trade and other payables (48,121) 19,953 98,370
Cash flows from operations (2,333) 17,191 68,496
* Contingent consideration tied to employment is deemed remuneration expenses
according to IFRS 3.
14. Related party transactions
Details of compensation for key management personnel for the 12 months to 31
December 2021 are disclosed on pages 71 to 91 of the Annual Report and
Accounts 2021. Apart from the key management personnel compensation and the
interest in S4S Ventures noted below, S(4)Capital Group did not have any other
related party transactions during the financial period (2021: nil).
Interest in S4S Ventures
The Group, through its subsidiary S(4)Capital 2 Limited a directly owned
subsidiary within the S4 Group ("S4"), together with Stanhope Capital LLP
("Stanhope LLP"), through its subsidiary Portman Square General Partner S.à
r.l. ("Stanhope"), subscribed for the initial €6,000 of shares each to
incorporate S4S Ventures General Partner S.à r.l. ("GP"), a Luxemburg
company. The GP has since established two S4S Ventures funds established in
Luxemburg and the US. Transactions pertaining to the fund were immaterial as
at the half year.
15. Reconciliation to non-GAAP measures of performance
Management includes non-GAAP measures as they consider these measures to be
both useful and necessary. They are used by management for internal
performance analyses; the presentation of these measures facilitates
comparability with other companies, although management's measures may not be
calculated in the same way as similarly titled measures reported by other
companies; and these measures are useful in connection with discussions with
the investment community.
Six months ended 30 Jun 2022 Reported Amortisation(*) Acquisition and set-up related expenses(**) Share based compensation Adjusted(6)
£000 £000 £000 £000 £000
Operating profit / (loss) (75,354) 24,229 69,698 6,880 25,453
Net finance expenses and loss on monetary position (10,224) - - - (10,224)
Profit / (loss) before income tax (85,578) 24,229 69,698 6,880 15,229
Income tax expense 3,181 (6,444) - - (3,263)
Profit / (loss) for the period (82,397) 17,785 69,698 6,880 11,966
* Amortisation relates to the amortisation of intangible assets identified
as part of the purchase price allocation exercise as a result of the
acquisitions.
** Acquisition and set-up related expenses relate to acquisition related
advisory fees of £3.6 million, contingent consideration as remuneration of
£67.8 million and remeasurement gain on contingent considerations of £1.7
million.
Six months ended 30 Jun 2021(2) Reported Amortisation(*) Acquisition and set-up related expenses(**) Share based compensation Adjusted(6)
£000 £000 £000 £000 £000
Operating profit / (loss) (16,590) 17,987 23,615 6,312 31,324
Net finance expenses (3,250) - - - (3,250)
Profit / (loss) before income tax (19,840) 17,987 23,615 6,312 28,074
Income tax expense (3,147) (6,582) - - (9,729)
Profit / (loss) for the period (22,987) 11,405 23,615 6,312 18,345
* Amortisation relates to the amortisation of intangible assets identified as
part of the purchase price allocation exercise as a result of the
acquisitions.
** Acquisition and set-up related expenses relate to acquisition related
advisory fees of £3.6 million, bonuses of £0.3 million and revaluation of
contingent considerations of £19.7 million.
Year ended 31 Dec 2021 Reported Amortisation(*) Acquisition and set-up related expenses(**) Share based compensation Adjusted(6)
£000 £000 £000 £000 £000
Operating profit / (loss) (42,055) 39,491 83,496 13,876 94,808
Net finance expenses and loss on monetary position (13,595) - - - (13,595)
Profit / (loss) before income tax (55,650) 39,491 83,496 13,876 81,213
Income tax expense (1,065) (6,941) (1,426) - (9,432)
Profit / (loss) for the period (56,715) 32,550 82,070 13,876 71,781
* Amortisation relates to the amortisation of intangible assets identified as
part of the purchase price allocation exercise as a result of the
acquisitions.
** Acquisition and set-up related expenses relate to acquisition-related
advisory fees of £10.5 million, bonuses of £0.8 million, contingent
consideration as remuneration of £70.5 million (out of which £10.0 million
is cash) and remeasurement loss on contingent considerations of £1.7 million.
Reconciliation to adjusted operational EBITDA Six months ended Six months ended Year
30 June 2022 30 June 2021(2) ended
31 Dec 2021
£000 £000 £000
Operating profit / (loss) (75,354) (16,590) (42,055)
Amortisation of intangible assets 24,229 17,987 39,491
Acquisition and set-up related expenses 69,698 23,615 83,496
Share based compensation 6,880 6,312 13,876
Depreciation property, plant and equipment(*) 4,640 3,023 6,179
Operational EBITDA 30,093 34,347 100,987
* Depreciation property, plant and equipment is exclusive of depreciation on
right-of-use assets.
Billings(1) Six months ended Six months ended Year
30 June 2022 30 June 2021 ended
31 Dec 2021
£000 £000 £000
Revenue 446,439 279,288 686,601
Pass-through expenses 319,202 268,259 610,249
Billings 765,641 547,547 1,296,850
Adjusted(6) Basic net profit per share Six months ended Six months ended Year
30 June 2022 30 June 2021(2) ended
31 Dec 2021
Weighted average number of shares in issue 567,714,015 544,589,568 551,752,618
Adjusted(6) net profit attributable to equity of owners of the company (£000) 11,966 18,345 71,781
Adjusted(6) Basic net earnings per share 2.1 3.4 13.0
As at 30 June 2022 the outstanding number of shares is 556,085,466.
16. Events occurring after the reporting period
Business combinations
¤ On 01 July 2022, S(4)Capital Plc announced the business combination
between MediaMonks and XX Artist, an award-winning Social Media Marketing
agency headquartered in Los Angeles who also touts an industry-leading talent
social practice, working with over 40 top musicians, actors, artists and
public figures on their digital platforms, for a total estimated consideration
of £20.1 million for 100% of equity and voting rights. The initial accounting
for the business combination has not been completed at the time the interim
financial statements were authorised for issue.
Capital reduction
¤ The Company is in the process of undertaking a reduction of
capital to affect the cancellation of: (i) the C ordinary shares resulting
from the capitalisation of the sum of £205,717,000 standing to the credit of
the Company's merger reserve and; (ii) the entire amount standing to the
credit of the Company's share premium account (the "Capital Reduction"), in
order to create distributable reserves. The Capital Reduction was approved by
shareowners at the Company's Annual General Meeting held on 16 June 2022. As
announced on 13 September 2022, the Capital Reduction was approved by the High
Court of Justice of England and Wales on 13 September 2022 and is expected to
be registered by the Registrar of Companies no later than 28 September 2022,
upon which the Capital Reduction will become effective. This will provide the
Company with the flexibility to make future purchases of its own shares and/or
to make future ordinary course dividends although, at this time, the Board
confirms that it has no current plans to do so. The Board continues to review
the advisability of declaring a modest dividend in future.
17. Principal risks and uncertainties
The key risks for the Group achieving their objectives remain largely the same
as those reported in the Annual Report and Accounts 2021 and can be found on
page 33 up to and including page 38. A description of the risks and
uncertainties have been included below.
Economic environment
Adverse developments in the global economy or the local economies in
the territories where the Group has operations could impact the level
of demand for the Group's services
People and leadership
The quality of the services provided by the Group's businesses are
fundamentally derived from the quality of the Group's people. The Group's
performance could therefore be adversely affected if it is not able to
recruit, train and retain key talent in the Group's businesses and at the
Group level.
Strategic
The Group's future results of operation and financial performance are partly
dependent on the successful implementation of the Group's strategy. The
Group's strategy is to build a purely digital multinational advertising and
marketing services business, initially by business combinations and long term
through robust organic growth.
The Group's strategy envisages that it will continue to grow rapidly.
The Group may not have the infrastructure, management time and/or governance
structure to be able to grow at the desired speed and/or to fully integrate
new businesses into the Group.
The Group has combined with a large number of businesses, which are being
integrated into the Group, and the Group's strategy envisages further
combinations. The Group's performance could be adversely affected if the
combined businesses are not successfully integrated into the Group.
The Group is dependent on relationships with certain third parties with
significant market positions, particularly Google Marketing Platform and
the rest of the Google advertising ecosystem and an unnamed
telecommunications company (subject to a NDA), but also Amazon and Meta.
As part of the Group's strategy, the Directors intend to identify suitable
combination opportunities. The Group may not successfully identify and
complete, or, if completed, integrate suitable combination opportunities in
the future.
The Group conducts due diligence as it deems reasonably practicable and
appropriate based on the facts and circumstances applicable to any business
combination under consideration. Material facts or circumstances may not be
revealed in the due diligence and may surface once the integration starts.
As the Group has been established through combinations, and the Company was
only listed on the London Stock Exchange in 2018, the Group's control
environment and governance arrangements are relatively in their infancy in
comparison to other listed companies, which could negatively impact on the
financial position and prospects of the Group.
Google, a key customer to us, recently announced that third-party cookies
would be blocked in Chrome by 2023. As a result, in the next 12 months,
third-party cookies will become effectively unusable for advertising
measurement and many forms of third-party data already challenged by GDPR
since May 2018, will cease to exist.
Competitive environment
The digital media and communication services industry is highly competitive.
The Group's revenues and/or margins could be reduced if clients are lost to
competitors, competition erodes the Group's pricing power or the economic
environment results in lower demand for advertising and marketing services of
the type which the Group provides. The advertising and marketing services
industry is subject to significant and rapid change.
IT and data security
The Group is subject to a number of laws relating to privacy and data
protection governing its ability to collect and use personal information.
These data protection and privacy-related laws and regulations are becoming
increasingly restrictive and complex and may result in greater regulatory
oversight and increased levels of enforcement and sanctions. The European
Union's General Data Protection Regulation (GDPR) and, the UK version of GDPR,
both provide for fines of up to 4% of global turnover to be levied for
breaches.
The Group may be vulnerable to hacking, identity theft and fraud.
The intellectual property rights of the Group are important to its business.
There is a risk that title to the relevant intellectual property rights has
not been properly assigned to the Group. There is a risk that third-party
distributors of intellectual property could allege that the Group has not
complied with the conditions of a licence.
Financial, regulatory, sanctions and taxation
The Group has exposure to credit risk through the default of a client or other
counterparty.
The Group does and expects to continue to generate a significant proportion of
its revenue in US dollars and other currencies. There is a risk that any
significant movement in foreign exchange rates between Pound Sterling and
other currencies in which revenue is generated could have an impact on the
Group's results and financial position.
The Group is and will continue to be subject to strict anti-corruption,
anti-bribery and anti-trust legislation and enforcement in the countries in
which it operates.
The Group may be subject to regulations restricting its activities or
effecting changes in taxation.
The Group is and will continue to be subject to the laws of the UK, the US,
the EU and other jurisdictions that impose sanctions and regulate the supply
of services to certain countries.
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 for 31 December 2021 (with the exception of the following changes in
the period: Mr Peter Rademaker and Mr Peter Kim resigned on 16 June 2022, and
Mr Colin Day was appointed on 2 August 2022). A list of current directors is
maintained on the S(4) Capital plc website: www.s4capital.com
(http://www.s4capital.com)
Signed on behalf of the Board on 21 September 2022
Sir Martin Sorrell
Mary Basterfield
Executive Chairman
Group Chief Financial Officer
Independent review report to S4 Capital plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed S4 Capital plc's condensed consolidated interim financial
statements (the "interim financial statements") in the unaudited consolidated
interim financial statements of S4 Capital plc for the 6 month period ended 30
June 2022 (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
2022;
· 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 cash flows 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 unaudited consolidated
interim financial statements of S4 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. 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 unaudited consolidated
interim financial statements 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 this ISRE. 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 unaudited consolidated interim financial statements, including the interim
financial statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the unaudited
consolidated interim financial statements in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the unaudited consolidated interim financial
statements, 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 unaudited consolidated interim financial statements 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
21 September 2022
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AnnouncementREG - S4 Capital PLC - Board Appointments
AnnouncementREG - S4 Capital PLC - Notice of Q1 Trading Update
AnnouncementREG - S4 Capital PLC - Holding(s) in Company
Announcement