REG - S4 Capital PLC - Trading Update

S4 CapitalAnnouncement

21/07/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220721:nRSU2684Ta&default-theme=true

RNS Number : 2684T  S4 Capital PLC  21 July 2022

21 July 2022

S4 Capital plc

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

 

Trading Update

Following preliminary reviews of the Company's financial results for June and
the results for the first six months of 2022, whilst like-for-like revenue and
gross profit/net revenue growth is in line with full year run rate
expectations of 25%, it is clear the Company's EBITDA and EBITDA margin will
be below its expectations for the first half of the year.

 

Whilst revenue and gross profit/net revenue growth remain robust, even against
very strong comparatives for Q2 2021 (prior year up 66% like-for-like),
continued significant investment in hiring and consequent expansion of the
Company's cost base, particularly in the Content practice, have had a negative
impact on first half EBITDA and EBITDA margin.

 

With the pattern of profitability already significantly skewed to the second
half of the year, and as previously signalled more than the usual two-thirds
weighting, this means that the profitability required for the second half of
the year to meet market expectations will be even greater.

 

As a result, the Board has decided that it would prefer to lower expectations
for its target EBITDA for the full year to approximately £120 million whilst
maintaining the target of 25% like-for-like gross profit / net revenue growth.
The Board notes that analysts currently forecast EBITDA in the range of
£154-165 million.

 

The Board expects Data&digital media and Technology services to deliver
healthy EBITDA margins for the full year, but increased costs at our Content
practice will impact the Company's overall Operational EBITDA margin in
2022.

 

Net debt at 30 June 2022 was towards the bottom end of previous guidance of
£140-190 million, due to an improvement in working capital. The balance sheet
remains strong with sufficient liquidity and long-dated debt maturities.

 

Specifically, in the Content practice, hiring and staff costs have continued
to increase ahead of the gross profit/net revenue growth rate.

 

Significant cost reduction measures, including a brake on hiring and
discretionary cost controls have been introduced already to better balance the
growth in revenue, gross profit / net revenue and costs. The significant
investment in financial controls, risk and governance as previously announced
and budgeted will not be impacted in any way by these measures.

 

Further details will be given when the results for the first half are released
in September.

Enquiries:

S(4) Capital
plc                                        Tel:
+44 (0)20 3793 0003/+44 (0)20 3793 0007

Sir Martin Sorrell (Executive Chairman)

Powerscourt
                                        Tel:
+44 (0)778 670 2526

(PR Adviser to S(4)Capital plc)

 

 Robin O'Kelly

 Jane Glover

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, cheaper"
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 S(4)Capital 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 S(4)Capital'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, Mary Basterfield and Scott
Spirit 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 Mary Basterfield.

 

The Company now has over 9,000 people in 32 countries across the Americas,
Europe, the Middle East and Africa and Asia-Pacific.

 

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.

 

Sir Martin Sorrell, Executive Chairman

S4 Capital plc

12 St James's Place

London

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

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