Sorrell’s S4 Posts First Profit Since Launch

Sir Martin Sorrell’s S4 Capital has reported a modest first-half, pre-tax profit. Despite the impact of COVID, the London-headquartered company posted earnings before tax of £118,000 ($A210,000) for January to June in its half-yearly numbers. That’s compared to a loss of £8.5 million ($15.1 million) over the same period last year.

Highlights of S4’s half-years included:

• Billings £260.4 million, up 41.4 per cent reported, up 12.7 per cent like-for-like, up 12.8 per cent pro-forma.

• Revenue £141.3 million, up 60.7 per cent reported, up 6.9 per cent like-for-like, up 7.8 per cent pro-forma.

• Gross profit £124.0 million, up 76.6 per cent reported, up 12.2 per cent like-for-like, up 13.2 per cent pro-forma.

• Like-for-like gross profit growth of 18.8 per cent in Q1 and 6.5 per cent in Q2 due to COVID-19, bottoming in April at over three per cent, accelerating in May to over five per cent, in June to over 11 per cent and into the second half of 2020 in July to over 18 per cent.

• Operational EBITDA before central costs £20.5 million, up 69.2 per cent reported, down 4.7 per cent like-for-like and down 3.8 per cent pro-forma, as the company dealt with the impact of COVID-19 by maintaining people levels and the human fabric of the firm and prioritised top-line growth. Headcount increased to 2,644 from 1,375 at the end of the first half last year, like-for-like headcount increased by 22 per cent, to support the even stronger revenue and gross profit growth anticipated in second half and achieve expectations for 2020.

S4 has over 2,650 people in 30 countries across the Americas, Europe, the Middle East and Africa and Asia-Pacific and a current market capitalisation of approximately £1.9 billion and would rank well into the FTSE 250.

In a statement, the company said: “Given the progress in the first half of 2020 and July, the company believes it has an even stronger fighting chance of doubling organically (meaning like-for-like) over the three years 2020-22 and delivering like-for-like double digit revenue and gross profit growth and reasonably strong margins in 2020. The company’s prospects for 2021 also look stronger given the organic growth rate, increasing client conversion at scale, significant merger activity and the likely post-COVID-19 economic recovery from relatively low levels of covid-19 economic growth.”

Sorrell commented: “The tragedy of covid-19 has only accelerated the speed of digital transformation and disruption at consumer, media and enterprise levels. These results confirm that S4Capital is currently in a growth sweetspot and that its digital only, faster, better, cheaper, unitary, ‘holy trinity’ model, which combines first party data with digital content, data and digital media, is migrating from brand awareness and trial to conversion at scale.

“After less than two years as a listed company and with a market capitalisation of around $US2.5 billion, which is well in to the top 200 FTSE companies, we are now in a position to build stronger value-adding relationships with tech, healthcare, financial and FMCG clients amongst others and with a strong and liquid balance sheet in a great financial place to expand through further combinations, which will add to our data, content, digital media and technological capabilities. We will continue to update the market on progress in reaching our new client conversion target of ’202‘, that is 20 clients with over $20 million of annual revenues,” Sorrell said.

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