“COVID, What COVID?” Sorrell’s S4 Shrugs Off The Pandemic To Post Impressive Q3 Numbers

Sir Martin Sorrell’s digitally-led agency S4 continues to be a shining light in an otherwise pandemic plagued industry announcing its Q3 numbers overnight that saw YOY revenues up 53 per cent to £86.4 million ($A156 million) and gross profit up almost 79 per cent to £75.3 million ($A136 milion).

The number of people in the firm was 2,870 at the end of the third quarter, up 26 per cent like-for-like compared to the same time last year.

The firm said it “continued to hire aggressively around strong gross profit growth and significant new business wins.”

Q3 highlights included:

• Third quarter Revenue up almost 53 per cent and almost 13 per cent like-for-like

• Third quarter Gross Profit up almost 79 per cent and almost 23 per cent like-for-like 

• Year-to-date Revenue up almost 58 per cent and over nine per cent like-for-like

• Year-to-date Gross Profit up almost 78 per cent and almost 16 per cent like-for-like

• Third quarter Revenue and Gross Profit like-for-like growth rate faster than first half with sequential improvements in each month

• Both EBITDA and EBITDA margin up very strongly in third quarter as momentum builds in second half

• Liquidity remains strong with net cash position still approximately £100 million including merger payments since July equity issue

• Client conversion at scale momentum increasing with three “whoppers” now secured and one in sight

• Four mergers or combinations announced in third quarter despite lockdowns with integration around both the content and data & digital media practices proceeding well

• Company trading well in line with internal and external expectations

• The Company’s latest and third three-year plan for 2021-2023 calls yet again for a doubling of top and bottom line organically

S4’s operations in Europe, the Middle East and Africa grew significantly Q3, with gross profit up over 34 per cent to £13. million. Year-to-date gross profit was up almost 40 per cent to £37 million.

The Americas showed exceptionally growth in the third quarter with gross profit up a whopping 93 per cent to £55.1 million. Year-to-date the Americas gross profit was up almost 90 per cent to £143.9 million.

Asia Pacific also grew strongly but from a smaller base, with gross profit up almost 83 per cent to £7.3 million in the third quarter. Year-to-date gross profit grew over 85 per cent to £18.4 million.

S4 said it “continues to trade extremely well in line with its post COVID-19 forecasts and objectives for 2020″.

The board also announced a return o executive and non-executive directors’ compensation to the levels they were in March, when they were cut by half and no cash bonuses were taken for 2019, with effect from 1 October.

The firm added that recruitment, raise and promotional policies were also restored in Q3.

Sorrell commented: “Most importantly, the Board wants to thank all our people for their extraordinary efforts at this particularly difficult time and the efforts of all the front line workers who have protected us and kept us safe.

“We continue to trade in line with ambitious internal and external targets, which now include doubling both top and bottom lines organically over the period 2021 to 2023. Our consistent, very strong organic gross profit growth of almost 16 per cent so far this year and almost 23 per cent in the third quarter, indicates that we are well positioned in the digital sweetspot of an otherwise stagnant advertising and marketing industry* and that clients are responding very well to our new age/new era, purely digital, “holy trinity” model of first party data fueling digital content, data and digital media. 

“COVID-19 has acted as an accelerator for search, social and ecommerce. Our very significant client wins in 2020, which include the BMW/Mini ‘Engine’ in Europe, signal that we are achieving client conversion at scale, after achieving brand awareness in 2018 and brand trial in 2019. Our mantra of ‘faster, better, cheaper’ or ‘speed, quality, value’ and our unitary, one P&L structure, are clearly resonating with clients and differentiating our offer.

“We are optimistic about the macro prospects for 2021, particularly given the likely Global GDP rebound, the probability of further vaccine, therapeutic and testing developments, Tokyo 2021 and Euro 2021 and, at a micro level, the progress we have already made with major new client assignments in 2020. We plan further integration and combinations in 2021, which will reinforce our client appeal.

“Agility, accentuated by the impact of COVID-19, remains the key, requisite corporate attribute for success, characterised by a shared purpose and vision, a network of empowered teams, rapid decision making, dynamic, passionate talent and enabling technology (the five dimensions identified by McKinsey & Co).”