S4 Capital Finally Releases Its Stronger Than Expected Full-Year Numbers

Sir Martin Sorrell’s S4 Capital has finally released its full-year results overnight after they were delayed since March after accountant PwC was unable to complete the audit. All numbers are in British pounds unless otherwise specified.

Sorrell himself labelled the delay as “embarrassing and unacceptable” but gave no explanation that saw the company’s share price plummet $150 million after investors got spooked that the agency wasn’t doing as well as the CEO was telling them.

However, everyone’s minds were put at rest after the company released promising numbers overnight.

Revenues doubled to £686.6 million (from £342.7m in 2020), while billings rose by 99 per cent to £1.3 billion.

The company made a pre-tax loss of £55.7m for the year to 2021, compared to a pre-tax profit of £3.1m in 2020, mainly due to acquisition costs and amortisation. S4’s shares rose 12 per cent on the news but have since fallen back by 11 per cent to 318.2p.

The company recently added Meta, Mondēlez, BMW/MINI and HP to the client roster, which also includes Alphabet, owner of Google.

Highlights of the numbers included:

• Like-for-like gross profit/net revenue up 44 per cent with simple two year stack up over 63 per cent and three year up over 100 per cent.

• Significant growth in like-for-like and pro-forma billings, revenue, gross profit/net revenue and EBITDA in the range of market expectations.

• 2022-24 Three Year Plan calls for a like-for-like doubling of top line and EBITDA margins returning to prior levels.

• Market guidance of 25 per cent like-for-like gross profit growth with steady improvement in EBITDA margins for 2022.

• 2022 Gross profit/net revenue has started ahead of guidance.

• Significant investment in and tightening of financial controls, risk and governance being implemented following the unacceptable delay in publishing the 2021 results.

Commenting on the results, Sorrell said: “In our third full financial year we almost doubled in size, approximately half through organic growth and approximately half through combinations and generated over $US900 million of revenue in 33 countries,” Sir Martin told investors.

“We continued to develop conversion at scale with six well established ‘whoppers’ and a further nineteen clients identified as ‘whoppertunities’ and with approximately half of our revenues from technology clients. We plan to achieve our ultimate 202 objective, that is twenty clients each generating revenues of over $US20 million per annum, over the period 2022-24,” Sorrell said.

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