S4 Capital reports solid growth in delayed 2021 results

Marketing and advertising company S4 Capital reported a 99.4% surge in billings in its preliminary results on Friday, to £1.3bn, with proforma billings rising 67.1% to £1.4bn.

The London-listed firm said revenue was ahead 100.4% for the year ended 31 December at £686.6m, while gross profit grew by 89.8% on a reported basis to £560.3m.

Two-year simple like-for-like gross profit was 63% firmer, the company said, while the three-year measure was up over 100%.

Operational EBITDA grew by 62.4% to £101m, with the company’s operational EBITDA margin falling three percentage points to 18%.

S4 Capital said that was driven by investment in major new clients, new areas of organic growth and its management infrastructure, with its margin improving from 14.5% in the first half to 20.6% in the second.

The company’s adjusted basic net result per share rose to 13p from 7.9p in 2020.

It recorded an operating loss of £42.1m, swinging from an operating profit of £8.1m in 2020, after charging £136.9m over acquisitions, amortisation and share-based payments.

The firm’s proforma operating loss narrowed to £83.5m for 2021, from £87.9m in 2020.

Statutory losses for the period totalled £56.7m, widening from £3.9m year-on-year, while basic and diluted net losses per share came in at 10.3p, after adjustments and tax, versus a 0.8p loss a year earlier.

Year-end net debt totalled £18m, compared to net cash of £51.6m at the end of the prior year, despite the company making £96.6m in cash payments for combinations and increasing working capital investment primarily to fund larger accounts.

Looking beyond the year-end, S4 Capital said net revenue in January and February was ahead of its targeted 25% like-for-like growth.

It added that it was implementing a “significant” increase in financial controls, risk and governance processes and resources under the guidance of its new chief financial officer, who took over the role on 3 January.

“In our third full financial year we almost doubled in size, approximately half through organic growth and approximately half through combinations, and generated over $900m of revenue in 33 countries,” said executive chairman Sir Martin Sorrell.

“We continued to develop conversion at scale with six well established ‘whoppers’, and a further 19 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 $20 million per annum, over the period 2022-2024.”

Sorrell said that while that growth, both organic and through business combinations, was “very satisfying”, the delay in producing the company’s 2021 results was “unacceptable and embarrassing”, with significant changes in its financial control, risk and governance structure and resources being implemented and planned.

At 1012 BST, shares in S4 Capital were up 3.5% at 337.4p.

Reporting by Josh White at Sharecast.com.