In a 3Q trading update, S4 Capital (SFOR ) reported a revenue increase of over 106% and a gross profit/net revenue increase of almost 92%, respectively, while liquidity remained ‘strong.’
The advertising agency firm saw a ‘very strong’ 3Q performance, following an ‘exceptionally strong’ 2Q, with two year revenue and gross profit/net revenue stacks ranging between 65% and 69%, in line with the performances of the technology service companies and platforms. In particular, S4 said Covid-19 has acted as an accelerator for search, social and ecommerce.
Revenue was up over 106% to £178.4m and gross profit/net rose by almost 92% to £144.4m. Like-for-like (including impact of asset purchase and combinations and in constant currency) revenue and gross profit/net revenue were up almost 56% and over 42%, respectively.
It said liquidity remained strong in 3Q with the current monthly net debt position fluctuating between £20 million and £40 million after significant merger payments following launch of €375 million senior secured term loan issue and £100 million revolving credit facility in July.
Executive Chairman, Sir Martin Sorrell, said the business has now secured six “whoppers” and identified nineteen more potentials, setting up the possibility of exceeding its 20 target. “Whoppers” are major clients that deliver over $20 million in revenue to the business.
New client wins this year include tech giants such as Facebook and HP. Google as well as BMW Mini, and Mondelez are other “whoppers”. Looking ahead, the group said it is now ‘well in line’ with its target of doubling organically (both top and bottom line) in three years by 2021.
Commenting on the trading performance, Sir Martin Sorrell added: “The pandemic has proven to be an accelerator of digital marketing transformation and we are taking full advantage of this opportunity by choosing to invest a proportion of our EBITDA margin in growth.”
S4 said it sees no negative impact so far in the remainder of 2021 or beyond from inflation, which it says is more than transitory, supply chain discontinuities or Apple’s changes to IDFA.
S4 said it continues to trade in line with ‘ambitious internal and external targets’, which now include doubling both top and bottom lines organically over the period 2022 to 2024.
“Beyond 2022, we believe the demand for digital marketing transformation, involving the sales, marketing and information technology functions in client organisations, will accelerate. We plan further integration and combinations in the remainder of 2021 and into 2022 across all practices and functions, all of which will reinforce our client appeal,” S4 told investors.
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