TIDMSFOR
RNS Number : 1814C
S4 Capital PLC
09 June 2023
9 June 2023
S4 Capital plc ("S (4) Capital" or "the Company")
AGM Statement
Like-for-like 2023 Net Revenue Growth guidance remains at 8-12%
excluding impact of "whopper" reduction (6-10% including
impact)
S (4) Capital plc (SFOR.L), the tech-led, new age, new era
digital advertising, marketing and technology services company
announces that at the Annual General Meeting of the Company to be
held at 1pm today, Sir Martin Sorrell, Executive Chairman of the
Company, will make the following statement:
"2022 was a very strong fifth growth year for S (4) Capital,
posting like-for-like net revenue growth of 26%, together with the
completion of combinations with XX Artists in the Content practice
and TheoremOne in Technology services, although like-for-like
Operational Earnings Before Interest, Depreciation and Amortisation
(EBITDA) growth and Operational EBITDA margins were not where we
targeted or wanted them to be.
The pace of like-for-like net revenue growth in the rst four
months of 2023 has been more modest, reflecting the slowdown in the
growth rates of our two main addressable markets, with technology
platforms around 6% and technology services to 7-10%. We maintain
like-for-like 2023 net revenue growth guidance of 8-12% excluding
impact of one "whopper" reduction and 6-10% including it, combined
with a targeted steady improvement in Operational EBITDA margins to
15-16%, and with Operational EBITDA signi cantly skewed to the
second half of the year, as usual.
We want to take this opportunity to remind everyone of our
Company's de nitive and di erentiated strategy, based on four core
principles. We say "our Company", as it is both your Company as our
shareowners and our Company, as your management team. We are still
tightly aligned with you - over 40% of our shareowners are
connected to our Monks or Directors.
But back to those four core principles: We are purely digital,
because that is where the growth is, even more so in a post
Covid-19, 24/7 always-on digital world. Our business model is to
focus on rst party data, which, in turn, fuels the creation,
production and distribution of digital advertising and marketing
creative content through our data&digital media planning and
buying and programmatic and performance executions. And we continue
to expand our capabilities in Technology services to fully provide
digital marketing transformation services for our clients. The
unique, transformational shift to Artificial Intelligence (AI) and
Artificial Generative Intelligence (AGI) will only accelerate the
pace of digital change and our mantra or strap line has now been
modified to "faster, better, cheaper and more" to reflect our
enhanced ability to accelerate copywriting and visualisation, to
automate media planning and buying, to use AI/AGI as a super tool
in our operations, to provide hyperpersonalisation at greater scale
and provide data to all our almost 9,000 Monks in 57 offices in 32
countries. We have also initiated a new go-to-market positioning
around "Now!", of which you will hear more shortly. Finally, our
organisational structure is unitary, with a single P&L, as
clients want the best people working on their business, not caring
where they come from.
Having built out our Content practice over the last five years
around MediaMonks and our Data&digital media practice around
MightyHive over the same period, we added eight companies in the
last seven months of 2021 and the rst ve months of 2022, before the
last AGM and one in the last seven months of 2022, before this one.
The pace of merger activity has lessened recently, as we focus on
deeper integration of the mergers that have been completed from the
earliest point possible and extracting synergies, particularly
revenue synergies, to underline the importance of our unitary
structure.
Since our last AGM in June of 2022, our Company has maintained
its number of Monks at under 9,000, despite significant net revenue
like-for-like growth, in 32 countries (having withdrawn from
Russia). At the same time, we continued to strengthen our financial
control, treasury, compliance, risk and governance and internal
audit resources and hone our pricing and estimating functions.
Forecasts for 2023 and 2024 global GDP growth have been
continuously reduced to approximately 2.0-2.5%, reflecting central
banks raising interest rates sharply (but perhaps too tardily) and
government-driven fiscal tightening. The impact of these financial
policies has been deepened by three geo-political forces - the
deterioration in US/China relations, particularly over the future
of Taiwan, the war in Ukraine and Russia's territorial ambitions
and the potential nuclear capability of Iran. For the foreseeable
future the world is going to be very different to the previous 50
or so years of globalisation. Growth will be lower and inflation
and interest rates higher than previously.
As a result, geographical growth will be more difficult to find
and fragmented, with focus on the higher growth Americas, the
Middle-East and Asia Pacific. And in that lower overall growth
world, the pace of digital transformation will intensify,
facilitated by AI/AGI, as clients seek to reduce costs and maintain
margins.
Our two major addressable markets, digital advertising driven by
the technology platforms and digital transformation look set to
grow this year by 7-10%. According to analysts, it will then
re-accelerate in 2024 and 2025 to 10-15% in the key US media
market, as digital advertising reaches 75% of client budgets by
2025. This tends to favour digitally-focused businesses like ours,
which focus on so-called "lower funnel" or performance and
activation work and which is understandably performance and results
orientated.
As in previous years, the Company continues to invest in talent
or human capital, in order to attract, develop and grow the human
fabric of the Company essential to achieving high organic growth
rates. The S (4) Fellowship Programme aimed at recruiting interns
from historically black universities and the S (4) Women Leadership
Programme with UC Berkeley are both developing their third
programmes, representing good examples of our diversity, equity and
inclusion initiatives. In addition, the S (4) Scholars Programme,
aimed speci cally at recruiting High School students will be
implemented.
We always knew that our people, being digital natives, would
adapt e ortlessly and productively to working from home and, as a
result, we are further developing a hybrid o ce model, which
accommodates those of our people who want to work more from home
and those who want to commute more exibly and provides spaces for
working, interacting with colleagues and interacting with clients.
We have terminated a number of o ce leases, which have enabled us
to integrate our operations even faster than we originally thought
in the cities in which we operate.
The Company's cash ow remains strong and our Company will
continue to examine strategic combinations, but only issuing equity
at share price levels prevailing in early 2022. As indicated in our
Q1 results, we will shortly start to buy back the underlying shares
in stock options issued each year to management, which amounts to
approximately 1% or 6,000,000 shares to counter dilution.
Having achieved brand awareness and brand trial over our rst
five years, our focus remains on broadening and deepening existing
client relationships and conversion at scale. Our ten biggest
clients achieved "whopper" status in 2022 (i.e. over $20 million of
revenue), compared with six this time last year, but we still
search for bigger and deeper relationships, and a further fourteen
clients, have been identi ed as having "whopper" potential over the
three year plan period 2023-25. Our objective remains 20 in total.
Since our last AGM we have seen the expansion of our major client
relationships, with additional assignments and geographies. We also
saw signi cant new business with engagements from new clients
including Philips, Diageo, Pepsico, Booking.com, Tim Horton's,
Pernod Ricard, TikTok, Bridgestone, Riot Games, M1, Walmart and
Microsoft.
Geographically, we remain present in 32 countries and we do not
believe that we will have to add more than four or ve markets to
our existing country tally. We continue to examine our needs for
deeper strategic insight and adding technology services, along with
increasing focus on the importance of rst party data and the walled
gardens, following the death of the cookie and change in IDFA,
which we are already well positioned for."
As the AGM is a hybrid, shareowners will have received joining
instructions for electronic access via the Lumi AGM app, including
details of voting and Q&A functions. Details are set out in the
Notice of Annual General Meeting.
Guest access to the AGM without voting or a Q&A facility
will be available as a webcast via the following link:
https://stream.brrmedia.co.uk/broadcast/6475ca27c0e842f4c6ea98db
Enquiries
S (4) Capital plc
Tel: +44 (0)20 3793 0003
Sir Martin Sorrell, Executive Chairman
Powerscourt (PR adviser to S (4) Capital plc)
Tel: +44 (0)7970 246 725
Elly Williamson
About S (4) Capital
S (4) Capital plc (SFOR.L) is the tech-led, new age/new era
digital advertising, marketing and technology services company,
established by Sir Martin Sorrell in May 2018.
Our strategy is to build a purely digital advertising and
marketing services business for global, multinational, regional,
and local clients, and millennial-driven influencer brands. This
will be achieved by integrating leading businesses in three
practices: Content, Data&digital media and Technology Services,
along with an emphasis on 'faster, better, cheaper, more' execution
in an always-on consumer-led environment, with a unitary
structure.
Victor Knaap, Wesley ter Haar, Christopher S. Martin, Scott
Spirit and Mary Basterfield all joined the S (4) Capital Board as
Executive Directors. The S (4) Capital Board also includes Rupert
Faure Walker, Paul Roy, Daniel Pinto, Sue Prevezer, Elizabeth
Buchanan, Naoko Okumoto, Margaret Ma Connolly, Miles Young and
Colin Day.
The Company now has approximately 8,700 people in 32 countries
with approximately 70% of revenue across the Americas, 20% across
Europe, the Middle East and Africa and 10% across Asia-Pacific. The
longer-term objective is a geographic split of 60%:20%:20%. Content
currently accounts for approximately 60% of revenue,
Data&digital media 30% and Technology Services 10%. The
long-term objective for the practices is a split of
50%:25%:25%.
Sir Martin was CEO of WPP for 33 years, building it from a GBP1
million 'shell' company in 1985 into the world's largest
advertising and marketing services company, with a market
capitalisation of over GBP16 billion on the day he left. Prior to
that Sir Martin was Group Financial Director of Saatchi &
Saatchi Company Plc for nine years.
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END
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