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(Alliance News) - S4 Capital PLC said trading in the first four months of the year has been strong but below budget, while May is set to outperform April.
Shares in S4 were up 4.1% at 264.28 pence in London in morning trading.
In prepared remarks to the digital advertising and marking services firm's annual general meeting later on Monday, Executive Chair Martin Sorrell will say: "Despite the catastrophic impact of Covid-19, trading for the first four months of 2020 continues to be strong, but understandably below a pre-pandemic budget."
Reportable revenue was up 68% for the fourth months ended April 30, while like-for-like revenue was more than 11% higher. Reportable gross profit was up by more than 82% and like-for-like gross profit by 15%. Pro-forma revenue growth was more than 13%, Sorrell said, and gross profit growth was close to 17%.
Given the pandemic, however, revenue and gross profit like-for-like growth rates were lower in April versus the first quarter since Covid-19 hurt the entire month in the Americas as well as Europe, the Middle East and Africa. Nonetheless, like-for-like gross profit was positive and exceeded 3%, he said.
Although May's figures are unavailable, "early indications" suggest that May will improve on April in both of the London-based company's practices.
Moreover, in June the pipeline of its content mandatory practice - accounting for more than two thirds of revenue and gross profit - started at a higher level than May. Technology clients, representing 53% of revenue, have been outspending retail, pharma, and consumer packaged goods or fast-moving consumer goods.
S4's chair notes that tech and other clients have shown "some evidence of postponement of spending from the second quarter into the second half of 2020."
Sorrell said S4 is still investing in staff so it can move ahead more quickly amid the significant easing of lockdowns in June. This will affect growth in earnings before interest, tax, depreciation and amortisation early in 2020.
"As we stated previously in our first quarter trading statement, we are confident that we will be able to deliver sector leading, double digit like-for-like revenue and gross profit growth for 2020, along with a reasonably strong operating earnings before interest, taxes, depreciation and amortisation margin. We also continue to believe that we still have a fighting chance of achieving our three-year plan for 2020-2022, which calls for a doubling of the company organically, at both top line and earnings before interest, taxes, depreciation and amortisation levels," said Sorrell.
S4 has terminated a number of its office leases as more people work from home during the pandemic. Cash flow is strong before "various stress test scenarios" and has an average net cash position despite merger payments. Strategic mergers will go ahead, Sorrell said, though "without compromising the strength of" S4's balance sheet or liquidity until the Covid-19 threat has passed.
By Anna Farley; annafarley@alliancenews.com
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