S4 Cap. Regulatory News (SFOR)

8 June 2020

S4 Capital plc

("S4Capital" or "the Company")

AGM Statement

S4Capital plc (SFOR.L), the tech-led, new age, new era, digital advertising and marketing services company, announces that at the Annual General Meeting of the Company to be held today, Sir Martin Sorrell, Executive Chairman of the Company, will make the following statement.

"2019 was a very busy second year for S4Capital and the last three months have been even more demanding because of the Coronavirus pandemic and, more recently, because of the tragic death of George Floyd, which has had a marked impact on our people. I am pleased to say that very few of our people and their families have been infected by covid-19 or developed serious problems as a result, although a very small number have lost family members. We wish them and their families long life and record our thanks to all the frontline workers, who have kept us well and safe. As a response to the historic and current crisis around racism in the United States, we have launched a matching donation fund, initially for our people in the United States and are actively developing diversity and inclusion training programmes and specific targets for all our people across the firm - although we believe every one of our people should, in their own way, be a Chief Diversity Officer, just as they should be a Chief Talent Officer.

First, I want to remind everyone, again, of our definitive and differentiated strategy, based on four core principles. We are purely digital, because that's where the growth is, even more so in a covid-19 world. In a 24/7, always-on digital world, our business model is to focus on first party data, which, in turn, fuels our digital advertising and marketing creative content and our digital media planning and buying or programmatic executions. Our mantra or strap line is faster, better, cheaper or speed, quality, value, because that's what clients want. 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. We don't do fragmenting earnouts.

Having built out our content practice in 2018 around MediaMonks and our programmatic and data and analytics practice around MightyHive also in 2018, we have added six content companies and four programmatic and data and analytics companies, two (Caramel Pictures and ProgMedia) before last year's AGM and eight in the last seven months of 2019 and the first five months of 2020.

In June 2019, MediaMonks announced a planned merger with Australia-based BizTech, a leading marketing transformation and customer experience company. In August 2019, MediaMonks merged with Amsterdam-based, digital influencer marketing agency IMA. In October 2019, MediaMonks merged with Firewood Marketing, the largest digital marketing agency based in Silicon Valley, that was recently ranked, along with MediaMonks, as one of fastest growing agencies by AdWeek, and MightyHive merged with award-winning UK-based digital analytics, biddable media and data science company ConversionWorks and a South Korea-based data and analytics consultancy, formerly known as Datalicious Korea, now branded MightyHive Korea. In November 2019, MediaMonks announced the merger with Delhi-based content creation and production company WhiteBalance and then with fully integrated digital agency, Circus Marketing, in January 2020. Finally, for now, MightyHive merged with Buenos-Aires based, Latin American data and analytics consultancy, Digodat, last month. All these mergers are being branded under the MediaMonks and MightyHive banners and, in turn, MediaMonks and MightyHive are increasingly and already successfully acting as one in going to market.

Since the last AGM in May of 2019, your Company has doubled its number of people to 2,550 in 30 countries and doubled its market capitalisation to around £1.2 billion million ($1.5 billion). S4Capital has achieved £ and $ "unicorn" status within 18 months of re-listing and would rank in the FTSE 250 by market capitalisation, if it had a premium listing.

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, with reportable revenues up 68% and like-for-like revenues up over 11%. Reportable gross profit was up over 82% and like-for-like gross profit 15%. Pro-forma revenue growth was over 13% and gross profit growth almost 17%. Both revenue and gross profit like-for-like growth rates, again understandably, were lower in April than in the first quarter, as covid-19 hit the whole of the month in the Americas and EMEA, but like-for-like gross profit remained in positive territory at well over 3%. We do not have our May figures as yet, but early indications are that May will be stronger than April across both our practices and that in June, the pipeline of our content mandatory practice, which is over two-thirds of our revenues and gross profit, has started at a higher level than May did. Tech clients, which constitute 53% of our revenues, are still generally outspending CPG/FMCG, pharma and retail clients, with both "buckets" of clients exhibiting some evidence of postponement of spending from the second quarter into the second half of 2020.

As last year, but for different reasons, the Company continues to invest heavily in human capital, in order to maintain the fabric of the Company in these difficult times, having dealt with the low hanging fruit in reducing costs around travel, non-essential business expenses and freelance contracts. As traditional competitors readily admit to pulling their operational levers slowly, we want to be in a position to move ahead quickly and aggressively as the lockdowns ease significantly in June, to take advantage of V-shaped and U-shaped recoveries in certain verticals, such as technology, healthcare, online retail and gaming and home entertainment. This affects the pattern of growth in earnings before interest, taxes, depreciation and amortisation early in the year, as the Company gears up for an even higher level of revenue and gross profit growth later in the year. The Company's quarter one revised forecast indicates strong performance for the year, in comparison to expectations. 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.

We always knew that our people, being digital natives, would adapt effortlessly and productively to working from home and, as a result, we are starting to adopt a hybrid model, which accommodates those of our people who want to work more from home and who want to commute more flexibly. We have already terminated a number of office leases, which will enable us to integrate our operations even faster than we originally thought.

The Company's cash flow remains strong, ahead of various stress test scenarios, with a continuing average net cash position, despite anticipated merger payments. Your Company will continue to conclude strategic mergers, but without compromising the strength of its balance sheet or liquidity, at least until the threat of covid-19 recedes.

Having achieved brand awareness and brand trial over the first two years, our focus remains on broadening and deepening existing client relationships and conversion at scale. Our two biggest clients have achieved "whopper" status (i.e. 5% of revenue), but we still search for bigger and deeper relationships. Notable recent client wins, including integrated content and programmatic assignments, number PayPal, Quibi, Twitch, Domino's, CEMEX, Fuji Television, Dole Food Company, AkzoNobel, Mondelèz, GymPass, Havaianas and Ace Hardware, amongst others. We eagerly await the results of two major pitches, one global and one regional, both of which are potential "whoppers".

Geographically, we have added offices in South Korea and Spain since the last AGM and Germany remains the last geographic priority, for the moment. We are increasingly building our third pillar, first party data, around our data and analytics capabilities in our programmatic practice and you can expect further expansion there, as well as build outs of our capabilities around the key tech platforms.

Finally, I am delighted to say that we have added considerable non-executive talent to our Board since the last AGM in the form of Australian Elizabeth Buchanan, Hong Kong Chinese Margaret Connolly and Japanese Naoko Okumoto. We now have seven Non-Executive Directors, with room, probably, for one more."

As the AGM is a hybrid AGM, 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://webcasting.brrmedia.co.uk/broadcast/5ed5f280e9f4830247c998b4

Enquiries

About S4Capital

S4Capital plc (SFOR.L) is the tech-led, new age, new era, digital advertising and marketing services company, established by Sir Martin Sorrell in May 2018.

Its strategy is to build a purely digital advertising and marketing services business for global, multinational, regional, local clients and millennial-driven influencer brands. This will be achieved initially by integrating leading businesses in three practice areas: first-party data, digital content, digital media planning and buying, along with an emphasis on "faster, better, cheaper" executions in an always-on consumer-led environment, with a unitary structure.

Digital is by far the fastest-growing segment of the advertising market. S4Capital estimates that in 2019 digital accounted for approximately 47.5% or $275 billion of total global advertising spend of $550-600 billion (excluding about $400 billion of trade support, the primary target of the Amazon advertising platform), and projects that by 2022 this share will grow to approximately 55-60%.

S4Capital combined with MediaMonks, the leading AdAge A-listed creative digital content production company led by Victor Knaap and Wesley ter Haar, in July 2018, and with MightyHive, the market-leading programmatic solutions provider for future thinking marketers and agencies, led by Peter Kim and Christopher S. Martin, in December 2018. 

In April 2019, MightyHive merged with ProgMedia to expand operations into Latin America and MediaMonks acquired film studio Caramel Pictures to expand content studio capabilities. In June 2019, MediaMonks announced a planned merger with Australia-based BizTech, a leading marketing transformation and customer experience company. In August 2019, MediaMonks merged with Amsterdam-based digital influencer marketing agency IMA. In October 2019, MediaMonks merged with Firewood Marketing, the largest digital marketing agency based in Silicon Valley, that was recently ranked, along with MediaMonks, as one of the fastest growing agencies by Adweek, and MightyHive merged with award-winning UK-based digital analytics, biddable media and data science company ConversionWorks and South Korea-based data and analytics consultancy MightyHive Korea. In November 2019, MediaMonks merged with Delhi-based content creation and production company WhiteBalance and then with fully integrated digital agency Circus Marketing in January 2020. In April 2020 MightyHive announced its merger with Digodat, a leading Latin American data and analytics consultancy.

Victor, Wesley, Pete, Christopher and Peter Rademaker (formerly Chief Financial Officer of MediaMonks, now Chief Financial Officer of S4Capital), all joined the S4Capital Board as Directors. The S4Capital Board also includes Rupert Faure Walker, Paul Roy, Daniel Pinto, Sue Prevezer, Elizabeth Buchanan, Scott Spirit, Naoko Okumoto and Margaret Ma Connolly.

The Company has a market capitalisation of approximately £1.2 billion (c.$1.5 billion) and 2,550 people in 30 countries across the Americas, Europe, the Middle East and Africa and Asia-Pacific. It has achieved Unicorn status in a little over one year, unique in the advertising and marketing services industry.

Sir Martin was CEO of WPP for 33 years, building it from a £1 million "shell" company in 1985 into the world's largest advertising and marketing services company with a market capitalisation of over £16 billion on the day he left. Today its market capitalisation is £8.6 billion. Prior to that he was Group Financial Director of Saatchi & Saatchi Company plc for nine years.