TIDMSFOR
RNS Number : 4656T
S4 Capital PLC
25 March 2021
25 March 2021
S(4) Capital plc
("S(4) Capital" or the "Company")
Unaudited 2020 preliminary results
New age/new era digital marketing model starts to convert at
scale
Significant growth in like-for-like and pro-forma billings,
revenue, gross profit and EBITDA
Announcement of MediaMonks conditional combination with Jam3
Financial Highlights
-- Billings* GBP653.4 million, up 43.4% reported, up 19.6%
like-for-like*** and pro-forma** billings GBP768.4 million, up
22.3%.
-- Revenue GBP342.7 million, up 59.3% reported from GBP215.1
million, like-for-like up 15.2%, pro-forma up 20.1%.
-- Gross profit GBP295.2 million, up 72.3% reported from
GBP171.3 million, like-for-like up 19.4%, pro-forma up 23.7%.
-- Operational EBITDA**** GBP62.2 million, up 86.1% reported,
like-for-like up 18.3%, pro-forma up 30.6%.
-- Operational EBITDA margin 21.1%, up 1.6 margin points on 2019
reported, like-for-like down 0.2 margin points, pro-forma up 1.2
margin points.
-- Operating profit GBP8.1million versus an operating loss of
GBP3.8 million in 2019. Operating profit is after charging GBP49.9
million of Adjusting Items relating to acquisitions, amortisation
and share based payments (including GBP7.4 million in deferred,
contingent combination payments tied to continued employment).
Pro-forma operating profit of GBP16.9 million versus an operating
loss of GBP1.2 million in 2019.
-- Profit before income tax GBP3.1 million, after charging
adjusting items, versus a loss of GBP9.2 million in 2019 and
pro-forma profit before income tax of GBP12.1 million
-- Statutory result for the period GBP3.9 million (loss) after
charging adjusting items after taxation versus GBP10.0 million
(loss) in 2019 and pro-forma result for the period of GBP1.2
million (loss)
-- Adjusted basic net result per share 7.9p versus 5.2p in 2019 and 9.8p pro-forma
-- Basic and diluted net result per share 0.8p (loss) which
includes adjusting items after tax versus 2.7p (loss) in 2019 and
pro-forma adjusted basic net result per share 0.2p (loss)
-- Year-end net cash***** GBP51.6 million, even after
significant combination payments since GBP113 million net
fundraising in July 2020, reflecting strong liquidity from
operations and EBITDA conversion to cash flow from operating
activities of 99% versus 74% in 2019
-- Good start to 2021 with like-for-like January gross profit
well ahead of budget and with budgeted gross profit growth
like-for-like for 2021 of 25%
*Billings is gross billings to client including pass through
costs
**Pro-forma numbers relate to unaudited full year non-statutory
and non-GAAP consolidated results in constant currency as if the
group had existed in full for the year and have been prepared under
comparable GAAP with no consolidation eliminations
***like-for-like relates to 2019 being restated to show the
unaudited numbers for the previous year of the existing and
acquired businesses consolidated for the same months as in 2020
applying currency rates as used in 2020
****Operational EBITDA is EBITDA adjusted for non-recurring
items and recurring share-based payments and is a non-GAAP measure
management uses to assess the underlying business performance.
Operational EBITDA margin is operational EBITDA divided by Gross
Profit.
*****Net cash including bank loans
Strategic and operational Highlights
-- In January, MediaMonks announced a combination with Circus
Marketing, a fully integrated digital agency, based in the Americas
and Spain (consolidated as from March 2020).
-- In May, MightyHive announced a combination with Digodat, a
leading Latin American data & analytics consultancy
(consolidated as from July).
-- In June, MightyHive announced a combination with Lens 10, a
leading Australian digital strategy & analytics consultancy
(consolidated as from October).
-- In July, MightyHive announced a combination with Orca
Pacific, a Seattle-based, Amazon-managed service provider
(consolidated as from August) and raised GBP113 million net
proceeds from a placing.
-- In August, MightyHive, announced a combination with
BrightBlue Consulting, an award-winning UK-based, data analytics
and measurement consultancy (consolidated as from September).
-- In September, BMW/MINI announced a new agency partner network
in Europe, called THE MARCOM ENGINE which included MediaMonks,
which would be "at the heart of the new constellation". On the same
day, MediaMonks announced a combination with Dare.Win, an
award-winning, Paris-based, digital creative agency.
-- In November, Mondēlez International confirmed that MediaMonks
had won its competitive pitch to manage its tech infrastructure and
websites globally, plus content production for North America, Latin
America, Asia, Middle-East and Africa.
-- Post year end:
o In January 2021, MediaMonks announced combinations with
Decoded Advertising, an integrated, creative, technology and media
agency, based in New York and also combined with Tomorrow, an
award-winning, Shanghai-based, creative agency and with Staud
Studios, a high-end creative, production studio, specialising in
the automotive industry.
o Also, in January, MightyHive announced a combination with
Metric Theory, an integrated performance marketing agency,
providing services across search, social and commerce media. Metric
Theory and Decoded Advertising were completed on 31 December, 2020
after the market was closed. As a result, the balance sheets of
both combinations are included in the consolidated balance sheet of
the Group.
o In February, MightyHive acquired the assets of Datalicious Australia, a Sydney, Melbourne and Brisbane-based data & analytics company.
o Today, S(4) Capital announced that it has entered into a
conditional agreement in relation to a combination of MediaMonks
with highly awarded design and experience agency, Jam3, based in
Toronto with offices in Amsterdam, Los Angeles and Uruguay.
o The pace of on-boarding both the new BMW/MINI and Mondēlez
"Whoppers" has intensified during the first and second quarters of
2021.
-- Addition of functional talent teams in fashion and luxury,
social media and government communications from leading
competitors, the first during 2020 and the last two in 2021.
-- Launch of both S4 Fellowship Programme for students from
Historically Black Colleges and Universities and in due course,
High Schools in the United States and S4 Women Leadership Programme
in association with UC Berkeley in California.
-- The Group now has approximately 4,400 people in 31 countries,
trending towards double where we were this time last year.
-- In addition to new client BMW/MINI and the significant
broadening of our relationship with Mondēlez, there were major new
remits from clients such as Google, Facebook, Amazon, Netflix,
Procter & Gamble, T-Mobile, Bayer & HP and major new
assignments from Cisco, Embibe, Harley Davidson, PayPal, LA28,
Shopify and Verizon amongst others, reflecting the strong tech
orientation of the Company's client base and the growing healthcare
and FMCG focus.
-- Current pipeline running at stronger level than last year
-- Appointment of Miles Young, a leading, industry-knowledgeable
Non-Executive Director, to the Board.
Sir Martin Sorrell, Executive Chairman of S(4) Capital plc
said:
"Our second full financial year was again outstandingly
successful. Having established brand awareness and secured brand
trial in the back end of 2018 and in 2019, we set about converting
client relationships at scale and now have five "Whoppers" secure
or in sight, in line with our ultimate 20 squared objective, that
is 20 clients each generating revenues of over $20 million per
annum.
Pride of place for these achievements should go to our (now)
over 4,400 people in 31 countries, who have responded unflinchingly
to the colossal strain and challenge of the pandemic. Their
creativity, adaptability, resilience and hard work have made this
success possible and have started to prove the potency of our new
age/new era, digital, data-driven, unitary model, which has started
to gain significant traction. The pandemic has, at the same time,
accelerated adoption of digital transformation amongst consumers,
across all media and within enterprises and, in turn, stimulated
the demand from clients for digital marketing expertise.
We continued to grow our top line and bottom line at industry
leading rates, despite covid-19 and exhibited agility in developing
new content revenue streams quickly, such as robotic production,
animation and on-line events and driving data & digital
marketing net revenues, particularly in the fourth quarter and into
this year. We continued to broaden and deepen our Content and Data
& digital media practices through organic growth and by the
addition of a further four Content and six Data & digital media
companies in 2020 and so far in early 2021. We further integrated
our unitary client offering around our Content and Data &
digital media practices. We broadened and deepened our client
roster. We embraced the diversity, equity and inclusion and ESG
opportunities and challenges with unique black-orientated
fellowship and female executive leadership programmes, changed
hiring practices and education programmes and made zero carbon
commitments targeting 2024. We achieved double $ and GBP Unicorn
status in terms of stock market value, in only our second full
year, while strengthening our balance sheet to take advantage of
short-term opportunities.
2021 has started strongly, well in line with our latest three
year plan to double organically in three years and we are focused
on three objectives for the year - to bed down our two new
"Whoppers" and develop and identify five more; to roll-out our
unitary branding; and to continue to broaden and deepen our digital
client offering by combination. We believe 2021 and 2022 will be
very strong years economically, as the world rebounds from the
pandemic and spends and invests the huge pandemic-driven fiscal and
monetary stimulus. Digital marketing expenditure is closely
correlated, but not dependent on GDP growth, just as traditional
media spending used to be in the last century."
Results webcast and conference call
A webcast will be held at 8.00am GMT. A live webcast of the
presentation will be available during the event at:
https://brrmedia.news/9ms2h
For Q&A:
UK: +44 (0)330 336 9125
US: +1 323-794-2093
Confirmation code: 6050306
A further live webcast conference call to cover the results will
be held today at 9.00am EDT / 13.00pm GMT and will be available at:
https://brrmedia.news/9fjjd
For Q&A
US: +1 323-794-2093
UK: +44 (0)330 336 9434
Confirmation code: 2926753
Enquiries to:
+44 (0)20 3793
S(4) Capital plc 0003
Sir Martin Sorrell, Executive Chairman
Peter Rademaker, Chief Financial Officer
Scott Spirit, Chief Growth Officer
Dowgate Capital Limited +44 (0)20 3903
(Joint Corporate Broker to S(4) Capital plc) 7715
James Serjeant
David Poutney
Jefferies International Limited +44 (0)20 7029
(Joint Corporate Broker to S(4) Capital plc) 8000
Tony White
Harry Le May
Morgan Stanley & Co. International plc +44 (0)20 7425
(Joint Corporate Broker to S(4) Capital plc) 8000
Paul Baker
Alex Smart
+44 (0)7970 246
725 / (0)7917 886
Powerscourt (PR Advisor) 576
Elly Williamson
Jack Shelley
Chairman's Letter
Dear Shareowner,
My Executive colleagues, Victor Knaap, Wesley ter Haar, Pete
Kim, Christopher Martin, Peter Rademaker, Scott Spirit, Michel de
Rijk and I are delighted to present our third full year results for
the period ending 31 December 2020 to our fellow shareowners.
In 2020, we continued to build our existing relationships with
clients such as Google, Facebook, Amazon, Netflix, Procter &
Gamble, T-Mobile, Bayer and Mondēlez and won significant new
business from BMW/MINI, Cisco, Embibe, Harley Davidson, PayPal,
LA28, Shopify and Verizon. Tech clients account for around 55% of
revenues, with a growing cadre of healthcare and FMCG clients.
We now project five "Whoppers" (clients with revenues over $20
million per annum), as opposed to only two at this time last year.
We have also now identified five more potential "Whoppers", where
we currently project $5-15 million of revenue per annum and
potentially could break through the $20 million per annum level. We
are also in the process of identifying five more potential
"Whoppers" currently generating under $10 million per annum,
bringing the total actual and potential "Whoppers" to 15 out of the
target of 20.
2020 also saw significant strengthening and deepening of our
Content and Data & digital media practices. MediaMonks
broadened and deepened its geographical footprint in 2020 and so
far in 2021, adding North and Latin American and Spanish content
capabilities with Circus Marketing, entering the French market with
Dare.Win , combining with Decoded in the United States, doubling up
in Shanghai with Tomorrow and opening up in Germany with Staud
Studios to build on the BMW/MINI relationship. MediaMonks also
added significant talent from competitors in the areas of fashion
and luxury, new digital media social content and digital government
communications. MightyHive was even more active in 2020 and so far
in 2021 , building its data & analytics capability inside and
outside the United States through the addition of Digodat in Latin
America, Lens 10 in Australia and New Zealand, Orca Pacific
specialising in the Amazon platform in Seattle, BrightBlue
Consulting in the UK and a second Datalicious operation in
Australia to complement South Korea. MightyHive also stepped up its
performance media capabilities adding Metric Theory.
Both MediaMonks and MightyHive have integrated each combination
into our Content and Data & digital media practices and brands
and we are starting to roll out our unitary brand. We already
operated as a single P&L, pretty much from inception, so as to
develop and maintain a seamless, fully integrated offer for our
clients. In addition, although nothing good can be said to have
come from it , the pandemic did enable us to consolidate separate
offices on a city-by-city basis faster, as existing leases were
terminated more quickly . In addition, property consolidation will
be assessed faster as vaccinations start to kick-in and lockdowns
ease, starting in the second quarter of 2021. There is little doubt
that we will not go back to the old normal in terms of office
location, layout and use. There will be more flexible working from
home, probably about 40% of the working week, with more flexible
commuting times, more dispersed working and living patterns and
different office layouts, with separate spaces for our people to
meet, to work and to engage with clients. We are also starting to
increasingly consolidate our strategic, client content and data and
programmatic offer at the S (4) Capital level.
Our focus on both developing our advertising and marketing
services know how and geographical expansion, particularly in Asia
Pacific, was further underlined by the appointment of Miles Young,
Warden of New College, Oxford University as a non-executive
director . He was formerly my colleague at WPP, where he was at
Ogilvy for 35 years and ran it very successfully for eight years
until 2016, expanding their footprint aggressively in growth areas
such as digital content and media and Asia Pacific, particularly
China and India - truly one of David Ogilvy's "Gentlemen with
Brains".
Summary of results
Condensed Consolidated Income Statement
For the period ended 31 Dec 2020 (unaudited)
Like
Year Year for like
ended ended cc Proforma Proforma
Year Year Year
31 ended ended ended
Dec 31 Dec 31 Dec 31 Dec 30 Dec
2020 2019 2019 2020 2019
For the period
ended 31
December LIR'000 LIR'000 YoY% LIR'000 YoY% LIR'000 LIR'000 YoY%
---------------- ---- ------------ ------------ ------------ ------------ ------------
Revenue 342,687 215,132 59% 297,410 15% 421,092 350,576 20%
Cost of sales 47,505 43,814 8% 50,129 -5% 52,137 52,324 0%
------------------------ ------------ ------------ ------------ ------------ ------------
Gross profit 295,182 171,318 72% 247,281 19% 368,955 298,252 24%
Net operating
expenses 287,049 175,153 64% 247,079 16% 352,008 299,422 18%
Operating profit/
(loss) 8,133 (3,835) - 202 3919% 16,948 (1,170) -
------------------------ ------------ ------------ ------------ ------------ ------------
Adjusted operating
profit 57,950 31,148 86% 50,019 16% 80,453 62,335 29%
Adjusting items (49,817) (34,983) - (49,817) - (63,505) (63,505) -
------------------------ ------------ ------------ ------------ ------------ ------------
Operating profit/
(loss) 8,133 (3,835) - 202 3919% 16,948 (1,170) -
Net finance
expense (5,037) (5,360) - (5,672) - (4,821) (5,530) -
------------------------ ------------ ------------ ------------ ------------ ------------
Profit / (loss)
before income
tax 3,096 (9,195) - (5,469) - 12,126 (6,700) -
Income tax
expense (7,025) (845) - (3,436) - (13,323) (6,543) -
------------------------ ------------ ------------ ------------ ------------ ------------
Loss for the
period (3,929) (10,040) - (8,905) - (1,197) (13,243) -
------------------------ ------------ ------------ ------------ ------------ ------------
Reconciliation
to operational
EBITDA
Operating profit
/ (loss) 8,133 (3,835) 202 16,948 (1,170)
Adjusting items 49,817 34,983 49,817 63,505 63,505
Depreciation
(excluding
right-of-use asset
depreciation) 4,228 2,260 2,520 4,679 2,829
-----------------------
Operational
EBITDA 62,178 33,408 86% 52,539 18% 85,132 65,164 31%
Central costs 6,112 5,817 5,859 6,112 5,859
------------------------
Operational EBITDA
before central costs 68,290 39,225 74% 58,398 17% 91,244 71,023 28%
======================= ============ ============ ====== ============ ====== ============ ============ ======
Reconciliation
to adjusted
operating
profit
---------------- ---- ------------ ------------ ------------ ------------ ------------
Operating profit
/ (loss) 8,133 (3,835) 202 16,948 (1,170)
Adjusting items 49,817 34,983 49,817 63,505 63,505
Adjusted operating
profit 57,950 31,148 86% 50,019 16% 80,453 62,335 29%
======================== ============ ============ ====== ============ ====== ============ ============ ======
Reconciliation
to adjusted result
before income
tax
---------------------- ------------ ------------ ------------ ------------ ------------
Result before
income tax 3,096 (9,195) (5,469) 12,126 (6,700)
Adjusting items 49,817 34,983 49,817 63,505 63,505
Adjusted result
before income
tax 52,913 25,788 105% 44,348 19% 75,631 56,805 33%
======================== ============ ============ ====== ============ ====== ============ ============ ======
Reconciliation
to adjusted
result for
the period
---------------- ---- ------------ ------------ ------------ ------------ ------------
Result for
the period (3,929) (10,040) (8,905) (1,197) (13,243)
Adjusting items 49,817 34,983 49,817 63,505 63,505
Tax on adjusting
items (6,996) (5,957) (6,996) (10,401) (10,401)
Adjusted result
for the period 38,892 18,986 105% 33,916 15% 51,907 39,861 30%
======================== ============ ============ ====== ============ ====== ============ ============ ======
Earnings per
share
---------------- ---- ------------ ------------ ------------ ------------ ------------
Weighted average number
of shares in issue for
the purpose of basic
and adjusted net
result
per share 493,290,974 368,067,662 493,290,974 529,788,744 529,788,744
Net result attributable
to equity owners of
the
Company (GBP'000) (3.929) (10,040) (8,905) (1,197) (13,243)
Basic net result
per share (pence) -0.8 -2,7 -1.8 -0.2 -2.5
Diluted net
result per
share (pence) -0.8 -2,7 -1.8 -0.2 -2.5
Adjusted non-recurring
expenses and
acquisition
related expenses 15,768 12,806 15,768 15,768 15,768
Share based
compensation 12,331 7,177 12,331 12,331 12,331
Revaluation contingent
considerations (1,430) 0 (1,430) (1,430) (1,430)
Adjusted amortisation
of intangible assets
related to
acquisitions 23,148 15,000 23,148 36,836 36,836
Adjusted tax
on adjustments (6,996) (5,957) (6,996) (10,401) (10,401)
Adjusted net
result 38,892 18,986 33,916 51,907 39,861
Adjusted Basic net
result per share
(pence) 7.9 5.2 53% 6.9 15% 9.8 7.5 30%
======================= ============ ============ ====== ============ ====== ============ ============ ======
Gross margin
per territory
---------------- ---- ------------ ------------ ------------ ------------ ------------
Americas 206,316 117,062 76% 173,258 19% 270,550 216,543 25%
EMEA 58,233 40,765 43% 52,776 10% 65,216 58,618 11%
Asia-Pacific 30,633 13,490 127% 21,248 44% 33,190 23,091 44%
Total 295,182 173,318 72% 247,281 19% 368,955 298,252 24%
======================== ============ ============ ====== ============ ====== ============ ============ ======
Gross margin
per practice
---------------- ---- ------------ ------------ ------------ ------------ ------------
Content 220,497 113,365 95% 182,792 21% 264,671 210,117 26%
Programmatic 74,685 57,953 29% 64,489 16% 104,285 88,135 18%
Total 295,182 171,318 72% 247,281 19% 368,955 298,252 24%
======================== ============ ============ ====== ============ ====== ============ ============ ======
Turning to the results themselves, we thought it would be most
useful to compare the reported results not only with last year's
reported results, but also on an unaudited like-for-like and
unaudited pro-forma basis, particularly given the continued rapid
inorganic expansion of the Company in 2020.
Billings were GBP653.4 million, up 43.4% on a reported basis, up
19.6% like-for-like and up 22.3% pro-forma. Controlled Billings,
that is billings we influenced in addition to billings that flowed
through our income statement, were approximately GBP2.3 billion
(2019: GBP1.9 billion). Revenue was GBP342.7 million, up 59.3% from
GBP215.1 million on a reported basis, up 15.2% like-for-like, and
up 20.1% on a pro-forma basis. Gross profit was GBP295.2 million,
up 72.3% reported, up 19.4% like-for-like, and up 23.7% pro-forma.
Operating profit was GBP8.1 million versus an operating loss of
GBP3.8 million in 2019. Operational EBITDA was GBP62.2 million, up
86.1% reported, up 18.3% like-for-like, and up 30.6% pro-forma.
Operational EBITDA margin was 21.1%, up 1.6 margin points versus
19.5% reported in 2019, down 0.2 margin points like-for-like and,
up 1.2 margin points pro-forma. Adjusted basic net result per share
was 7.9p versus 5.2p in 2019, 6.9p like-for-like and 9.8p
pro-forma. Statutory result for the period was GBP3.9 million
(loss), versus a reported GBP10.0 million (loss) in 2019, after
charging under IFRS GBP7.4 million of combination payments, which
were tied to the continued employment of key merger share-owning
principals. Although such contractual provisions result in a
non-cash charge to the income statement, your Board believes this
is a better commercial approach given the nature of our business.
Basic and diluted net result per share were 0.8p (loss) per share,
versus 2.7p (loss) in 2019, like-for-like 1.8p (loss) per share and
pro-forma 0.2p (loss) per share. Year-end net cash was GBP51.6
million, despite making GBP83 million in cash combination payments,
since the GBP113 million gross equity fundraising in July 2020 and
reflecting strong cash flow from operating activities with 99%
operating cash flow conversion from EBITDA. In line with our first
half statement in September 2020, Operational EBITDA margins
improved significantly in the second half from 14.5% to 25.8%, as
the first half increased investment in people yielded higher
productivity in the second half.
Pro-forma billings were GBP768.4 million. Pro-forma revenue was
GBP421.1 million and pro-forma gross profit was GBP369.0 million up
20.1% and 23.7% respectively in 2019. Pro-forma operational EBITDA
was GBP85.1 million, up 30.6% on 2019, with operational EBITDA
margin at 23.1%, up 1.2 margin points on the previous year.
Pro-forma adjusted operating profit excluding adjusting items of
GBP63.5 million, is GBP80.5 million, up 29.1% on the previous year.
Pro-forma adjusted pre-tax profits were GBP75.6 million versus
GBP56.8 million in the previous year, up 33.1%. Pro-forma adjusted
result for the period was GBP51.9million, up 30.2%. Adjusted
pro-forma basic earnings per share before exceptional items were
9.8p, up from 7.5p in the previous year. The Board continues to
recommend no dividend given the growth opportunities that
beckon.
By geography, on a pro-forma basis, the Americas accounted for
73.3% of gross profit against 72.6% in 2019. Europe, the
Middle-East and Africa represented 17.7% of gross profit against
19.7% in 2019. Asia-Pacific represented 9.0% of gross profit
against 7.7% in 2019. Growth in gross profit was up 24.9% in the
Americas, 11.3% in Europe, Middle-East and Africa and 43.7% in
Asia-Pacific. Our long-term objective is to achieve a geographic
distribution of 40% in the Americas, 20% in Europe, the Middle-East
and Africa and 40% in Asia-Pacific, particularly given the likely
continuing rise of China and India and despite the US/China trade
frictions.
By practice, on a pro-forma basis, Content accounted for 71.7%
of gross profit against 70.4% in 2019. The Data & digital media
practice represented 28.3% of gross profit against 29.6% in 2019.
Growth in gross profit was up 26.0% like-for-like at the Content
practice and up 18.3% at the Data & digital media practice. Our
long-term objective is to achieve a practice distribution around
two-thirds Content and one-third Data & digital media,
emphasising the growing importance of digital video.
Significant new business wins include assignments from Google,
Facebook, Amazon, Netflix, Procter & Gamble, T-Mobile, Bayer,
HP, Cisco, Embibe, Harley Davidson, PayPal, LA28, Shopify and
Verizon amongst others as we expanded our tech client portfolio and
presence in healthcare and FMCG. Encouragingly, our current
pipeline is proportionally ahead of last year's level.
The Environment, Social and Governance
In 2020, the Company upped its game significantly in all three
areas. We actively track our CO(2.) emissions and perform
competitively with a sample of other similar companies in the areas
of gender and diversity. We have committed to achieving zero
greenhouse gas emissions by 2024, in response to the World Economic
Forum 2020 Davos Manifesto and were the first advertising and
marketing firm to commit to the Amazon Climate Challenge, which has
a longer term objective in relation to zero emissions. We are
seeking B Corp status by the end of the year.
Last year, we averaged a 0.82 female to male ratio across the
firm, representing a significant improvement over last year's ratio
of 0.47. In response to the tragic killing of George Floyd and the
surge behind the Black Lives Matter movement, we organised a
firm-wide, matched contribution campaign, which raised $0.3 million
for four key black charities. We, immediately, also began to
intensify changes in our hiring and educational policies in
relation to diversity, equality and inclusion, with a public
commitment to publish annually and improve our diversity numbers so
as to be representative of the communities we work in. We are
already approximately 40% People of Colour in the United States,
with strong Hispanic and Asian representation, in particular. In
the markets we can legally measure, we are approximately 5% Black,
which, for example in the United States, still represents
significant under-representation of the communities we work in. In
California, such a percentage may be representative, but
nationally, where the proportion is 13% and in New York, where it
is 25%, it is unacceptable. These are our objectives. We have also
hired our first Fellows (and Fellowesses) in the S4 Fellowship
Programme, who exclusively come from Historically Black Colleges
and Universities in the United States. We have outstanding recruits
for this four-year, multi-practice programme, who will be
evangelising the programme across the United States shortly into
High Schools too. Finally, we have just started the S4 Women
Leadership Programme, identifying 50 female leaders from across the
firm to study on-line with UC Berkeley, California for the next 18
months.
Across S(4) Capital we donated an additional $0.4 million to
charities and also aim to contribute to society and the needs of
the planet with our Projects for Good, which are all related to the
United Nations Sustainable Development Goals. In 2020, we delivered
41 Projects for Good.
We also launched S(4) Impact Day globally, a volunteering day
when all our 4,400 people in 31 countries can tangibly give back to
the communities of which they are a part.
As regards Governance, we continued to enhance the Board with
the addition of one new Director, now with four female and four
male Non-Executive Directors. The recommendations of Lord Hill's
Report to the UK's Chancellor of the Exchequer also provides a
possible pathway to a premium or standard listing with fund
indexation, if, of course, the recommendations are accepted.
Outlook and current trading
All-in-all, we continued to fire on all cylinders in 2020, with
like-for-like revenue and gross profit up 15.2% and 19.4% and
pro-forma revenue and gross profit growth of 20.1% and 23.7% and a
pro-forma operational EBITDA margin of over 23%, after central
costs. January 2021 like-for-like gross profit growth was strong
and ahead of budget . This performance is planned to continue into
2021, with budgets and plans targeting strong revenue, gross profit
growth and improving operational EBITDA margin and the three-year
plan for 2021-3 targeting a doubling of the firm organically,
excluding combinations.
There is no doubt that covid-19 has had a devastating impact on
the global economy and society. Our people have been put under
immense strain, particularly with the illness and loss of family
members. We applaud their resilience, hard work and success and
thank them for all their efforts. We took the view that we would
not make significant reductions in the number of people in the
firm, nor rely in any significant way on government support or
funding. This was a bold thing to do, particularly in the pressure
cooker of the end of the first quarter and beginning of the second
quarter in 2020. Our Content practice, representing about three
quarters of our business pivoted very quickly to robotic production
and animation and converting live events to virtual ones. We,
therefore, created significant new content revenue streams very
quickly, with April 2020 being the weakest like-for-like growth
month, but still a growth month. There was then a steady
progression in the Content practice gross profit organic growth
rate through 2020 and into 2021. The Data & digital media
practice was more impacted by covid-19 in Quarters 2 and 3 2020,
but still grew gross profit organically significantly over those
quarters, with the growth accelerating markedly in Quarter 4 and
into 2021.
Overall, it is clear that covid-19 has accelerated the adoption
of digital transformation and digital media at three levels.
Firstly, at the consumer level, with consumers buying groceries and
essentials on-line, educating their kids on-line, using financial
services on-line and gorging on on-line entertainment and gaming.
Secondly, media trends have been accelerated, with the streamers
like Netflix and Disney+ gaining on free to air tv, traditional
newspapers and magazines under greater pressure from digital
alternatives and traditional outdoor being increasingly eclipsed by
digital outdoor. Finally, enterprise adoption of digital
transformation has accelerated, as covid-19 disrupted steady state
growth and during that disruption "change agents" have been given
more oxygen to implement digital organisational change.
It is also clear that the Company's purely digital model based
on first party data (reinforced by the recent privacy policy
decisions by Apple and Google) fuelling the creation, production
and distribution of digital advertising content and distributed by
digital media is increasingly resonating with clients. Our tag line
"faster, better, cheaper" or "speed, quality, value" and unitary,
one P&L structure also appeal strongly. The imperatives for
2021 continue to be to move beyond brand awareness and brand trial
to greater client conversion at scale and achieving our 20 squared
objective as rapidly as possible; to roll out our unitary branding;
and to broaden and deepen our service capability through mergers
and combination .
Best wishes,
Sir Martin Sorrell
Executive Chairman
About S(4) Capital
S(4) Capital 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 two
practice areas: Data & digital media and Content, 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. S (4) Capital estimates that in 2020 digital accounted for
over 50% (for the first time) or $290 billion of total global
advertising spend of $525 billion (excluding over $500 billion of
trade promotion marketing, the primary target of the Amazon
advertising platform), and projects that by 2022 this share will
grow to approximately 60% and by 2024 to approximately 66%,
accelerated by the impact of covid-19.
S(4) Capital 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 digital media solutions provider for future thinking
marketers and agencies, led by Peter Kim and Christopher S. Martin,
in December 2018.
In April 2019, MightyHive combined 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 combination with
Australia-based BizTech, a leading marketing transformation and
customer experience company. In August 2019, MediaMonks combined
with Amsterdam-based digital influencer marketing agency IMA. In
October 2019, MediaMonks combined with Firewood Marketing, the
largest digital marketing agency based in Silicon Valley, that was
recently ranked, along with MediaMonks and Circus (see below), as
one of the fastest growing agencies by Adweek, and MightyHive
combined 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 announced its combination with
Delhi-based content creation and production company WhiteBalance
(completed in August 2020 - the delay due to necessary merger
clearance procedures) and then with fully integrated digital agency
Circus Marketing in January 2020 (completed in March 2020).
In May 2020, MightyHive announced a combination with Digodat,
one of the leading Latin American data and analytics consultancies,
and in June 2020, MightyHive announced its combination with Lens10,
a leading Australian digital strategy and analytics consultancy. In
July 2020, MightyHive announced a combination with Orca Pacific, a
market leading full-service Amazon agency and boutique consultancy
firm based in Seattle. In August 2020, MightyHive announced a
combination with London-based Brightblue, an econometric and media
optimisation consultancy. In September 2020, MediaMonks announced
its combination with Dare.Win, expanding its geographical presence
to France. In January 2021, MediaMonks announced its combination
with integrated creative, technology and media agency Decoded
Advertising, Shanghai based creative agency TOMORROW and Stuttgart
based automotive specialist STAUD STUDIOS. MightyHive also
announced its combination with integrated digital performance
marketing agency Metric Theory. In February 2021, MightyHive
acquired the assets of Datalicious, a leading Google Marketing
Platform, Google Cloud and Google Analytics partner in Asia
Pacific.
On 16 July 2020, S(4) Capital announced the successful placing
of 36,766,642 new ordinary shares at a price of 315p raising
approximately GBP116 million gross proceeds which will be used for
further expansion and combination purposes.
Victor Knaap, Wesley ter Haar, Pete Kim, Christopher Martin,
Peter Rademaker and Scott Spirit all joined the S(4) Capital Board
as Directors. The S(4) Capital Board also includes Rupert Faure
Walker, Paul Roy, Daniel Pinto, Sue Prevezer, Elizabeth Buchanan,
Naoko Okumoto, Margaret Ma Connolly and Miles Young.
The Company now has over 4,400 people in 31 countries across the
Americas, Europe, the Middle East and Africa and Asia-Pacific and a
current market capitalisation of approximately GBP2.5 billion
(c.$3.5 billion), and would rank around the FTSE 150. It 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 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. Today its
market capitalisation is GBP11 billion. Prior to that Sir Martin
was Group Financial Director of Saatchi & Saatchi Company Plc
for nine years.
Unaudited consolidated statement of profit or loss
For the year ended 31 December 2020
2020 2019
Unaudited Unaudited
======================================
Notes GBP'000 GBP'000
====================================== ===== ========== ==========
Revenue 342,687 215,132
Cost of sales 47,505 43,814
Gross profit 295,182 171,318
Personnel costs 205,135 111,572
Other operating expenses 30,561 25,803
Acquisition and set-up related
expenses 14,338 12,806
Depreciation and amortisation 37,015 24,972
Total operating expenses 287,049 175,153
Operating profit (loss) 8,133 (3,835)
Adjusted operating profit 57,950 31,148
Adjusting items (49,817) (34,983)
Operating profit (loss) 8,133 (3,835)
--------------------------------------- ----- ---------- ----------
Finance income 698 20
Finance expenses (5,735) (5,380)
Net finance expenses (5,037) (5,360)
Profit (loss) before income
tax 3,096 (9,195)
Income tax expense 5 (7,025) (845)
Loss for the year (3,929) (10,040)
======================================= ===== ========== ==========
Attributable to owners of the Company (3,929) (10,040)
Attributable to non-controlling - -
interests
(3,929) (10,040)
====================================== ===== ========== ==========
Loss per share is attributable to the ordinary equity holders of
the Company
Basic loss per share (pence) 3(0.8) (2.7)
Diluted loss per share (pence) 3(0.8) (2.7)
Unaudited consolidated statement of comprehensive income
For the year ended 31 December 2020
2020 2019
Unaudited Unaudited
======================================
GBP'000 GBP'000
====================================== ========== ==========
Profit (loss) for the year (3,929) (10,040)
Other comprehensive income (loss)
Items that may be reclassified
to profit or loss
Foreign operations - foreign currency
translation differences 2,905 (20,620)
Total other comprehensive
income (loss) 2,905 (20,620)
Total comprehensive loss
for the year (1,024) (30,660)
============================================= ========== ==========
Attributable to owners of the Company (1,024) (30,660)
Attributable to non-controlling - -
interests
(1,024) (30,660)
========================================= ========== ==========
Unaudited consolidated balance sheet
At 31 December 2020
2020 2019
Unaudited Unaudited
======================================
Notes GBP'000 GBP'000
====================================== ===== ========== ==========
Assets
Non-current assets
Intangible assets 4 799,129 540,129
Right-of-use assets 21,653 25,779
Property, plant and equipment 14,537 9,730
Deferred tax assets 2,068 1,086
Other receivables 2,125 2,731
839,512 579,455
Current assets
Trade and other receivables 181,391 126,353
Cash and cash equivalents 142,052 66,106
323,443 192,459
Total assets 1,162,955 771,914
======================================= ===== ========== ==========
Liabilities
Non-current liabilities
Deferred tax liabilities 62,100 54,834
Loans and borrowings 44,819 42,374
Lease liabilities 5 15,942 18,787
Contingent consideration 32,593 3,669
Other payables 1,941 2,007
157,395 121,671
Current liabilities
Trade and other payables 191,125 118,014
Contingent consideration
and holdback 35,742 51,202
Loans and borrowings 45,623 -
Lease liabilities 7,047 7,975
Tax liabilities 12,480 6,751
292,017 183,942
Total liabilities 449,412 305,613
======================================= ===== ========== ==========
Net assets 713,543 466,301
======================================= ===== ========== ==========
Equity
Attributable to owners of the Company
Share capital 135,516 117,307
Reserves 577,927 348,894
713,443 466,201
Non-controlling interests 100 100
Total equity 713,543 466,301
======================================= ===== ========== ==========
Unaudited consolidated statement of cash flows
For the year ended 31 December 2020
2020 2019
Unaudited Unaudited
==========================================
GBP'000 GBP'000
========================================== ========== ==========
Cash flows from operating
activities
Profit (loss) before income
tax 3,096 (9,195)
Financial income and expenses 5,037 5,360
Depreciation and amortisation 37,015 24,972
Share based compensation 12,331 7,177
Acquisition and set-up
related expenses 14,338 12,806
Increase in trade and other
receivables (29,282) (31,288)
Increase in trade and other
payables 29,893 22,310
Cash flows from operations 72,428 32,142
Income taxes paid (10,758) (7,571)
Net cash flows from operating
activities 61,670 24,571
================================================= ========== ==========
Cash flows from investing
activities
Investments in intangible assets (34) (1,578)
Investments in property, plant
and equipment (7,396) (7,865)
Acquisition of subsidiaries, net
of cash acquired (124,155) (56,954)
Financial fixed assets 871 (779)
Cash flows from investing
activities (130,714) (67,176)
================================================= ========== ==========
Cash flows from financing activities
Proceeds from issuance
of shares 113,386 97,451
Additional borrowings 45,378 22,418
Payment of lease liabilities
and interest (12,175) (6,687)
Repayments of loans and
borrowings (24,119)
Interest paid (742) (4,744)
Cash flows from financing
activities 145,847 84,319
================================================= ========== ==========
Net movement in cash and cash equivalents 76,803 41,714
Cash and cash equivalents beginning
of the year 66,106 25,005
Exchange gain/(loss) on cash and
cash equivalents (857) (613)
Cash and cash equivalents
at 31 December 142,052 66,106
================================================= ========== ==========
Unaudited consolidated statement of changes in equity
For the year ended 31 December 2020
Foreign
Number Share Share Merger Other exchange Accumulated Non-controlling Total
of shares capital premium reserves reserves(1) reserves losses Total interests equity
==============
Equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== =========== ======= ======= ======== =========== ======== =========== ======== =============== ========
Balance at 1
January
2019 363,396,923 90,849 52,871 205,717 (847) 1,870 (8,266) 342,194 100 342,294
Comprehensive
loss
for the year
Loss for the
year - - - - - - (10,040) (10,040) - (10,040)
Foreign
currency
translation
differences - - - - - (20,620) - (20,620) - (20,620)
Total
comprehensive
loss for the
year - - - - (20,620) (10,040) (30,660) (30,660)
Transactions
with
owners of the
Company
Issue of
Ordinary
Shares 105,324,634 26,331 121,182 - - - - 147,513 - 147,513
Employee
share
schemes 505,702 127 249 - (313) - 7,091 7,154 - 7,154
Balance at 31
December
2019 469,227,259 117,307 174,302 205,717 (1,160) (18,750) (11,215) 466,201 100 466,301
Comprehensive
loss
for the year
Profit for
the
year - - - - (3,929) (3,929) - (3,929)
Foreign
currency
translation
differences - - - - 2,905 - 2,905 - 2,905
Total
comprehensive
loss for the
year - - - 2,905 (3,929) (1,024) - (1,024)
Transactions
with
owners of the
Company
Issue of
Ordinary
Shares 36,766,642 9,192 103,995 113,187 - 113,187
Business
combinations 34,744,022 8,686 84,564 28,655 121,905 - 121,905
Employee
share
schemes 1,327,535 331 1,334 (454) 11,963 13,174 - 13,174
723,729
Balance at 31
December
2020 542,065,458 135,516 364,195 205,717 27,041 (15,845) (3,181) 713,443 100 713,543
============== =========== ======= ======= ======== =========== ======== =========== ======== =============== ========
Notes to the consolidated financial statements
General information
S(4) Capital plc ('S(4) Capital' or 'Company'), is a public
Company, limited by shares, incorporated on 14 November 2016 in the
United Kingdom. The Company has its registered office at 12 St
James's Place, London, SW1A 1NX, United Kingdom.
The unaudited preliminary consolidated condensed financial
statements represent the results of the Company and its
subsidiaries (together referred to as 'S(4) Capital Group' or the
'Group').
S(4) Capital Group is a new age/new era digital advertising and
marketing services company.
Basis of preparation
The financial statements have been prepared in accordance with
the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority. They have been prepared in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the EU.
On 31 December 2020 EU-adopted IFRS was brought into UK law and
became UK-adopted international accounting standards, with future
changes to IFRS being subject to endorsement by the UK Endorsement
Board. The Consolidated Financial Statements will transition to
UK-adopted international accounting standards for financial periods
beginning 1 January 2021.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2020.
The statutory accounts for 2020 will be finalised on the basis of
the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of
Companies in due course. The unaudited financial information is
prepared under the historical cost basis, unless stated otherwise
in the accounting policies.
Accounting policies
The accounting policies will be included in the Annual Report
and Accounts 2020. The accounting policies are materially
consistent with those described in the Annual Report and Accounts
2019, which were set out on pages 87 to 95.
New and amended standards adopted by the Group
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2020 reporting
periods and have not been early adopted by the Group. These
standards are not expected to have a material impact on the Group
in the current or future reporting periods and on foreseeable
future transactions.
Critical accounting estimates and judgements
The critical accounting estimates and judgments will be included
in the Annual Report and Accounts 2020. These are consistent with
those described in the Annual Report and Accounts 2019, which were
set out on pages 87 and 89.
1. Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the
Directors and executive management of S Capital Group.
During the year, S Capital Group has been active in two
segments.
// Content Practice: Creative content, campaigns and assets at a
global scale for paid, social and earned media - from digital
platforms and apps to brand activations that aim to convert
consumers at every possible touchpoint.
// Data & Digital media: this technology and services
practice encompasses full-service campaign management analytics,
creative production and ad serving, platform and systems
integration and transition and training and education.
The customers are primarily businesses across technology, FMCG
and media & entertainment.
The Directors and executive management monitor the results of
the operating segments separately for the purpose of making
decisions about resource allocation and performance assessment
prior to charges for tax, depreciation and amortisation.
Operating segment information under the primary reporting format
is disclosed below:
Data &
Content Digital
Practice media Total
=======================================
2020 GBP'000 GBP'000 GBP'000
======================================= ========= ======== ========
Gross profit 220,497 74,685 295,182
Segment profit (1) 45,609 21,603 67,212
Overhead cost (5,034)
Adjusted non-recurring and acquisition
related expenses (26,669)
Depreciation(2) and amortisation (27,376)
Net finance expenses (5,037)
Profit before income tax 3,096
========================================== ========= ======== ========
(1) Including GBP 9.6 million depreciation on right-of-use
assets
(2) Excluding GBP 9.6 million depreciation on right-of-use
assets
Data &
Digital
Content media Total
=======================================
2019 GBP'000 GBP'000 GBP'000
======================================= ======= ======== ========
Gross profit 113,365 57,953 171,318
Segment profit(1) 25,570 13,654 39,224
Overhead cost (5,817)
Adjusted non-recurring and acquisition
related expenses (19,983)
Depreciation(2) and amortisation (17,259)
Net finance expenses (5,360)
Loss before income tax (9,195)
========================================== ======= ======== ========
(1) Including GBP 7.7 million depreciation on right-of-use
assets
(2) Excluding GBP 7.7 million depreciation on right-of-use
assets
Key management of S(4) Capital Group uses gross profit rather
than revenue to manage the Group due to the fluctuating amounts of
third-party costs and/or pass-through expenses, which form part of
revenue.
2. Adjusting items
S Capital Group uses certain adjusted earnings measures to
provide additional clarity about the performance of the business.
Therefore, the operating profit in the condensed consolidated
income statement is also adjusted for the following items, which
comprise:
// Acquisition and set-up related expenses are not considered
part of underlying trading and are material one-off expense or
income, which are relevant to an understanding of the underlying
performance of the Group.
// Amortisation of certain fair value adjustments recorded in
respect of finite-life intangible assets recognised in the purchase
price allocation of the acquisitions.
// Share based compensation.
The adjusting items amount to GBP49.8 million for the financial
year ended 31 December 2020 (for the financial year ended 31
December 2019: GBP35.0 million). The tables below provide a
reconciliation of the Group's reported statutory earnings measures
to its adjusted measures
Acquisition
and set-up
related Share based
Reported Amortisation(1) expenses(2) compensation Adjusted
===========================
January to December 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ======== =============== ============ ============= ========
Operating profit 8,133 23,148 14,338 12,331 57,950
Net finance expenses (5,037) - - - (5,037)
Profit before income tax 3,096 23,148 14,338 12,331 52,913
Income tax expense (7,025) (5,758) (1,238) - (14,021)
(Loss) profit for the year (3,929) 17,390 13,100 12,331 38,892
(1) Amortisation relates to the amortisation of certain
intangible assets recognised as a result of the acquisitions.
(2) Acquisition and set-up related expenses relate to
acquisition related bonuses of GBP2.2 million and transaction
related advisory fees of GBP13.6 million and the accounting for
contingent considerations of GBP1.4 million.
Acquisition
and set-up
related Share based
Reported Amortisation(1) expenses(2) compensation Adjusted
================================
January to December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================ ======== =============== ============ ============= ========
Operating (loss) profit (3,835) 15,000 12,806 7,177 31,148
Net finance expenses (5,360) - - - (5,360)
(Loss) profit before income tax (9,195) 15,000 12,806 7,177 25,788
Income tax credit / (expense) (845) (3,893) (2,064) - (6,802)
(Loss) profit for the year (10,040) 11,107 10,742 7,177 18,986
================================= ======== =============== ============ ============= ========
(1) Amortisation relates to the amortisation of certain
intangible assets recognised as a result of the acquisitions.
(2) Acquisition and set-up related expenses relate to
acquisition related bonuses of GBP7.2 million and transaction
related advisory fees of GBP5.7 million.
3. Earnings per share
2020 2019
========================================== =========== ===========
Income (Loss) attributable to shareowners
of the Company (GBP'000) (3,929) (10,040)
Weighted average number of ordinary
shares 493,290,974 368,067,622
Basic loss per share (pence) (0.8) (2.7)
============================================== =========== ===========
Diluted loss per share (pence) (0.8) (2.7)
---------------------------------------------- ----------- -----------
Earnings per share is calculated by dividing the net result
attributable to the shareowners of the S(4) Capital Group by the
weighted average number of Ordinary Shares in issue during the
year.
4. Intangible assets
Customer
Goodwill relationships Brands Order Backlog Other Total
==============================
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================== ======== ============== ======= ============= ======= ========
Net book value at 1 January
2019 238,237 148,085 13,697 180 1,937 402,136
============================== ======== ============== ======= ============= ======= ========
Acquired through business
combinations 106,610 66,231 2,082 1,098 2,590 178,611
Additions - - - - 1,578 1,578
Amortisation charge for
the year - (12,017) (1,117) (1,212) (654) (15,000)
Foreign exchange differences (16,011) (10,191) (681) (66) (247) (27,196)
Total transactions during
the year 90,599 44,023 284 (180) 3,267 137,993
============================== ======== ============== ======= ============= ======= ========
Cost 328,836 206,706 15,276 5,464 6,364 562,646
Accumulated amortisation - (14,598) (1,295) (5,464) (1,160) (22,517)
Net book value at 31 December
2019 328,836 192,108 13,981 - 5,204 540,129
============================== ======== ============== ======= ============= ======= ========
Acquired through business
combinations 228,376 39,379 1,059 3,065 2,269 274,148
Addition 34 34
Reclassifications (2,793) 2,298 211 (284)
Amortisation charge for
the year (17,747) (1,866) (1,919) (1,616) (23,148)
Foreign exchange differences 5,503 2,303 294 56 94 8,250
Total transactions during
the year 231,086 26,233 (302) 1,202 781 259,000
============================== ======== ============== ======= ============= ======= ========
Cost 559,922 250,583 16,799 8,805 8,745 844,854
Accumulated amortisation - (32,243) (3,121) (7,604) (2,757) (45,725)
Net book value at 31 December
2020 559,922 218,340 13,678 1,201 5,988 799,129
============================== ======== ============== ======= ============= ======= ========
Acquisitions 2020
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and provisional goodwill of the
subsidiaries acquired in financial year 2020 are as follows:
Data &
Content digital Total
Practice media practice Fair value
==============================
GBP'000 GBP'000 GBP'000
============================== ====== === === ========= =============== =============
Intangible assets - Customer
relationships 21,836 17,543 39,379
Intangible assets - Brand
names 663 396 1,059
Intangible assets - Order
backlog 1,652 1,413 3,065
Intangible assets - Software - 2,269 2,269
Property, plant and equipment 2,110 343 2,453
Financial fixed assets 165 102 267
Cash and cash equivalents 12,259 7,555 19,814
Trade and other receivables 30,753 7,408 38,160
Trade and other payables (34,601) (5,423) (40,026)
Current taxation 567 (985) (418)
Lease liabilities (674) - (674)
Other non-current liabilities (385) (1,553) (1,937)
Deferred taxation (6,619) (5,045) (11,664)
Net assets 27,726 24,023 51,749
Goodwill 126,908 101,469 228,376
Total purchase consideration 154,634 125,492 280,125
================================================== ========= =============== =============
Payment in kind (common
stock) 24,293 49,379 73,671
Cash 73,361 50,079 123,442
Deferred consideration 29,222 5,890 35,111
Contingent consideration 27,757 20,143 47,899
Total purchase consideration 154,634 125,492 280,125
================================================== ========= =============== =============
Purchase consideration
- cash 73,361 50,079 123,440
Cash and cash equivalents 12,259 7,555 19,814
Cash outflow on acquisition
(net of cash acquired) 61,102 42,524 103,626
================================================== ========== =============== ===========
In 2020, S(4) Capital Group combined with the following
businesses:
Content Practice
Combinations in 2020 of the Group's Content Practice are:
// On 8 January 2020, S(4) Capital plc announced (completed and
control passed on 12 March 2020) the combination of MediaMonks with
the fully integrated digital agency Circus Network.
// On 10 September 2020, S(4) Capital plc announced that
MediaMonks has entered into exclusivity in relation to a
combination with Dare.Win, an award-winning Paris based digital
creative agency. The combination expands MediaMonks' geographical
presence to France, Europe's third largest advertising market. At
the end of the reporting year, the opening balance sheet has not
been agreed upon and therefore the calculated goodwill is
provisional.
// In November 2019, S(4) Capital plc announced (completed and
control passed on 27 August 2020) the combination of MediaMonks
with WhiteBalance, Indian-based digital creative and production
agency.
// On 4 January 2021, S(4) Capital plc announced (completed and
control passed on 31 December 2020) the combination of MediaMonks
with Decoded Advertising, a San Francisco-based marketing agency.
Decoded Advertising buys media across search, social and ecommerce
properties.
Data & digital media practice
Combinations in 2020 of the Group's Data & digital media
practice are:
// On 26 May 2020, S(4) Capital plc announced (completed and
control passed on 10 July 2020) the combination of MightyHive with
Digodat, a leading Latin American data and analytics
consultancy.
// On 30 June 2020, S(4) Capital plc announced the combination
of MightyHive with Lens10, a leading Australian digital strategy
and analytics consultancy, pending Foreign Investment Review Board
and Australian Competition and Consumer Commission.
// On 29 July 2020, S(4) Capital plc announced the combination
of MightyHive with Orca Pacific, a market leading full-service
Amazon agency and boutique consultancy firm based in Seattle.
// On 27 August 2020, S(4) Capital plc announced the combination
of MightyHive with Brightblue Consulting, an award-winning UK based
data analytics and measurement consultancy
// On 4 January 2021, S(4) Capital plc announced (completed and
control passed on 31 December 2020) the combination of MightyHive
with Metric Theory, an US-based agency fully integrated agency
covering creative, media and technology
The goodwill represents the potential growth opportunities and
synergy effects from the acquisition. The goodwill is not
deductible for tax purposes. Trade receivables net of expected
credit losses acquired are considered to be fair value and are
expected to be collectable in full.
The contingent considerations are contingent on the acquired
companies achieving their 2020 results and, in some cases their
2021 and 2022 results, as determined upon acquiring the subsidiary.
The contingent considerations are included for the maximum amount
of the consideration expected.
The total acquisition costs of GBP10.8 million (2019: GBP4.7
million) have been recognised under acquisition and set-up related
expenses in the statement of profit or loss.
Firewood
Contingent consideration arising from business combinations is
fair valued, with key inputs including the probability of success,
consideration of potential delays and the expected levels of future
revenues. In 2020, Management has identified changes in certain key
assumptions with respect to the acquisition of Firewood Marketing
Inc that caused the calculated fair value to vary compared to the
initial calculated fair value. Revaluations of Contingent
consideration are recognised in Selling, general and administrative
costs and include a decrease of GBP8.8 million in 2020 (2019: nil)
based on revised milestone probabilities, and revenue forecasts,
relating mainly to the acquisition of Firewood Marketing.
Events occurring after the reporting period
On 11 January 2021, S(4) Capital plc announced that TOMORROW, an
award-winning Shanghai-based creative agency, is combined with
MediaMonks, S (4) Capital's Content Practice. The combination
expands MediaMonks' existing capabilities and presence in China,
the world's second largest advertising market.
On 20 January 2021, S(4) Capital plc announced a combination
with Staud Studios, a German high-end creative production studio
specialising in the automotive industry. Pursuant to the terms of
the Transaction, we have agreed to issue 661,927 ordinary shares of
25 pence each in the capital of the Company, credited as fully
paid, as initial consideration. The Initial Consideration Shares
will be subject to a restriction on sale until 22 January 2023.
On 1 February 2021, S(4) Capital plc announced that MightyHive
has acquired the assets of Datalicious, a leading Google Marketing
Platform, Google Cloud and Google Analytics partner in Asia
Pacific. Datalicious is a specialised data and analytics
consultancy, helping marketers make sense of their data.
Datalicious tracks and analyzes customer interactions across
multiple marketing channels, so clients can drive the most impact
from their marketing dollars and create targeted and personalised
customer experiences and staff and clients in the financial
services, telecommunications and media industries will become part
of S (4) Capital's expanding Data and Digital media practice at
MightyHive.
On 25 March 2021, S(4) Capital announced that it has entered
into a conditional agreement in relation to a combination of
MediaMonks with the highly awarded design and experience agency,
Jam3, based in Toronto with offices in Amsterdam, Los Angeles and
Uruguay
5. Income tax expense
The corporate income tax charge comprises the following:
2020 2019
GBP'000 GBP'000
================================= ========= ========
Current tax for the year (12,970) (4,022)
Adjustments for current tax of
prior years (203) (36)
Total current tax (13,173) (4,058)
Movement in deferred tax 6,148 3,213
Income tax expense in profit or
loss (7,025) (845)
================================== ========= ========
2020 2019
GBP'000 GBP'000
======== ========
Income (Loss) before income taxes 3,096 (9,195)
Tax credit at the UK rate of 19%
(2019:19%) (589) 1,747
Tax effect of amounts which are
non-deductible (taxable) (4,245) (2,074)
Differences in overseas tax rates (1,988) (554)
Adjustment for current taxes of
prior years (203) 36
Income tax expense in profit
or loss (7,025) (845)
======================================= ======== ========
The applicable tax rate is based on the proportion of the
contribution to the result by the Group entities and the tax rate
applicable in the respective countries. The applicable tax rate in
the respective countries ranges from 17% to 35%. The effective tax
rate used to calculate the actual tax charge for the year deviates
from the applicable tax rate mainly because of non-deductible
items, amortisation, accelerated capital allowances over
depreciation on plant, property and equipment and differences in
overseas tax rates.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR PPUUAWUPGUQA
(END) Dow Jones Newswires
March 25, 2021 03:00 ET (07:00 GMT)
S4 Capital (LSE:SFOR)
Historical Stock Chart
From Mar 2024 to Apr 2024
S4 Capital (LSE:SFOR)
Historical Stock Chart
From Apr 2023 to Apr 2024
