Martin Sorrell’s S4 Capital, reporting strong first half results in the face of the pandemic, revealed it is close to bringing in new large digital advertising accounts similar to Google.
The company reported like-for-like billings up 12.7% to £260.4 million in the six months to June. Revenue was £141.3 million, up 6.9%, and gross profit of £124 million up 12.2%.
In London, shares in S4 closed 2.78% higher at 374.00 pence.
The second half of the year started strongly with July like-for-like gross profit up 18.2%, with the company upbeat on prospects for the rest of the year.
The company’s client roster is dominated by technology, fast moving consumer goods (FMCG), telecommunications and pharmaceuticals -- sectors doing well during COVID-19.
S4 has been winning business as well. Work won in the first half of 2020 includes Paypal, Dole Foods, Bumble, Verizon, Shopify and Twitch, the LA 2028 Olympics, a global consumer electronics company, a global automotive company and a global FMCG.
“Having achieved brand awareness and brand trial over the first two years of its existence, the company has high hopes of adding two more ‘whoppers’ to our roster of clients – that is, clients who represent more than $US20 million of revenue each year,” the company says in its half year results.
“We currently have two, Google and another well-known tech company (subject to a non disclosure agreement), and a new one will be announced, we hope, very shortly.”
The company has a target of 20 clients with over $US20 million annual revenue.
In the six months to June, S4’s content business saw gross profit increase by 14% on a like-for-like basis. Data and digital media was up 7%.
By geography, the Americas gross profit was 13% on a like-for-like basis. EMEA was up 7%, Asia-Pacific 18%.
Sir Martin says S4 is in a growth sweetspot with digital only. The company’s “holy trinity” model combines first-party data with digital content, data and digital media.
He says the company is now in a position to build stronger value-adding relationships with tech, healthcare, financial and FMCG clients.
S4 plans to expand by adding to data, content, digital media and technological capabilities.
The company believes that the June quarter was the low point of the economic fallout from the pandemic.
Significant improvements are expected in the third and fourth quarter followed by a “full-throated” recovery in 2021, driven by a vaccine or vaccines.
The company believes it has an even stronger fighting chance of doubling organically over the three years 2020-22 and delivering like-for-like double digit revenue and gross profit growth and reasonably strong margins in 2020.
The company says its prospects for 2021 also look stronger given the organic growth rate, increasing client conversion at scale, significant merger activity and the likely post-COVID-19 economic recovery from relatively low levels of economic growth.
“We continue to believe that the shape of the COVID-19 recession is essentially a reverse square root, with a sharp fall followed by a sharp recovery, although not immediately to prior levels,” S4 says in its first half report.
“Within this, there will be some V-shaped verticals like technology, healthcare, financials, in-home entertainment and online shopping. There will be U-shaped verticals like packaged goods and autos and there will be more L-shaped verticals like travel and hospitality.”
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