S4 Capital Sees Spending Delays As Virus Starts To Bite Trading

(Alliance News) - S4 Capital PLC on Thursday posted solid growth in first quarter earnings and ...

Alliance News 7 May, 2020 | 12:48PM
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(Alliance News) - S4 Capital PLC on Thursday posted solid growth in first quarter earnings and said that it has a "fighting chance" to achieve its internal three-year goal of doubling organically.

The advertising company, however, warned that it has seen delays in spending from clients as a result of the Covid-19 pandemic and has taken several steps to conserve cash.

Shares in S4 Capital were up 5.9% at 194.50 pence each in London on Thursday afternoon.

Chair Martin Sorrell said: "Our tech clients, which account for approximately half of our revenue, have by and large continued to invest, particularly in purpose campaigns, although there has been some genuine postponement of spending from the first or second quarters into the second half.

The other half, dominated by FMCG or CPG companies, pharma and retail is more mixed, with some cutting or reducing spend and, of course, investment in purpose campaigns too. The travel and hospitality verticals have virtually all stalled".

S4 Capital, as a result of the challenging environment, has reduced non-essential expenses, cut travel, reduced hiring and its eight senior executives have cut their compensation by half effective from April 1 for six months and waived their cash bonuses, taking share awards instead.

Further, the company has adjusted its headcount numbers marginally and consolidated office premises where possible and faster than originally planned.

For the three months to March-end, S4 reported 85% growth in gross profit to GBP60.7 million from GBP32.8 million a year ago.

Geographically, all regions showed strong growth, the company said. The Americas, representing 73% of gross profit, reported 96% rise in gross profit; Europe, Middle East & Africa, representing 19%, saw 45% rise; and Asia Pacific gross profit, representing the remaining 8%, more than doubled. On a like-for-like basis, the Americas were up 21%, EMEA up 11% and Asia Pacific up 21%.

First-quarter revenue surge 73% year-on-year on a reported basis to GBP71.0 million. On a like-for-like basis, revenue was up 17%.

The company's digital content unit, MediaMonks, representing 79% of total gross profit, was up 89% in reported revenue and up 17% on a like-for-like basis.

The programmatic and data and analytics practice, MightyHive, representing 21% of total gross profit, was up 32% in reported revenue and 18% on a like-for-like basis.

"In our view, Covid-19 will only accelerate the digital trends we have seen before at three levels - consumers, media owners and enterprise managers," Sorrell said.

By Tapan Panchal; tapanpanchal@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
S4 Capital PLC 310.50 GBX 0.00 -

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