Martin Sorrell’s S4 Capital Stock Climbs After Releasing a Strong First Full-Year Report

A revenue boost of 58% factored in numbers from its MediaMonks and MightyHive acquisitions

Martin Sorrell's S4 Capital saw its revenue climb 58 percent in 2018.
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Martin Sorrell’s S4 Capital stock rose nearly 3 percent on Monday morning after the self-described “new age/era digital advertising and marketing services” company released its first full-year financial results (as of its May 2018 founding), which saw a significant rise in revenue.

S4 Capital posted 2018 billings of $385.2 million. Full-year revenue increased 58 percent to $179.8 million from 2017. The company’s 2018 operational earnings before interest, taxes, depreciation and amortization (EBITDA) rose 99 percent from the previous year to $29.6 million.

The company reported adjusted 2018 earnings of $6.09 a share. S4 said its year-end net debt was $27.3 million, including the $60.3 million loan it drew to help fund the MediaMonks acquisition. (S4 Capital reportedly paid $350 million for the production company in July.)

These figures include the full-year numbers of MediaMonks and programmatic solutions provider MightyHive, which S4 paid $150 million to acquire in December 2018, factored in as if all three entities had been operating as one for the entirety of 2018. Combined, S4 now employs 1,200 people across 16 countries.

According to S4, by region, the Americas accounted for 65 percent of revenue and 72 percent of gross profit in 2018. Europe, the Middle East and Africa represented 29 percent of revenue and 22 percent of gross profit, and Asia-Pacific accounted for 6 percent of both revenue and gross profit.

By function, S4 reported that digital content accounted for 75 percent of revenue in 2018 and 67 percent of gross profit, and programmatic represented 25 percent of revenue and 33 percent of gross profit.

Sorrell, chairman of the company he founded last May after relinquishing his 33-year reign over WPP the month earlier, said in a statement to shareholders that S4’s recent focus has been on “geographical expansion, particularly in Asia-Pacific,” highlighting the November 2018 hiring of Michel de Rijk as CEO of the region and Poran Malani as director of its newly established Indian operation. Rijk was formerly the global chief growth officer of WPP’s Performance Media Group.

During “the short period” S4 has been in operation, Sorrell said it has accomplished four “initial steps” in its “digital data, content, programmatic strategy”: the formation and funding of the company, the acquisition of MediaMonks, the “reverse takeover” of publicly-traded London firm Derriston Capital and the purchase of MightyHive.

“Your company now has in place the digital content and programmatic building blocks on which to grow,” Sorrell said, pointing to recent wins, which include assignments from some of advertising’s biggest spenders such as Procter & Gamble, Nestlé, Avon, Mondelez, Shiseido and Bayer.

He added that the company’s current pipeline is “approximately twice the level of last year.”

“All in all, a powerful 2018,” Sorrell said. “This performance is planned to continue into 2019 with budgets and plans targeting strong revenue, gross profit growth and improving operational EBITDA margin and with January showing revenue and gross profit like-for-like growth of over 30 percent.”

S4’s three-year plan, from 2019 through 2021, projects a doubling in revenue and gross profits, “with an improvement in EBITDA margin.”

“It is clear that the company’s purely digital model based on first-party data fueling digital content and programmatic is resonating with clients,” Sorrell said. “Our tagline [of] ‘Faster, better, cheaper’ and [having a] unitary, one P&L structure also appeal strongly. The imperatives will be to broaden and deepen relationships with existing and new clients; to broaden and deepen geographical coverage; and to attract additional data, content and media talent and resources through direct recruitment, acquisition and/or merger.”

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