Unaudited 2021 preliminary results

RNS Number : 5387K
S4 Capital PLC
06 May 2022
 

 

 

 

S4Capital plc

("S4Capital" or "the Company")

 

Unaudited 2021 preliminary results

 

Like-for-like gross profit/net revenue up 44% with simple two year stack up over 63% and three year up over 100%

 

Significant growth in like-for-like and pro-forma billings, revenue, gross profit/net revenue and EBITDA in the range of market expectations

 

2022-24 Three Year Plan calls for a like-for-like doubling of top line and EBITDA margins returning to prior levels

 

Market guidance of 25% like-for-like gross profit growth with steady improvement in EBITDA margins for 2022

 

2022 Gross profit/net revenue has started ahead of guidance

 

Significant investment in and tightening of financial controls, risk and governance being implemented following the unacceptable delay in publishing the 2021 results

 

1.  Financial highlights

¤Billings* £1.3 billion, up 99.4% reported, up 66.8% like-for-like** and pro-forma*** billings £1.4 billion, up 67.1%.

 

¤Revenue £686.6 million, up 100.4% reported from £342.7 million, like-for-like up 52.4%, pro-forma up 53.8%.

 

¤     Gross profit which is equivalent to net revenue £560.3 million, up 89.8% reported from £295.2 million, like-for-like up 43.7%, pro-forma up 45.7%.

 

¤Two year simple like-for-like gross profit/net revenue stack up over 63%******* and three year up over 100%.

 

¤Operational EBITDA**** £101.0 million, up 62.4% reported, like-for-like up 11.9%, pro-forma up 16.8%.

 

¤Operational EBITDA margin 18.0%, down 3.0 percentage points on 2020 reported, like-for-like down 5.1 percentage points, pro-forma down 4.6 percentage points driven by investment in major new "whopper******" clients, new areas of organic growth and the Group's management infrastructure. Operational EBITDA margin improved from 14.5% in the first half to 20.6% in the second half.

 

¤Adjusted basic net result per share 13.0p versus 7.9p in 2020 up 64.6%.

 

¤2021 results in the range of market expectations of revenue of £619.0 million to £691.0 million, gross profit/net revenue of 553.6 million to 572.5 million and Operational EBITDA of £99.7 million to £111.6 million (consensus of £650.8 million, £559.1 million and £103.8 million respectively).

 

¤Operating loss £42.1 million versus an operating profit of £8.1 million in 2020. Operating loss is after charging £136.9 million of Adjusting items relating to acquisitions, amortisation and share based payments (including £72.3 million in contingent combination consideration mainly tied to continued employment). Pro-forma operating loss of £83.5 million versus an pro-forma operating loss of £87.9 million in 2020.

 

¤Loss before income tax £55.7 million, after charging adjusting items, versus a profit of £3.1 million in 2020.

 

¤    Statutory loss for the period £56.7 million, after charging adjusting items and after taxation, versus £3.9 million (loss) in 2020 and pro-forma loss for the period of £98.1 million.

 

¤Basic and diluted net loss per share 10.3p, after charging adjusting items and after taxation, versus 0.8p (loss) in 2020.

 

¤    Year-end net debt***** £18.0 million (2020: net cash £51.6 million), despite making £96.6 million in cash payments for combinations and increasing working capital investment primarily to fund larger accounts, reflecting liquidity from operations and EBITDA conversion to cash flow from operating activities of 54.1% (including £10.0 million relating to contingent consideration tied to employment) versus 99.2% in 2020.

 

¤January and February gross profit/net revenue ahead of targeted 25% like-for-like growth.

 

¤Significant increase in financial controls, risk and governance processes and resources being implemented and planned under guidance of new Chief Financial Officer, who took over the role on January 3rd 2022.

 

2.  Sir Martin Sorrell, Executive Chairman of S4Capital Plc said:

"In our third full financial year we almost doubled in size, approximately half through organic growth and approximately half through combinations and generated over $900 million of revenue in 33 countries. We continued to develop conversion at scale with six well established "whoppers" and a further nineteen clients identified as "whoppertunities" and with approximately half of our revenues from technology clients. We plan to achieve our ultimate 202 objective, that is twenty clients each generating revenues of over $20 million per annum, over the period 2022-24. Whilst this growth, both organic and through business combinations, is very satisfying, the delay in producing our 2021 results is unacceptable and embarrassing and significant changes in our financial control, risk and governance structure and resources are being implemented and planned, including several significant additions to the central and Content practice financial teams and the Audit Committee.

 

Pride of place for any achievements should go to our (now) over 8,400 Monks globally, who no sooner than recovering from the strain and challenge of the pandemic, had to face the impact of the shocking events in Ukraine, but continue to respond unflinchingly. 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 gained significant traction. The pandemic has, at the same time, accelerated the drive to create a digital world, together with the 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 continue to grow our top line at industry leading rates, despite Covid-19, and have exhibited agility in developing new content revenue streams quickly, in such areas as the Unreal Engine, the Metaverse, blockchain, crypto and NFTs placing us at the forefront of these significant disruptions. We continued to broaden and deepen our Content and Data&digital media practices through organic growth and by the addition of a further five Content, four Data&digital media and one Technology services companies in 2021 and one so far in early 2022, in the Data&digital media practice. As a result, we broadened our services capabilities by expanding into the third practice area - Technology services - enabling us to engage more deeply with CIOs and CTOs in addition to CMOs, Chief Sales Officers and CDOs. We further integrated our unitary client offering around our Content, Data&digital media and Technology services practices , with the launch mid-year of one operating brand, Media.Monks, which celebrated our roots in both Content (MediaMonks) and Data&digital media (MightyHive) and embodied sufficient flexibility to engage our entrepreneurial talent . We broadened and deepened our client roster. We continued to embrace our diversity, equity and inclusion opportunities with unique black-orientated fellowship and female executive leadership programmes, changed hiring practices and education programmes. In addition, we continued to make progress in our zero carbon commitments targeting 2024, earlier than most. We also leveraged our balance sheet to take advantage of combination opportunities.

 

2022 has started, more than in line with our latest three year plan to double gross profit/net revenue organically in three years and we are focused on five objectives for the year - to continue to develop our six existing "whoppers" and develop and secure five more this year, one having already been almost secured, to integrate our three practices and three geographies even more effectively into an even stronger unitary, one P&L client offering; to strengthen and deepen our diversity and climate change agenda; to continue to broaden and deepen our digital client offering through combinations; and finally, to try to ensure that a results delay does not happen again, w e are making the necessary investments to strengthen and tighten our financial controls. Although global GDP forecasts have slipped in the past few months from 4-5% to 3%+, we believe 2022 will generally be a good year economically overall, with consumers temporarily insulated from an inflationary squeeze by Covid savings. This, despite the significant inflation, higher interest rates, continued Covid lockdowns in China, and the bitter, vicious war in Ukraine - which will raise risk levels for clients in Central and Eastern Europe and to a lesser extent Asia Pacific, whilst lowering them in North and South America. As defence budgets are increased, the need for strong technology companies with a robust surrounding technological eco-system will become more and more apparent. 2023 may be a different kettle of fish as GDP growth weakens further and geo-political tensions impact economics more significantly. Although a bi-polar world and populist forces may check globalisation and free trade and slow overall global GDP growth, the demand for technological development and digital transformation will continue to drive the demand for our digital marketing services. Digital marketing expenditure is closely correlated to, but not dependent on GDP growth, just as traditional media spending used to be in the last century."

 

 

 

3.  Strategic and operational highlights

¤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.

 

¤Also, in January 2021, MightyHive announced a combination with Metric Theory, an integrated performance marketing agency, providing services across search, social and commerce media. The combinations with Metric Theory and Decoded Advertising were completed on 31 December, 2020.

 

¤     In February 2021, MightyHive acquired the assets of Datalicious Australia, a Sydney, Melbourne and Brisbane-based data & analytics company.

 

¤    In March 2021, S4Capital announced that it had 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.

 

¤  In May 2021, MightyHive announced it had entered into a conditional agreement in relation to a combination of MightyHive with the leading digital performance agency in Brazil, Raccoon Group.

 

¤    In July 2021, MightyHive announced a combination with Salesforce specialist Destined expanding its data and digital media practice in Asia Pacific.

 

¤Also in July 2021, S4Capital announced it had engaged Credit Suisse AG, London branch, HSBC Bank plc and Barclays Bank plc as lead arrangers for a seven-year €375 million senior secured term loan. In addition, it negotiated a five-year £100 million equivalent multicurrency senior secured revolving credit facility with Credit Suisse, HSBC, Barclays, JP Morgan and BNP Paribas. Both term loan and revolving facility were successfully completed in early August 2021. This refinanced its existing €25 million and US$28.9 million term loans and its €35 million and €43.5 million multicurrency revolving credit facilities and provided approximately £200 million for general corporate purposes, including funding the cash element of future combinations, which is typically one-half of overall consideration. The Company will maintain its policy of maximum net leverage not exceeding 1.5-2x Operational EBITDA.

 

¤ During the summer functional talent teams in social media and government communications joined the group from leading competitors.

 

¤In August 2021, S4Capital launched its unitary brand, by merging MediaMonks and MightyHive into a single operational  brand, Media.Monks, represented by a dynamic logo mark that features MightyHive's iconic hexagon. This marked the next step in speedily delivering on its foundational promise to unify its practices into one P&L.

 

¤    In September 2021, the new unitary brand Media.Monks announced a combination with the iconic culture and creative marketing agency Cashmere, based in Los Angeles.

 

¤     Also in September 2021, Media.Monks announced a combination with leading digital transformation services firm Zemoga, headquartered in Los Angeles, with further US offices as well as delivery centres in Colombia. The combination expanded the Media.Monks offering into technology services for the first time.

 

¤In November 2021, Media.Monks announced a combination with leading creative content marketing agency Miyagi. The combination added to Media.Monks' existing content and data & digital media capabilities in Italy, Europe's fourth largest advertising market. The acquisition was completed on 10 November 2021.

 

¤ In December 2021, Media.Monks announced a combination with Maverick Digital, expanding its Data&digital media and Technology services and global Salesforce capabilities. The acquisition was completed on 30 November 2021.

 

¤2021 saw the addition of four new "whoppers" - Meta, Mondēlez, BMW/MINI and HP - adding to Alphabet and a leading NDA'd telecommunications company - all of which generate more than $20 million of revenue. A further 19 clients have been identified as "whoppertunities" over the three year period 2022-24 to reach the objective of 202 or 20 "whoppers".

 

¤ Post year end, Media.Monks announced a combination with 4Mile Analytics, a US based leader in delivery of services on the Looker platform.

 

¤ Continuation of both the S4 Fellowship Programme for students from Historically Black Colleges and Universities and its extension to High Schools in the United States and the S4 Women Leadership Programme in association with UC Berkeley in California.

 

¤ The Group now has over 8,400 people in 33 countries, trending towards double where we were at this time last year.

 

¤ 2021 saw the expansion of our major client relationships with additional remits and geographies at brands including Google, Meta, Amazon, Paypal, HP, Netflix, Procter & Gamble, Mondelez and BMW. We also saw significant new business with engagements from new clients including Allianz, Miele, Instacart, Pearson, Dropbox, Canva, Constellation Brands and M1.

 

¤ Our current client activity pipeline is running at a stronger level than last year.

 

 

*Billings is gross billings to client including pass through costs

**Like-for-like relates to 2020 being restated to show the unaudited numbers for the previous year of the existing and acquired businesses consolidated for the same months as in 2021 applying currency rates as used in 2021

***Pro-forma numbers relate to unaudited full year non-statutory and non-GAAP consolidated results in constant currency as if the S4Capital Plc Group (the Group) had existed in full for the year and have been prepared under comparable GAAP with no consolidation eliminations in the pre-acquisition period

****Operational EBITDA is EBITDA adjusted for acquisition related expenses, non-recurring items and recurring share-based payments, and includes Right-of-use assets depreciation. It is a non-GAAP measure management uses to assess the underlying business performance (also see note 7). Operational EBITDA margin is Operational EBITDA as a percentage of Gross Profit/net revenue.

*****Net debt comprises cash minus gross bank loans (excluding transaction costs)

****** A "Whopper" is defined as a major client with over $20 million in revenue and currently number 6 - Google, an NDA'd telecommunications FAANG, Meta, Mondēlez, BMW/MINI and HP.

******* Two year simple stack is like-for-like 2021 growth added to 2020 and three year simple stack, 2019 growth added to 2020 and 2021.

 

This document contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group, including, among other things, statements about expected revenues, margins, earnings per share or other financial or other measures. Although the Group believes its expectations are based on reasonable assumptions, any forward-looking statements, by their very nature, involve risks and uncertainties and may be influenced by factors that could cause actual outcomes and results to be materially different from those predicted. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and the Group undertakes no obligation to update these forward-looking statements. The Group identifies the forward-looking statements by using the words 'anticipates', 'believes', 'expects', 'intends', 'estimate', 'expect', 'project', 'plan', 'believe', 'target' and similar expressions in such statements. Important factors that could cause actual results to differ materially from those contained in forward-looking statements, certain of which are beyond the Group's control, include, among other things: the unanticipated loss of a material client or key personnel, delays or reductions in client advertising budgets, shifts in industry rates of compensation, regulatory compliance costs or litigation, natural disasters or acts of terrorism, the overall level of economic activity in the Company's major markets etc.

Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made and are based upon the knowledge and information available to the Directors on the date of this document.

Results webcast and conference call

A webcast and conference call covering the results will be held today at 08:30 BST in London, followed by another webcast and call at 08:00 EDT / 13:00 BST. The presentation for these webcasts and conference calls has been posted on our website www.s4capital.com at the same time as this announcement.

 

 

08:30 BST webcast (watch only) and conference call (for Q&A):

Webcast: https://brrmedia.news/SFOR_FY21_Eur

Conference call:

UK: +44 (0) 33 0551 0200

US: +1 212 999 6659

Confirmation code: 060522

 

08:00 EDT / 13:00 BST webcast (watch only) and conference call (for Q&A):

Webcast: https://brrmedia.news/SFOR_FY21_US

Conference call:

UK: +44 (0) 33 0551 0200

US: +1 212 999 6659

Confirmation code: 02060522

 

 

Enquiries to:

S4Capital Plc  

Sir Martin Sorrell, Executive Chairman  +44 (0)20 3793 0003/+44 (0)20 3793 0007

Mary Basterfield, Chief Financial Officer

Scott Spirit, Chief Growth Officer

 

Dowgate Capital Limited (Joint Corporate Broker to S4Capital plc )  

James Serjeant  +44 (0)20 3903 7715

David Poutney 

 

Jefferies International Limited (Joint Corporate Broker to S4Capital plc)

Tony White  +44 (0)207 029 8000

Harry Le May

 

Morgan Stanley & Co. International plc (Joint Corporate Broker to S4Capital plc) 

Paul Baker  +44 (0)207 425 8000

Alex Smart

 

Powerscourt (PR Advisor)    

Robin O'Kelly  +44 (0)778 670 2526

Jane Glover

 

 

Summary of results (unaudited)

 

 

 

Year ended  31 Dec 2021

Year ended 31 Dec 2020

 

 

Like-for-like1 Year ended 31 December  2020

Proforma2 Year ended 31 Dec 2021

Proforma

Year ended 31 Dec 2020

Notes

£'000

£'000

 

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

Revenue

1

686,601

342,687

 

 

450,452

740,203

481,139

Cost of sales

 

126,338

47,505

 

 

60,568

131,076

63,173

 

 

 

 

 

 

 

 

 

Gross profit

1

560,263

295,182

 

 

389,884

609,127

417,966

 

 

 

 

 

 

 

 

 

Content

 

385,552

220,497

 

 

261,585

408,194

273,872

Data & digital media

 

167,079

74,685

 

 

124,044

180,430

132,662

Technology services

 

7,632

-

 

 

4,255

20,503

11,432

 

 

 

 

 

 

 

 

 

America's

 

391,117

206,316

 

 

283,591

434,112

310,353

EMEA

 

115,957

58,233

 

 

70,511

118,637

69,475

Asia-Pacific

 

53,189

30,633

 

 

35,782

56,378

38,138

 

 

 

 

 

 

 

 

 

Total operating expenses

 

602,318

287,049

 

 

431,090

692,589

505,889

 

 

 

 

 

 

 

 

 

Operating (loss) / profit

 

(42,055)

8,133

 

 

(41,206)

(83,462)

(87,923)

 

 

 

 

 

 

 

 

 

Adjusted operating profit

 

94,808

57,950

 

 

85,225

106,700

 91,498

Adjusting items

2

(136,863)

(49,817)

 

 

 (126,431)

(190,162)

 (179,421)

Operating (loss) / profit

 

(42,055)

8,133

 

 

 (41,206)

(83,462)

 (87,923)

 

 

 

 

 

 

 

 

 

Net finance expenses

 

(12,251)

(5,037)

 

 

(4,328)

(12,261)

(4,523)

Loss on the net monetary position

 

(1,344)

-

 

 

-

-

-

 

 

 

 

 

 

 

 

 

(Loss) / profit before income tax

 

(55,650)

3,096

 

 

(45,534)

(95,723)

(92,446)

 

 

 

 

 

 

 

 

 

Adjusted profit before income tax

 

81,213

52,913

 

 

80,897

94,439

86,975

Adjusting items

2

(136,863)

(49,817)

 

 

 (126,431)

(190,162)

(179,421)

(Loss) / profit before income tax

 

(55,650)

3,096

 

 

 (45,534)

(95,723)

(92,446)

 

 

 

 

 

 

 

 

 

Income tax expense

 

(1,065)

(7,025)

 

 

(11,011)

(2,402)

(10,739)

 

 

 

 

 

 

 

 

 

(Loss) / profit for the period

 

(56,715)

(3,929)

 

 

(56,545)

(98,125)

(103,185)

 

 

 

 

 

 

 

 

 

Adjusted profit for the period

 

71,781

38,892

 

 

59,534

82,335

64,548

Adjusting items

2

(136,863)

(49,817)

 

 

(126,431)

(190,162)

(179,421)

Tax on adjusting items

 

8,367

6,996

 

 

10,352

9,702

11,688

Loss for the period

 

(56,715)

(3,929)

 

 

(56,545)

(98,125)

(103,185)

 

 

 

 

 

 

 

 

 

Operating (loss) / profit

 

(42,055)

8,133

 

 

 (41,206)

(83,462)

(87,923)

Adjusting items

2

136,863

49,817

 

 

126,431

190,162

179,421

Depreciation (excl. right-of-use assets)

 

6,179

4,228

 

 

5,036

6,338

5,259

 

 

 

 

 

 

 

 

 

Operational EBITDA

2

100,987

62,178

 

 

90,261

113,038

96,757

Central costs

 

9,410

6,112

 

 

5,991

9,410

5,991

 

 

 

 

 

 

 

 

 

Operational EBITDA before central costs

 

110,397

68,290

 

 

96,252

122,448

102,748

 

 

 

 

 

 

 

 

 

Weighted average number of shares in issue for the purpose of basic and adjusted net result per share

 

  551,752,618

 

493,290,974

 

 

551,752,618

556,142,912

  556,142,912

 

 

 

 

 

 

 

 

 

 

Net loss attributable to equity owners of the company (£'000)

 

(56,715)

(3,929)

 

 

(56,545)

(98,125)

 

(103,185)

 

 

 

 

 

 

 

 

 

 

Basic net loss per share (pence)

 

(10.3)

(0.8)

 

 

(10.2)

(17.6)

(18.6)

Diluted net loss per share (Pence)

 

(10.3)

(0.8)

 

 

(10.2)

(17.6)

(18.6)

 

 

 

 

 

 

 

 

 

Adjusted profit for the period

 

71,781

38,892

 

 

59,534

82,335

64,548

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share (pence)

 

13.0

7.9

 

 

10.8

14.8

11.6

 

Notes:

1.  Like-for-like is a non-GAAP measure and relates to 2020 being restated to show the unaudited numbers for the previous year of the existing and acquired businesses consolidated for the same months as in 2021 applying currency rates as used in 2021;

2.  Proforma 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 in the pre-acquisition period.

 

 

Chairman's Letter

 

Dear Shareowner,

 

My Executive colleagues, Victor Knaap, Wesley ter Haar, Pete Kim, Christopher Martin, Scott Spirit, Mary Basterfield, and I are delighted to present our fourth set of results for the year ending 31 December 2021 to our fellow shareowners. However, the delay in producing these results is totally unacceptable and embarrassing to all of us and has caused significant concern to our shareowners (of which management accounts for approximately 40%). In response, significant financial control, risk and governance changes are being implemented and planned across the Company under the guidance and leadership of new Chief Financial Officer, Mary Basterfield, who took over the role at January 3rd 2022 along with a strengthening of the Audit Committee.

 

2021 saw the expansion of our major client relationships with additional remits and geographies at brands including Google, Meta, Amazon, Paypal, HP, Netflix, Procter & Gamble, Mondelez and BMW. We also saw significant new business with engagements from new clients including Allianz, Miele, Instacart, Pearson, Dropbox, Canva, Constellation Brands and M1. Encouragingly, our current pipeline is proportionally ahead of last year's level following a fast start to 2022.

 

We had six "whoppers" (clients with revenues over $20 million per annum) in 2021, as opposed to only two in 2020. We have also now identified nineteen more potential "whoppers", where we currently project $5-15 million of revenue per annum and which potentially could break through the $20 million per annum level over the latest three year planning period for 2022-24. We anticipate that up to a further five clients may well become "whoppers" this year making a total of eleven in 2022, well on the way to achieving our 202 objective and have already landed an NDA'd consumer goods client at an annual "whopper" level.

 

2021 also saw significant strengthening and deepening of our Content and Data&digital media practices. Our newly launched unitary brand, Media.Monks, broadened and deepened its geographical footprint in 2021 and so far in 2022. It added North and South American Content and Data&digital media capabilities through Jam3, Racoon Group, Cashmere, Maverick Digital and 4Mile. In Europe, the Middle-East and Africa, Media.Monks entered the German and Italian markets through Staud Studios and Miyagi. In Asia Pacific, we added Content and Data&digital capabilities through Tomorrow in China and Datalicious and Destined both in Australia. Media.Monks also added significant talent from competitors in the areas of new digital media social content and digital government communications. Finally, Media.Monks entered a third practice, Technology services, through South-American based Zemoga.

 

Media.Monks has integrated each combination into our now three practices: Content, Data&digital media and Technology services. We 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, one of the consequences of the pandemic was an acceleration in consolidating separate offices on a city-by-city basis, as existing leases were terminated more quickly. We are now planning new leases with an approximately 60% pro-rata capacity floor plate, assuming office occupation of three days a week on average. There is little doubt that we will not return 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 increasingly consolidating our strategic, client content, data and programmatic and technology services offer at the S4Capital level.

 

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 Group in 2021.

 

Billings were £1.3 billion, up 99.4% on a reported basis, up 66.8% like-for-like and up 67.1% pro-forma. Controlled Billings, that is billings we influenced in addition to billings that flowed through our income statement, were approximately £5.4 billion (2020: £2.3 billion). Revenue was £686.6 million, up 100.4% from £342.7 million on a reported basis, up 52.4% like-for-like, and up 53.8% on a pro-forma basis. Gross profit was £560.3 million, up 89.8% reported, up 43.7% like-for-like, and up 45.7% pro-forma. Operational EBITDA was £101.0 million, up 62.4% reported, up 11.9% like-for-like, and up 16.8% pro-forma. Operational EBITDA margin was 18.0%, down 3.0 percentage points on 2020, down 5.1 percentage points like-for-like and 4.6 percentage points pro-forma, reflecting investment ahead of the revenue curve in major new "whopper" clients, new areas of organic growth, such as connected tv, and management infrastructure to manage future growth, in line with our first half statement in September 2021.

 

Operational EBITDA margin improved in the second half to 20.6% from 14.5% in the first half giving 18.0% for the full year, as the first half increased investment in our people yielded higher productivity in the latter half. Operating loss was £42.1 million, after £136.9 million of adjusting items, principally acquisition and amortisation expense, versus an operating profit of £8.1 million in 2020. Adjusted basic net result per share was 13.0p versus 7.9p in 2020. Statutory loss for the period was £56.7 million, versus a reported £3.9 million (loss) in 2020, after charging under IFRS £72.3 million of combination payments, which were mainly tied to the continued employment of key share-owning principals in combinations. Although such contractual provisions impact the income statement, your Board believes this is a better commercial approach given the professional service nature of our business. Basic and diluted net loss per share were 10.3p, versus 0.8p (loss) in 2020.

 

Year-end net debt was £18.0 million (2020 net cash: £51.6 million), despite making £96.6 million in cash combination payments and reflecting cash flow from operating activities with 54.1% operating cash flow conversion from EBITDA. In line with our first half statement in September 2021, Operational EBITDA margins improved in the second half from 14.5% in the first half to 20.6% in the second half giving 18.0% for the full year, as the first half increased investment in our people yielded higher productivity in the second half.

 

Pro-forma billings were £1.4 billion. Pro-forma revenue was £740.2 million and pro-forma gross profit was £609.1 million up 53.8% and 45.7% respectively on 2020. Pro-forma operational EBITDA was £113.0 million, up 16.8% on 2020, with operational EBITDA margin at 18.6%, 4.6 percentage points down on the previous year. Pro-forma adjusted operating profit, excluding adjusting items of £190.2 million, is £106.7 million, up 16.6% on the previous year. Pro-forma adjusted pre-tax profits were £94.4 million versus £87.0 million in the previous year, up 8.6%. Pro-forma adjusted profit for the period was £82.3 million (2020: £64.5 million), up 27.6%.

 

By geography, on a pro-forma basis, the Americas accounted for 71.3% of gross profit against 74.3% in 2020. Europe, the Middle-East and Africa represented 19.4% of gross profit against 16.6% in 2020. Asia-Pacific represented 9.3% of gross profit against 9.1% in 2020. Pro-forma growth in gross profit/net revenue was up 39.9% in the Americas, 70.8% in Europe, Middle-East and Africa and 47.8% in Asia-Pacific. Our long-term objective has been 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 recent US/China trade frictions. However, the war in Ukraine, has increased concerns about Taiwan and China and as a result, it is likely that our transition to Asia Pacific will take longer, with a 60:20:20 geographical split being a more realistic objective, at least in the medium term.

 

By practice, on a pro-forma basis, Content accounted for 67.0% of gross profit/net revenue against 65.5% in 2020. The Data&digital media practice represented 29.6% of gross profit/net revenue against 31.8% in 2020. Technology services, a new practice for us in 2021, accounted for the remaining 3.4%. Pro-forma growth in gross profit/net revenue was up 49.0% at the Content practice and up 36.0% at the Data&digital media practice. Technology services was up 79.3%. Our long-term objective now is to achieve a practice distribution around one-half in Content, one quarter in Data&digital media and one quarter in Technology services.

 

Environment, Social and Governance strategy

In 2021, the Company continued to raise the bar in all three areas of our ESG strategy. We actively track our CO2 emissions and perform competitively with a sample of peer companies in the areas of gender and diversity. We have committed to achieving carbon neutrality by 2024, which we have realised in 2021 by offsetting our 2020 emissions in our S4 forest. We have planted over 265,000 trees and will officially offset our emission for 2021 in 2022 through certified forest preservation projects. These actions are taken in response to the World Economic Forum 2020 Davos Manifesto. We are 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 across the whole Company, not for individual offices, by 2023.

 

In 2021, we strengthened changes in our hiring and educational policies in relation to diversity, equity, and inclusion. We have continued to closely track our numbers and included the option for our people of not declaring gender or race for the first time in 2021. As a result our diversity numbers changed slightly compared to 2020 in the United States - 32% People of Colour and 16% undeclared vs 40% People of Colour and 60% White in 2020. We also increased our Black representation, from 5% to 6.5%, which, though an improvement, still shows significant under-representation of the communities we work in. In California, our percentage is somewhat representative, but nationally, where the proportion is 13% and in New York, where it is 24%, it is not acceptable. We have also hired our second year flight of Fellows (and Fellowesses) for the S4 Programme, who exclusively come from Historically Black Colleges and Universities in the United States. The Class of 2021 is developing very well and about to start new assignments, some of them international. This is a four-year, multi-practice programme, that will in the future extend recruitment beyond the borders of the United States. We have also started to recruit in US High Schools, starting with two, one public and one charter in New York. With regard to gender diversity, our relative ratio has also improved, with 43% women globally, 13% undeclared and 44% men (compared to 45% women and 55% men in 2020). Our second edition of the S4Women Leadership Programme has just launched. While the inaugural programme was on-line and hosted over 50 global leaders from across the firm, in 2022 the program will run in person, in May, at UC Berkeley, and will feature 30 of our global women leaders. Finally, the most important step we have taken towards keeping diversity efforts front and centre of our everyday practices has been to hire James Nicholas Kinney as our global Chief Diversity Officer. His main task is leading our recruiting efforts, so we can discover and attract the candidates that represent our communities.

 

Across S4Capital we donated 1,460 hours to Community and Charity services and we continue 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 and aimed to create positive impact. In 2021 we raised our number of Projects for Good from 41 to 251.

 

As regards Governance, we continue to try to enhance the capabilities of the Board with the addition of more diverse talent to add to the existing, four female and four male Non-Executive Directors based in the Americas, EMEA and Asia Pacific and will strengthen the Audit Committee given the unacceptable delay in reporting these results.. We continue to review the recommendations of Lord Hill's Report to the UK's Chancellor of the Exchequer that provides a possible pathway to a premium UK listing and the possibilities of a US listing, where market valuations for comparators are higher.

 

Outlook and current trading

All-in-all, we continued to fire on almost all cylinders in 2021, with like-for-like revenue and gross profit/net revenue up 52.4% and 43.7%, two-year simple stacks for gross profit/net revenue up 63% and three year up over 100%, the one feature we would have liked to improve on being the Operational EBITDA margin, which was impacted by the significant investment required to bed down our growth. Pro-forma revenue and gross profit/net revenue growth were 53.8% and 45.7% and a pro-forma operational EBITDA margin was 18.6%, after central costs. Strong performance is planned to continue into 2022, with budgets and plans targeting strong revenue, gross profit/net revenue growth and improving operational EBITDA margin and the three-year plan for 2022-24 aiming for a doubling of the group organically, excluding combinations and EBITDA margins returning to previous levels. January and February 2022 gross profit/net revenue growth was ahead of guidance. Mary Basterfield, our new Chief Financial Officer, who took over the role at January 3rd 2022, has had an immediate number of challenges to deal with, but has responded strongly, already adding new positions at the S4 Capital level in the financial control, treasury, risk and governance functions and in the Content practice. More resources will be added across all three practices in short order, so as to try to ensure that delays in producing our figures do not reoccur.

 

There is no doubt that covid-19 has had a devastating impact on the global economy and society over the last two years. 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 company, nor rely in any significant way on government support or funding. Our Content practice, now representing about two-thirds of our business pivoted very quickly to robotic production and animation and from orchestrating live events to virtual ones. We, therefore, created significant new content revenue streams very quickly, with like-for-like gross profit/net revenue growth of 19.4% in 2020 and 43.7% in 2021, a two year simple growth stack of 63% and three year over 100%, whilst the analogue advertising and marketing services industry struggled to find low single digit two- and three-year simple stack of around 3%. There was steady progression in the Content and Data&digital media practices with gross profit/net revenue organic growth rates relatively even across the year, although Data&digital media had a slightly stronger first half. Technology services made a blockbuster start as it was included for the first time in the fourth quarter.

 

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, despite recent gyrations. 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 2022 continue to be to greater client conversion at scale and achieving our 202 objective as rapidly as possible; to integrate our three practices even more effectively; to continue to strengthen our diversity, equity and inclusion and climate change achievements; to continue to broaden and deepen our service capability through further combinations; and finally, of course, to try to ensure we never experience an unacceptable delay in our results again.

 

 

Best wishes,

 

 

Sir Martin Sorrell

Executive Chairman

 

 

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 by integrating leading businesses in three practice areas: Content, Data&digital media and Technology services, 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 2021 digital accounted for over 60% (for the first time) or $400-450 billion of total global advertising spend of $680-700 billion (excluding over $500 billion of trade promotion marketing, the primary target of the Amazon advertising platform) and projects that by 2025 total global advertising spend will expand to $975 billion and digital's share will grow to approximately 70%, accelerated by the impact of covid-19. In fact 97% of the projected growth in Advertising spend between 2021 and 2025 will come from Digital. Global spend on Digital Transformation (the primary addressable market for Technology Services) is growing at 21% CAGR and projected to be $879bn by 2025.

 

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

 

Since then, MediaMonks and MightyHive combined with more than 25 companies across Content, Data&digital media and Technology services. For a full list, please see the S4Capital website.

 

In August 2021, S4Capital launched its unitary brand by merging MediaMonks and MightyHive into Media.Monks, represented by a dynamic logo mark that features MightyHive's iconic hexagon. As the operational brand, Media.Monks underpins S4Capital's agility, digital knowledge and efficiency and is the next step in delivering on its foundational promise to unify Content, Data&digital media and Technology services.

 

Victor Knaap, Wesley ter Haar, Pete Kim, Christopher Martin, Mary Basterfield and Scott Spirit all joined the S4Capital Board as Executive Directors. The S4Capital Board also includes Rupert Faure Walker, Paul Roy, Daniel Pinto, Sue Prevezer, Elizabeth Buchanan, Naoko Okumoto, Margaret Ma Connolly, Miles Young and Peter Rademaker.

 

The Company now has over 8,400 people in 33 countries across the Americas, Europe, the Middle East and Africa and Asia-Pacific and a current market capitalisation of approximately £1.8 billion (c.$2 billion) and would rank in the FTSE 200. 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 £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 £11 billion, dropping into third place behind both Omnicom and Publicis for the first time ever. 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 2021

 

 

 

 

 

 

2021

2020

 

Notes

 

 

£'000

£'000

 

 

 

 

 

 

 

Revenue

 

6

 

 

686,601

342,687

Cost of sales

 

 

 

 

126,338

47,505

 

 

 

 

 

 

 

Gross profit

 

6

 

 

560,263

295,182

 

 

 

 

 

 

 

Personnel costs

 

 

 

 

412,537

205,135

Other operating expenses

 

 

 

 

49,829

30,561

Acquisition and set-up related expenses

 

 

 

 

83,496

14,338

Depreciation and amortisation

 

 

 

 

56,456

37,015

 

 

 

 

 

 

 

Total operating expenses

 

 

 

 

602,318

287,049

 

 

 

 

 

 

 

Operating (loss) / profit

 

 

 

 

(42,055)

8,133

 

 

 

 

 

 

 

Adjusted operating profit

 

 

 

 

 94,808

57,950

Adjusting items

 

7

 

 

 (136,863)

(49,817)

Operating (loss) / profit

 

 

 

 

 (42,055)

8,133

 

 

 

 

 

 

 

Finance income

 

 

 

 

1,032

698

Finance expenses

 

 

 

 

(13,283)

(5,735)

 

 

 

 

 

 

 

Net finance expenses

 

 

 

 

(12,251)

(5,037)

Loss on the net monetary position

 

 

 

 

(1,344)

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) / profit before income tax

 

 

 

 

(55,650)

3,096

 

 

 

 

 

 

 

Income tax expense

 

8

 

 

(1,065)

(7,025)

 

 

 

 

 

 

 

Loss for the year

 

 

 

 

(56,715)

(3,929)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to owners of the Company

 

 

 

(56,715)

(3,929)

Attributable to non-controlling interests

 

 

 

-

-

 

 

 

 

 

 

 

 

 

 

 

 

(56,715)

(3,929)

 

 

Loss per share is attributable to the ordinary equity holders of the Company

Loss per share (pence)

 

9

 

 

(10.3)

(0.8)

 

Diluted loss per share (pence)

 

9

 

 

(10.3)

(0.8)

 

 

 

 

 

 

Unaudited consolidated statement of comprehensive income

For the year ended 31 December 2021

 

 

 

 

 

2021

2020

 

 

 

 

£'000

£'000

 

 

 

 

 

 

 

Loss for the year

 

 

 

 

(56,715)

(3,929)

 

 

 

 

 

 

 

Other comprehensive (loss) / income

 

 

 

 

 

Items that may be reclassified to profit or loss

 

 

 

 

 

Foreign operations - foreign currency translation differences

 

 

 

(6,358)

2,905

 

 

 

 

 

 

 

Total other comprehensive (loss) / income

 

 

 

 

(6,358)

2,905

 

 

 

 

 

 

 

Total comprehensive loss for the year

 

 

 

 

(63,073)

(1,024)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to owners of the Company

 

 

 

(63,073)

(1,024)

Attributable to non-controlling interests

 

 

 

-

-

 

 

 

 

 

 

 

 

 

 

 

 

(63,073)

(1,024)

 

 

Unaudited consolidated balance sheet

as at 31 December 2021

 

 

 

 

 

2021

 

 

2020

Restated 1

 

Notes

 

 

£'000

£'000

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

  Intangible assets

 

10

 

 

980,915

801,066

  Right-of-use assets

 

 

 

 

36,608

26,830

  Property, plant and equipment

 

 

 

 

21,548

14,537

  Deferred tax assets

 

 

 

 

6,526

2,068

  Other receivables

 

 

 

 

3,185

2,125

 

 

 

 

 

 

 

 

 

 

 

 

1,048,782

846,626

Current assets

 

 

 

 

 

 

  Trade and other receivables

 

 

 

 

335,498

181,708

  Cash and cash equivalents

 

 

 

 

301,021

142,052

 

 

 

 

 

 

 

 

 

 

 

 

636,519

323,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

1,685,301

1,170,386

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

  Deferred tax liabilities

 

 

 

 

68,478

59,794

  Loans and borrowings

 

11

 

 

308,571

44,819

  Lease liabilities

 

 

 

 

31,423

20,860

  Contingent consideration

 

 

 

 

31,749

32,593

  Other payables

 

 

 

 

2,845

1,941

 

 

 

 

 

 

 

 

 

 

 

 

443,066

160,007

Current liabilities

 

 

 

 

 

 

  Trade and other payables

 

 

 

 

324,059

191,069

  Contingent consideration and holdback

 

 

 

 

86,370

37,330

  Loans and borrowings

 

11

 

 

2,523

45,623

  Lease liabilities

 

 

 

 

10,545

8,100

  Tax liabilities

 

 

 

 

17,500

12,480

 

 

 

 

 

 

 

 

 

 

 

 

440,997

294,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

884,063

454,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

801,238

715,777

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

  Share capital

 

 

 

 

138,827

135,516

  Reserves

 

 

 

 

662,311

580,161

 

 

 

 

 

 

 

Attributable to owners of the Company

 

 

 

 

801,138

715,677

  Non-controlling interests

 

 

 

 

100

100

 

 

 

 

 

 

 

Total equity

 

 

 

 

801,238

715,777

[1]Restated for the initial accounting for the business combinations of Decoded, Metric Theory, Orca Pacific and BrightBlue as required by IFRS 3. Details are disclosed in Note 10.

 

Company's registered number: 10476913
 

Unaudited consolidated statement of cash flows

For the year ended 31 December 2021

 

 

 

 

 

2021

2020

 

Notes

 

 

£'000

£'000

 

 

 

 

 

 

 

Cash flows from operations

 

12

 

 

68,496

72,428

  Income taxes paid

 

 

 

 

(13,874)

(10,758)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from operating activities

 

 

 

 

54,622

61,670

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

  Investments in intangible assets

10

 

 

(3,458)

(34)

  Investments in property, plant and equipment

 

 

 

(11,119)

(7,396)

  Acquisition of subsidiaries, net of cash acquired

 

 

 

(86,604)

(124,155)

  Tax paid as a result of acquisition

 

 

 

(5,116)

-

  Financial fixed assets

 

 

 

 

(323)

871

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

(106,620)

(130,714)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

  Proceeds from issuance of shares

 

 

 

 

1,143

113,386

  Additional borrowings during the year

 

11

 

 

342,994

45,622

  Payment of lease liabilities

 

 

 

 

(10,903)

(12,175)

  Repayments of loans and borrowings

 

11

 

 

(110,895)

-

  Transaction costs paid on borrowings

 

11

 

 

(8,379)

(244)

  Interest paid

 

11

 

 

(5,530)

(742)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

208,430

145,847

 

 

 

 

 

 

 

Net movement in cash and cash equivalents

 

 

 

156,432

76,803

  Cash and cash equivalents beginning of the year

 

 

 

142,052

66,106

  Exchange gain / (loss) on cash and cash equivalents

 

 

 

638

(857)

 

 

 

 

 

 

 

Cash and cash equivalents at 31 December

 

 

 

 

299,122[1]

142,052

 [1]Including bank overdrafts of £1.9 million. 

 

Unaudited consolidated statement of changes in equity

For the year ended 31 December 2021

Equity

Number of shares

Share  capital

Share premium

Merger reserves

Other reserves2

Foreign exchange reserves

Accumulated losses

Total

Non-controlling interests

Total  equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2020

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

 

 

 

 

 

 

 

 

 

 

  Loss 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

 

 

 

 

 

 

 

 

 

 

 

Balance as previously reported

542,065,458

135,516

364,195

205,717

27,041

(15,845)

(3,181)

713,443

100

713,543

Restatement1

-

-

-

-

2,234

-

-

2,234

 

2,234

Balance as at 31 December 2020

542,065,458

135,516

364,195

205,717

29,275

(15,845)

(3,181)

715,677

100

715,777

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss for the year

 

 

 

 

 

 

 

 

 

 

  Loss for the year

-

-

-

-

-

 

(56,715)

(56,715)

-

(56,715)

  Foreign currency translation differences

-

-

-

-

-

(6,358)

-

(6,358)

-

(6,358)

  Hyperinflation revaluation

-

-

-

-

1,633

-

-

1,633

-

1,633

Total comprehensive loss for the year

-

-

-

-

1,633

(6,358)

(56,715)

(61,440)

-

(61,440)

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners of the Company

 

 

 

 

 

 

 

 

 

 

  Issue of Ordinary Shares

-

-

-

-

-

-

-

-

-

-

  Business combinations

13,242,114

3,311

82,715

-

45,856

-

-

131,882

-

131,882

  Employee share schemes

-

-

-

-

(110)

-

15,129

15,019

-

15,019

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2021

555,307,572

138,827

446,910

205,717

76,654

(22,203)

(44,767)

801,138

100

801,238

Notes:

1.  Restated deferred equity consideration for the business combination of Decoded as required by IFRS 3 . Details are disclosed in Note 10.

2.  Other reserves include the deferred equity consideration of £77.0 million, made up of the following: Decoded for £47.9 million, Raccoon for £16.8 million, Cashmere for £6.9 million and Zemoga £5.4 million (2020: £28.9 million), the treasury shares issued in the name of S4Capital Group to an employee benefit trust for the amount of £2.5 million (2020: £ 3.8 million), and hyperinflation impact in Argentina of £1.6m (2020: nil).

1. 

 

Notes to the unaudited consolidated financial statements

For the year ended 31 December 2021

 

1.  General information

S4 Capital Plc ( ' S4 Capital ' or ' Company ' ) is a public limited company 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 consolidated financial statements represent the results of the Company and its subsidiaries (together referred to as ' S4 Capital Group ' or the ' Group ' ). An overview of the subsidiaries is provided in note 14 on page 128 of the Annual Report and Accounts 2020 and note 4 for the combinations made during the year.

 

S4Capital Group is a new age/new era digital advertising and marketing services company.

 

2.  Basis of preparation

A.  Statement of compliance

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. S4 Capital transitioned to UK-adopted International Accounting Standards in its company financial statements on 1 January 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.

 

The financial statements of S4Capital plc have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2021. The statutory accounts for 2021 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.

 

B.  Functional and presentation currency

The unaudited consolidated financial statements are presented in Pound Sterling (£ or GBP), the Company ' s functional

currency. All financial information in Pound Sterling has been rounded to the nearest thousand unless otherwise indicated.

 

3.  Significant accounting policies

The unaudited consolidated financial statements have been prepared on a consistent basis with the accounting policies of the Group which were set out on pages 105 to 114 of the Annual Report and Accounts 2020. No changes have been made to the Group's accounting policies in the year ended 31 December 2021.

 

Certain new accounting standards and interpretations have been published that are not mandatory for the 31 December reporting periods and have not yet 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. Amendments to IFRS effective in the year do not have a material effect on the Group's financial statements.

 

4.  Critical accounting estimates and judgements

The critical accounting estimates and judgments will be included in the Annual Report and Accounts 2021. These are consistent with those described in the Annual Report and Accounts 2020, which were set out on pages 106 and 107, with the addition of revenue recognition for fixed fee contracts where revenue is recognised over time.

 

5.  Statutory information

The unaudited consolidated financial statements for the year ended 31 December 2021 and the financial information for the year ended 31 December 2021 do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2020 have been delivered to the Registrar of Companies and received an unqualified auditors' report, did not include a reference to any matters to which the auditors drew attention by way of an emphasis of matter and did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006.

 

 

 

 

 

6.  Operating segments

 

A.  Revenue from operations

 

 

 

 

 

Year ended  31 Dec 2021

Year ended 31 Dec 2020

 

 

 

 

£'00 0

£'0 0 0

 

 

 

 

 

 

 

Services

 

 

 

 

686,601

342,687

 

 

 

 

 

 

 

Total

 

 

 

 

686,601

342,687

 

 

B.  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 Board of Directors of S⁴Capital Group.

 

During the year, S⁴Capital Group has been active in three 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.

// Technology Services: digital transformation services in delivering advanced digital product design, engineering services and delivery services.

 

The customers are primarily businesses across technology, FMCG and media & entertainment. Any intersegment transactions are based on commercial terms.

 

The Board of Directors 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:

 

 

2021

 

 

Content Practice

Data & Digital media

Technology Services

Total

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

Gross profit

 

 

385,552

167,079

7,632

560,263

 

 

 

 

 

 

 

 

 

Segment profit 1

 

 

52,286

55,024

3,087

110,397

 

 

 

 

 

 

 

 

 

Overhead costs

 

 

 

 

 

(9,410)

 

Adjusted non-recurring and acquisition related expenses

 

 

 

 

(97,372)

 

 

 

 

 

 

(45,670)

 

 

 

 

 

 

(13,595)

 

 

 

 

 

 

 

 

 

Loss before income tax

 

 

 

 

 

(55,650)

 

 

1 Including £ 10.8 million depreciation on right-of-use assets

2 Excluding £ 10.8 million depreciation on right-of-use assets

2020

 

 

 

Content

Data & Digital media

Total

 

 

 

£'000

£'000

£'000

 

 

 

 

 

 

 

Gross profit

 

 

 

220,497

74,685

295,182

 

 

 

 

 

 

 

Segment profit1

 

 

 

46,687

21,603

68,290

 

 

 

 

 

 

 

Overhead costs

 

 

 

 

 

(6,112)

Adjusted non-recurring and acquisition related expenses

 

 

 

 

(26,669)

Depreciation2 and amortisation

 

 

 

 

 

(27,376)

Net finance expenses

 

 

 

 

 

(5,037)

 

 

 

 

 

 

 

Profit before income tax

 

 

 

 

 

3,096

 

1 Including £ 9.6 million depreciation on right-of-use assets

2 Excluding £ 9.6 million depreciation on right-of-use assets

 

The Board of S4Capital Group use gross profit rather than revenue to manage the Company due to the fluctuating amounts of third-party costs and/or pass-through expenses, which form part of revenue. The revenue amounted to £686.6 million, 75% from Content Practice, 24% from Data & Digital media and 1% from Technology Services. In 2020 the revenue amounted to £342.7 million, 78% from Content Practice and 22% from Data & Digital media.

 

No analysis of the assets and liabilities of each operating segment is provided to the chief operating decision maker ("CODM") in the monthly management accounts; therefore, no measure of segmental assets or liabilities is disclosed in this Note.

 

 

7.  Adjusted items

S⁴Capital 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 adjusted to an allow a clearer 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 £136.9 million for the financial year ended 31 December 2021 (for the financial year ended 31 December 2020: £49.8 million). The tables below provide a reconciliation of the Group's reported statutory earnings measures to its adjusted measures.

 

January to December 2021

 

Reported

Amortisation1

Acquisition and set-up related expenses2

Share based compensation

Adjusted

 

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) / profit

(42,055)

39,491

83,496

13,876

94,808

Net finance expenses and loss on net monetary position

(13,595)

-

-

-

(13,595)

 

 

 

 

 

 

 

(Loss) / profit before income tax

(55,650)

39,491

83,496

13,876

81,213

Income tax expense

(1,065)

(6,941)

(1,426)

-

(9,432)

 

 

 

 

 

 

 

(Loss) / profit for the year

 

(56,715)

32,550

82,070

13,876

71,781

1  Amortisation relates to the amortisation of intangible assets recognised as a result of the acquisitions.

2 Acquisition and set-up related expenses relate to acquisition related advisory fees of £ 10.5 million, bonuses of £ 0.8 million, contingent consideration as remuneration of £70.5 million (out of which £10.0 million is cash) and remeasurement loss on contingent considerations of   £ 1.7 million.

 

January to December 2020

 

Reported

Amortisation1

Acquisition and set-up related expenses2

Share based compensation

Adjusted

 

£'000

£'000

£'000

£'000

£'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 credit / (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 intangible assets recognised as a result of the acquisitions.

2 Acquisition and set-up related expenses relate to acquisition related bonuses of £2.2 million, transaction related advisory fees of £13.6 million and a remeasurement gain on contingent consideration of £1.5 million.

 

 

 

 

8.  Income tax expense

The corporate income tax charge comprises the following:

 

 

 

 

 

2021

2020

 

 

 

 

£'000

£'000

 

 

 

 

 

 

 

Current tax for the year

 

 

 

(12,638)

(12,970)

Adjustments for current tax of prior years

 

 

 

620

(203)

 

 

 

 

 

 

 

Total current tax

 

 

 

(12,018)

(13,173)

Movement in deferred tax liabilities

 

 

 

6,594

5,699

Movement in deferred tax assets

 

 

 

4,359

449

 

 

 

 

 

 

 

Income tax expense in profit or loss

 

 

 

(1,065)

(7,025)

 

 

 

 

 

 

 

2021

2020

 

 

 

 

£'000

£'000

 

 

 

 

 

 

 

Income (Loss) before income taxes

 

 

 

(55,650)

3,098

 

 

 

 

 

 

 

Tax credit at the UK rate of 19% (2020:19%)

 

 

 

10,574

(589)

Tax effect of amounts which are non-deductible (taxable)

 

 

 

(12,840)

(4,245)

Differences in overseas tax rates

 

 

 

581

(1,988)

Adjustment for current taxes of prior years

 

 

 

620

(203)

 

 

 

 

 

 

 

Income tax expense in profit or loss

 

 

 

 

(1,065)

(7,025)

 

 

9.  Earnings per share

 

 

 

 

 

2021

2020

 

 

 

 

 

 

 

Loss attributable to shareowners of the Company (£'000)

 

 

 

(56,715)

(3,929)

Weighted average number of ordinary shares

 

 

 

551,752,618

493,290,974

 

 

 

 

 

 

 

Basic loss per share (pence)

 

 

 

 

(10.3)

(0.8)

 

 

 

 

 

 

 

Diluted loss per share (pence)

 

 

 

 

(10.3)

(0.8)

 

Earnings per share is calculated by dividing the net result attributable to the shareowners of the S4Capital Group by the weighted average number of Ordinary Shares in issue during the year.

 

 

10. Intangible assets

 

 

Goodwill

Customer relationships

Brands

Order Backlog

Other

Total

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Net book value at 1 January 2020

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 as previously reported

559,922

218,340

13,678

1,201

5,988

799,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restatement1

(61,809)

56,537

1,758

2,989

2,462

1,937

Net book value at 31 December 2020

498,113

274,877

15,436

4,190

8,450

801,066

 

 

 

 

 

 

 

Acquired through business combinations

134,975

86,552

2,804

3,547

829

228,707

Addition

-

-

-

-

3,458

3,458

Amortisation charge for the year

-

(26,762)

(3,312)

(6,380)

(3,037)

(39,491)

Foreign exchange differences

(8,462)

(3,790)

(431)

(28)

(114)

(12,825)

 

 

 

 

 

 

 

Total transactions during the year

126,513

56,000

(939)

(2,861)

1,136

179,849

 

 

 

 

 

 

 

Cost

624,626

  389,040

20,883

14,987

15,203

1,064,739

Accumulated amortisation

-

(58,163)

(6,386)

(13,658)

(5,617)

(83,824)

 

 

 

 

 

 

 

Net book value at 31 December 2021

624,626

330,877

14,497

1,329

9,586

980,915

 

 

 

 

 

 

 

1 Restated for the initial accounting for the business combinations of Decoded, and Metric Theory (completed and control passed on 31 December 2020) as required by IFRS 3.

 

A.  Acquistions 2021

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill of the subsidiaries acquired in the financial year 2021 are as follows:

 

Jam3

Raccoon

Cashmere

Zemoga

Others

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

Intangible assets - Customer relationships

20,713

14,907

17,703

26,053

7,176

86,552

 

Intangible assets - Brand names

573

553

535

638

505

2,804

 

Intangible assets - Order Backlog

1,243

-

466

1,252

586

3,547

 

Intangible assets - Software

661

168

-

-

-

829

 

Property, plant and equipment and ROU assets

832

1,175

2,670

954

3,218

8,849

 

Cash and cash equivalents

3,233

546

8,611

1,393

2,056

15,839

 

Trade and other receivables

4,513

3,719

2,885

4,874

4,927

20,918

 

Other non-current assets

38

9

145

369

142

703

 

Trade and other payables

(3,871)

(695)

(8,629)

(4,003)

(4,699)

(21,897)

 

Current taxation

(6,550)

(865)

(322)

(37)

(665)

(8,439)

 

Lease liabilities

(461)

(684)

(2,697)

(125)

(2,387)

(6,354)

 

Other non-current liabilities

-

(25)

-

(792)

(1,471)

(2,288)

 

Deferred taxation

(1,178)

-

(5,237)

(7,790)

(2,132)

(16,337)

 

 

 

 

 

 

 

 

 

Net assets

19,746

18,808

16,130

22,786

7,256

84,726

 

Goodwill

18,564

14,955

29,308

41,069

31,079

134,975

 

 

 

 

 

 

 

 

 

Total purchase consideration

38,310

33,763

45,438

63,855

38,335

219,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment in kind (common stock)

16,176

-

16,647

12,509

10,904

56,236

 

Cash

10,785

16,862

19,843

16,216

13,498

77,204

 

Deferred consideration

-

16,834

6,156

5,454

-

28,444

 

Contingent consideration

 11,349

 67

 2,792

 29,676

 13,933

 57,817

 

 

 

 

 

 

 

 

 

Total purchase consideration

38,310

33,763

45,438

63,855

38,335

219,701

 

 

 

 

 

 

 

 

 

Cash purchase consideration

10,785

16,862

19,843

16,216

13,498

77,204

 

Cash and cash equivalents

3,233

546

8,611

1,393

2,056

15,839

 

 

 

 

 

 

 

 

 

Cash outflow on acquisition (net of cash acquired)

7,552

16,316

11,232

14,823

11,442

61,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                  

 

With all business combinations 100% of the voting equity interest has been acquired. In 2021, S4Capital Group combined with the following businesses:

 

Content Practice

Jam3

On 25 March 2021, S4Capital plc announced (completed and control passed on 4 May 2021) the combination of MediaMonks with Jam3, a Toronto-based design and experience agency, for a total consideration of £38.3 million. Since the acquisition date, Jam3 contributed £19.9 million to the Group's revenue and £2.7 million of profit for the year ended 31 December 2021.

 

Cashmere

On 3 September 2021, S4Capital plc announced (completed and control passed on 3 September 2021) the combination of Media.Monks with Cashmere, an iconic and creative marketing agency based in Los Angeles, for a total consideration of £45.4 million. Since the acquisition date, Cashmere contributed £13.5 million to the Group's revenue and £0.9 million of profit for the year ended 31 December 2021. Once the opening balance sheet is finalized the purchase price allocation can be concluded and therefore the calculated goodwill is provisional. During the measurement period in 2022, S4Capital plc will obtain the information necessary to identify and measure the assets and liabilities and retrospectively adjust the provisional amounts recognised at the acquisition date.

 

Other Content Practice

Other combinations in 2021 of the Group's Content Practice are:

// On 11 January 2021, S4Capital plc announced the combination with Tomorrow, an award-winning Shanghai-based creative

agency.

// On 20 January 2021, S4Capital Plc announced the combination with Staud Studios, a German high-end creative production studio specializing in the automotive industry.

// On 15 November 2021, S4Capital Plc announced the combination with Miyagi, a leading creative content marketing agency, integrating strategy, creativity and production, further expending its content practice into Italy Europe.

 

The total consideration for the above three transactions all due to contingent are expected to be approximately £20.2 million. These acquisitions contributed £11 million revenue and £1.9 million profit.

 

 

Data & digital media practice

Raccoon

On 26 May 2021, S4Capital plc announced (completed and control passed on 26 May 2021) the combination of its Data & digital media practice with Raccoon Group, a leading digital performance agency in Brazil, for total consideration of £33.8 million. Since the acquisition date, Raccoon Group contributed £11.8 million to the Group's revenue and £4.3 million of profit for the year ended 31 December 2021. Once the opening balance sheet is finalized the purchase price allocation can be concluded and therefore the calculated goodwill is provisional. During the measurement period in 2022, S4Capital Group will obtain the information necessary to identify and measure the assets and liabilities and retrospectively adjust the provisional amounts recognised at the acquisition date.

 

Other Data & digital media practice

Other combinations in 2021 of the Group's Data & digital media practice are:

 

// On 1 February 2021, S4Capital Plc announced that MightyHive has acquired the assets of Datalicious, a leading Google Marketing Platform, Google Cloud and Google Analytics partner in Asia Pacific.

//On 29 July 2021, S4Capital Plc announced the combination with Salesforce specialist Destined expanding its data and digital media practice in Asia Pacific.

//On 1 December 2021, S4Capital Plc announced the combination with Maverick Digital, a leader in digital transformation strategy, Salesforce platform implementation, integration strategy & execution and managed services.

 

The total consideration for the above three transactions is expected to be approximately £18.1 million. These acquisitions contributed £2.7 million revenue and £0.1 million profit.

 

 

Technology services practice

Zemoga

On 17 September 2021, S4Capital plc announced (completed and control passed on 15 September 2021) the combination of Media.Monks with Zemoga, a US-based leading digital transformation services firm specialising in providing product design, engineering and delivery services to enterprise clients across multiple verticals, for a total consideration of £63.9 million. Since the acquisition date, Zemoga contributed £7.8 million to the Group's revenue and £2.4 million of profit for the year ended 31 December 2021. Once the opening balance sheet is finalized the purchase price allocation can be concluded and therefore the calculated goodwill is provisional. During the measurement period in 2022, S4Capital Group will obtain the information necessary to identify and measure the assets and liabilities and retrospectively adjust the provisional amounts recognised at the acquisition date.

 

Goodwill and other disclosures

The goodwill represents the potential growth opportunities and synergy effects from the acquisitions. 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 gross contractual amounts receivable of the acquired companies at the acquisition date are £14.7 million and the best estimate at the acquisition date of the contractual cash flows not expected to be collected is £0.4 million. At the end of the reporting period the purchase price allocations for Tomorrow, Staud, Jam3,  Raccoon, Destined, Cashmere, Zemoga, Miyagi and Maverick have not been fully finalised and therefore the assets and liabilities remain provisional. During the remaining measurement period in 2022, S4Capital Group will obtain the information necessary to identify and measure the assets and liabilities and retrospectively adjust the provisional amounts recognized at the acquisition date.

 

Contingent consideration arising from business combinations is fair valued, with key inputs including the probability of success of the combinations achieving target, consideration of potential delays and the expected levels of future revenues. The contingent consideration is contingent on the acquired companies achieving their 2021 results and, in some cases their 2022 and 2023 results, as forecasted upon acquiring the subsidiary. The contingent considerations are included for the maximum amount of the consideration expected to be paid which is in line with management's estimate of expected pay-out. Contingent consideration classified as a liability is subject to remeasurement at each reporting date until its ultimate settlement date. Deferred considerations are commonly expected to be paid on the second-year anniversary of the acquisition date. Holdbacks as part of the purchase consideration are generally held in escrow accounts and are expected to be released within two years of the acquisition date. Any change in the fair value of the liability due to events that occur after the acquisition date would be recognized in the profit or loss. The contingent consideration and holdback liabilities of £118.1 million as at 31 Dec 2021 includes £67.9 million of employment linked consideration and £16.8 million of holdbacks. During 2021, an amount of £25.2 million of contingent consideration and holdback have been paid.

 

The total acquisition costs of £8.1 million (2020: £10.8 million) have been recognised under acquisition and set-up related expenses in the statement of profit or loss. 

 

Since the acquisition date, the acquired companies contributed £66.7 million (Jam3 £19.9 million, Raccoon £11.8 million, Cashmere 13.5 million, Zemoga £7.8 million and the others £13.7 million) to the Group's revenue and £12.3 million (Jam3 2.7 million, Raccoon £4.3 million, Cashmere £0.9 million, Zemoga £2.4 million and the others £2.0 million) into the Group's profit for the year ended 31 December 2021.

 

If the acquisitions had occurred on 1 January 2021, the Group's revenue would have been £740.2 million and the Group's loss for the year would have been £98.1 million.

 

B. Restatements

 

As stated on page 116 of the Group's 2020 annual report and accounts, the initial accounting for the business combinations of Decoded, Metric Theory, BrightBlue and Orca Pacific, acquired as of 31 December 2020, was incomplete by the end of the reporting period ending 31 December 2020. At the end of the reporting period, the identifiable intangibles acquired were not identified, were consequently not measured and were therefore not deducted from goodwill as at 31 December 2020.

 

During the reporting period ended 31 December 2021, S4Capital Group has obtained the information necessary to identify and measure the identifiable intangible assets for the business combinations of Decoded Advertising, Metric Theory, BrightBlue and Orca Pacific and has adjusted its intangible assets, deferred tax liabilities and reserves as of 31 December 2020, as required by IFRS 3, as follows:

 

 

 

11. Loans and borrowings

 

 

Loans and borrowings

 

Bank loans

Senior secured term loan B (TLB)

Transaction costs

 

Loan interest

Total

 

£'000

£'000

£'000

 

£'000

 

 

 

 

 

 

 

Balance at 1 January 2020

 

43,215

-

(841)

-

42.374

 

 

 

 

 

 

 

Additions

 

45,623

-

(244)

-

45,379

Acquired through business combinations

 

1,958

-

-

-

1,958

Repayments

 

-

-

-

-

-

Charged to profit-or-loss

 

-

-

286

-

286

Exchange rate differences

 

489

-

(45)

-

444

 

 

 

 

 

 

 

Total transactions during the year

 

48,070

-

(3)

-

48,067

 

 

 

 

 

 

 

Principal amount

 

93,083

-

(1,442)

-

91,641

Accumulated repayments

 

(1,798)

-

-

-

 (1,798)

Accumulated charges to profit or loss

 

-

-

598

-

598

 

 

 

 

 

 

 

Balance at 31 December 2020

 

91,285

-

(844)

-

90,441

 

 

 

 

 

 

 

Additions

 

24,632

318,938

(8,379)

-

335,191

Acquired through business combinations

 

2,760

-

-

-

2,760

Waived loans

 

(1,592)

-

-

-

(1,592)

Repayments

 

(110,895)

-

-

(5,530)

(116,425)

Charged to profit-or-loss

 

-

-

1,283

6,169

7,452

Exchange rate differences

 

(2,864)

(3,833)

(21)

(15)

(6,733)

 

 

 

 

 

 

 

Total transactions during the year

 

(87,959)

315,105

(7,117)

624

220,653

 

 

 

 

 

 

 

Principal amount

 

117,308

315,105

(9,789)

-

422,624

Accumulated repayments

 

(112,390)

-

-

(5,488)

(117,878)

Accumulated charges to profit-or-loss

 

(1,592)

-

1,828

6,112

6,348

 

 

 

 

 

 

 

Balance at 31 December 2021

 

3,326

315,105

(7,961)

624

311,094

Repayment obligations coming year

 

1,899

-

-

624

2,523

 

 

 

 

 

 

 

Long-term balance as at 31 December 2021

 

1,427

315,105

(7,961)

-

308,571

 

 

 

A.  New facility agreement

On 6 August 2021, S4 Capital Group signed a new facility agreement, consisting of a Term Loan B (TLB) of EUR 375 million and a multicurrency Revolving Credit Facility (RCF) of £100 million. During 2021 the RCF remained fully undrawn. The interest on the facilities is the aggregate of the variable interest rate (EURIBOR, LIBOR or, in relation to any loan in GBP, SONIA) and a margin based on leverage (between 2.25% and 3.75%). The duration of the facility agreement is seven years in relation to the TLB, therefore the termination date is August 2028, and five years in relation to the RCF, therefore the termination date is August 2026.

During the reporting period, the average carried interest rate of the outstanding loans amounts 2.96% (2020: 1.42%) The average effective interest rate for the outstanding loans is 2.93% (2020: 1.38%) and during the period interest expense of £ 6.2 million was recognised on a monthly basis.

 

 

 

B.  Prepayment of previous facilities

On 9 August 2021, S4 Capital Group has prepaid its previous facilities, consisting of a EUR 25.0 million term loan, USD 28.9 million term loan, a multicurrency Revolving Credit Facility (RCF) of EUR 35 million, which was fully drawn at the end of the prior reporting period, and a multicurrency Revolving Credit Facility (RCF) of EUR 43.5 million, which was fully drawn at the end of the prior reporting period. The repayments of these facilities amounted to £110.6 million. The capitalized transactions costs for these repaid facilities, which amounted £1.0 million on 9 August 2021 were charged to profit-or-loss.

 

The new facility agreement imposes certain covenants on the Group. The loan agreement states that (subject to certain exceptions) S4 Capital Group will not provide any other security over its assets and receivables and will ensure that the net debt will not exceed 4.50:1 of the proforma earnings before interest, tax, depreciation and amortisation, measured at the end of any relevant period of 12 months ending each semi-annual date in a financial year.

 

During the year S4 Capital Group complied with the covenants set in the loan agreement.

 

 

12. Cashflow from operations

 

 

 

 

2021

 

2020

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

  (Loss)/ profit before income tax

 

 

 

(55,650)

 

3,096

  Financial income and expenses

 

 

 

12,251

 

5,038

  Depreciation and amortisation

 

 

 

56,456

 

37,015

  Share based compensation

 

 

 

13,876

 

12,331

 

 

 

 

 

 

 

  Acquisition and set-up related expenses

 

 

83,496

 

14,338

 

  Contingent consideration paid1

 

 

(9,985)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

73,511

 

14,338

  Loss on the net monetary position

 

 

 

1,344

 

-

  Increase in trade and other receivables

 

 

 

(131,662)

 

(29,282)

  Increase in trade and other payables

 

 

 

98,370

 

29,892

 

 

 

 

 

 

 

Cash flows from operations

 

 

 

68,496

 

72,428

1 Contingent consideration tied to employment is deemed remuneration expenses according to IFRS 3.

 

 

13. Events occurring after the reporting period

On 12 January 2022, S4Capital plc announced that 4 Mile Analytics, a California-based full-service data consultancy specializing in custom data experience powered by the Looker platform, combined with Media.Monks. The combination significantly expands Media.Monks' capabilities of its Data&Digital media practice. The merger augments its global analytics capabilities and expands its client base. 4 Mile Analytics is a leader in data analytics, data engineering, data governance, software engineering, UX design and project & product management.

 
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