S4 Capital has posted a 35% rise in like-for-like revenues to £122m for the first three months of 2021, with comparable gross profits up 33% to £104m.
The business, founded by former WPP boss Sir Martin Sorrell, has upped its sales and earnings outlook for the year, saying it is now expecting 30% like-for-like revenue and gross profit growth this year, up from 25% previously.
The Media Monks owner has credited the acceleration of digital advertising, a “frenetic” new business market and investments in first-party data for its robust financial performance.
S4 Capital in numbers
S4 reported revenue of £122m for the first quarter, up 35% on a like-for-like basis, directly contributing to a 33% boost to reported gross profits which stood at £104m.
The strong set of figures represent an acceleration from the equivalent statistics reported in the last quarter of 2020 when like-for-like gross profit grew 27% - a significant increase in itself from the 19% reported in the first quarter of 2020.
S4 has been buoyed by the addition of 'Whopper' clients Mondelez and BMW to its roster, both of which are positively impacting profits.
Sorrell is already teasing a further five outsize rabbits up his expansive sleeves for the year ahead as S4's executive chairman bullishly predicts a bumper 2021 with a handful of further big brands joining the portfolio by year's end.
A busy start to the year means the group is on track to meet its target of doubling its size on a like-for-like basis by 2023.
S4 will be further propelled by the rising tide of an expected global economic recovery with a strong rebound in GDP expected to feed through to 20% per annum growth in digital advertising in a shift given legs by the pandemic.
Flush with this success S4 will now pencil in even more ambitious targets of 30% like-for-like and gross profit growth - up from 25% previously.
What’s driving S4’s growth
Double-digit returns were reported across the board with like-for-like revenues up 30% in the Americas, 44% in Europe, the Middle East and Africa and 34% across the Asia Pacific region.
An outsize slice of this growth was returned by the group's content marketing practice, which now accounts for 72% of total gross profit after jumping a further 31%.
The remaining 28% is accounted for by the group's data & digital media practice, which increased its profits by 36%.
Lauding the results Sorrell said: “We feel very optimistic about our company and its prospects. Clients are focused on taking back control of their marketing functions, which favors our in-house, embedded or even outsourced capabilities.”
Citing 'frenetic' new business activity S4 is pitching further growth as part of its pivot to digital, encouraged by a healthy pipeline of work that is significantly above levels recorded last year.
This will be built on a significantly larger base following a spate of merger and acquisition activity spearheaded by S4, including its acquisition of Shanghai-based creative agency Tomorrow and the merger of MediaMonks with Firewood.
Sorrell anticipates further growth accruing from privacy decisions by Apple and Google which have undermined third-party cookies while playing to S4's strengths in data and analytics.
"As a result, the marketing VIX index (if there was one) has spiked, creating significant additional demand for our data & analytics and digital content and media expertise,” Sorrell added.
‘Chickens could come home to roost’ in 2023
S4's global growth trajectory is now expected to jump further into positive territory, rising by 6% in 2021 and a further 5% in 2022, recovering from losses in 2020.
Casting his eyes further ahead, Sorrell warns that 'chickens may well come home to roost in 2023' for the advertising sector as the herculean task of paying down mammoth debt mountains weighs on most nations.
Ending on an upbeat note, however, Sorrell concludes: "But, digital marketing expenditure remains robust, even in a recession, as our results last year demonstrate, given its secular growth trend."
Sorrell is also engaged in a battle to obtain hundreds of thousands of pounds in share awards owed by his former employer after WPP suspended payments citing allegations that Sorrell leaked "confidential information" to the media following his departure from the advertising business he founded. Sorrell has blasted the "petty move" and described WPP's actions as "nonsense".