Sir Martin Sorrell’s S4 Capital has half a billion pounds of ‘fire power’ to pursue more business mergers, the former WPP chief’s digital marketing group has announced alongside his first quarter results.
S4, the holding company behind MediaMonks and MightyHive, announced a 71% increase in organic revenue (reported as “gross profit”) to £ 104million ($ 144million) for the first three months of 2021. This is a 33% increase at constant scope.
The two-year-old company, formed by Executive Chairman Sorrell after his acrimonious exit from WPP in 2018, is now aiming for “even stronger” growth this year as the global economy rebounds from the Covid-19 pandemic.
S4 is targeting 30% organic revenue growth this year, compared to a previous target of 25%. In 2020, the company posted Organic revenue growth of 19.4% to £ 295m.
The company attributed its growth to two “whopper” account gains that began to impact its balance sheet in March. S4 didn’t say today which brands it was, but last year MightyHive won T-Mobile’s internal digital media account and MediaMonks has recovered the pan-European account of BMW / Mini.
Earlier this year, Sorrell said S4 had five other “whoppers” who were “secure or in sight”. The company has a “20 squared” goal, which is to have 20 customers who each generate more than $ 20 million in revenue per year.
She is also keen to explore other “merger opportunities,” the company announced today, particularly in “high-growth functional areas of content and data and digital marketing practices.” Sorrell previously explained how S4 takeover targets should be viewed as ‘mergers’ rather than ‘acquisitions’.
“We are prepared to leverage the business at approximately twice EBITDA and are preparing a bond issue to lock in our long-term debt capacity at attractive rates,” the company statement said.
“This, combined with the available liquidity and the 50:50 cash: equity merger structure that we commonly use, will give us £ 500million firepower for merger transactions. “
Sorrell also echoed S4’s belief that offices will be occupied an average of three days a week, with more employees working from home and over longer distances. The pandemic has demonstrated that a more flexible and “hybrid” approach can be more effective, he added.
He explained: “This is especially the case as we are probably at the start of a major new technological change, which will make remote working and living more efficient. Office spaces will also be different. We will continue to consolidate our two practices in each city into one location, but the office layout model may vary between spaces for clients, spaces for our people to work together and for our people to have privacy. . “
S4 is “extremely optimistic” about its growth prospects this year and into 2022, Sorrell added, given the “huge global fiscal and monetary stimulus” countries like the United States and the United Kingdom have put in place. implemented in response to the pandemic.
However, he warned: “The chickens may well return to roost in 2023, given the debt burden most countries will have and the tax increases that will need to be implemented. But, digital marketing spending remains robust even in times of recession, as our results last year show, given its secular growth trend. “