02:00 Wed 09 Sep 2020
S4 Capital PLC - Results for the six months ended 30 June
("S4Capital" or "the Company")
Results for the six months ended 30 June
Industry leading progress despite covid-19 driven by global digital tech and healthcare focus
Like-for-like gross profit (net revenue) up over 12% with accelerating growth from April trough through July
Company well on track to deliver full year expectations with increasing client conversion at scale
Financial highlights
¤ Billings*
¤ Revenue
¤ Gross profit
¤ Like-for-like gross profit growth of 18.8% in Q1 and 6.5% in Q2 due to covid-19, bottoming in April at over 3%, accelerating in May to over 5%, in June to over 11% and into the second half of 2020 in July to over 18%.
¤ Operational EBITDA**** before central costs
¤ Operational EBITDA
¤ Operating profit
¤ Result before income tax
¤ Result for the period
¤ Adjusted basic net result of 2.3p per ordinary share, up over 155%, versus 0.9p per share in the first half of last year.
¤ Basic and diluted net result per share 0.1p (loss) which includes adjusting items after tax versus 2.5p (loss) in 2019 and pro-forma adjusted basic net result per share 0.0p.
¤ Liquidity continued to strengthen despite the impact of covid-19, with net cash balances throughout almost all of the half-year, despite significant merger payments, with period end net cash*****
¤ On 16 July, the Company announced the placing of 36,766,642 new ordinary shares at 315p, which represented a small premium to the then market price and raised approximately
Operational highlights
¤ As the primarily analogue advertising holding companies are forecast to savage their head counts by 50,000 or so as their net revenues fell by between 10-26% in Q2 2020, prioritising revenue and gross profit growth at this early stage of the Company's development continues to be part of its strategy, boosted by substantial human capital investment, particularly given anticipated stronger second half momentum.
¤ Part of our purpose is to provide jobs and long-term career opportunities for our people. We are growing S⁴Capital in a responsible and sustainable way, for the long-term benefit of all, making a meaningful difference and leaving a light footprint. Sustainability is an integral part of S4Capital's long-term business strategy, growing the world's brightest talent to create a skilled, diverse workplace and applying technology and our digital expertise for the greater good. Our strategy and activities are built around three pillars: Sustainable Production,
¤ Client roster continues to be dominated by and strengthened in technology, as well as in fast moving consumer goods (FMCG), in telecommunications and in pharmaceuticals, both by practice and geography. Notable assignments in the first half of 2020 were won with Paypal,
¤ By practice, Content gross profit up 109% reported, 14% like-for-like and over 15% pro-forma. Data & digital media up 18% reported, 7% both like-for-like and pro-forma.
¤ By geography, the
¤ Non-Executive Director and senior management appointments in the first half and third quarter including
¤ Content and data capabilities added in
¤ Further data, ecommerce and econometric and media optimisation capabilities added in
Outlook
¤ Although below pre-covid-19 budgets, the second half of 2020 has started strongly in line with the Q1 and Q2 revised forecasts, with July like-for-like gross profit up 18.2% and pro-forma up 14.6%.
¤ Given the progress in the first half of 2020 and July, the Company believes it has an even stronger fighting chance of doubling organically (meaning like-for-like) over the three years 2020-22 and delivering like-for-like double digit revenue and gross profit growth and reasonably strong margins in 2020. The Company's prospects for 2021 also look stronger given the organic growth rate, increasing client conversion at scale, significant merger activity and the likely post-covid-19 economic recovery from relatively low levels of covid-19 economic growth.
¤ We continue to believe that the shape of the covid-19 recession is essentially a reverse square root, with a sharp fall followed by a sharp recovery, although not immediately to prior levels. Within this, there will be some V-shaped verticals like technology, healthcare, financials, in-home entertainment and online shopping. There will be U-shaped verticals like packaged goods and autos and there will be more L-shaped verticals like travel and hospitality. We also believe that Q2 2020 represents the low point (in our case in
Sir Martin Sorrell , Executive Chairman of S4Capital Plc said
"The tragedy of covid-19 has only accelerated the speed of digital transformation and disruption at consumer, media and enterprise levels. These results confirm that S4Capital is currently in a growth sweetspot and that its digital only, faster, better, cheaper, unitary, "holy trinity" model, which combines first party data with digital content, data and digital media, is migrating from brand awareness and trial to conversion at scale. After less than two years as a listed company and with a market capitalisation of around
*Billings is gross billings to client including pass through costs
**Like-for-like relates to 2019 being restated to show the numbers for the previous year of the existing and acquired businesses consolidated for the same months as in 2020 applying currency rates as used in 2019
***Pro-forma numbers relate to unaudited full year non-statutory and non-GAAP consolidated results in constant currency as if the S4Capital
****Operational EBITDA is EBITDA adjusted for non-recurring items and recurring share-based payments and is a non-GAAP measure management uses to assess the underlying business performance (also see note 13)
*****Net cash comprises cash minus bank loans
Results webcast and conference call
A webcast and conference call covering the results will be held today at
US: +1 323-994-2093
Confirmation code: 9071519
US: +1 323-794-2590
Confirmation code: 6412423
Capital Markets 'Day'
9, 10, 11 September
For details, contact Scott Spirit (scott@s4capital.com)
Enquiries to
S4
Sir Martin Sorrell, Executive Chairman
Peter Rademaker, Chief Financial Officer
Scott Spirit, Chief Growth Officer
Powerscourt (PR Advisor) +44 (0)7970 246 725
Elly Williamson
Jessica Hodgson
James Serjeant
David Poutney
Adrian Lewis
Sam Barnett
Sam Hart
About S4Capital
S4
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 initially by integrating leading businesses in two practice areas: Data & digital media and Content, 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 2019 digital accounted for approximately 47.5% or
S4Capital combined with MediaMonks, the leading AdAge A-listed creative digital content production company led by Victor Knaap and Wesley ter Haar, in
In
In
On
Victor, Wesley, Pete, Christopher and Peter Rademaker (formerly Chief Financial Officer of MediaMonks, now Chief Financial Officer of S4Capital), all joined the S4Capital Board as Directors. The S4Capital Board also includes Rupert Faure Walker, Paul Roy, Daniel Pinto, Sue Prevezer, Elizabeth Buchanan, Scott Spirit, Naoko Okumoto, Margaret Ma Connolly and Miles Young.
The Company has over 2,650 people in 30 countries across the Americas, Europe, the Middle East and Africa and Asia-Pacific and a current market capitalisation of approximately
Sir Martin was CEO of WPP for 33 years, building it from a
Summary of results
|
|
Six months ended |
Six months ended |
Year ended 31 Dec 2019 |
|
|
Like-for-like1 Six months ended |
Proforma2 Six months ended |
Proforma Six months ended 30 Jun 2019 |
Notes |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
5 |
141,344 |
87,972 |
215,132 |
|
|
132,168 |
144,449 |
133,941 |
Cost of sales |
|
17,375 |
17,787 |
43,814 |
|
|
21,678 |
17,375 |
21,707 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
5 |
123,969 |
70,185 |
171,318 |
|
|
110,490 |
127,074 |
112,234 |
|
|
|
|
|
|
|
|
|
|
Content |
|
94,410 |
45,215 |
113,365 |
|
|
82,818 |
97,515 |
84,562 |
Data & Digital media |
|
29,559 |
24,970 |
57,953 |
|
|
27,672 |
29,559 |
27,672 |
|
|
|
|
|
|
|
|
|
|
America's |
|
88,818 |
47,411 |
117,063 |
|
|
78,569 |
91,672 |
80,223 |
EMEA |
|
23,991 |
16,798 |
40,765 |
|
|
22,473 |
24,242 |
22,563 |
Asia-Pacific |
|
11,160 |
5,976 |
13,490 |
|
|
9,448 |
11,160 |
9,448 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
121,477 |
76,414 |
175,153 |
|
|
107,470 |
124,025 |
108,836 |
|
|
|
|
|
|
|
|
|
|
Operating profit / (loss) |
|
2,492 |
(6,229) |
(3,835) |
|
|
3,020 |
3,049 |
3,398 |
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
|
16,265 |
8,736 |
31,148 |
|
|
18,108 |
16,823 |
18,486 |
Adjusting items |
13 |
(13,773) |
(14,965) |
(34,983) |
|
|
(15,088) |
(13,773) |
(15,088) |
Operating profit / (loss) |
|
2,492 |
(6,229) |
(3,835) |
|
|
3,020 |
3,049 |
3,398 |
|
|
|
|
|
|
|
|
|
|
Net finance expenses |
|
(2,374) |
(2,261) |
(5,360) |
|
|
(2,056) |
(2,356) |
(2,056) |
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before income tax |
|
118 |
(8,490) |
(9,195) |
|
|
964 |
693 |
1,342 |
|
|
|
|
|
|
|
|
|
|
Adjusted result before income tax |
|
13,891 |
6,475 |
25,788 |
|
|
16,052 |
14,466 |
16,430 |
Adjusting items |
13 |
(13,773) |
(14,965) |
(34,983) |
|
|
(15,088) |
(13,773) |
(15,088) |
Profit / (loss) before income tax |
|
118 |
(8,490) |
(9,195) |
|
|
964 |
693 |
1,342 |
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
(641) |
(329) |
(845) |
|
|
(1,218) |
(751) |
(1,358) |
|
|
|
|
|
|
|
|
|
|
Loss for the period |
|
(523) |
(8,819) |
(10,040) |
|
|
(254) |
(58) |
(16) |
|
|
|
|
|
|
|
|
|
|
Adjusted result for the period |
|
10,894 |
3,288 |
18,986 |
|
|
11,655 |
11,360 |
11,893 |
Adjusting items |
13 |
(13,773) |
(14,965) |
(34,983) |
|
|
(15,088) |
(13,773) |
(15,088) |
Tax on adjusting items |
|
2,356 |
2,858 |
5,957 |
|
|
3,179 |
2,356 |
3,179 |
Loss for the period |
|
(523) |
(8,819) |
(10,040) |
|
|
(254) |
(58) |
(16) |
|
|
|
|
|
|
|
|
|
|
Operating profit / (loss) |
|
2,492 |
(6,229) |
(3,835) |
|
|
3,020 |
3,049 |
3,398 |
Adjusting items |
13 |
13,773 |
14,965 |
34,983 |
|
|
15,088 |
13,773 |
15,088 |
Depreciation (excl. right-of-use assets) |
|
1,719 |
890 |
2,260 |
|
|
1,025 |
1,719 |
1,025 |
|
|
|
|
|
|
|
|
|
|
Operational EBITDA |
|
17,984 |
9,626 |
33,408 |
|
|
19,133 |
18,543 |
19,511 |
Central costs |
|
2,493 |
2,475 |
5,817 |
|
|
2,361 |
2,493 |
2,361 |
|
|
|
|
|
|
|
|
|
|
Operational EBITDA before central costs |
|
20,477 |
12,101 |
39,225 |
|
|
21,494 |
21,036 |
21,872 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares in issue for the purpose of basic and adjusted net result per share |
|
465,697,844 |
348,354,880 |
368,067,622 |
|
|
465,697,844 |
474,908,603 |
474,908,603 |
|
|
|
|
|
|
|
|
|
|
Net result attributable to equity owners of the company (GBP'000) |
|
(523) |
(8,819) |
(10,040) |
|
|
(254) |
(58) |
(16) |
|
|
|
|
|
|
|
|
|
|
Basic net result per share (pence) |
|
(0.1) |
(2.5) |
(2.7) |
|
|
(0.1) |
(0.0) |
(0.0) |
Diluted net result per share (Pence) |
|
(0.1) |
(2.5) |
(2.7) |
|
|
(0.1) |
(0.0) |
(0.0) |
|
|
|
|
|
|
|
|
|
|
Adjusted result for the period |
|
10,894 |
3,288 |
18,986 |
|
|
11,655 |
11,360 |
11,893 |
|
|
|
|
|
|
|
|
|
|
Adjusted basic net result per share (pence) |
|
2.3 |
0.9 |
5.2 |
|
|
2.5 |
2.4 |
2.5 |
Notes:
1. Like-for-like is a non-GAAP measure relates to 2019 being restated to show the unaudited numbers for the previous year of the existing and acquired businesses consolidated for the same months as in 2020 applying currency rates as used in 2020;
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.
3. The key risks for the company achieving their objectives remain the same as at year end and can be found on page 21 up to and including page 26 of the Annual Report and Accounts 2019.
S4Capital is proud to report strong statutory, like-for-like and pro-forma revenue and gross profit growth for the first six months of 2020, despite the impact of covid-19. We still believe, that despite the pandemic, we have a fighting chance of achieving our target of doubling the size of the Company organically by 2022.
Billings were
Revenue was
Reported gross profit was
Like-for-like gross profit growth decelerated from 18.8% in Q1 to 6.5% in Q2 due to covid-19, but bottomed in April at 3.4% and accelerated to 11.2% in June and 18.2% in July, just below where it was in February.
Operational Earnings Before Interest, Taxes, Depreciation and Amortisation ('EBITDA') before S4Capital central costs was
Operational EBITDA was
Adjusted operating profit was up 86.2% at
Adjusted profit before income tax was
Adjusted profit for the period was
Adjusted basic net result was 2.3p per share, versus adjusted basic net result per share of 0.9p in the first half of 2019.
The Board has decided that there will be no interim dividend declared for the first half of 2020, although it continues to review the advisability of declaring a modest dividend in future.
Gross profit, Operational EBITA and Operational EBITA margins by practice
Content practice gross profit was
Data & digital media practice gross profit was
Content practice operational EBITDA before S4Capital central costs was
Data & digital media practice operational EBITDA before S4Capital central costs was
Gross Profit by Geography
Americas (72% of total) was
EMEA (19% of total gross profit) was
Asia Pacific (9% of total) was
Client activity, development and integration
There has been strong individual Content practice and Data & digital media practice client development in FMCG, pharmaceutical, media, financial services, telecommunications, hospitality, retail, sport and technology. High profile wins during the first half have included PayPal, Bumble,
Significant developments continue at Google, Procter & Gamble, LinkedIn, Facebook, Netflix, Uber, Sprint, Bayer, Electrolux, HP, Amazon, a global pharmaceutical company (NDA) and a global consumer electronics company (NDA) amongst others. The Company is increasingly being included in a number of major industry reviews, reflecting the client interest in the new era, new age agency consultancy model. We have high hopes of adding two more "whoppers" to our roster of clients - that is clients who represent more than
There has been significant joint and integrated activity in the auto, durables, healthcare, FMCG, financial services, media, retail, sports, telecommunications and technology areas.
The first office integrations have been implemented successfully in Amsterdam, Buenos Aires and Singapore and following the impact of covid-19 escalated integrations are being planned in all of the 46 cities that the Company operates in, dependent on the expiration dates of existing leases. Cross-functional geographic co-operation continues to be significant. In addition, the Company is implementing sales pipeline and HR tooling to underpin its unitary structure. First steps are being taken to implement unified ERP tooling.
Merger and acquisition activity
This year has seen significant activity, with five transactions aimed at continuing to build our Content capabilities and building out our data and key platform capabilities and resources. After the onset of covid-19 in March, one of the objectives was to try to maintain a strong balance sheet and not be overly ambitious at this stage given the uncertainties triggered by the pandemic.
In January, the Content practice division built around MediaMonks combined with Circus Marketing a fully integrated digital agency with offices in Mexico, Brazil, Argentina, Colombia, Costa Rica and Chile in Latin America, Los Angeles in the United States and in Spain. Clients include Netflix, Spotify, Google, Facebook, Uber and others on its A-list roster.
In May, the Data & digital media practice built around MightyHive combined with Digodat, one of the leading Latin American data consultancies, with offices in Argentina, Colombia, Chile, and Mexico and clients including Google, Telecom Argentina, Banco Galicia, Cencosud, BBVA, Grupo Falabella and Intercorp.
In June, the same practice announced its combination with Lens10, a leading Australian digital strategy and analytics consultancy with offices in Australia and clients including CottonOn,
After the end of the first half of 2020, in July, MightyHive announced its combination with Orca Pacific, a market leading full-service Amazon agency and boutique consultancy based in Seattle and clients including Reebok, Uni-ball, OshKosh B'gosh, Godiva, Del Monte and Kenroy Home.
Finally, towards the end of August, MightyHive combined with
In all cases total consideration paid or payable was approximately half in cash and half in S4Capital Ordinary Shares, with a two-year lock-up from date of issue. Multiples paid were in the range of approximately 1-2 times revenues and 5-10 times EBITDA, depending on current and forecast performance over the current and/or following year, with no earnouts. The total consideration for all five transactions is expected to be approximately
To further strengthen the Company's balance sheet and to provide flexibility in securing financing for opportunities that may occur as a result of the disruption caused by covid-19, the Company announced in July the successful placing of 36,766, 642 (7.5% of the enlarged ordinary share capital) new ordinary shares at 315p, a small premium to the then market price. This raised a further net
Balance sheet liquidity
Liquidity remains strong with half-year end net cash around
S4Capital remains content to contemplate leverage of up to approximately twice EBITDA, as indicated previously.
Outlook and July results
Like for like growth rates continue to accelerate, with July's revenue and gross profit up 6.9% and 18.2%, just below where it was in February.
As anticipated in the Company's pre-covid-19 budget and Q1 and Q2 revised forecasts, the second half is targeted to be even stronger and has started very well.
Unaudited consolidated interim statement of profit or loss
for the six month period ended
|
|
|
|
Six months ended |
Six months ended |
Year ended 31 Dec 2019 |
Notes |
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Revenue |
5 |
|
|
141,344 |
87,972 |
215,132 |
Cost of sales |
|
|
|
17,375 |
17,787 |
43,814 |
|
|
|
|
|
|
|
Gross profit |
5 |
|
|
123,969 |
70,185 |
171,318 |
|
|
|
|
|
|
|
Personnel costs |
|
|
|
92,412 |
46,606 |
111,572 |
Other operating expenses |
|
|
|
14,278 |
12,145 |
25,803 |
Acquisition and set-up related items |
13 |
|
|
(1,805) |
7,358 |
12,806 |
Depreciation and amortisation |
|
|
|
16,592 |
10,305 |
24,972 |
|
|
|
|
|
|
|
Total operating expenses |
|
|
|
121,477 |
76,414 |
175,153 |
|
|
|
|
|
|
|
Operating profit / (loss) |
|
|
|
2,492 |
(6,229) |
(3,835) |
|
|
|
|
|
|
|
Adjusted operating profit |
|
|
|
16,265 |
8,736 |
31,148 |
Adjusting items |
13 |
|
|
(13,773) |
(14,965) |
(34,983) |
Operating profit / (loss) |
|
|
|
2,492 |
(6,229) |
(3,835) |
|
|
|
|
|
|
|
Finance income |
|
|
|
- |
- |
20 |
Finance expenses |
|
|
|
(2,374) |
(2,261) |
(5,380) |
|
|
|
|
|
|
|
Net finance expenses |
|
|
|
(2,374) |
(2,261) |
(5,360) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before income tax |
|
|
|
118 |
(8,490) |
(9,195) |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
(641) |
(329) |
(845) |
|
|
|
|
|
|
|
Loss for the period |
|
|
|
(523) |
(8,819) |
(10,040) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to owners of the Company |
|
|
(523) |
(8,819) |
(10,040) |
|
Attributable to non-controlling interests |
|
|
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
(523) |
(8,819) |
(10,040) |
Loss per share is attributable to the ordinary equity holders of the Company
Basic loss per share (pence) |
7 |
|
|
(0.1) |
(2.5) |
(2.7) |
Diluted loss per share (pence) |
7 |
|
|
(0.1) |
(2.5) |
(2.7) |
Unaudited consolidated interim statement of comprehensive income
for the six month period ended
|
|
|
|
Six months ended |
Six months ended |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Loss for the period |
|
|
|
(523) |
(8,819) |
(10,040) |
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
Items that may be reclassified to profit or loss |
|
|
|
|
|
|
Foreign operations - foreign currency translation differences |
|
|
34,341 |
1,494 |
(20,620) |
|
|
|
|
|
|
|
|
|
|
|
|
34,341 |
1,494 |
(20,620) |
|
|
|
|
|
|
|
Total comprehensive gain / (loss) for the period |
|
|
33,818 |
(7,325) |
(30,660) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to owners of the company |
|
|
33,818 |
(7,325) |
(30,660) |
|
Attributable to non-controlling interests |
|
|
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
33,818 |
(7,325) |
(30,660) |
Unaudited consolidated interim balance sheet
as at
|
|
|
|
Six months ended |
Six months ended |
Year ended 31 |
Notes |
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Intangible assets |
8 |
|
|
611,962 |
404,646 |
540,129 |
Right-of-use assets |
|
|
|
23,127 |
16,159 |
25,779 |
Property, plant and equipment |
|
|
|
12,880 |
5,692 |
9,730 |
Deferred tax assets |
|
|
|
993 |
190 |
1,086 |
Other receivables |
|
|
|
2,606 |
2,033 |
2,731 |
|
|
|
|
|
|
|
|
|
|
|
651,568 |
428,720 |
579,455 |
Current assets |
|
|
|
|
|
|
Trade and other receivables |
9 |
|
|
120,409 |
95,589 |
126,353 |
Cash and cash equivalents |
|
|
|
84,972 |
26,944 |
66,106 |
|
|
|
|
|
|
|
|
|
|
|
205,381 |
122,533 |
192,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
856,949 |
551,253 |
771,914 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Loans and borrowings |
10 |
|
|
45,800 |
46,253 |
42,374 |
Lease liabilities |
|
|
|
17,579 |
9,844 |
18,787 |
Contingent considerations |
|
|
|
410 |
16 |
3,669 |
Other payables |
|
|
|
2,159 |
2,089 |
2,007 |
Deferred tax liabilities |
|
|
|
56,446 |
40,563 |
54,834 |
|
|
|
|
|
|
|
|
|
|
|
122,394 |
98,765 |
121,671 |
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
11 |
|
|
124,949 |
95,322 |
118,014 |
Loans and borrowings |
10 |
|
|
31,935 |
- |
- |
Contingent considerations and holdbacks |
|
|
|
15,858 |
8,013 |
51,202 |
Lease liabilities |
|
|
|
6,769 |
6,468 |
7,975 |
Tax liabilities |
|
|
|
13,475 |
5,548 |
6,751 |
|
|
|
|
|
|
|
|
|
|
|
192,986 |
115,351 |
183,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
315,380 |
214,116 |
305,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
|
541,569 |
337,137 |
466,301 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to owners of the company |
|
|
|
|
|
|
Share capital |
|
|
|
122,530 |
91,038 |
117,307 |
Reserves |
|
|
|
418,939 |
245,999 |
348,894 |
|
|
|
|
|
|
|
|
|
|
|
541,469 |
337,037 |
466,201 |
Non-controlling interests |
|
|
|
100 |
100 |
100 |
|
|
|
|
|
|
|
Total equity |
|
|
|
541,569 |
337,137 |
466,301 |
Note:
1. Restated for the initial accounting for the business combination of
Unaudited consolidated interim statement of cash flows
for the six month period ended
|
|
|
|
Six months ended |
Six months ended |
Year ended 31 |
|
Notes |
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Profit / (loss) before income tax |
|
|
|
118 |
(8,490) |
(9,195) |
Finance income and expenses |
|
|
|
2,374 |
2,262 |
5,360 |
Depreciation and amortisation |
|
|
|
16,592 |
10,305 |
24,972 |
Share based compensation |
|
|
|
6,141 |
1,319 |
7,177 |
Decrease / (increase) in trade and other receivables |
|
|
11,936 |
(14,184) |
(31,288) |
|
Increase in trade and other payables |
|
|
|
405 |
22,464 |
35,116 |
|
|
|
|
|
|
|
Cash flows from operations |
|
|
|
37,566 |
13,676 |
32,142 |
Income taxes paid |
|
|
|
(1,246) |
(2,147) |
(7,571) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
|
36,320 |
11,529 |
24,571 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Investments in intangible assets |
|
|
(49) |
- |
(1,578) |
|
Investments in property, plant and equipment |
|
|
(4,192) |
(947) |
(7,865) |
|
Acquisition of subsidiaries, net of cash acquired |
|
|
(40,876) |
(2,571) |
(56,954) |
|
Financial fixed assets |
|
|
|
192 |
(592) |
(779) |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
(44,925) |
(4,110) |
(67,176) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Proceeds from issuance of shares |
|
|
|
126 |
- |
97,451 |
Amount draw down during the period |
10 |
|
31,025 |
- |
22,418 |
|
Payment of lease liabilities and interest |
|
|
|
(5,688) |
(4,494) |
(6,687) |
Repayments of loans and borrowings |
|
|
|
- |
- |
(24,119) |
Interest paid |
|
|
|
(474) |
(1,105) |
(4,744) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
24,989 |
(5,599) |
84,319 |
|
|
|
|
|
|
|
Net movement in cash and cash equivalents |
|
|
16,384 |
1,820 |
41,714 |
|
Cash and cash equivalents beginning of the period |
|
|
66,106 |
25,005 |
25,005 |
|
Exchange gain / (loss) on cash and cash equivalents |
|
|
2,482 |
119 |
(613) |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
|
|
84,972 |
26,944 |
66,106 |
Unaudited consolidated interim statement of changes in equity
for the six month period ended 30 June 2020
Equity |
Number of shares |
Share capital |
Share premium |
Merger reserves |
Other reserves |
Foreign exchange reserves |
Retained losses |
Total |
Non-controlling interests |
Total equity |
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2019 |
363,396,923 |
90,849 |
52,871 |
205,717 |
(847) |
1,870 |
(8,266) |
342,194 |
100 |
342,294 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss for the period |
|
|
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
- |
- |
(8,819) |
(8,819) |
- |
(8,819) |
Foreign currency translation differences |
- |
- |
- |
- |
- |
1,494 |
- |
1,494 |
- |
1,494 |
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners of the company |
|
|
|
|
|
|
|
|
|
|
Issue of Ordinary Shares |
600,673 |
150 |
694 |
- |
- |
- |
- |
844 |
- |
844 |
Employee share schemes |
155,689 |
39 |
64 |
- |
- |
- |
1,221 |
1,324 |
- |
1,324 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2019 |
364,153,285 |
91,038 |
53,629 |
205,717 |
(847) |
3,364 |
(15,864) |
337,037 |
100 |
337,137 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss for the period |
|
|
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
- |
- |
(1,221) |
(1,221) |
- |
(1,221) |
Foreign currency translation differences |
- |
- |
- |
- |
- |
(22,114) |
- |
(22,114) |
- |
(22,114) |
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners of the company |
|
|
|
|
|
|
|
|
|
|
Issue of Ordinary Shares |
104,723,961 |
26,181 |
120,488 |
- |
- |
- |
- |
146,669 |
- |
146,669 |
Employee share schemes |
350,013 |
88 |
185 |
- |
(313) |
- |
5,870 |
5,830 |
- |
5,830 |
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 December 2019 |
469,227,259 |
117,307 |
174,302 |
205,717 |
(1,160) |
(18,750) |
(11,215) |
466,201 |
100 |
466,301 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss for the period |
|
|
|
|
|
|
|
|
|
|
Loss for the period |
- |
- |
- |
- |
- |
- |
(523) |
(523) |
- |
(523) |
Foreign currency translation differences |
- |
- |
- |
- |
- |
34,341 |
- |
34,341 |
- |
34,341 |
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners of the company |
|
|
|
|
|
|
|
|
|
|
Issue of Ordinary Shares |
20,275,846 |
5,068 |
30,364 |
- |
(250) |
- |
- |
35,182 |
- |
35,182 |
Employee share schemes |
619,074 |
155 |
390 |
- |
(426) |
- |
6,149 |
6,268 |
- |
6,268 |
|
|
|
|
|
|
|
|
|
|
|
Balance as at 30 June 2020 |
490,122,179 |
122,530 |
205,056 |
205,717 |
(1,836) |
15,591 |
(5,589) |
541,469 |
100 |
541,569 |
Notes to the unaudited consolidated interim financial statements
for the six month period ended 30 June 2020
1. General information
S4Capital Plc ('S4Capital' 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 interim financial statements represent the results of the Company and its subsidiaries (together referred to as 'S4Capital Group' or the 'Group'). An overview of the subsidiaries is provided in note 14 on page 108 of the Annual Report and Accounts 2019.
S4Capital Group is a new age/new era digital advertising and marketing services company.
2. Basis of preparation
A. Statement of compliance
The unaudited consolidated interim financial statements is a condensed set of financial information and has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority. They have been prepared in accordance with IAS 34, Interim Financial Reporting.
The unaudited consolidated interim financial statements were authorized for issue by the Board of Directors on 9 September 2020.
B. Functional and presentation currency
The unaudited consolidated interim financial statements are presented in pounds sterling (GBP or £), the Company's functional currency. All financial information in pounds sterling has been rounded to the nearest thousand unless otherwise indicated.
3. Significant accounting policies
The unaudited consolidated interim financial statements have been prepared on a consistent basis with the accounting policies of the Group which were set out on pages 87 to 95 of the Annual Report and Accounts 2019. No changes have been made to the Group's accounting policies in the period ended 30 June 2020.
Certain new accounting standards and interpretations have been published that are not mandatory for the six-month reporting period ending 30 June 2020 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.
4. Statutory information and independent review
The unaudited consolidated interim financial statements for the six month period ended 30 June 2020 and the financial information for the year ended 31 December 2019 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 2019 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. The consolidated interim financial statements are unaudited but have been reviewed by the auditors and their report is set out below at the end of the document.
5. Segment information
A. Revenue from operations
|
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Services |
|
|
|
141,344 |
87,972 |
215,132 |
|
|
|
|
|
|
|
Total |
|
|
|
141,344 |
87,972 |
215,132 |
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 Directors and executive management of S⁴Capital Group.
During the period, S⁴Capital Group has been active in two segments.
¤ Content: 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.
The customers are businesses across various industries.
The Directors and executive management 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.
During the reporting period management changed the name of Programmatic to Data & digital media. The activities of the segment remain the same.
During the period, S⁴Capital Group has not been active in the first-party data practice. Operating segment information under the primary reporting format is disclosed below:
Six months ended 30 June 2020 |
|
|
First-party data |
Content |
Data & digital media |
Total |
|
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
94,410 |
29,559 |
123,969 |
|
|
|
|
|
|
|
Segment profit |
|
|
- |
15,491 |
4,987 |
20,478 |
|
|
|
|
|
|
|
Overhead cost |
|
|
|
|
|
(2,493) |
Adjusted non-recurring and acquisition related expenses |
|
|
|
|
(13,773) |
|
Depreciation1 and amortisation |
|
|
|
|
|
(1,719) |
Finance expenses |
|
|
|
|
|
(2,375) |
|
|
|
|
|
|
|
Profit before income tax |
|
|
|
|
|
118 |
1 Depreciations is exclusive of depreciation on right-of-use assets.
Six months ended 30 June 2019 |
|
|
First-party data |
Content |
Data & digital media |
Total |
|
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
45,215 |
24,970 |
70,185 |
|
|
|
|
|
|
|
Segment profit |
|
|
- |
8,980 |
3,121 |
12,101 |
|
|
|
|
|
|
|
Overhead cost |
|
|
|
|
|
(2,475) |
Adjusted non-recurring and acquisition related expenses |
|
|
|
|
(8,676) |
|
Depreciation1 and amortisation |
|
|
|
|
|
(7,179) |
Finance expenses |
|
|
|
|
|
(2,261) |
|
|
|
|
|
|
|
Loss before income tax |
|
|
|
|
|
(8,490) |
1 Depreciations is exclusive of depreciation on right-of-use assets.
Year ended 31 December 2019 |
|
|
First-party data |
Content |
Data & digital media |
Total |
|
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
113,365 |
57,953 |
171,318 |
|
|
|
|
|
|
|
Segment profit |
|
|
- |
25,570 |
13,654 |
39,224 |
|
|
|
|
|
|
|
Overhead cost |
|
|
|
|
|
(5,817) |
Adjusted non-recurring and acquisition related expenses |
|
|
|
|
(19,983) |
|
Depreciation1 and amortisation |
|
|
|
|
|
(17,259) |
Finance expenses |
|
|
|
|
|
(5,360) |
|
|
|
|
|
|
|
Loss before income tax |
|
|
|
|
|
(9,195) |
1 Depreciations is exclusive of depreciation on right-of-use assets.
6. Income tax
|
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Current tax for the year |
|
|
|
(3,004) |
(1,798) |
(4,022) |
Adjustments for current tax of prior years |
|
|
7 |
(1) |
(36) |
|
|
|
|
|
|
|
|
Total current tax |
|
|
|
(2,997) |
(1,799) |
(4,058) |
Decrease in deferred tax |
|
|
|
2,356 |
1,470 |
3,213 |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
(641) |
(329) |
(845) |
7. Earnings per share
|
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
|
|
|
|
Loss attributable to shareowners of the company (GBP'000) |
|
|
(523) |
(8,819) |
(10,040) |
|
Weighted average number of ordinary shares |
|
|
465,697,844 |
348,354,880 |
368,067,622 |
|
|
|
|
|
|
|
|
Basic loss per share |
|
|
|
(0.1) |
(2.5) |
(2.7) |
|
|
|
|
|
|
|
Diluted loss per share |
|
|
|
(0.1) |
(2.5) |
(2.7) |
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 period.
8. Intangible assets
|
Goodwill |
Customer relationships |
Brands |
Order Backlog |
Other |
Total |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Cost |
238,237 |
151,224 |
13,910 |
4,381 |
1,946 |
409,698 |
Accumulated amortisation |
- |
(3,139) |
(213) |
(4,201) |
(9) |
(7,562) |
|
|
|
|
|
|
|
Net book value at 1 January 2019 |
238,237 |
148,085 |
13,697 |
180 |
1,937 |
402,136 |
|
|
|
|
|
|
|
Acquired through business combinations |
6,027 |
1,059 |
- |
- |
1 |
7,087 |
Amortisation charge for the year |
- |
(5,438) |
(473) |
(178) |
(199) |
(6,288) |
Foreign exchange differences |
1,531 |
167 |
14 |
(2) |
1 |
1,711 |
|
|
|
|
|
|
|
Total transactions during the period |
7,558 |
(4,212) |
(459) |
(180) |
(197) |
2,510 |
|
|
|
|
|
|
|
Cost |
245,795 |
152,450 |
13,924 |
4,379 |
1,948 |
418,496 |
Accumulated amortisation |
- |
(8,577) |
(686) |
(4,379) |
(208) |
(13,850) |
|
|
|
|
|
|
|
Net book value at 30 June 2019 |
245,795 |
143,873 |
13,238 |
- |
1,740 |
404,646 |
|
|
|
|
|
|
|
Acquired through business combinations |
100,583 |
65,172 |
2,082 |
1,098 |
2,589 |
171,524 |
Additions |
- |
- |
- |
- |
1,578 |
1,578 |
Amortisation charge for the year |
- |
(6,579) |
(644) |
(1,034) |
(455) |
(8,712) |
Foreign exchange differences |
(17,542) |
(10,358) |
(695) |
(64) |
(248) |
(28,907) |
|
|
|
|
|
|
|
Total transactions during the period |
83,041 |
48,235 |
743 |
- |
3,464 |
135,483 |
|
|
|
|
|
|
|
Cost |
328,836 |
206,706 |
15,276 |
5,464 |
6,364 |
562,646 |
Accumulated amortisation |
- |
(14,598) |
(1,295) |
(5,464) |
(1,160) |
(22,517) |
|
|
|
|
|
|
|
Net book value at 31 December 2019 |
328,836 |
192,108 |
13,981 |
- |
5,204 |
540,129 |
|
|
|
|
|
|
|
Acquired through business combinations |
40,111 |
- |
- |
- |
- |
40,111 |
Additions |
- |
- |
- |
- |
49 |
49 |
Amortisation charge for the year |
- |
(7,874) |
(819) |
- |
(745) |
(9,438) |
Foreign exchange differences |
25,738 |
14,001 |
1,008 |
- |
364 |
41,111 |
|
|
|
|
|
|
|
Total transactions during the period |
65,849 |
6,127 |
189 |
- |
(332) |
71,833 |
|
|
|
|
|
|
|
Cost |
394,685 |
222,046 |
16,405 |
5,863 |
6,887 |
645,886 |
Accumulated amortisation |
- |
(23,811) |
(2,235) |
(5,863) |
(2,015) |
(33,924) |
|
|
|
|
|
|
|
Net book value at 30 June 2020 |
394,685 |
198,235 |
14,170 |
- |
4,872 |
611,962 |
BizTech Group
On 20 December 2019, MediaMonks acquired the assets from BizTech Australia and 100% of the shares in BizTech Enterprise Solutions Canada Ltd. BizTech is an Adobe and digital transformation specialist. The transaction with BizTech Kazakhstan and BizTech Russia is expected to close in the third quarter of 2020. The initial accounting for the business combination of the BizTech Group was incomplete by the end of the six-month reporting period ended 30 June 2020. At the end of the reporting period, the identifiable intangibles acquired were not identified, are consequently not measured and are therefore not deducted from goodwill. During the measurement period in 2020, S4Capital Group will obtain the information necessary to identify and measure the identifiable intangible assets and retrospectively adjust the provisional amounts recognised at the acquisition date.
Circus Marketing
On 8 January 2020, S4Capital Plc announced the combination of MediaMonks with the fully integrated digital agency Circus Marketing for a total consideration of USD 53.3 million. The combination was completed on 12 March 2020. The initial accounting for the business combination of the Circus Marketing Group was incomplete by the end of the six-month reporting period ended 30 June 2020. Since the acquisition date, Circus Marketing contributed GBP 10.1 million to the Group's revenue and GBP 1.5 million into the Group's profit for the six-month reporting period ended 30 June 2020 and added approximately GBP 2.3 million of net assets to the balance sheet of the Group. At the end of the reporting period, the identifiable intangibles acquired were not identified, are consequently not measured and are therefore not deducted from goodwill. During the measurement period in 2020, S4Capital Group will obtain the information necessary to identify and measure the identifiable intangible assets and retrospectively adjust the provisional amounts recognized at the acquisition date.
9. Trade and other receivables
|
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Trade receivables |
|
|
108,830 |
89,021 |
119,632 |
|
Prepayments |
|
|
3,921 |
1,980 |
2,073 |
|
Accrued income |
|
|
5,355 |
2,096 |
3,790 |
|
Other receivables |
|
|
2,303 |
2,492 |
858 |
|
|
|
|
|
|
|
|
Total |
|
|
|
120,409 |
95,589 |
126,353 |
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. A provision for expected credit loss of GBP 2.0 million was recognised on the Group's trade receivables at the end of the period (30 June 2019 GBP 1.2 million, 31 December 2019 GBP 1.4 million).
10. Loans and borrowings
Loans and borrowings |
|
|
|
Bank loans |
Transaction costs |
Total |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Principal amount |
|
|
|
46,516 |
(975) |
45,541 |
Accumulated charges to profit or loss |
|
|
|
- |
97 |
97 |
|
|
|
|
|
|
|
Balance as at 1 January 2019 |
|
|
|
46,516 |
(878) |
45,638 |
|
|
|
|
|
|
|
Charged to profit-or-loss |
|
|
|
- |
98 |
98 |
Exchange rate differences |
|
|
|
519 |
(2) |
517 |
|
|
|
|
|
|
|
Total transactions during the period |
|
|
|
519 |
96 |
615 |
|
|
|
|
|
|
|
Principal amount |
|
|
|
47,035 |
(977) |
46,058 |
Accumulated charges to profit or loss |
|
|
|
- |
195 |
195 |
|
|
|
|
|
|
|
Balance as at 30 June 2019 |
|
|
|
47,035 |
(782) |
46,253 |
|
|
|
|
|
|
|
Additions |
|
|
|
22,418 |
(205) |
22,213 |
Repayments |
|
|
|
(24,119) |
- |
(24,119) |
Charged to profit-or-loss |
|
|
|
- |
110 |
110 |
Exchange rate differences |
|
|
|
(2,119) |
36 |
(2,083) |
|
|
|
|
|
|
|
Total transactions during the period |
|
|
|
(3,820) |
(59) |
(3,879) |
|
|
|
|
|
|
|
Principal amount |
|
|
|
43,215 |
(1,134) |
42,081 |
Accumulated charges to profit-or-loss |
|
|
|
- |
293 |
293 |
|
|
|
|
|
|
|
Balance as at 31 December 2019 |
|
|
|
43,215 |
(841) |
42,374 |
|
|
|
|
|
|
|
Additions |
|
|
|
31,025 |
25 |
31,050 |
Repayments |
|
|
|
- |
- |
- |
Charged to profit-or-loss |
|
|
|
- |
126 |
126 |
Exchange rate differences |
|
|
|
4,293 |
(109) |
4,184 |
|
|
|
|
|
|
|
Total transactions during the period |
|
|
|
35,318 |
42 |
35,360 |
|
|
|
|
|
|
|
Principal amount |
|
|
|
78,533 |
(1,240) |
77,293 |
Accumulated charges to profit-or-loss |
|
|
|
- |
442 |
442 |
|
|
|
|
|
|
|
Balance as at 30 June 2020 |
|
|
|
78,533 |
(798) |
77,735 |
|
|
|
|
|
|
|
Repayment obligations coming 12 months |
|
|
|
31,935 |
- |
31,935 |
|
|
|
|
|
|
|
Non-current balance as at 30 June 2020 |
|
|
|
46,598 |
(798) |
45,800 |
As of 6 July 2018, S4Capital Group signed a facility agreement, consisting of:
¤ A EUR 25.0 million term loan facility
¤ A USD 28.9 million term loan facility; and
¤ A multicurrency Revolving Credit Facility (RCF) of EUR 35 million, which was fully drawn at the end of the reporting period (31 December 2019 nil, 31 December 2018 EUR 2 million was drawn).
The interest of the facilities is the aggregate of the variable interest rate (LIBOR or, in relation to any loan in euro, EURIBOR) and a margin based on leverage (between 1.25% and 3.00%). During the reporting period, the average interest rate of the outstanding loans amounts to 1.71% (six month period ending 30 June 2019 3.32%, 12 month period ending 31 December 2019 2.92%). The average effective interest rate for the outstanding loans is 1.65% (six month period ending 30 June 2019 3.22%, 12 month period ending 31 December 2019 2.84%) and during the period interest expense of GBP 0.6 million (six month period ending 30 June 2019 1.0 million, 12 month period ending 31 December 2019 GBP 2.0 million) million was recognised.
The duration of the facility agreement is five years; therefore, the termination date of the facility agreement is 6 July 2023. S4Capital Group shall repay each of the loans in full on the termination date.
The bank loans impose certain covenants on the Group. The loan agreement states that (subject to certain exceptions) S4Capital Group will not provide any other security over its assets and receivables and will ensure that the following financial ratios, measured at the end of any relevant period of 12 months ending each semi-annual date in a financial year commencing on 30 June 2019, are met:
¤ net debt will not exceed 300% of the earnings before interest, tax, depreciation and amortisation; and
¤ net finance charges will not exceed 300% of the earnings before interest, tax, depreciation and amortisation.
During the period S4Capital Group is in compliance with these covenants.
11. Trade and other payables
|
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Trade payables |
|
|
85,584 |
76,988 |
88,986 |
|
Accruals |
|
|
21,701 |
13,399 |
14,447 |
|
Deferred income |
|
|
17,664 |
4,935 |
14,581 |
|
|
|
|
|
|
|
|
Total |
|
|
|
124,949 |
95,322 |
118,014 |
12. Related party transactions
Details of compensation for key management personnel are disclosed on pages 64 to 66 of the Annual Report and Accounts 2019. S4Capital Group did not have any other related party transactions during the financial period.
13. Reconciliation to non-GAAP measures of performance
Management includes non-GAAP measures as they consider these measures to be both useful and necessary. They are used by management for internal performance analyses; the presentation of these measures facilitates comparability with other companies, although management's measures may not be calculated in the same way as similarly titled measures reported by other companies; and these measures are useful in connection with discussions with the investment community.
Six months ended 30 Jun 2020 |
|
Reported |
Amortisation1 |
Acquisition and set-up related expenses2 |
Share based compensation |
Adjusted |
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Operating profit / (loss) |
2,492 |
9,438 |
(1,805) |
6,141 |
16,265 |
|
Net finance expenses |
(2,374) |
- |
- |
- |
(2,374) |
|
|
|
|
|
|
|
|
Profit / (loss) before income tax |
118 |
9,438 |
(1,805) |
6,141 |
13,892 |
|
Income tax expense |
(641) |
(2,356) |
- |
- |
(2,997) |
|
|
|
|
|
|
|
|
Profit / (loss) for the period |
|
(523) |
7,082 |
(1,805) |
6,141 |
10,895 |
1 Amortisation relates to the amortisation of certain intangible assets recognised as a result of the acquisitions.
2 Acquisition and set-up related expenses relate to acquisition related advisory fees of GBP 5.4 million, bonuses of GBP 1.0 million and revaluation of contingent considerations of GBP 8.2 million credit.
Six months ended 30 Jun 2019 |
|
Reported |
Amortisation1 |
Acquisition and set-up related expenses2 |
Share based compensation |
Adjusted |
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Operating profit / (loss) |
(6,229) |
6,288 |
7,358 |
1,319 |
8,736 |
|
Net finance expenses |
(2,261) |
- |
- |
- |
(2,261) |
|
|
|
|
|
|
|
|
Profit / (loss) before income tax |
(8,490) |
6,288 |
7,358 |
1,319 |
6,475 |
|
Income tax expense |
(329) |
(1,291) |
(1,567) |
- |
(3,187) |
|
|
|
|
|
|
|
|
Profit / (loss) for the period |
|
(8,819) |
4,997 |
5,791 |
1,319 |
3,288 |
1 Amortisation relates to the amortisation of certain intangible assets recognised as a result of the acquisitions.
2 Acquisition and set-up related expenses relate to acquisition related bonuses of GBP 6.3 million and transaction related advisory fees of GBP 1.1 million.
Year ended 31 Dec 2019 |
|
Reported |
Amortisation1 |
Acquisition and set-up related expenses2 |
Share based compensation |
Adjusted |
|
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Operating profit / (loss) |
(3,835) |
15,000 |
12,806 |
7,177 |
31,148 |
|
Net finance expenses |
(5,360) |
- |
- |
- |
(5,360) |
|
|
|
|
|
|
|
|
Profit / (loss) before income tax |
(9,195) |
15,000 |
12,806 |
7,177 |
25,788 |
|
Income tax expense |
(845) |
(3,893) |
(2,064) |
- |
(6,802) |
|
|
|
|
|
|
|
|
Profit / (loss) for the period |
|
(10,040) |
11,107 |
10,742 |
7,177 |
18,986 |
1 Amortisation relates to the amortisation of certain intangible assets recognised as a result of the acquisitions.
2 Acquisition and set-up related expenses relate to acquisition related bonuses of GBP 7.2 million and transaction related advisory fees of GBP 5.6 million.
Reconciliation to adjusted operational EBITDA |
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
||
|
|
|
|
|
|
|
Operating profit / (loss) |
|
|
2,492 |
(6,229) |
(3,835) |
|
|
|
|
|
|
|
|
Amortisation of intangible assets |
|
|
9,438 |
6,288 |
15,000 |
|
Acquisition and set-up related expenses |
|
|
(1,805) |
7,358 |
12,806 |
|
Share based compensation |
|
|
6,141 |
1,319 |
7,177 |
|
Depreciation property, plant and equipment1 |
|
|
1,719 |
890 |
2,260 |
|
|
|
|
|
|
|
|
Operational EBITDA |
|
|
|
17,984 |
9,626 |
33,408 |
1 Depreciation property, plant and equipment is exclusive of depreciation on right-of-use assets
Billings1 |
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
GBP'000 |
GBP'000 |
GBP'000 |
|
|
|
|
|
|
|
|
Revenue |
|
|
141,344 |
87,972 |
215,132 |
|
|
|
|
|
|
|
|
Pass-through expenses |
|
|
119,105 |
96,262 |
240,648 |
|
|
|
|
|
|
|
|
Billings |
|
|
|
260,449 |
184,234 |
455,780 |
1 Billings is gross billings to client including pass-through expenses
Adjusted Basic net result per share |
|
|
|
Six months ended 30 Jun 2020 |
Six months ended 30 Jun 2019 |
Year ended 31 Dec 2019 |
|
|
|
|
|
|
|
Weighted average number of shares in issue |
|
|
465,697,844 |
348,354,880 |
368,067,622 |
|
Adjusted net result attributable to equity of owners of the company (GBP'000) |
|
|
10,895 |
3,288 |
18,986 |
|
|
|
|
|
|
|
|
Adjusted Basic net result per share |
|
|
|
2.3 |
0.9 |
5.2 |
14. COVID-19
A summary of the Group's operational response in relation to COVID-19 is presented on page 2 and 3 of the Annual Report and Accounts 2019.
Whilst the full financial impact of the crisis for the remainder of 2020 and 2021 is impossible to predict, the Group's actual cash flows have exceeded even the most optimistic forecasts made at the peak of the COVID-19 crisis in late March. In August the Group has carried out a new sensitivity analyses on their forecasted cash-flows for the remainder of 2020 and 2021 gaming substantial falls in revenue, with cost corrections, compared to budget, which indicate viability and the Group will comply with the covenants set in the loan agreement. Accordingly, the Directors continue to adopt the going concern basis in preparing the unaudited consolidated interim financial statements.
Liquidity continued to strengthen despite of COVID-19, therefore the group repaid its revolving credit facility of EUR 35 million in August 2020, which was fully utilized in advance of announced mergers in March 2020. The Group also signed an additional facility agreement, consisting of a multicurrency Revolving Credit Facility of EUR 43.5 million, increasing its total available credit facilities to EUR 78.5 million, currently fully unutilized.
15. Events occurring after the reporting period
A. Mergers and acquisitions
¤ On 26 May 2020, MightyHive announced the combination with Digodat, a leading Latin American data and analytics consultancy. The combination has closed on 10 July 2020;
¤ In November 2019, MediaMonks announced the combination with WhiteBalance, Indian-based digital creative and production agency. This combination has completed on 27 August 2020.
¤ On 27 August 2020, MightyHive combined with Brightblue Consulting, an award-winning UK based data analytics and measurement consultancy.
¤ On 30 June 2020, MightyHive announced the combination with Lens10, a leading Australian digital strategy and analytics consultancy, pending Foreign Investment Review Board and Australian Competition and Consumer Commission.
¤ The total consideration for the above four transactions is expected to be approximately GBP 55 million.
¤ On 29 July 2020, MightyHive announced the combination with Orca Pacific, a market leading full-service Amazon agency and boutique consultancy firm based in Seattle.
¤ The transaction with BizTech Kazakhstan and BizTech Russia is expected to close in the second half-year of 2020.
B. Equity placing
On 16 July, the Company announced the placing of 36,766,642 new ordinary shares at 315p, which represented a small premium to the then market price and raised approximately £113 million net proceeds, which will be used for further expansion, principally mergers and acquisitions.
C. New facility agreement
As of 15 July 2020, S4Capital Group signed an additional facility agreement, consisting of a multicurrency Revolving Credit Facility (RCF) of EUR 43.5 million, of which at the end of the reporting period nil is drawn. The interest of the facilities is the aggregate of the variable interest rate (LIBOR or, in relation to any loan in euro, EURIBOR) and a margin based on leverage (between 2.00% and 3.75%). The duration of the facility agreement is three years; therefore, the termination date of the facility agreement is July 2023. S4Capital Group shall repay each of the loans in full on the termination date.
The bank loans impose certain covenants on the Group. The loan agreement states that (subject to certain exceptions) S4Capital Group will not provide any other security over its assets and receivables and will ensure that the following financial ratios, measured at the end of any relevant period of 12 months ending each semi-annual date in a financial year, are met:
¤ net debt will not exceed 300% of the earnings before interest, tax, depreciation and amortisation; and
¤ net finance charges will not exceed 300% of the earnings before interest, tax, depreciation and amortisation.
During the period S4Capital group complied with the covenants set in the loan agreement.
Responsibility statement
We confirm that to the best of our knowledge:
¤ The set of interim financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
¤ The interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
¤ The interim management report includes a fair review of the information required by DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions (note 12) that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
Signed on behalf of the Board on 9 September 2020
Sir Martin Sorrell Peter Rademaker
Executive Chairman Group Chief Financial Officer
Independent review report to the members of S4Capital Plc
Report on the unaudited consolidated interim financial statements
Our conclusion
We have reviewed S4 Capital Plc's unaudited consolidated interim financial statements (the "interim financial statements") in the Interim results 2020 report of S4 Capital Plc for the 6 month period ended 30 June 2020. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
We have reviewed
The interim financial statements comprise:
¤ the unaudited consolidated interim balance sheet as at 30 June 2020;
¤ the unaudited consolidated interim statement of profit or loss and unaudited consolidated interim statement of comprehensive income for the period then ended;
¤ the unaudited consolidated interim statement of cash flows for the period then ended;
¤ the unaudited consolidated interim statement of changes in equity for the period then ended; and
¤ the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results 2020 report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim results 2020 report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim results 2020 report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Interim results 2020 report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim results 2020 report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 September 2020
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