S4 Capital's APAC biz sees growth surge, agility remains key

S4 Capital has witnessed a revenue increase of almost 53% to about US$113.8 million, and a 79% increase in gross profit to about US$99 million for the third quarter of 2020 (Q3 2020). According to its financial statement, Asia Pacific "grew very strongly from a smaller base", with gross profit up almost 83% to US$9.6 million in Q3 2020 and up over 26% like-for-like. Year-to-date gross profit for the region grew over 85% to US$24.2 million and like-for-like increased to over 21%.

Likewise, the Americas also showed strong growth with gross profit up over 93% to US$72.6 million and almost 27% like-for-like. Meanwhile, Europe, the Middle East and Africa also grew significantly in the third quarter, with gross profit up over 34% to US$17.1 million and like-for-like up almost 7%.

S4 Capital's content as well as data and digital media practices also did well in Q3 2020. Its content practice revenue went up over 69% to US$91.3 million, with a like-for-like up almost 15%. Gross profit for the quarter was up over 119% to US$76.9 million and over 28% like-for-like. In the meantime, Q3 revenue for its data and digital media practice rose by almost 10% to US$22.5 million and almost 7% like-for-like. Its gross profit for the third quarter was up over 9% to US$22.2 million and up 6% like-for-like.

On the billings front, S4 Capital reported an increase of more than 12% to over US$558.7 million and a gross profit increase of almost 78% to US$262.6 million. The company also previously developed a 20-squared client objective which means to develop 20 clients with more than US$20 million revenue per year, termed "whoppers".

For its content arm, MediaMonks bagged the BMW/Mini European content and production account named "The Engine", which S4 Capital said will join Google and another tech company as a third "whopper" in 2021. Among the list of other new business wins include Hasbro, T-Mobile, Palo Alto Networks, Shopfiy and brands in the automotive, FMCG, pharma and consumer electronics categories.

Martin Sorrell (pictured), executive chairman of S4 Capital, said its consistent, very strong organic gross profit growth of almost 23% in the third quarter and almost 16% so far this year indicates that it is "well positioned in the digital sweeet spot of an otherwise stagnant advertising and marketing industry.

He said that COVID-19 has acted as an accelerator for search, social and eCommerce. "We are optimistic about the macro prospects for 2021, particularly given the likely global GDP rebound, the probability of further vaccine, therapeutic and testing developments, Tokyo 2021 and Euro 2021," he said. At a micro level, the company remains optimistic with the progress it has already made with major new client assignments this year. According to Sorrell, S4 Capital is planning further integration and combinations in 2021, which will reinforce its client appeal. 

"Agility, accentuated by the impact of COVID-19, remains the key, requisite corporate attribute for success, characterised by a shared purpose and vision, a network of empowered teams, rapid decision making, dynamic, passionate talent and enabling technology," he explained.

S4 Capital has certainly solidified its prowess in the advertising scene since its launch in 2018. Investment bank Jefferies said in a research note to clients in May that S4 Capital is now increasingly correlated with tech platforms such as Google and Facebook as well as consultancies such as Accenture, rather than ad holding companies. It added that S4’s “atypical exposure” is reflected in its more resilient top line in the short-term and organic growth opportunity in the longer-term.

“S4’s investment thesis is clearly resonating in a backdrop of accelerating digital transformation. We think COVID-19 is highlighting the short and long-term opportunity,” the note said. Jefferies added that feedback from CMOs is the step change in digital stick. According to the note, MightyHive and MediaMonks are “at the forefront” of helping to shape CMO strategy.

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