S4 Capital highlights growth as coronavirus pandemic drives digital-first advertising

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S4 Capital PLC’s (LON:SFOR) third quarter results highlight 23% like-for-like profit growth as an acquisitive strategy continued to build the advertising business.

Four mergers and combinations were struck in the quarter, despite the challenges of COVID-19 lockdowns, and, the company said integration of the contentment and digital media practices are proceeding well.

The digital advertising firm said that COVID-19 has been an accelerator for search, social and ecommerce and, as such, has driven new client wins.

Trading is described as “well in line with expectations” whilst the company added that it is achieving client conversion at scale and momentum is increasing. Three ‘whoppers’ have now been secured and one more significant client conversion is in-sight.

Third-quarter revenue rose by almost 53%, to £86.4mln, whilst gross profit increased 79% (23% like-for-like) to £75.3mln.

The company highlighted both revenue and gross profit grew faster than in the first half of 2020, with sequential improvement seen each month. Earnings margins are up very strongly in the half, it added.

Liquidity is, meanwhile, described as strong with the company noting a net cash position in excess of £100mln.

“We continue to trade in line with ambitious internal and external targets, which now include doubling both top and bottom lines organically over the period 2021 to 2023,” S4 said.

“Our consistent, very strong organic gross profit growth of almost 16% so far this year and almost 23% in the third quarter, indicates that we are well positioned in the digital sweetspot of an otherwise stagnant advertising and marketing industry.”

The company also noted that board compensation will now be reinstated to pre-COVID levels, as trading has similarly returned to that level.

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