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Sorrell’s in the money again as S4 Capital (MediaMonks et al) hits £600m market value

Is Sir Martin Sorrell’s new S4 Capital – proud owner of MediaMonks and MightyHive – motoring as fast as his Martin-ness would like?

Here’s what he said at the AGM (there’s a lot of it but it’s instructive.)

“2018 was a busy first year for your newly-named Company, S4Capital, formerly Derriston plc.

“First, there was the formulation of a definitive and differentiated strategy, around four core principles. We are purely digital, because that’s where the growth is. In a 24/7, always-on digital world, our new business model is to focus on first party data, which, in turn, fuels our digital advertising and marketing creative content and our digital media planning and buying or programmatic.

Our mantra or strap line is faster, better, cheaper, because that’s what clients want. Finally, our organisational structure is unitary, with a single P&L, as clients want the best people working on their business, not caring where they come from. We don’t do earn-outs.

“In July, we built our first pillar in digital advertising and marketing content, merging S4Capital, then a private, unlisted company, with MediaMonks, an Amsterdam-based digital advertising and marketing production company, with a global footprint and a stellar creative and technological reputation.

“In September, S4Capital, along with the merged MediaMonks, was reversed into Derriston plc, a Standard London Stock Exchange listed company and the quotation restored in the same month.

“In December, we built our second pillar in digital media planning and buying, merging S4Capital with MightyHive, the leading programmatic consultancy, based in San Francisco, also with a global footprint.

“The pace of activity continued into the New Year, with a strengthening of our management in Asia Pacific. In April, Progmedia joined MightyHive, adding a programmatic offer to our content offer in Brazil, Mexico and Argentina. At the same time, MediaMonks added a robotic video studio in Amsterdam, Caramel Pictures, specialising in food and drink video content.

“Within nine months, your Company now has approximately 1300 people in 18 countries and a market capitalisation of around £600 million ($750 million).

“Trading for the first four months of 2019 continues to be strong and in line with our budget and quarter one revised forecast at all levels, with reportable revenues up 45 per cent and like-for-like revenues up over 41 per cent. Reportable gross profit was up over 41 per cent and like-for-like gross profit almost 37 per cent. Both revenue and gross profit growth rates improved over the first quarter in April.

(In its first annual results released in March, which covered the year to December 2018, S4 reported pre-tax profits of £7.6m while revenues increased 58 per cent to £135.9m.)

“The focus remains on broadening and deepening existing client relationships and our geographical offer. Our two biggest clients may double in size this year, but we still search for bigger and deeper relationships or “whoppers”. Notable recent client wins, including integrated content and programmatic assignments, number Procter & Gamble’s Braun, Google, Nestlé’s Starbucks at Home, Netflix, Mondelez, Uber, Bayer, Sprint, Avon, ServiceNow, Shiseido, and Olympic Broadcasting Services, amongst others.

“Geographically, we have added offices in France and Italy so far this year and are looking at South Korea, Germany and Spain. We continue to mine first party data opportunities to create our third pillar, although they remain few and far between and expensive.”

So yes – and maybe no.

Buying MediaMonks was obviously smart as it seems a successful, cash-generative business with good growth opportunities. But S4’s “unitary structure” seems to mean that the main growth has to be from this one company. At WPP, in its heyday, growth came from numerous big creative and media agencies.

S4’s growth will presumably come from Sorrell’s ability to attract big cvlients and the MediaMonks team, in operational charge.

Still, with a market cap of £600m already, big shareholder Martin’s in the money again.

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