S4 Capital Plc · LSE:SFOR
S4 Capital — H1 2023 Earnings Presentation
57 slides from S4 Capital's earnings presentation, Sep 18, 2023
Slide 1: H1 2023 Results
H1 2023 Results 18 September 2023 1 S4 Capital plc
Slide 2: Contents
Contents 1. Results 2. Market Momentum 3. Client Analysis 4. Content 5. Data&Digital Media 6. Technology Services 7. Artificial Intelligence 8. Summary and Outlook 9. Q&A 10. Appendix S4 Capital plc 18 September 2023 2
Slide 3: Results
Chapter 1 Results 3 S4 Capital plc 18 September 2023
Slide 4: Financial Headlines
Financial Headlines Net revenue Operational EBITDA EBITDA margin £445.5m £36.5m 8.2% +18.7% reported +21.3% reported vs. 8.0% prior year reported +5.1% like-for-like1 -30.2% like-for-like vs. 12.3% prior year like-for-like Adjusted operating profit2 Adjusted EPS Net Debt3 £30.6m 1.7p adjusted EPS £1
Slide 5: Income statement
Income statement ⁄ Net revenue growth of 18.7%, 5.1% like-for-like, reflecting the challenging macroeconomic conditions and clients’ caution ⁄ Operational EBITDA of £36.5 million, 8.2% margin, below our initial budget reflecting slower top line growth and moderate cost growth ⁄ Adjusting items prima
Slide 6: Net revenue by practice and region
Net revenue by practice and region ⁄ Content’s trading overall was tough. There was solid growth across its scaled client base, although some larger Tech clients showed hesitancy and budget constraints. Some mid tier clients were affected by market softness and internal restructurings. New business,
Slide 7: Operational EBITDA by practice
Operational EBITDA by practice ⁄ Content saw people cost inflation and higher IT costs against lower than budgeted revenues which impacted profitability. Control on hiring has reduced headcount at the period end and will benefit the second half ⁄ Data&Digital Media also had some people cost inflatio
Slide 8: Debt & balance sheet
Debt & balance sheet ⁄ Liquid balance sheet with long dated maturities ⁄ £100m RCF remains undrawn ⁄ 2023 H1 net debt £109 million (versus £135 million at June 2022), leverage at 0.9x 1. The comparatives as at 31 December 2022 have been restated for the adoption of the amendment to IAS 12, measureme
Slide 9: Cashflow highlights
Cashflow highlights ⁄ Capital expenditure primarily IT infrastructure, and lower than prior period which included key office fit outs ⁄ Increase in interest paid reflects higher Euribor rates on the term loan ⁄ Continued focus on working capital and cash management ⁄ Higher tax costs reflect increas
Slide 10: 2023 Guidance
2023 Guidance 2022 Proforma net revenue1 2023 Net revenue EBITDA margin c.£908m Expected to be down 12-13.5% targeted2 like-for-like on prior year Trading has been slow over the summer Heavily H2 and particularly Q4 weighted months Net finance expense Effective tax rate Cash contingent 24-26% expect
Slide 11: Market Momentum
Chapter 2 Market Momentum 11 S4 Capital plc 18 September 2023
Slide 12: 2023 More challenging growth in our addressable markets
2023 More challenging growth in our addressable markets Digital Media Spend is The 5 main platforms are Digital Transformation projected to grow at 8.9% forecast to grow ad Service revenues at peers to $600m in 2023¹ revenue 10.6% to $420m in projected to grow 2% in 2023 and 14% to $480m in 2023 and
Slide 13: Client Analysis
Chapter 3 Client Analysis 13 S4 Capital plc 18 September 2023
Slide 14: Our client portfolio
Our client portfolio HY2023 Client Categories HY2022 Client Categories 14 S4 Capital plc Chapter 3 - Client Analysis 18 September 2023
Slide 15: An attractive & growing client base
An attractive & growing client base 15 S4 Capital plc Chapter 3 - Client Analysis 18 September 2023
Slide 16: Content
Chapter 4 Content 16 S4 Capital plc 18 September 2023
Slide 17: Growth has slowed across tech and within local markets
➔ Growth has slowed across tech and within local markets, while macro pressures (budget conservatism, delayed H2 planning among some brands, client concern about potential recession) have brought longer sales cycles. Still, we continue to see growth and progress with scaled and selected portfolio cl
Slide 18: Evolved growth model, doubling down on select regions
➔ We've evolved our growth model and are doubling down on developing select regions like Latam, Middle East and APAC. We are seeing continued growth in scaled clients, heavily weighted to tech, and eyeing significant strategic opportunities resulting from the launch of PlusOne. Our leading positionin
Slide 19: Further integrated teams with single P&L offering
➔ We've further integrated our teams, expanding our single P&L offering to clients with best in class subject matter expertise. The latest example is Experience.Monks (built around Jam3), which has already resulted in sizable new projects for existing clients at CES, the Super Bowl and Complexcon, an
Slide 20: Significant way through our merger model
➔ We’re a significant way through our merger model, which should drive cost efficiencies in H2, we’ve brought costs and hiring under control by integrating our operational teams and have refined our structure to better reflect client need. We have reduced headcount and will continue to focus on aligning
Slide 21: Launching new partnerships
➔ We’re not just attracting best in class talent, we are also launching exciting new partnerships. We were first to the Sphere with YouTube and brought Scholastic to Roblox. We've also introduced new collaborative efforts with our partners, including the launch of Fan-Focused AI Highlights with NVIDIA
Slide 22: Using a tough year to implement changes
➔ It hasn't been an easy year to manage—but we will continue to use a tough year to implement changes that make us leaner, lighter with more levers to grow. We've spent this year optimizing internal teams and structure without negatively impacting levels of quality and service. And have put ourselve
Slide 23: Data&Digital Media
Chapter 5 Data&Digital Media 23 S4 Capital plc 18 September 2023
Slide 24: Data&Digital Media | 2023 2H Outlook
Data&Digital Media | 2023 2H Outlook CLIENT TRADING Client Spend Softness Leaner Client Teams Agency Consolidation Decision Timelines Clients are cautious with media This trends is offset by clients controlling Agency consolidation trends continue. Simplification, Slower decision making has materially
Slide 25: Data&Digital Media | H1 2023
Data&Digital Media | H1 2023 H1 - CLIENT MOMENTUM THOUGHT LEADERSHIP New Clients Main Beats| Importance of Data, AI, Customer Relationship Innovation ● Activating First-Party Data ● Revolutionizing Customer Relationships Through AI ● Unlock deep customer insights with a Data Cloud LIGHT SPOT Salesfo
Slide 26: Data&Digital Media | H1 2023
Data&Digital Media | H1 2023 OUR WORK Global Expansion Ramping up our Media OS updates Investment in Increase Measure.Monks development of modularized to inform media data & tech stickiness offering enterprise-grade, strategy for clients products to fuel among resale cloud-based data and our media c
Slide 27: Data&Digital Media | Foundations 2024
Data&Digital Media | Foundations 2024 PARTNERSHIPS AUTOMATION ARTIFICIAL INTELLIGENCE - #5 on Global Agency Rankings Launching Automation Consulting & Launching AI Products and Services In - Announced as Strategic Launch Partner for Salesforce Web3 Services in Market Market - Announced as Influentia
Slide 28: Technology Services
Chapter 6 Technology Services 28 S4 Capital plc 18 September 2023
Slide 29: More new clients
More new clients Apex JB Emerging Tech 29 S4 Capital plc Chapter 6 - Technology Services 18 September 2023
Slide 30: We're Winning Together
We’re Winning x Together Prospecting Connecting Landing Expanding → 18 months → Partnership with → 60 days → 90 days of chasing Experience.Monks Large scale SOW Significant $ + AI opportunities expansion 30 S4 Capital plc Chapter 6 - Technology Services 18 September 2023
Slide 31: More expertise in AI & Cloud and new ways to start
More expertise in AI & Cloud and new ways to start. Alert – Effectively measure and improve AI readiness at the enterprise. New AI Engagements in H1 with: Kwasi Ankomah – Aniruth Sarathy Head of AI – Head of Cloud Ignite new ideas for a product’s life cycle. Spark! – Quickly align vision, opportunity
Slide 32: Our capability expansion
our capability expansion GPTGladiator Score the best response Consulting AI & ML to your prompt. Consulting acts as a unifying strategy Becoming an AI-powered organization layer on our API model. means rapid deployment of creative Refactor Bot Expanded teams of management/business consultants are so
Slide 33: Our first in-market AI product
our first in-market AI product DocRobot.ai Effortlessly locate, condense, or interpret information while concealing any sensitive or confidential data. 33 S4 Capital plc Chapter 6 - Technology Services 18 September 2023
Slide 34: Growing demand gen and new partners
growing our demand gen new partners Ben Lee → Chief Marketing Officer @Formula.Monks Patrick Ward VP of Marketing ← @Formula.Monks → 6 new managing partners Oracle CloudWorld — Private AI Roundtable Participant — Partnership Accelerator — Technical Certifications 34 S4 Capital plc Chapter 6 - Technolog
Slide 35: Artificial Intelligence
Chapter 7 Artificial Intelligence 35 S4 Capital plc 18 September 2023
Slide 36: Culture • Commerce • Technology
Culture • Commerce • Technology 36 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 37: My calendar for the last 3 months
Media.Monks Proprietary & Confidential 37 My calendar for the last 3 months 37 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 38: Many jobs and agencies can be replaced
Media.Monks Proprietary & Confidential 38 “Based on what they already have, yes, many jobs and agencies can be replaced” CMO at a global CPG firm 38 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 39: Efficiency
Media.Monks Proprietary & Confidential 39 Efficiency 600k 400k 200k 0K 2023 2024 2025 2026 Traditional Shoot AI Enabled 39 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 40: Effectiveness
Media.Monks Proprietary & Confidential 40 Effectiveness 120 100 80 CPA 60 40 R2 = 0.9259 20 0 1 2 3 4 5 6 7 8 9 10 15 20 25 30 35 40 45 50 55 60 65 # of Creatives 40 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 41: Experience
Media.Monks Proprietary & Confidential 41 Experience 41 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 42: We're building pipelines
Media.Monks Proprietary & Confidential 42 We’re building pipelines Photography Scaled Copy Data Science Relevant Customized Faster Cost efficient Analytics Predictive Faster Accurate Scaled Natural Personalized SEO tification Growth driver iden i cast Fore c ng Fore leagueoflegends Hey fellow summoners!
Slide 43: And partnerships
Media.Monks Proprietary & Confidential 43 And partnerships “Our collaboration with the Monks will help deliver a more engaging and personalized experience for brands and consumers” 43 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 44: Media.Monks Revolutionizes the Fan Experience With Software-Defined Production and AI
Media.Monks Proprietary & Confidential 44 Media.Monks Revolutionizes the Fan Experience With Software-Defined Production and AI Driven by advances in technology from Adobe, Amazon Web Services and NVIDIA, this disruptive innovation moves Media.Monks' broadcast systems into a new arena LOS ANGELES, Sep
Slide 45: Across the value stack
Media.Monks Proprietary & Confidential 45 Across the value stack Generative AI Value Stack Services Automation Augmentation Transformation Software & Applications Vertically integrated Vertical Apps Horizontal Apps Apps & Models Models & ML Ops Foundation Verticalized On-Device Vertical DB Infrastruc
Slide 46: We have the receipts
Media.Monks Proprietary & Confidential 46 We have the receipts
Slide 47: A fifth of rich world firms do not even have a website
Media.Monks Proprietary & Confidential 47 “A fifth of rich world firms do not even have a website” The Economist 47 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 48: A copywriter used to do 4 pages a day, now 40
“ Media.Monks Proprietary & Confidential 48 A copywriter used to do 4 pages a day, now we’re aiming for 40 Louise Media.Monks 48 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 49: Now I can just talk to our data
“ Media.Monks Proprietary & Confidential 49 We don’t have to pull reports because now I can just talk to our data Michael Data.Monks 49 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 50: We finally get to create the experiences we've Always Imagined
“ Media.Monks Proprietary & Confidential 50 We finally get to create the experiences we’ve Always Imagined Vincent Experience.Monks 50 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 51: Check out our latest report
CHECK OUT OUR LATEST REPORT 51 S4 Capital plc Chapter 7 - Artificial Intelligence 18 September 2023
Slide 52: Summary and Outlook
Chapter 8 Summary and Outlook 52 S4 Capital plc 18 September 2023
Slide 53: Summary and Outlook
Summary and Outlook ⁄ Very mixed first half of 2023 ⁄ Net revenue growth of 5% like-for-like, behind our expectation, reflecting challenging macro-economic conditions and client fear of recession ⁄ Solid growth across scaled client base with top 20 clients’ like-for-like revenue up 9% and top 50 up
Slide 54: Q&A
Chapter 9 Q&A 54 S4 Capital plc 18 September 2023
Slide 55: Appendix
Chapter 10 Appendix 55 S4 Capital plc
Slide 56: Appendix | Additional information
Appendix | Additional information Guidance on adjusting items for 2023 Shares Consideration Committed ⁄ Amortisation c.£50-55m ⁄ Deferred share issuance of c.14m shares in 2023 and c.36m in 2024, ⁄ Share based payments c.£15-20m totalling c.50m ⁄ Acquisition, restructuring and other expenses c.£25-£
Slide 57: Thank you
Thank you 57 S4 Capital plc