This document contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group, including, among other things, statements about expected revenues, margins, earnings per share or other financial or other measures. Although the Group believes its expectations are based on reasonable assumptions, any forward-looking statements, by their very nature, involve risks and uncertainties and may be influenced by factors that could cause actual outcomes and results to be materially different from those predicted. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and the Group undertakes no obligation to update these forward-looking statements. The Group identifies the forward-looking statements by using the words 'anticipates', 'believes', 'expects', 'intends', 'estimate', 'expect', 'project', 'plan', 'believe', 'target' and similar expressions in such statements. Important factors that could cause actual results to differ materially from those contained in forward-looking statements, certain of which are beyond the Group's control, include, among other things: the unanticipated loss of a material client or key personnel, delays or reductions in client advertising budgets, shifts in industry rates of compensation, regulatory compliance costs or litigation, natural disasters or acts of terrorism, the overall level of economic activity in the Company's major markets etc.

Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made and are based upon the knowledge and information available to the Directors on the date of this document.

A webcast and conference call covering the results will be held today at 08:30 BST in London, followed by another webcast and call at 08:00 EDT / 13:00 BST. The presentation for these webcasts and conference calls has been posted on our website www.s4capital.com at the same time as this announcement.

08:30 BST webcast (watch only) and conference call (for Q&A):

Webcast: https://brrmedia.news/SFOR_FY21_Eur

Conference call:

UK: +44 (0) 33 0551 0200

US: +1 212 999 6659

Confirmation code: 060522

08:00 EDT / 13:00 BST webcast (watch only) and conference call (for Q&A):

Webcast: https://brrmedia.news/SFOR_FY21_US

Conference call:

UK: +44 (0) 33 0551 0200

US: +1 212 999 6659

Confirmation code: 02060522

Enquiries to:

S⁴Capital Plc                                                                                                         

Sir Martin Sorrell, Executive Chairman                                                                            +44 (0)20 3793 0003/+44 (0)20 3793 0007

Mary Basterfield, Chief Financial Officer

Scott Spirit, Chief Growth Officer

Dowgate Capital Limited (Joint Corporate Broker to S⁴Capital plc)                     

James Serjeant                                                                                                                                     +44 (0)20 3903 7715

David Poutney     

Jefferies International Limited (Joint Corporate Broker to S⁴Capital plc)

Tony White                                                                                                                                           +44 (0)207 029 8000

Harry Le May

Morgan Stanley & Co. International plc (Joint Corporate Broker to S⁴Capital plc) 

Paul Baker                                                                                                                                             +44 (0)207 425 8000

Alex Smart

Powerscourt (PR Advisor)                                                                

Robin O'Kelly                                                                                                                                        +44 (0)778 670 2526

Jane Glover

Notes:

1.         Like-for-like is a non-GAAP measure and relates to 2020 being restated to show the unaudited numbers for the previous year of the existing and acquired businesses consolidated for the same months as in 2021 applying currency rates as used in 2021;

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 in the pre-acquisition period.

Dear Shareowner,

My Executive colleagues, Victor Knaap, Wesley ter Haar, Pete Kim, Christopher Martin, Scott Spirit, Mary Basterfield, and I are delighted to present our fourth set of results for the year ending 31 December 2021 to our fellow shareowners. However, the delay in producing these results is totally unacceptable and embarrassing to all of us and has caused significant concern to our shareowners (of which management accounts for approximately 40%). In response, significant financial control, risk and governance changes are being implemented and planned across the Company under the guidance and leadership of new Chief Financial Officer, Mary Basterfield, who took over the role at January 3^rd 2022 along with a strengthening of the Audit Committee.

2021 saw the expansion of our major client relationships with additional remits and geographies at brands including Google, Meta, Amazon, Paypal, HP, Netflix, Procter & Gamble, Mondelez and BMW. We also saw significant new business with engagements from new clients including Allianz, Miele, Instacart, Pearson, Dropbox, Canva, Constellation Brands and M1. Encouragingly, our current pipeline is proportionally ahead of last year's level following a fast start to 2022.

We had six "whoppers" (clients with revenues over $20 million per annum) in 2021, as opposed to only two in 2020. We have also now identified nineteen more potential "whoppers", where we currently project $5-15 million of revenue per annum and which potentially could break through the $20 million per annum level over the latest three year planning period for 2022-24. We anticipate that up to a further five clients may well become "whoppers" this year making a total of eleven in 2022, well on the way to achieving our 20² objective and have already landed an NDA'd consumer goods client at an annual "whopper" level.

2021 also saw significant strengthening and deepening of our Content and Data&digital media practices. Our newly launched unitary brand, Media.Monks, broadened and deepened its geographical footprint in 2021 and so far in 2022. It added North and South American Content and Data&digital media capabilities through Jam3, Racoon Group, Cashmere, Maverick Digital and 4Mile. In Europe, the Middle-East and Africa, Media.Monks entered the German and Italian markets through Staud Studios and Miyagi. In Asia Pacific, we added Content and Data&digital capabilities through Tomorrow in China and Datalicious and Destined both in Australia. Media.Monks also added significant talent from competitors in the areas of new digital media social content and digital government communications. Finally, Media.Monks entered a third practice, Technology services, through South-American based Zemoga.

Media.Monks has integrated each combination into our now three practices: Content, Data&digital media and Technology services. We operated as a single P&L, pretty much from inception, so as to develop and maintain a seamless, fully integrated offer for our clients. In addition, one of the consequences of the pandemic was an acceleration in consolidating separate offices on a city-by-city basis, as existing leases were terminated more quickly. We are now planning new leases with an approximately 60% pro-rata capacity floor plate, assuming office occupation of three days a week on average. There is little doubt that we will not return to the old normal in terms of office location, layout and use. There will be more flexible working from home, probably about 40% of the working week, with more flexible commuting times, more dispersed working and living patterns and different office layouts, with separate spaces for our people to meet, to work and to engage with clients. We are also increasingly consolidating our strategic, client content, data and programmatic and technology services offer at the S⁴Capital level.

Turning to the results themselves, we thought it would be most useful to compare the reported results not only with last year's reported results, but also on an unaudited like-for-like and unaudited pro-forma basis, particularly given the continued rapid inorganic expansion of the Group in 2021.

Billings were £1.3 billion, up 99.4% on a reported basis, up 66.8% like-for-like and up 67.1% pro-forma. Controlled Billings, that is billings we influenced in addition to billings that flowed through our income statement, were approximately £5.4 billion (2020: £2.3 billion). Revenue was £686.6 million, up 100.4% from £342.7 million on a reported basis, up 52.4% like-for-like, and up 53.8% on a pro-forma basis. Gross profit was £560.3 million, up 89.8% reported, up 43.7% like-for-like, and up 45.7% pro-forma. Operational EBITDA was £101.0 million, up 62.4% reported, up 11.9% like-for-like, and up 16.8% pro-forma. Operational EBITDA margin was 18.0%, down 3.0 percentage points on 2020, down 5.1 percentage points like-for-like and 4.6 percentage points pro-forma, reflecting investment ahead of the revenue curve in major new "whopper" clients, new areas of organic growth, such as connected tv, and management infrastructure to manage future growth, in line with our first half statement in September 2021.

Operational EBITDA margin improved in the second half to 20.6% from 14.5% in the first half giving 18.0% for the full year, as the first half increased investment in our people yielded higher productivity in the latter half. Operating loss was £42.1 million, after £136.9 million of adjusting items, principally acquisition and amortisation expense, versus an operating profit of £8.1 million in 2020. Adjusted basic net result per share was 13.0p versus 7.9p in 2020. Statutory loss for the period was £56.7 million, versus a reported £3.9 million (loss) in 2020, after charging under IFRS £72.3 million of combination payments, which were mainly tied to the continued employment of key share-owning principals in combinations. Although such contractual provisions impact the income statement, your Board believes this is a better commercial approach given the professional service nature of our business. Basic and diluted net loss per share were 10.3p, versus 0.8p (loss) in 2020.

Year-end net debt was £18.0 million (2020 net cash: £51.6 million), despite making £96.6 million in cash combination payments and reflecting cash flow from operating activities with 54.1% operating cash flow conversion from EBITDA. In line with our first half statement in September 2021, Operational EBITDA margins improved in the second half from 14.5% in the first half to 20.6% in the second half giving 18.0% for the full year, as the first half increased investment in our people yielded higher productivity in the second half.

Pro-forma billings were £1.4 billion. Pro-forma revenue was £740.2 million and pro-forma gross profit was £609.1 million up 53.8% and 45.7% respectively on 2020. Pro-forma operational EBITDA was £113.0 million, up 16.8% on 2020, with operational EBITDA margin at 18.6%, 4.6 percentage points down on the previous year. Pro-forma adjusted operating profit, excluding adjusting items of £190.2 million, is £106.7 million, up 16.6% on the previous year. Pro-forma adjusted pre-tax profits were £94.4 million versus £87.0 million in the previous year, up 8.6%. Pro-forma adjusted profit for the period was £82.3 million (2020: £64.5 million), up 27.6%.

By geography, on a pro-forma basis, the Americas accounted for 71.3% of gross profit against 74.3% in 2020. Europe, the Middle-East and Africa represented 19.4% of gross profit against 16.6% in 2020. Asia-Pacific represented 9.3% of gross profit against 9.1% in 2020. Pro-forma growth in gross profit/net revenue was up 39.9% in the Americas, 70.8% in Europe, Middle-East and Africa and 47.8% in Asia-Pacific. Our long-term objective has been to achieve a geographic distribution of 40% in the Americas, 20% in Europe, the Middle-East and Africa and 40% in Asia-Pacific, particularly given the likely continuing rise of China and India and despite the recent US/China trade frictions. However, the war in Ukraine, has increased concerns about Taiwan and China and as a result, it is likely that our transition to Asia Pacific will take longer, with a 60:20:20 geographical split being a more realistic objective, at least in the medium term.

By practice, on a pro-forma basis, Content accounted for 67.0% of gross profit/net revenue against 65.5% in 2020. The Data&digital media practice represented 29.6% of gross profit/net revenue against 31.8% in 2020. Technology services, a new practice for us in 2021, accounted for the remaining 3.4%. Pro-forma growth in gross profit/net revenue was up 49.0% at the Content practice and up 36.0% at the Data&digital media practice. Technology services was up 79.3%. Our long-term objective now is to achieve a practice distribution around one-half in Content, one quarter in Data&digital media and one quarter in Technology services.

Environment, Social and Governance strategy

In 2021, the Company continued to raise the bar in all three areas of our ESG strategy. We actively track our CO₂ emissions and perform competitively with a sample of peer companies in the areas of gender and diversity. We have committed to achieving carbon neutrality by 2024, which we have realised in 2021 by offsetting our 2020 emissions in our S⁴ forest. We have planted over 265,000 trees and will officially offset our emission for 2021 in 2022 through certified forest preservation projects. These actions are taken in response to the World Economic Forum 2020 Davos Manifesto. We are the first advertising and marketing firm to commit to the Amazon Climate Challenge, which has a longer term objective in relation to zero emissions. We are seeking B Corp status across the whole Company, not for individual offices, by 2023.

In 2021, we strengthened changes in our hiring and educational policies in relation to diversity, equity, and inclusion. We have continued to closely track our numbers and included the option for our people of not declaring gender or race for the first time in 2021. As a result our diversity numbers changed slightly compared to 2020 in the United States - 32% People of Colour and 16% undeclared vs 40% People of Colour and 60% White in 2020. We also increased our Black representation, from 5% to 6.5%, which, though an improvement, still shows significant under-representation of the communities we work in. In California, our percentage is somewhat representative, but nationally, where the proportion is 13% and in New York, where it is 24%, it is not acceptable. We have also hired our second year flight of Fellows (and Fellowesses) for the S⁴ Programme, who exclusively come from Historically Black Colleges and Universities in the United States. The Class of 2021 is developing very well and about to start new assignments, some of them international. This is a four-year, multi-practice programme, that will in the future extend recruitment beyond the borders of the United States. We have also started to recruit in US High Schools, starting with two, one public and one charter in New York. With regard to gender diversity, our relative ratio has also improved, with 43% women globally, 13% undeclared and 44% men (compared to 45% women and 55% men in 2020). Our second edition of the S⁴Women Leadership Programme has just launched. While the inaugural programme was on-line and hosted over 50 global leaders from across the firm, in 2022 the program will run in person, in May, at UC Berkeley, and will feature 30 of our global women leaders. Finally, the most important step we have taken towards keeping diversity efforts front and centre of our everyday practices has been to hire James Nicholas Kinney as our global Chief Diversity Officer. His main task is leading our recruiting efforts, so we can discover and attract the candidates that represent our communities.

Across S⁴Capital we donated 1,460 hours to Community and Charity services and we continue to contribute to society and the needs of the planet with our Projects for Good, which are all related to the United Nations Sustainable Development Goals and aimed to create positive impact. In 2021 we raised our number of Projects for Good from 41 to 251.

As regards Governance, we continue to try to enhance the capabilities of the Board with the addition of more diverse talent to add to the existing, four female and four male Non-Executive Directors based in the Americas, EMEA and Asia Pacific and will strengthen the Audit Committee given the unacceptable delay in reporting these results.. We continue to review the recommendations of Lord Hill's Report to the UK's Chancellor of the Exchequer that provides a possible pathway to a premium UK listing and the possibilities of a US listing, where market valuations for comparators are higher.

Outlook and current trading

All-in-all, we continued to fire on almost all cylinders in 2021, with like-for-like revenue and gross profit/net revenue up 52.4% and 43.7%, two-year simple stacks for gross profit/net revenue up 63% and three year up over 100%, the one feature we would have liked to improve on being the Operational EBITDA margin, which was impacted by the significant investment required to bed down our growth. Pro-forma revenue and gross profit/net revenue growth were 53.8% and 45.7% and a pro-forma operational EBITDA margin was 18.6%, after central costs. Strong performance is planned to continue into 2022, with budgets and plans targeting strong revenue, gross profit/net revenue growth and improving operational EBITDA margin and the three-year plan for 2022-24 aiming for a doubling of the group organically, excluding combinations and EBITDA margins returning to previous levels. January and February 2022 gross profit/net revenue growth was ahead of guidance. Mary Basterfield, our new Chief Financial Officer, who took over the role at January 3^rd 2022, has had an immediate number of challenges to deal with, but has responded strongly, already adding new positions at the S⁴ Capital level in the financial control, treasury, risk and governance functions and in the Content practice. More resources will be added across all three practices in short order, so as to try to ensure that delays in producing our figures do not reoccur.

There is no doubt that covid-19 has had a devastating impact on the global economy and society over the last two years. Our people have been put under immense strain, particularly with the illness and loss of family members. We applaud their resilience, hard work and success and thank them for all their efforts. We took the view that we would not make significant reductions in the number of people in the company, nor rely in any significant way on government support or funding. Our Content practice, now representing about two-thirds of our business pivoted very quickly to robotic production and animation and from orchestrating live events to virtual ones. We, therefore, created significant new content revenue streams very quickly, with like-for-like gross profit/net revenue growth of 19.4% in 2020 and 43.7% in 2021, a two year simple growth stack of 63% and three year over 100%, whilst the analogue advertising and marketing services industry struggled to find low single digit two- and three-year simple stack of around 3%. There was steady progression in the Content and Data&digital media practices with gross profit/net revenue organic growth rates relatively even across the year, although Data&digital media had a slightly stronger first half. Technology services made a blockbuster start as it was included for the first time in the fourth quarter.

Overall, it is clear that Covid-19 has accelerated the adoption of digital transformation and digital media at three levels. Firstly, at the consumer level, with consumers buying groceries and essentials on-line, educating their kids on-line, using financial services on-line and gorging on on-line entertainment and gaming. Secondly, media trends have been accelerated, with the streamers like Netflix and Disney+ gaining on free to air tv, traditional newspapers and magazines under greater pressure from digital alternatives and traditional outdoor being increasingly eclipsed by digital outdoor, despite recent gyrations. Finally, enterprise adoption of digital transformation has accelerated, as covid-19 disrupted steady state growth and during that disruption "change agents" have been given more oxygen to implement digital organisational change.

It is also clear that the Company's purely digital model based on first party data (reinforced by the recent privacy policy decisions by Apple and Google) fuelling the creation, production and distribution of digital advertising content and distributed by digital media is increasingly resonating with clients. Our tag line "faster, better, cheaper" or "speed, quality, value" and unitary, one P&L structure also appeal strongly. The imperatives for 2022 continue to be to greater client conversion at scale and achieving our 20² objective as rapidly as possible; to integrate our three practices even more effectively; to continue to strengthen our diversity, equity and inclusion and climate change achievements; to continue to broaden and deepen our service capability through further combinations; and finally, of course, to try to ensure we never experience an unacceptable delay in our results again.

Best wishes,

Sir Martin Sorrell

Executive Chairman

S⁴Capital plc (SFOR.L) is the tech-led, new age/new era digital advertising and marketing services company, established by Sir Martin Sorrell in May 2018.

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 by integrating leading businesses in three practice areas: Content, Data&digital media and Technology services, 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 2021 digital accounted for over 60% (for the first time) or $400-450 billion of total global advertising spend of $680-700 billion (excluding over $500 billion of trade promotion marketing, the primary target of the Amazon advertising platform) and projects that by 2025 total global advertising spend will expand to $975 billion and digital's share will grow to approximately 70%, accelerated by the impact of covid-19. In fact 97% of the projected growth in Advertising spend between 2021 and 2025 will come from Digital. Global spend on Digital Transformation (the primary addressable market for Technology Services) is growing at 21% CAGR and projected to be $879bn by 2025.

In 2018, S⁴Capital combined with MediaMonks, the leading AdAge A-listed creative digital content production company led by Victor Knaap and Wesley ter Haar, and then with MightyHive, the market-leading digital media solutions provider for future thinking marketers and agencies, led by Peter Kim and Christopher S. Martin.

Since then, MediaMonks and MightyHive combined with more than 25 companies across Content, Data&digital media and Technology services. For a full list, please see the S⁴Capital website.

In August 2021, S⁴Capital launched its unitary brand by merging MediaMonks and MightyHive into Media.Monks, represented by a dynamic logo mark that features MightyHive's iconic hexagon. As the operational brand, Media.Monks underpins S⁴Capital's agility, digital knowledge and efficiency and is the next step in delivering on its foundational promise to unify Content, Data&digital media and Technology services.

Victor Knaap, Wesley ter Haar, Pete Kim, Christopher Martin, Mary Basterfield and Scott Spirit all joined the S⁴Capital Board as Executive Directors. The S⁴Capital Board also includes Rupert Faure Walker, Paul Roy, Daniel Pinto, Sue Prevezer, Elizabeth Buchanan, Naoko Okumoto, Margaret Ma Connolly, Miles Young and Peter Rademaker.

The Company now has over 8,400 people in 33 countries across the Americas, Europe, the Middle East and Africa and Asia-Pacific and a current market capitalisation of approximately £1.8 billion (c.$2 billion) and would rank in the FTSE 200. It achieved Unicorn status in a little over one year, unique in the advertising and marketing services industry. Sir Martin was CEO of WPP for 33 years, building it from a £1 million "shell" company in 1985 into the world's largest advertising and marketing services company with a market capitalisation of over £16 billion on the day he left. Today its market capitalisation is £11 billion, dropping into third place behind both Omnicom and Publicis for the first time ever. Prior to that Sir Martin was Group Financial Director of Saatchi & Saatchi Company Plc for nine years.

For the year ended 31 December 2021

Loss per share is attributable to the ordinary equity holders of the Company

For the year ended 31 December 2021

as at 31 December 2021

[1] Restated for the initial accounting for the business combinations of Decoded, Metric Theory, Orca Pacific and BrightBlue as required by IFRS 3. Details are disclosed in Note 10.

Company's registered number: 10476913
 

For the year ended 31 December 2021

 [1] Including bank overdrafts of £1.9 million.