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S4 Capital ups targets after strong first quarter

Tue 04 May 2021 13:07 | A A A

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(Sharecast News) - Shares in S4 Capital sparked on Tuesday after the advertising firm upped revenue and profit targets following a strong start to the year.

The digital advertising agency, which was founded by Sir Martin Sorrell after his acrimonious departure from WPP in 2018, said reported revenues rose 71% to £121.6m in the three months to 31 March, or by 35% on a like-for-like basis.

Reported gross profits were ahead 71% or 33% on a like-for-like basis at £104m.

S4C attributed the strong performance to "significant" new work from larger clients, including Amazon, Facebook and Mondelez International. New business wins during the quarter include assignments from Diesel, Allianz and Crocs.

S4 Capital expects a rebound in global GDP in 2021 and 2022 to drive digital advertising growth by 20% per annum, and is now targeting 30% like-for-like revenue and gross profit growth, up from 25% previously.

Executive chairman Sorrell said: "We are extremely optimistic about our prospects for this year and next, given the huge global fiscal and monetary stimulus introduced to counter the impact of the pandemic and the subsequent increase in consumer savings ratios and stagnation of corporate capital investment."

As at 1245 GMT, shares in S4C were ahead 2% at 570.7p, having earlier reached 576p.

Steve Liechti, analyst at Numis, upped the price target on S4C to 670p from 650p following the "strong" update.

He said: "Momentum remains good. We see a nice play on digital/data-led growth trends in marketing, given in its blank sheet focus and experienced management. High rating reflects growth/positioning." Numis has an 'add' recommendation on the stock.

S4C also announced on Tuesday that it was partnering in Brazil with Raccoon, a full-service digital marketing agency with around 200 large clients. Sorrell said the country was a "crucial" market for the firm.

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