- S4 has kicked off the new year with two acquisitions
- It has also hinted at further M&A to come
S4 Capital (SFOR) has not paused for breath. On the first working day of the new year, the advertising group announced two acquisitions – it will combine integrated media agency Decoded Advertising with its MediaMonks division, and marketing agency Metric Theory with its MightyHive business. These new additions mark seven acquisitions by S4 since the first Covid-19 lockdown began in March. While the purchase prices were not disclosed, the group says it will maintain “significant net cash balances”.
Analysts at Jefferies estimate the two mergers will boost EPS by over 13 per cent this year, suggesting the companies are a good fit for S4. And there could be more M&A to come. The group – which is led by Sir Martin Sorrell – says that with greater certainty around Brexit, it will be able to deploy its services more effectively not just in Europe, but also in the Americas, Asia-Pacific and Middle East. A note that “further moves will be announced shortly” could be hinting at new buys in these regions in the near future.
In the meantime, trading for the 11 months to 30 November and expectations for December were in line with market expectations, with like-for-like double-digit revenue and gross profit growth. Company compiled-consensus places S4’s gross profit at between £279m and £300m in 2020, up from £171m in 2019. Buy at 498p.
Last IC View: Buy, 520p, 10 Dec 2020
