Martin Sorrell’s S4 Capital buys California data consultancy as the advertising and marketing group’s profits soar
- 4 Mile Analytics provides data and engineering services to Fortune 500 clients
- The deal ‘significantly expands’ Media Monks’ data and digital media capabilities
- Share price is down 40% on its September 2021 peak
S4 Capital, the ad agency run by former WPP boss Sir Martin Sorrell, has followed its 2021 deal spree with a merger between its Media Monks subsidiary and California-based data consultancy 4 Mile Analytics.
S4 announced the deal alongside a trading update, which revealed that performance in the first 11 months of its financial year was strong and it the firm is well ahead of its previous guidance of 40 per cent gross profit growth.
The firm told investors on Wednesday that the deal ‘significantly expands’ Media Monks’ data and digital media capabilities, and expasnds its client base.
Sir Martin Sorrell hailed the ‘growth opportunity ahead of [S4] in 2022 and beyond’
Santa Cruz-based 4 Mile Analytics provides data analytics, data engineering, data governance, software engineering, UX design, and project and product management for a number of Fortune 500 brands.
With around 50 data specialists, 4 Mile Analytics generated revenues of approximately $6.5million in 2021 and is targeting to double up this year.
It follows Media Monks’ November merger with Italian content marketing agency Miyagi, which added 70 staff to S4’s roster and marked its 11th deal in as many months.
Nick Fogler, founder and chief executive, welcomed the prospect of ‘huge opportunities to bring the offerings of the wider group to our clients and provide even more opportunities for our team’.
Tyler Pietz, global executive vice president for data at Media Monks, added: We’ve seen incredibly strong demand for data analytics and engineering expertise from our clients. Nick and his team at 4 Mile Analytics will bring additional expertise, scale and clients to one of our fastest expanding service areas.’
S4 Capital also revealed that operational earnings margins improved ‘significantly’ in the second half of its financial year.
The firm’s revenues more than doubled in the third quarter of 2021 after it landed ‘whopper’ clients.
Digital marketing, in which S4 specialises, has accelerated during the pandemic as more companies advertise online rather than in print and on TV.
Income rocketed up 106 per cent to £178million over the period, better than previous expectations, while gross profits surged 92 per cent to £144.4million.
Recent client additions include social media giant Facebook and computer maker HP. Existing clients include Google, Amazon, Burberry and Netflix.
S4 shares remain roughly 40% off their September peak
Sir Martin Sorrell hailed the ‘growth opportunity ahead of us in 2022 and beyond’, adding that S4’s budgets are set at 25 per cent like-for-like gross profit/net revenue growth ‘in line with that three year plan, which seeks to double the size of the company organically and targets an improvement in the operational EBITDA margin back towards previous levels’.
S4 shares were up 5.7 per cent by midday on Wednesday to 560p, but had fallen back slightly to 555p this morning.
The shares remain down roughly 40 per cent since their September peak, driven by concerns about reduced margins.
Analysts at Peel Hunt said the de-rating of the stock ‘overdone, with the shares now trading on only 28x FY22E PE’.
‘We believe confirmation of ongoing performance will support the share price.’
The analysts gave S4 a Buy rating with a target price of 950p.