S4 Capital plc

good morning everybody uh good afternoon uh to others but good morning to those of you who are dialing in from the uh the us this is uh s4 capital's q1 trading update we did a presentation to uk and european and probably asian investors Early today, now we're doing one for the Americas, basically. So we'll firstly do Mary Basterfield, Jean-Benoît Berti with us in London, and Scott Spirit in Singapore, myself in Chicago. So we'll do a trading update. Mary will take us through the numbers, and then Scott will take us through market momentum and client analysis. And then I'll come back on and just a brief summary and outlook. And we'll take any Q&A that anybody has. So firstly, over to Mary.

Thank you, Martin. Hello and thank you for joining us today. Our first quarter performance was in line with expectations. Net revenue of £186 million decreased 15% reported or 12% like for like. Operational EBITDA for the quarter was also in line with our expectations, reflecting both lower activity levels and the benefits of cost reductions made in 2023. We maintain our full year guidance and clients remain cautious in the near term as market uncertainty remains, but we are managing through this. At a practice level for the full year, we continue to expect... Content to deliver an improvement in EBITDA and margin, driven by cost reductions made last year. And data and digital media to perform in line with 2023 on both top and bottom line, with some margin improvement. Technology services has a more challenging outlook, and we expect both lower revenue and EBITDA following a reduction in activity with some key clients. We continue to maintain a disciplined approach to cost management, including headcount and discretionary costs, and a focus on utilisation, billing and pricing. Given the outlook for technology services, we continue to target a decrease in like-for-like group net revenue versus 2023, with a broadly similar level of operational EBITDA. The comparatives with 2023 will be tougher in the first half and ease in the second. We also expect 2024 to be heavily weighted to the second half, given our natural seasonality and expected improvement in end markets. Net debt at the end of March was 206 million, or 2.2 times operational EBITDA. This is after 10 million of contingent consideration payments in the first quarter. We maintain our full year net debt guidance of 150 to 190 million. Moving to the next slide, let's take a look at first quarter net revenue by practice and region. My comments here are all on a like-for-like basis. Content's net revenue was down 9% at $116 million, with some growth within our scaled and portfolio clients, but ongoing lower demand from some technology clients. Content's margin for the first quarter improved year on year as a result of the actions we took in 2023 to reduce costs. Changes to the leadership structure are now well established. Data and digital media net revenue was 9% lower at 47 million, with less activity, especially in the activation and performance business lines. In technology services, net revenue decreased 28% due to lower activity from some key clients, as expected. From a regional perspective, net revenue in the Americas declined 12%, driven by technology services. The Americas accounted for 79% of the mix. EMEA was down 8%, reflecting lower activity in the Middle East. and APAC reduced 13% with slower demand in Australia. Overall, there has been a pick-up in momentum compared to our 2023 exit rate. Net revenue in the first quarter was down 12%, versus 15% for the fourth quarter. This is despite the slowdown in technology services and is most evident in content, where the first quarter was down 9% compared to a decrease of 17% in the fourth. We have included information in the appendix on expected share count and invested capital, and we are happy to take any questions on these at your convenience. So thank you very much. I'll now hand over to Scott for the client and market update.

Hello, everybody. Thank you for joining. So for our two addressable markets, it is a contrasting picture. The digital media market is healthy with a strong end to 2023 and a good start to 2024. Growth is expected to moderate over the course of 24, but the major platforms will still grow by double digits. Obviously, that contrasts with our own performance so far, but we are still seeing caution from our clients, particularly those in the technology sector. If you look at Meta's Q1 results, for example, their revenues were up 27%, very healthy, but their sales and marketing expenses were down 16%. And we're seeing similar patterns across the industry. For tech services, this is a more difficult market which slowed in 2023 and is flat in 2024. We actually had a very strong 2023. So the negative market trends have caught up with us in 2024. Onto the next slide. Most of our client categories were stable in Q1 with technology still by far the main category and representing 43% of our revenue. We saw a decline in financial services category, and that was largely driven by the decline in spend with one of our clients in our tech services practice. We saw strong growth from our existing clients in auto and fashion, which saw us gain traction in those two categories. Next slide. Whilst the majority of our top 10 and top 50 clients did in fact show growth, we saw declines overall in the average size of our clients, driven largely by continued softness in technology clients. And as I mentioned, that specific large financial service client in our tech services practice, which has reduced spend. Given our overall revenue decline, our top 10 clients declined slightly less than overall, our top 20 in line, and our top 50 slightly more. When we look at the distribution of our clients via spend, you'll see that we have seven clients spending above £5 million versus eight last year, with Mondelez being the one which dropped down below that threshold. On a positive note, over the course of 2023, we did see a significant decline in the number of clients in the 0.1 to £1 million category, which tend to be project-based clients, local client relationships, and new business. This is stabilized in Q1 and we do see a healthy pipeline of pitches and wins, including Burger King, Panasonic, FanDuel, AliExpress, Decathlon, Santander and ICBC, which should support our H2 weighted outlook. We're also excited to welcome Justin Billingsley as our new chief growth officer, who will be focused on driving new business with existing and new clients. And with that, I'll hand back to Martin for the summary slide.