Ladies and gentlemen, good day, and welcome to the S4 Capital PLC Results for the Year Ended thirty one December twenty nineteen Conference Call. At this time, I'd like to turn the conference over to Sir Martin Sorrell. Please go ahead, sir.
Thank you, operator. Thank you, Julia. Welcome, everybody. Obviously, difficult time to coordinate everything, but thanks, everybody, for joining. Think we probably have about a 100 people, either online, or on the on the call itself.
I'm I'm joined by Peter Rademaker who's in, Amsterdam, by Scott Spirit, who's joining us from Singapore, by Victor Matt, who as you as you know is the CEO of MediaMonks, and by Pete Kim, who is the Victor is in Amsterdam too with Peter. And Pete Kim is in New York, the CEO of MightyHive. I'm here in London. I I I was trying to think just before we start as to, you know, so what is the, sort of key, assumption or takeaway from, what we're about to show you. And I think, obviously, the coronavirus, overshadows everything, and we're largely looking at historically what happened in 02/2019.
And 02/2019, as you can see, was a a very good year for s four with industry leading stats. Having said that, I think what coronavirus, the tragedy, which is clearly a tragedy, and the health and safety of all our 2500 people and their families in 30 countries is of paramount importance. But I think the underlying thing that we're starting to see, and I think it will come out of the presentation, as we go through it, is that the impact of coronavirus probably will be result in an acceleration in the change in the digital change change and transformation. That what we're going to see is an acceleration in the trends that there will be no excuses anymore for delaying the changes to the digital economy and digital transformation and business transformation. So with that as an observation, I'll hand over to Peter to take us through the results.
Julian, if you could move on to the contents page, we we have Peter doing the results. Scott will cover the market, client momentum, people, mergers, and integration. Victor will cover the content practice and Pete will cover the data and programmatic practice. And I'll come back with a summary and outlook and look after the Q and A. So over to you, Peter.
Thank you, Mr.
Martin. If you can switch to the next page, the financial performance on Page three, please tune in. As Martin just indicated, I would say, an outstandingly successful first full financial year 2019 of S4 Capital. As you may remember, last year was our first year, which started in May 2018 till December. So also for comparison purposes, specific these specific numbers are a little bit hard to compare.
And and what we have done and also furthermore in the presentation, we have compared as much as possible in like for like 2018 as if in the sort of same performance and same timing of our acquisitions and also on a pro form a basis on a full financial year basis because we believe that that in itself shows the best comparison how we have performed in 2019. And again, we consider that as outstandingly successful and also good what is also good to notice is that we were above, let's say, the consensus or the market expectations. So I will pinpoint a few items on our profit and loss and balance sheet and cash flow further in this presentation. So I'll start with our billings, which is our gross billings, which is which includes client pass through costs, it's not our net revenue, but our total gross billings were €455,800,000 And on a pro form a, so full financial year on year basis, we were at €513,200,000 billings. Our revenue was €215,100,000 which is up 292% compared to last year's statutory numbers, which were $4,554,800,000.0 euros and a like for like, we were 41% up and on a pro form a basis, 37% up.
Our gross profit, which is our most important measure within express our performance as a percentage of our gross profit went up to €171,300,000 which is 361% up compared to last year on like for like 44% up and on a pro form a basis, 9% up. Our operational EBITDA, which is still a very important measure for us, euros 33,400,000.0, which is 612000000% up compared to last year, and like for like 51% up and pro form a on 47 up. Our operational EBITA margin was 19.5% in this year as percentage again of gross profits, which is 6.9 margin points up on 2018 and like for like was 18.6% and pro form a 20.9 So a lot of percentages, I realize that. And basically here to point that out is if you look at in our September presentation where we presented our half year numbers, and this is in relation to EBITDA, we were, as we indicated in our half year numbers, basically investing or gearing up for our expected busy second half year, and that clearly shows because in our EBITDA in the first half year was 13.7%, and in the second half, it was 23.5% resulting in this 19.5% overall for the full year after central cost.
Our operating result or loss was 3,800,000.0 And important to notice, and I will come back to that later also, is that we that includes adjusting items of €35,000,000 which is acquisition related expenses, its amortization and share based compensation. That's included in that €35,000,000 And last year, it was an €8,500,000 operating loss in 2018 and on a pro form a basis, it would be 2,500,000.0 The results before income tax were €9,200,000 loss. Again, these include the adjusting items versus a loss of €9,100,000 in 2018 and pro form a €2,800,000 loss. The result, basically the net result after tax result was €10,000,000 loss for 2019, again including the adjusting items versus 8,100,000 loss in 2018 and the pro form a results for the period of €5,700,000 loss. Adjusted basic net result, so that includes again adding back the adjusting items was 5.2p versus 1.0p in 2018.
And our basic diluted net result per share was 2.7p loss versus 3.3p loss in 2018 and then pro form a adjusted basic net result per share of 1.3p loss. Our year end net cash, and again, I will come back to that in the when I address some of the topics in the balance sheet, we ended up in a net cash position of €23,700,000 or in other words, we had €66,000,000 cash on our balance sheet. We have the €42,500,000 approximately €42,500,000 loan, which we have drawn down to fund the acquisition back in 2018 in the MedioMox transaction. And important to notice, for 2020, we had a very good start in January with a top line up over 30%. And of course, it was January, so we were not seeing any material impact as yet from the coronavirus.
But we will, of course, update. And I think Martin will also come back later in the presentation on that. So if we flip to the next slide, then here you see a lot of these numbers that I just I just mentioned. You have an overview which clearly shows the the different p and l. So from left to right, the unaudited 2019 statements, which we're about to finalize and expect our financial statements to be ready at the April.
So they're still classified as unaudited compared to the audited numbers from last year, that seven month period, the unaudited like for like, the pro form a and the pro form a full year 2018 for comparison purposes. If I flip to the next slide, again, the unaudited condensed income statement, what's important to notice here next to the fact what I addressed in the first slide is that we have the EBITDA mentioned, euros 33,400,000.0 in the first block on the top side of the sheet, if you see the sheets in front of you. And the holding costs were €5,800,000 So basically, the operation was delivering €39,200,000 EBITDA contribution in end year twenty nineteen, which is approximately and that's also our guidance to the market that's the 23% approximately 23% performance where we indicate ourselves in somewhere in area between 1823%, 24% EBITDA margin for our operations, so before central cost. And after central cost, it's around 20%. And what we did in this sheet also for comparison purposes, we included last year and and, again, the like for likes, and we have annualized some of the positions like amortization charges to make a comparison as good as possible.
And what I would point out is that also if you look at our unaudited pro form a full financial year 2019, so that means that looking at the performances as if all acquisitions and all activities were included from January 1, our performance would be approximately CHF45 million in EBITDA. And before holding cost, it would be approximately million to show our, let's say, profit potential in the group. If we then switch to the next slide, again, a lot of numbers in here. And what I would like to point out in this sheet is basically our numbers of weighted average numbers of shares were in 2019, euros $368,000,000 and delivering an adjusted basic net result per share of 5.2p compared to last year, 1.0p. And if you would look at 2019 on a full financial year basis, again, as if all acquisitions and all activities were there from January 1 for the full year, our adjusted basic net result per share was six p.
You also see in this specific slide our adjusted nonrecurring expenses and acquisition related expenses, which were EUR12.8 million, our share based compensation of EUR7.2 million and our amortization charges, which we have to include in our profit and loss account for the amortization of the intangibles that we separate from our acquisitions. That's the approximately €35,000,000 where I was referring to, and this is basically the composition. And of course, for calculating the adjusted basic net share, we also have to take the adjusted tax on this item, delivering the 5.2p again. So if you go back go further to the next slide, the unaudited consolidated balance sheet, what I would like to pinpoint here is a couple of things. We consider this, especially in the time where we're in right now, as a very strong balance sheet.
As I indicated in my opening, we have a cash and cash equivalents of 66,000,000 We have the still the long term debt of EUR 42,000,000, delivering us this EUR 23,000,000, 24,000,000 net cash at year end, which we consider to be very strong. This is the result of a strong cash flow. I'll come back to that in the next slide because the group is able to deliver strong operational cash flows with an approximate €9,000,000 working capital investment, which is limited if you would look at the total numbers and the growth percentages compared to last year on a pro form a basis or a like for like basis. Also new for this year in the unaudited balance sheet, we have included IFRS 16, the right of use assets or in other words, we have capitalized our rental contracts against the liability, which is now included in our long term and our short term liability since IFRS requires. It's a little bit of a strange topic in our balance sheet, but still we have to comply to that, and that's now included.
And as you will also see, there is some contingent consideration and holdbacks from our 2019 specifically mergers or acquisitions that we have done in that year, and the biggest component of that is the Firewood acquisition, which we announced in October 2019. And basically, those were the items I wanted to pinpoint in the consolidated balance sheet. And if we then move over to the cash flows, what's maybe good to notice on the next slide is that if you look at the cash flow from operations for the year 2019, you will see that our cash flow from operations was €32,000,000 And if you compare that to our €33,400,000 EBITDA, you will notice that there is a high cash conversion or a relatively low investment in working capital, as I just indicated when we're talking about the balance sheet. So that's a strong performance for our whole group. And also, what you see is the cash outflows from our investing activities, 67,000,000.
That's what we've done. As you probably all aware of is that typically, when we do our transactions, pay 50% in cash and 50% in kind to the formal founders, owners of the companies we acquire. And that resulted in 2019, approximately 57,000,000 was investment of acquisitions of subsidiary net of cash acquired, resulting in a cash outflow of €67,000,000 And of course, the issuance of shares, which we did in October when we acquired Firewood, we had our share admission, which resulted in a 97% net income at that moment in time of proceeds from this issuance of shares in order to finance our mergers. And again, we started the year with €25,000,000 cash on our balance sheet and we ended, as I indicated, with 66,000,000 delivering our net cash position of approximately 24,000,000 If you go to the next slide, the pro form a gross profit and operational EBITDA by practice. The content practice, the biggest part of S4 Capital Group, 73% of total and slightly declined compared to last year given the growth percentages of our programmatic practice, because programmatic gross profit was 27% of this year compared to 24% in 2018.
Our Content Practice operational EBITDA before holding costs was €35,900,000 and our Content Practice operational EBITDA margin was 22.1. Our Programmatic Practice operational EBITA before holding cost was €14,900,000 and the margin was 24.1% over the full financial year. And if I go to my last slide, the pro form a gross profit by geographies, The Americas, that's still very strong like in last year, 71% of total delivering on the €60,400,000 which is a 39% up compared to last year pro form a. EMEA, 22% of total or in other words, almost CHF 49,000,000, 27% up. And Asia Pacific, 7% of total started with a small base with 107% growth, delivering approximately €15,000,000 profit contribution for full financial year 2019.
This was my short summary on our financial performance, and I'll hand over to Scott to take us to the market next section. Scott?
Great. Thank you, Peter. We can move to the next slide. So the plan today is to share with you some of our perspectives about what's happening in the marketing and advertising industry and why we believe S4 is so well placed to help clients navigate this landscape and continue to enjoy our strong organic growth, which is significantly above the market and our competitors, for the future. So as you know, the four core defining principles of S4 Capital are we're purely digital.
We have a holy trinity of data, digital content, and programmatic services. Our go to market strategy is being faster, better, cheaper, and providing speed, quality, and value, and we have a unitary structure. On the first of those purely digital, can see from this chart that media spend continues to migrate from traditional to digital, which is enjoying strong double digit growth rates. And so we see a total media spend landscape at $640,000,000,000, and digital is rapidly approaching half of that. And this is in the context of a of a larger 1,900,000,000,000.0 total marketing spend.
This includes, just over half a billion dollars of sorry. $500,000,000,000 of trade marketing, and that's actually also rapidly switching to digital as Amazon and Alibaba and others make inroads. So as you can see, we have a huge and growing addressable market. So if we move down to the next slide, you'll see some further charts here from, from Mary Meeker, primarily, which illustrate So you can see from the quarterly advertising revenue growth that that, we see at the large companies, the large platforms like Google, Facebook, Amazon, Twitter, Snap, and Pinterest, they continue to enjoy strong double digit ad revenue growth rates.
You can see from the other charts that search, that social, that programmatic and ecommerce advertising all continue their upward trends, and this is due to consumer behavior and media consumption migrating to being more and more digital. And with the streaming wars taking consumers away from traditional linear TV, and radio, we will continue to see this trend accelerate. On the next slide, I think it's important to understand that as Sfour, we very much see ourselves as a service layer for the big media platforms, ecommerce platforms, the marketing and advertising technology, and software companies. The reality is now, as a CMO, you'll probably have relationships with most of the companies on this slide. And these companies provide products and they provide technology that's very helpful for marketing, and that's what their valuations are based on.
But they don't provide or they provide very limited services. And as such, they've developed and nurtured ecosystems of service partners. So our objective at S4 is clear. We want to be the most nimble, agile, creative, and strategic partner for these companies and help create success stories for our mutual clients. The partnerships we build with these companies are absolutely crucial to our success, We already have deep symbiotic relationships with most of them.
Google, for example, is our largest client and accounts for almost a quarter of our revenue, and we work with them across all our practice areas of data, creative, and programmatic. But that only tells half the story. MightyEye is one of the leading accredited practitioners across Google's entire product range and a key service partner for them. They operate across Google's marketing platform, search, cloud analytics, etcetera. And a significant portion of their business, their client business, both enterprise and small and medium sized business, is referred directly to us by Google.
So the idea that these tech companies are looking to disintermediate agencies is simply not true. At least in our case, they're actively helping us develop and grow. We're building similar relationships across all these companies. So Adobe, Facebook, Snap, Alibaba, Salesforce, Microsoft, IBM, Spotify, Netflix, ByteDance, Amazon, and others on this slide are all clients of ours already. And we're building out our service capabilities with all of them across data, content, and programmatic.
On the next slide, I think it's key to note that agility and speed are at the heart of our model and our competitiveness. How we deliver services to our clients and our partners is significantly different to the traditional agency service model. The way clients engage with agencies is evolving and changing. We view it as a spectrum. On the left hand side, have that traditional model of clients fully outsourcing their business to an agency, and this is the model that's been going for ages and that holding companies especially rely on.
But what we're seeing is that for diverse reasons, spanning a desire for transparency, data privacy, wanting direct relationships with the tech platforms, and ultimately simply wanting work to be faster, better, and cheaper, clients are increasingly taking more control and moving along this spectrum, exploring new engagement models and new operating models such as hybrid embedded models, which is not simply placing staff on-site. It's an entirely different integrated way of working with the client marketing team. And at the far right of the spectrum, have the clients fully in housing certain capabilities. At Sfour, we have a flexible approach and a business model which supports clients wherever they want to be on this spectrum. We don't have the burden of incumbency, which allows us to be truly agnostic and consultative in how we engage with clients.
Now in housing continues to be a major topic in the industry. Several recent surveys, including the one quoted here from MediaLink and Walk, have shown that this is a trend which continues to dominate client thinking. It's also evident here in the recent comments from senior clients at Uber and Marks and Spencer. Our unitary structure at S4 really allows us to operate anywhere on the spectrum. And the quote you see on the bottom right here from a leading Fortune 500 retailer is typical of the feedback we get versus traditional siloed company, holding company approaches.
Now the next slide, I want to quickly talk about what's going on in the industry and and the kind of rapidly changing environment we're operating in, from a digital perspective. So I'm sure those of you that follow the industry and and understand digital marketing will have read lots of headlines recently, in the trade press, about cookies. And they've had a bad rap cookies, but here's a couple of our favorite cookies. So these are Oreos from Mondelez, one of our favorite clients. But the cookies that have been talked about are digital cookies.
Now what's actually happened? So Google announced that in two years' time, it's gonna phase out the use of third party cookies following the lead of Safari and Firefox. Now this is a decision that was driven by privacy concerns, and they plan to develop other technologies called their privacy sandbox, which will allow some of the functionality of cookies, but in a more privacy compliant way. Now this is not a surprise, and it's likely a precursor to further decisions in the future. So what does that actually mean for online advertising and programmatic, which we specialize in?
Well, in terms of programmatic, I mean, we define that as the use of automation and technology informed by data to buy advertising in real time instead of going through human negotiations and preset prices. So if you can see, that's a pretty broad definition. It encompasses search, display, social, video, mobile, increasingly connected TV, digital, and it covers billions and billions of dollars of spend. So our view is that digital advertising is in a constant state of disruption and change, and the industry will and is already adapting to this particular move through innovation and new solutions. Now given that MightyHive is a consultancy and this is an area of opportunity for us because we work with clients and platforms to help them find new solutions.
For example, we're already seeing increased demand for first party data strategies for cloud based services and for working with data clean rooms, which, Google, Amazon, and Facebook all have. Now third party cookies have been the enabler to collect data and signals from online users, and that's an important data source in programmatic advertising to date. But they're far from the only one. It's likely that there will still be some form of privacy compliance third party data functionality for targeting maybe quote cohorts of people rather than individuals, and that will likely come from Google or others. But many other data sources continue to exist, such as contextual data or location based data, and it will only heighten the importance of first party data for clients.
And this is an area that we've talked about, in the past and, particularly for Sfour and media and and, MightyHive. They're deeply involved in it. We've made several transactions in this area. We've already seen a significant uptick in business from clients. Now incidentally, one of the welcome side effects of this development is that many clients are understanding that a sort of blind reliance on tactics driven by third party cookies is no longer possible or relevant, and a smarter strategy informed by first party data and with the relevant platform and audience specific content is the winning one.
Now this should sound familiar because that's our holy trinity approach at Sfour, and we believe this will drive wider collaboration between our practice areas. So moving on to the next slide, you'll see our client list. Obviously, we've had a stellar year of organic growth as Peter outlined, and we're very proud of the clients that have helped us achieve this. We have a first class client list, some of the world's leading, most dynamic brands, many of them disruptors in their industries, and that's something that we admire and share and aspire to be in our own industry. Moving on to the next slide, as you'll see from both of these slides on the logos, tech is a major sector for us and we have large scaled relationships with most of the leading tech companies in the world.
This is obviously beneficial to our organic growth rate given that these companies are seeing strong top line revenue growth and are thus expanding their own marketing investment way beyond typical levels. And this is illustrated, there's a chart on the next slide here. This chart here is the, the FANG spend on worldwide advertising, and you can see, the kind of growth rates, pretty much exponential compared to the, average growth rate of the market and and what you see from some of the traditional categories like auto and FMCG. Actually, Ad Age recently published an article, saying that Amazon was now the highest spending advertiser in in the in the world in 2019 surpassing P and G. Around half of our revenue comes from clients in this sector.
It provides us with very significant organic growth opportunities, and also, obviously, we intend to expand our share of these clients. On to the next slide, this discusses an area called torso clients. So an underappreciated aspect in the rise of the Googles and Facebooks of the world is the degree to which their growth has been driven by small and medium businesses. The chart on this slide, illustrates that there are literally millions of advertisers on Facebook and Instagram on a monthly basis. And this is easy to overlook because the small and medium sized businesses don't lack.
They sort of lack the name recognition of their larger and more famous enterprise equivalents, which have been the focus of traditional advertising agencies for more than a century. But upon closer inspection, the importance of the SMB sector is obvious. So what changed? Well, quite simply, technology has unshackled smaller advertisers, enabling them for the first time to compete directly with their larger brethren in the global programmatic advertising industry. And Mighty have MightyHive has long served these new entrants into the advertising industry.
In fact, it's where they first started their efforts in marketing services. And in doing so, they developed from scratch the team's tools and processes to serve these clients well, tackling problems such as how to build scale, how to automate the day to day operational challenge of serving thousands of accounts rather than dozens and encompassing issues ranging from client management to service, support and billing. And these developments enable not only growth of their SMB business, but also provide valuable in their enterprise efforts. As we continue to develop the business, we're committed in our belief that SMB will play an important role in our future. These contributions will include revenue growth, client diversification, automation and efficiency, the developing of new marketing tactics and the ability to grow with our SMB clients, some of which will obviously become the giants of tomorrow.
But this is quite a differentiation, from traditional ad agencies who really focus on the Fortune 500. The next slide, talks about our own client momentum Obviously, the kind of organic growth we've been showing, we've won a lot of business. We've seen our client roster expand and grow dramatically. Our land and expand strategy has seen us grow organically at clients where we've deepened our relationships.
Clients like Google, HP, Netflix, Facebook, Salesforce, Amazon, and LinkedIn in the tech sector and the likes of Heineken, Mondelez, L'Oreal, as well. We've also been successful in landing new clients and broadening our service client base. So we welcome new brands such as Fanser, Shiseido, Mead Johnson, Lavazza, SoFi, P and G, Merck, Marriott, and Vodafone. And the mergers we've done have also boosted group group growth with the unitary structure we have that encourages collaboration, referrals, and introduction from day one across both the content and data and programmatic practices. A couple of examples here such as Caramel and BizTech collaborating with MediaMonks to win a significant creative and digital transformation assignment from ExxonMobil, IMA supporting MediaMonks to pick up creative and social work from HP, and Progmedia in Brazil helping, Mightyhive expand its AB InBev relationship.
We've also been pleased with the progress S4 Capital has made in winning business from what we call the full holy trinity pitch of data, digital, content, and programmatic. And some of this has been by our land and expand and growing existing clients into new practice areas, but also increasingly pitching our full capabilities as a service and winning new business. So with wins across the likes of Sprint, Bayer, Ace, Hardware, Google, L'Oreal, and InBev, we're entering 2020 involved in several major pitches across FMCG, pharma, tech, and automotive. Moving on to the next slide. We've clearly achieved brand awareness and brand trial in 02/2019, and 2020 needs to be a year of conversion at scale for us.
So with these levels of organic growth, that we've been experiencing, obviously, and as Peter mentioned, particularly in the first half of the year, we've been investing very heavily in our talent base. And here are just a few highlights of the kind of hires we've made in 2019. So these are our organic hires. This is on top of the significant talent injections we've had from the various mergers we've completed during the year. And one thing you'll notice in their backgrounds is that the majority of these hires don't come from traditional agencies.
We continue to hire people from a diverse background of creative, production, consulting, tech and analytics. Moving on to the next slide, you'll see that our presence has expanded significantly across the globe. We now have a truly global presence with 2,500 colleagues across 30 markets, and we don't feel like we need to be in 100 plus markets, so we feel very comfortable with our geographic exposure as it is. Around 70% of our revenue comes from The Americas, 20% from Europe and 10% from Asia. Asia is growing at triple digit organic rates and we'd certainly like and expect it to be a more significant tranche of our business in the future.
And longer term we've talked about moving to a ratio of 40% America, 20% EMEA and 40% Asia Pacific. Now moving on to mergers, obviously we started S4 with a blank piece of paper and a clear vision and 2019 was a foundational year in delivering on that vision and building out our capabilities and geographical coverage. The core mergers of MediaMonks and MightyHive took place in 2018 and in 2019 we did a further eight transactions and then Circus joined us recently in January 2020. Whilst we continue to have a strong M and A pipeline, we do feel comfortable that we've built market leading capabilities in the wholly 20 practice areas of data, creative and programmatic, and we have good geographical coverage. Having spent much of the past few months with these companies, I should also stress the amazing talent that this has brought into us for.
Not just the exceptional entrepreneurs that are shown on the slide here with their mugshots, but also the deep talent ventures those entrepreneurs have assembled, and it really is as good as anything I've ever seen in the industry. Moving on to the next slide. I wanted to quickly talk about integration. Obviously, with this level of transactions, getting the integration right is incredibly important for our success and is key to delivering us delivering on our promise of having a unitary structure. And that principle informs our deal structure, so it lends itself to integration from day one.
We buy a 100% of these companies. We don't do minorities. We don't do earn outs. We don't build silos. And usually around half of the consideration is in S4 capital stock, creating a common incentive for our leadership team.
From a practical perspective, we focus heavily on making these integrations win win situations. Culturally, there's a very clear alignment and buy in across all our entrepreneurial leaders, a shared desire to disrupt the traditional holding company model, and this certainly helps with the integration. From a more practical perspective, we have common cloud based operating systems using best in class solutions like NetSuite, Salesforce, G Suite, and Workday across the whole business rather than having disparate siloed solutions in each part of it. And and I can certainly assure you in the past month of this, coronavirus scare that's proved invaluable to our new ways of remote working. From a commercial perspective, there's clearly a belief that one and one equals significantly more than two, and we've seen an s four effect in the business development opportunities for each of these mergers, and I've talked about some of those client wins already.
From a, branding perspective, it's important for us that we're not trying to build a holding company two point zero approach with multiple siloed competing brands. We have two core practice areas, digital content, which is MediaMonks, and data and programmatic, which is Mightyhive. And over time, with sensitive and non prescriptive approach, we've been integrating those, mergers that we've done already. So Progmedia, ConversionWorks, DataLicious already operating as Mightyhive. Just a couple of weeks ago, BizTech rebranded as MediaMonks in Australia, and this helps us fulfill our promise of a unitary structure.
On the office side, we've already integrated certain offices and continue to pursue others in the major markets of London, New York, San Francisco, and Buenos Aires. Now I will pass to Victor to update us on the MediaMark side of things.
Thank you, Scott. And next slide, please. Hello, everyone. Many thanks for joining. And before looking back at great 2019, I would like to start with our big 2020 goal.
We want to end the year with 2,500 monks, 25 offices, one brand, and an unbeatable pitch and positioning. And, obviously, that 2020 forecast is built on top of a strong 2019 strategy of growth. Next sheet, please. So we went from a thousand to two thousand months at a core capabilities like film, Adobe, influencers, and embedded to help brands consolidate creative and content spend. Besides that, because of our additions, like BizTech, IMA, Firewood, White Balance, and Circus, we strengthened our position in LatAm and APAC.
And some of our key clients grew to whopper status. And overall, we've seen a lot of organic growth with Google, IBM, Amazon, to name a few, and we had no key account losses. We won new clients like HP, Pernod Ricard, Shiseido, Fanta in APAC, and Avon. And, obviously, it's going to be challenging times for our clients as well. And as MediMom's, we are very well positioned to help our clients to keep in touch with their consumers.
People are spending more time on social media as ever and our offering in digital content creation, influencers, animation, gaming, live stream solutions, studio films are perfectly suited to help brands to connect to their consumers. And if we look at the awards side of things, we had a very good year in the major award shows as well. So from web web accolades like being the first company that won 250 favorite website awards to being the number one agency in in in digital agency in Mexico, to being the best places to work at at Edge, to best connected home products at CES, to Greater China Production Company of the Year, Southeast Asia Digital Agency of the Year, and many more in CAN, Clio, Effie, Bevy, and so on and so on. And and let's look at some of our work that we created. So we created four sheets, up to the next one, please, that shows you a little bit the type of work and the clients that we work for.
So I will keep this short, but we we produced over 2,000 pieces of work in 02/2019. But let me show you a little bit the best in class in the different in the different regions. So for HP, we do a lot of video and social campaigns. For AT and T, we created a super cool four d experience where people can become Batman, a lot of inspirational films for Procter and Gamble, and Microsoft, a lot of installations that combine art and technology. LatAm, it's been a great year in LatAm as well.
You could have seen that from our growth figures, also, in work. We've done some excellent work for Aeromexico that as well is delivering a lot of, top line results as well as in the award shows. Victoria, Samex for a digital transformation, games for Formatone. Moving to the to Europe, you will see HP popping up in different regions at at at at Nemo. It truly becomes a global client.
So very nice film and integrated campaign for HP Elite. We build a content studio for Avon, ramping out 25,000 pieces of content every single year. We build the best one point seven second ad for L'Oreal, and we've done great work with The Witcher for Netflix. Last but not least, APAC, our fastest grow growing region at this moment. We've done installations for Puma in China to beautiful, art installations for Google that helps kids to learn how to develop, to work for Johnson and Johnson, Neutrogena, and, in store activations for SK two.
So that's it from my side. Please ask any questions if you like and over to Pete.
Thank you, Victor. I will cover the data and programmatic practice. And moving on to slide thirty two, two thousand nineteen for Mightyhive was a year of tremendous growth, and everybody on the team is extraordinarily excited by what is happening. Just a couple of factoids here. We scaled our presence and doubled global head counts from 200 to 400, doubled the number of offices from 12 to 24, and made several several acquisitions which have already been mentioned.
The merger pipeline is focused on building our enterprise consulting and data analytics capabilities, which as Scott mentioned, is very timely now in a, you know, during the ongoing disruptions inside of the media and advertising worlds. This has shown up with a number of very excellent client wins that we're very proud of. AB InBev, L'Oreal, ASICs, Bayer, iFood, Lavazza, SoFi, Vodafone, etcetera, are just a sampling of the exciting wins that we're seeing around the globe. We come in with a, it's always nice to be recognized, with awards and accolades from the trade press and our partners especially, being recognized as the partner of the year in our Australia, New Zealand markets. One that I'm particularly proud of is being recognized as the employer most dedicated to employee growth.
We saw we saw some of our executives like Sasha Schmidt be recognized as one of the women to watch in the EMEA markets and were recognized as one of the best mid sized companies to work for in New York City. Moving on, just this is, as Scott mentioned, the partners and the tech ecosystem is incredibly important for MightyHive. And as you see, we continue to be, experts across the various platforms that are all critical and yet confusing to master and we can help our clients really to cut through that confusion and move straight to getting the results that they need from this. Moving on, just a couple of, case studies that we'll highlight, briefly here. I think we've gone through some of these in the past, but I just really want to show that we Mightyhive is able to deliver game changing results for clients that are out there, you know, really trying to figure out how to adapt themselves in the new world.
These, kinds of these kinds of activities really kinda show themselves when we look at case studies like these. And it's really just showing how much innovation is still left to be done and that clients that are new as well as clients that are, venerable can make these changes and can compete in an ongoing world. Moving on to the next slide, we see yet another case study inside of there where we have just shown that our clients continue to, increase profitability and increase business results using, very innovative tactics like in housing, are difficult, difficult motions to execute and yet with the right help, for example, from Mighty Hive can be done and done well. Another we can move through some of these, but just like taking a look at, like, what we're doing inside of the large services company here, we can't name just for confidentiality reasons. But transitioning a client from a 100% outsourced model to a in house hands on keyboard model is just generating incredible results here.
And just to sum it up, a 400% increase against performance goals while reducing man hours inside of analytics by 96%. I think these numbers speak for themselves in terms of what we can do with an 8 figure marketing budget. Moving on, and just one final highlight here is with, once again, with our one of our favorite clients, Mondelez International. And what's interesting about this one is the work that we're doing here is not so much focused on media as it is on the other piece of the, holy trinity data. And we are really helping our clients here in order to transform all of their digital measurements and add, first party data assets in a way that is transformative to the business.
And when you're talking about a huge marketer like Mondelez International, when you start posting results like 10% increases in ROI, it really does gain a lot of attention. And with that, quick summary, I will turn it over to Sir Martin.
Thank you, Pete, and thank you, Victor, and thank you, Scott, and thanks, Peter. And I just want to summarize, if we move on to the next slide, Julian, just summarize, where where we are, and the and the outlook. So, I think, firstly, as we look at '20 it was a very strong gross profit and bottom line organic, growth, very much in line with the well, beyond the the three year plan that we set for 2019 to 2021. As Peter pointed out, we have a very strong cash flow and a strong balance sheet, which going into, this virus driven recession, I we think is important. We have looked again at our three year plan as we do every year.
And for 2022, we're targeting to double organically in three years. That implies for those mathematical disposition at 24% compound organic growth rate. I stress this is without deals or mergers. And we feel comfortable over the three years, twenty to twenty two, with a target, of that nature. And you saw in January, and the indications for February are are good too from what we've seen, although they're limited.
But obviously, the virus will have, impacts going going forward. It's a good start to 2020. Gross profit in January up over 30%. We've seen a limited effect from COVID-nineteen so far, but we think, we have to be obviously realistic about the potential impact. And we've shown you the ways that we're already starting to mitigate that impact with our clients.
This is very client driven in terms of the ways that they're working. But I think I just want to go back to what I said at the beginning. I think the net result of all this is going to be an acceleration in digital transformation or business transformation work. We have a very healthy merger pipeline in data and analytics, in content and programmatic media. I I think one thing to say is that we haven't seen a commensurate drop in pricing.
Sellers are are clinging to sort of previrus, valuation metrics. I think that will shake out from what we hear. Private equity companies, or driven companies are drawing down their revolvers, focusing on liquidity. And obviously, the impact is gonna be quite significant in some of the highly leveraged situations and we think that will have an impact on pricing, which will probably help. We achieved, as Scott said, brand awareness in 2019 and brand trial, and we now need to develop conversion at scale in 2020.
And to that point, we're involved in a number of major opportunities, presentations or pitches. We're we're not particularly enamored of the the pitch process because we have a supply constraint, and it's difficult for Victor, and his colleagues, Wes, and and Pete and his colleagues, Chris Martin, to apportion resources when you're growing on the content side by 30 over 35% or around 35% on the programmatic side by 60% as they were last year, and it's difficult to apportion resources. So we much prefer the land and expand route as Scott touched on, but we're we're realistic again that we have to compete in a world where, presentations are important. And as I said, there are a number of those. So with that said, if I can pass it back to Julia, can we take Q and A?
We've been going for about fifty five minutes. Thank you for listening so far. We'll take Q and A.
Thank you, sir. Again, please press star one to ask a question. We'll pause for just a moment to allow everyone to signal a question. Thank you. Thank you.
We will now take our first question from Paul Richards from Dowgate. Please go ahead. Your line is open.
Thank you. Congratulations on a tremendous performance in 2019. Clearly, all the focus now is on COVID nineteen. Could you provide a bit more color, perhaps, of your experience of China? Recognize it's a small part of the group, how that went into COVID and now that it's sort of coming out from that, how that has affected marketing?
And then secondly, yeah, to to what extent can you continue with the sort of business as usual, for example, the the sort of pitching process in an at a time when there are no face to face meetings? So it would be good to get a bit of color on both of those, please.
Okay. So thank you, Paul. Thanks for the question. We anticipated, a lot of interest obviously on COVID-nineteen. And Scott, together with Victor and Peter Pete, has sort of put together a couple of slides that that I think we can we can put up or if we we can't put them up, well, Scott can take us through them.
I just make the observation on the second part of your question, Paul, around presentations. As Victor and his colleagues know for while, we're participating in a couple of major presentations at the moment. And those presentations have gone they've gone virtual, and they are the process continues, but not with physical visits or physical presentations, but with virtual presentations. It can be a little bit more clunky than we would we would like, but the process continues. So I think, I think what happens, Paul, is the process continues.
It's probably a little bit a little bit more delayed, and there are other there are other rounds that come in as a result. I think probably gets a little bit elongated, but the answer is, the the process is continued. Scott, do you wanna just run through the the results of the research you've done? I mean, we've got a couple of slides, which I think we can we can get Julian to put up. But if we yeah.
If you just wanna run run through it.
Yeah. Happy to do that. So, I mean, it it should answer your question more, Paul. I've I've the past couple of days going around the company and really trying to get to the bottom of what the impact is and what our response is and and how we see this playing out. So don't know if, Julian, you can get those slides up.
This should be the next slide. So, you know, obviously, like any company, our priority initially has been, the focus on the safety and health of our colleagues and families. And so far, everyone's safe and well, and putting in protocols to to try and guarantee that. We started testing our home working protocols in late February and early March of of, of this year in many of the major markets, and we've now moved to that option in in most locations. From a financial perspective, we only have visibility of our January figures at the moment, so they were very strong, and we talked about gross profit up over 30% in line with budgets.
Obviously, you know, that was pre virus. It's unlikely that February will be majorly impacted given that most of the current restrictions, really only came into effect in in early to mid March. So even when we have those February numbers, we're still anticipating a, you know, decent February. I think it's important to remember that F4 Capital is a services business and not a media business. So we started the year with a very strong order book, and to date, we've not seen any significant deterioration in that.
Indeed, the pipeline is still stronger right now than it was this time last year. Many of our clients have moved to virtual model in the past few weeks and a remote working model. And in all those cases, especially the larger clients, the tech clients that we service heavily, we've quickly established a new way of working. And it's really helpful, I think, that many of our client engagements operated already on this sort of hybrid embedded model that I've talked about rather than an outsourced model and where we're already seen as part of the client marketing team. So we already share the same cloud based tools, the same security access and protocols, the same processes and ways of working.
So that, you know, has made it as seamless as possible. It's obviously not ideal, but it's it's been helpful. You know? And that helps internally as well. So our unitary structure and the and the kind of tools that we use across the group are all common.
So that's made collaboration much easier as we've moved to this, kind of remote working, model. So outside of specific sectors, you know, travel, bricks and mortar, retail, hospitality, live events, etcetera, we're not seeing any cancellations, more reallocations, and some of which are actually in our favor. So we're seeing some sort of traditional media spend moving into digital because they simply can't get the traditional work done. And there's some discussions of delays, but in the vast majority of cases, there's an assumption that, spending will ramp up once the situation, recovers. And as you mentioned, China, I mean, ideally, China offers us some hope of what happens once countries control the spread of the virus, both from a kind of a societal basis, but also from a business basis for us.
I mean, we closed our China office for New Year as everyone did. We extended that for a couple of weeks as was the Chinese policy, but then we got back to work very, very quickly initially from home and then opened up our office in in late February. And that office is up and running and and doing you know, providing a lot of work to to clients and actually helping clients who who are having struggling themselves to get up and running. So, you know, fingers crossed that the the rest of the world can, can deal with it in such a quick and efficient way. So that said, I think it's super naive of us to think that this is not gonna have a major effect on the world's economy and on GDP growth, and that's obviously correlated to marketing spend.
There's gonna be significant pressure on consumption in the shop short term, and in many nations, shops are literally shut now. There's gonna be a significant hit to employment in small business, in hospitality, in retail, etcetera. And I guess the extent of these impacts will align how quickly the pandemic can be controlled, and and I'm certainly no experts on on that. So that's speculation. Just anecdotally, there are a few factors that we look at from our perspective at S4 Capital where we feel like we have more protection, our business model has more protection, and it depends on our ability to continue delivering above market growth.
So I'll go through those quickly. So the first one is that we're purely digital, our and business is a 100% focused on digital. Much of our work can be produced in remote and virtual working environments. We've got a more limited exposure to offline marketing, will be more impacted, And we're also seeing some kind of live action production being transferred to animation or VFX, which is easier to do from a remote perspective. We have a leaner structure.
We've got low overheads. We've got flexible direct costs. Agility is really important on this. I mean, Victor can talk about it later, but he's already gone to market for his client base, with the whole set, and he he discussed it a little bit earlier, of kind of products and solutions to help clients in this, to help them, move more quickly, to continue to continue producing content, to move from an offline, perspective to a digital one. So we've really been already able to help multiple clients in that respect, and, and clients are responding well to that proposition.
We've had strong feedback from our larger tech based clients that we're very well positioned in in our ways of working, and our ability to switch to virtual engagement. The fact that we have a large California presence in the same time zone is also very helpful. We talked about China already. It's very small for us, but, it's already back to work. We have several examples where we're working with our tech platform partners to adjust their advertising products.
So they're they're trying to help brands adapt their spending, and we're working with them on the product development side of that. So one example is where we've worked with a major platform to help their clients create VR and AR enabled events rather than, offline ones which have to be canceled. That's again switching budget from offline to online. We have, as I said many times, a high exposure to tech clients, and that's a sector which has higher growth rates and is, probably less exposed than than sectors like retail and travel and more likely to continue spending. We we have limited exposure to travel, that's, you know, about 2% for us, I think, and that's obviously the the area where there's been the most delays and cancellations.
And then I think as Martin stressed all the way through that, you know, we even in the most challenged sectors, we view this as something that's gonna accelerate digital transformation, and and and that's an agenda that'll be protected and and accelerated within companies. There's actually an interview you can find online with the chief digital officer of Royal Caribbean, obviously a company that's right in the eye of the hurricane, so to speak. And he says exactly that, that the digital agenda continues despite the challenges to the business. We'll keep you guys updated. We remain very confident in our ability to deliver growth, to maintain margins, and obviously as Peter has explained, we have the benefit of an incredibly strong balance sheet to get us through this.
Yeah. Victor, I'm just May may maybe Victor can just expand a bit on what Scott said. You you've developed a program for clients. Do you want to say a little bit about that, Victor?
Yeah. Thanks for this. So the first thing that that that's going to happen in in production of advertising materials is that, all the major shoots are being canceled and all the experiential, and event based, marketing materials are being stopped. So what we created is a package, how we can help brands to reconnect to their consumers that spend increasingly more time, on social media. So that means, we set up dedicated animation studios.
We can do post production because there are isolated offices. We spend we can help with with with gaming, with filters, with influencers. IMA is very well positioned to help out because content is created by the influencers at their homes. And we're we're sending that through in order to help brands that are facing currently the the cancellations of all the video shoots and events all over the world. It's very well received.
We were very fast by offering this help. So we started sending out all that material yesterday, and we get very positive response on it. So, it's difficult times, but we we are helping wherever we can, by using our digital knowledge.
Okay. Alright. Thank you. Paul, are you satisfied with that?
I I think it's probably the most comprehensive answer I've ever had as an analyst, to be honest. Yes. So thank you very much indeed.
Alright. Okay. Operator, Julia, any other questions?
Yes. We will now take our next question from Joe Spooner from HSBC. Please go ahead. Your line is open.
Good morning, guys. Just in light of these coronavirus uncertainties that you spoke about, have you changed plans around, recruitment and, obviously, headcount being an upfront investment? Are you still, running to the same plan or are those adjusted?
Well, Joe, I I think, you know, early days, but, you know, we've always, and we saw it last year in 02/2019. As you know, when we came to the end of the first half, I think our top line was up about 30, Peter, 35, and we had recruited at a rate of about 50%. And that had a compression effect on our operating margins. We had recruited ahead of the curve, both at programmatic, with Pete's operations and at content, with Victor's operations. And we course corrected.
As we said in the first half, our margins were impacted by that. I mean, I I think it's a fair sort of rule of thumb to say, you know, in order to maintain margins and to maintain profitability, you you recruit the same not headcount numbers, would would rise in at the same rate as you see gross profit, not not, not revenues, not gross revenues, but net revenues. And I think, you know, whilst we haven't we haven't really seen what's fully happened in February, but I think our our people who are running our individual businesses, our two practices, really are tailoring headcount increase and expansion to what we see happening at the revenue level. I think in the as I said, in the first half of last year, we were burnt a bit by over high it is very difficult when you're when you're growing at these sort of rates, 40 to 45, and an implied rate of, let's say, 30% plus, going forward, in the three year plan organic growth. What what you really have to do is to hire ahead of the curve, particularly at the end of the year.
If you think about the pattern of our revenues, q one is the weakest quarter in terms of size. Q two is probably the second's second strongest, q three the second weakest, and q four, the strongest. So as you go through the calendar year, you you probably have to hire in anticipation, and your growth sort of strengthens as you move through the year or the absolute size strengthens. So it's a difficult balancing act, but I think what we try and do is balance given the experience we had in the first half of last year, and we did, you know, by by implication, probably the hiring rate was slowed down as we went, through the second half of the year. We we're trying to balance it as best we can on the the best knowledge that we have.
Peter, do you wanna add anything to that with what you see going on at the moment?
Yeah. No. So I I think what you said is is is totally right. And and and also to coming back to Joe's question, basically, one of the things we focus on is to have as much as possible flexibility in the group or to gear up or, if necessary, to gear down. Again, we don't see it yet waiting for the numbers February, but that's at least how we try to be as flexible as possible with our total cost structure in order to, if necessary, take the necessary steps.
If I can ask a second question while I've got the line. You spoke in the presentation about the TULSA clients. And it seemed like, those comments were focused on, on Mighty Hive. Is there a role there that that's important customer base for the other side of the business, MediaMonks?
Well, Victor can so I think, really, Victor's business, the content practice is almost solely, around what we would call enterprise clients. And on the content side, you know, there's much, in our view, much less of an opportunity. Pete, do you wanna talk a little bit about torso clients and SMB and and how how important that is in the relationship to of Google well, in the in the in the ad revenues of Google and Facebook and Amazon.
Absolutely. And I think Scott covered it well, but the high level points remain the same, which is that the incredible growth that we've seen in the digital advertising industry, is apparent. But what's not apparent sometimes is where the revenues have come from and just a tremendous contribution to that overall growth has come from the so called torso, the small and medium business. And it really is important to note some of the job creation and economic activity that has spurred by all of this on the backs of these technology platforms that have really unleashed the SMB category into the advertising world. And so we look at that as not only just revenue growth and continued traction, but also as a really wonderful place in order to do training for future hires, and so for future employees to work on these sort of larger, enterprise accounts as well as, a source of research and development into new tactics.
Oftentimes, smaller and nimbler players can be the places where new tactics are first born and tested and tried out. And finally, inside of the world of just growth, you can see that torso, as Scott mentioned, some of these folks will be the giants of tomorrow and we're excited to assist them on that journey.
I think I think to be fair I think to be fair, Joe, the the pressure in this event driven cycle that we're we're going through at the moment or event driven recession, the pressure will be on those smaller smaller companies. We reckon, Scott, what it's around about 10% of our revenues, maybe five five to 10% of our revenues.
And Yeah. Overall.
Rep the rep the pressure is gonna be on them. But on the on the flip side of that is the relief from the fiscal bazookas that are being fired at the moment is coming in in the the small and medium sized sector. And I think those companies will start to move, as I say, even more to to digital. So I think that's the background to it.
Yeah. And just to be clear, we're really talking about the medium sized end of that. Some of the companies you saw the logos of there, they might not be super well known companies, but they're pretty big. We're not in a position to help the local plumbers yet.
Thank you very much, James.
Okay. Julia, any more questions?
Yes. We'll now take our next question from Adrian de Saint Hilaire from Bank of America. Please go ahead. Your line is open.
Good morning, everyone, and thanks for taking the questions. And I hope you're all safe. First, Martin, I read an interview this weekend where you were saying that maybe this crisis is in between nineeleven and the February. So is that also your best guess in terms of where the ad market is going to go for 2020, so a decline of between 510%? And maybe as a follow-up to what you were saying, would you expect that online outperforms the broader markets and off line underperforms?
That's the first question. Secondly, you've made the points a few times that you are a service company, not a media company. What is the typical lag that you would expect between media ad spending and services, let's say? And then thirdly, you discussed about increasing talent, etcetera. I mean, in previous downturns, this marketing industry has been very quick to adjust headcount and staffing to the downturn.
But do you think there's a case that given the talent scarcity, that doesn't apply anymore and that effectively everyone will need to get their keep their headcount, let's say, in the face of the downturn? Thank you very much indeed.
Okay. Maybe, Scott, you can you can take the the service media lag second question for Adrian, and I'll try and deal with the recession and the nature of the recession and the talent piece. It's so difficult. I mean, you know, ten days ago, two weeks ago, it it it seemed to me that this was more like 09/11 than, you know, 02/2008. You know, it's it's clearly deepened maybe because of the nature of actions that that various governments made or or didn't make, but the impact is serious.
I mean, it's intriguing to look at the indices yesterday that that really if you look at the some of the S and P indices, not the not The UK indices, but the S and P indices, what what's happened so far is we're back to where we were in February, that the the gains of 25% or whatever, they were being wiped out. And what we're where we are at the moment is back to where we when we had that sort of panic, let's call it a mini panic in February. I mean, I saw a, I think, a good analysis, yesterday on a on a Goldman call, which looked at, you know, sort of structural recessions, cyclical recessions, and event driven recessions. And the argument, which I I think I have some sympathy for, for what it's worth, is that this is event driven. And I I I think what's gonna happen is pretty much what they laid out, which is this is gonna have a a very big effect on GDP figures in February and q three.
The 2020 is a a shot year. You know, it's a a dead year for many companies. That will accelerate the digital change and transformation. It will make CEOs, I think, embrace what Scott pointed out in relation to Royal Caribbean, which is, as he said, in the eye of the storm. And I think what's gonna happen so I think the nature of this is somewhere between what we saw after 09/11 and then 02/2008.
Now we did see a very sharp we in 02/2008, coming to the talent part of the question, you know, we I remember that at WPP, we had pretty much done what we needed to do by the February. And The US, obviously, has historically had the advantage that it is a much more flexible economy. That's a harsh thing to say because it's it's a harsh reality. But the American economy and just to remind you, 70% of our business is in The Americas, North And South America, the preponderance of that being in North America. So we're very North America sort of driven.
So when, you know, when the dollar strengthens, you know, that's, make the point. I mean, the the pound has weakened to pre Brexit levels, 01/21, 01/22, and it gives us sort of a a 6% or so cushion, if you like, as we were talking about last night. But but, you know, effectively, I think the our ability to deal with the it comes back to Joe's question about balancing revenue growth and headcount. I think given the fact we're very Americanly American focused gives us a sort of structural advantage about apart from the fact, you know, as Peter pointed out, our direct costs are are much more flexible and at lower levels, And our indirects are not nonexistent, but virtually nonexistent because we haven't had time to develop bad habits. So that's where I think it is.
I think this will be v shaped. I I think, you know, the China news, I even heard this morning that a leading military bio department in the Chinese army stroke state is developing a vaccine quite rapidly. So I think I I think it will be it's gonna be very painful. Let let's let's be quite clear. It for all sorts of reasons, and it's a terrible human crisis.
But I think it will be q two or q three orientated. I think the markets will start to respond faster than real business and that real business in q four will will readjust. You know, I'm going out on a limb here, but I think that's where I think it we'll we'll see in the real world some readjustment. And I think the the readjustment will be quite violent, quite strong. So it'll be a strong v shape recovery, and I think it will be heavily driven by online.
I don't know about you, Adrian, but I I think my pattern of travel will change. I I think I will do less travel. I think I will do more technology. And when we did a CNBC interview on on Skype this morning, I I'm told it's the first time they've done that, which I found sort of extraordinary. But you're gonna get more you're gonna get more of that.
It there's gonna be a change in the pattern of behavior. This is gonna have, I think, a very significant psychological impact on people and what they do and how they go about it. I don't think it's gonna be a return to the same pattern. So I think, again, I I just reflecting on it in the last couple of days as we were preparing the results, I think, really, we're gonna see an acceleration to online behavior of some significance. On the talent side, you know, we will seek to retain, obviously, all that we can.
I I think we will continue to grow our headcount. I I don't think I think we will you know, Victor referred to two thousand five hundred months, and, you know, we we already have 500 people, 400 to 500 people on the data programmatic and media side. So, you know, that's indicating our headcount will be something like, you know, 3,000, by the end of the year even if we don't expand programmatic, which you earn data, which we will do. So we would expect to expand our headcount quite significantly as we go through the year in line with with our revenue growth. Scott, do you wanna try and deal with the service media lag?
I mean, think media, I guess, gets hit hit quick. I mean, you see on ITV and yeah. I just see as we were as we were talking that BBC had suspended the production of EastEnders and a number of other their other programming. So you're you're seeing that, Scott.
Sure. Well, thanks for the question, Adrian, and, hope you're well. And, also, thanks for getting Martin to commit to less travel as well. It's very helpful. So on the on the specific question, mean, what I was trying to specify there is that, obviously, we know we're a services business.
The the media owners, the decisions are are kinda quicker and harsher, I think, in terms of budgets being cut. As Martin referred to, ITV seeing a bit of that, specifically in the categories like travel, retail, leisure, where, you know, the stores are shut. I think what we're seeing, you know, it differs maybe a little bit between the creative and media side of our business. But on the creative side, you know, our clients still need to market. Right?
So they might be making strategic media decisions and stopping, outdoor, for example, is not gonna be much use for outdoor in the in the next, few weeks or or stopping some of their, TV budget and switch. What we're seeing really is is that switch to digital. So you still wanna reach consumers. As Martin said, consumer behavior is switching much more to digital. You know, it has been anyway, but in the short term because of this, it would be even more.
So how can you reach them? And as Victor outlined, there's a whole host of tactics that we're putting into play with our clients about how to do that and convert some of that budget to make it still work. On the media side of our business, I mean, Pete can talk about it more. Obviously, in in those specific categories, you know, we're gonna see some pain inevitably. But again, there, what what you see on retail, for example, most retailers are omnichannel now.
So, you know, they might be shutting their physical stores, but that means they'll be driving more and more money, to online spend and performance spend trying to drive people to their .com stores or their apps. So, you know, I think, again, it's it's balanced by the fact that we're focused entirely on digital.
Okay. You very much. And yes. Stay safe.
We'll now take our next question from Matthew Walker from Credit Suisse.
Thanks, everyone, and good morning. Just a couple of questions. The first one is, obviously, you've got this model to drive 24% compound growth rate. Do you see that as being because of the virus, do you see that as being a slower year this year, notwithstanding the good start in January and February, and then an acceleration from q four onwards? That's the first question.
The second question is you've raised money in the past. You know, you've been pretty acquisitive. How do you think about that this year? How are you going to sort of do what you want to do on the acquisition front, but also protect the balance sheet and not raise money at a share price that you maybe don't want to? And then the third question is for Scott, which is on the cookies and the replacement for the third party cookies.
You mentioned there would be some replacements. Maybe you can give a bit more color on what you ultimately think the third party, might be. Thanks.
Okay. Thank you. Thanks, Matthew. Scott, do you wanna deal with third party? Maybe Pete can come in on the third party cookies as well whilst I think of an answer to Pat and the financing.
Yeah. Sure. So I'll give it a quick quick go and then hand over to Pete, who's by far more the expert than me. So I think there are a couple of points. So one, I think, that there'll be a big shift in emphasis from third party data to first party data, and that's already been happening, and it and it will continue more aggressively.
So, you know, it's not a a like for like replacement if you like, but it's a sub a substitute, I think. Specifically, what I was referring to is that when Google made the announcement that they were gonna get rid of third party cookies, the reason they gave two years notice or part of the reason was that they said they were gonna develop, an alternative, technology, which would be browser based and privacy compliant, which would still give advertisers some of the, capabilities for targeting that cookies give, but in a privacy and and kind of anonymized way. So probably likelihood is you'll target cohorts of users rather than down to the individual level. Now they announced that, but that's that's kind of all in theory. Right?
So they haven't built it yet. It's not like it's a product that's ready to go. So, you know, we're working closely with them trying to feed into that process. There are other third parties out there trying to build, similar products, and, you know, a lot of the ad tech companies are pivoting away from third party cookies to try and have, kind of a different approach. So there's a lot of innovation going into this.
But anyway, I'll hand it over to Pete who can who can probably give you a better answer.
I don't know, Scott. That was pretty good. The only other comments that I would add is the net impact of the third party cookie changes is will take a while to really shake out. You know, the equation that I use in my head is going to be initial impact of the third party cookie sort of impending expiration will be offset by the products and services, notably the Chrome privacy sandbox in addition to the other, efforts that are being built out there right now. And so we we just don't know what that number is.
So it's just going to be will that Band Aid be a 99% Band Aid or a 1% Band Aid? It will likely be somewhere in between, but I think that that specific will matter a lot. And so right now, those, solutions are still being discussed and designed and, you know, nowhere near a place where we can really start to, gauge their impacts. But, you know, you can get into GitHub and, you know, take a look at all of the different specifications and the debates that are changing day by day, and we're monitoring them closely. A lot of cases are even opining as to which direction they should take.
All of that being said, I do think that the larger crosscurrents here, that, you know, can we're thinking about this are notable in the sense that, number one, with third party cookies having a question mark by it, I think that we will accelerate the shift to first party data. Let me be clear there. I think that, you know, from a broader, point of view, third party data has always been a little bit of a challenge in the sense that, it's typically, temporary arbitrage in terms of the profits that you can be, gaining from third party cookies simply because it's very difficult to have a differentiated data strategy using the same data that everybody else has too, which points, now towards, you know, which already pointed towards a first party data emphasis eventually, and I think this has just accelerated that. And we indeed are seeing, upticks in business as, you know, those realities now start to, land and expand, if you will, in the minds of CMOs and, the CXO suite in general. I think that also there's going to be some, you know, when you're taking a look at the data density in terms of the ad sorry.
The media inventory that's out there, we do see a, specific advantage for the quote unquote walled gardens who do have the advantage of the identity graphs and the logins, that they have throughout and, you know, the the giants are well known inside of this. And there will be efforts by these small publishers in order to try to compete with that. And so there are various things that are out there, and various theories that are out there around what that might look like for everything from, you know, sort of a magical tech, solution that is pushed out to, co ops and, you know, collaboration between small, small publishers in order to, put something that is close to a larger identity graph or even just roll ups and consolidation in the industry. And so we're tracking all of these things very, very closely, and I think we could do a two hour call just on the, you know, the analysis of these type of things. But those are my high level comments at the moment.
Yep. Do you want do you wanna say a little bit, Pete, about the impact on publishers and, you know, alternatives to DoubleClick, I mean, Trade Desk and and and other things like that? Just to give Matt Matthew a little bit more detail on it.
Yeah. Sure. So, in terms of publishers, I think that some of the quotes that have been out there and they've been floating around, but Google has, stated in several forms that according to their data, the clearing price in terms of media in terms of media in the presence and in the absence of cookies differs by up to 50%. I think in one case I saw it at 52 percent, in another case I saw it at 53 as quoted. But regardless of the specific number, those are really large figures in terms of what's going on in terms of the actual revenue coming in from these channels.
And what's interesting about that is I think that the small and medium publishers of the world, sans the or sorry, the small and medium publishers of the world, you know, we're already sort of skating on, thin ice. We saw a lot of consolidation in some of the larger of the kind of challenger brands and publishing last year, media last year. And I think that a 50% drop in some of these cases if they don't have the cookies and they don't have the identity graphs, you know, that's obviously not a good thing. And so I do think that that's going to lead towards some of these of these efforts to offset which we just discussed in the previous stanza. And then as we're taking a look at, you know, some of the the efforts of the independent ad tech folks, and when I say independent, those are the folks that don't have the benefit of an identity graph.
I I think that, you know, there is absolutely going to be a little bit of an effort in order to try and replace these types of things. So, you know, our friends at The Trade Desk have been, very vocal about the things that they're working on and, we shall see exactly how successful those are. But I do think that's, that's definitely going to be a challenge, that they're gonna have to meet.
Okay. So coming back, Matthew, to your the other two questions you had, if you're happy with, that that set of responses. I mean, on the patent, inevitably, you know, if you go look at our patent will follow what we think and it's very early days, the pattern that we see with the clients. And I think clients will see significant pressures in Q2 and Q3. And as I said, I think the real world will start to recover and I think it will be quite a sharp recovery in Q4.
What that means for the full year in 2020 is difficult to lay out completely. But I think we can say we're still comfortable with the three year plan objectives that we set out for 1921, and 2022. On on finance, Peter, do you wanna add anything to that in terms of what you see?
No. So indeed, we're quite comfortable at this very moment in time with our plan. And indeed, it's going to be a big question, of course, what's going to happen or in Q1 or maybe Q2 or sorry, Q2 already. But in our three year plan horizon, we are very comfortable or confident that we would be able to achieve our goals.
On on financing, you know, think you you can expect, Matthew, a similar pattern to what we've we've been doing recently. I mean, we've we've filled out geographically for a minute. We're in 30 countries as Scott, outlined. We we see a need for Germany, And, you know, we've taken some time on Germany, but there are some specific opportunities in Germany currently. And I think that we would like to to add an operation in Germany fairly quickly, or it will depend on what happens in terms of client developments, but to some extent, but I think that will be important.
So I think that's the one country where we'd like to add. So 30 we took us to 31. The financing of that would be internal cash flow. You know, our our usual half share management taking half half cashing cashing half of their equity and half shares. On the data and programmatic side, you've seen what we've done with ConversionWorks and Datalicious, which are now MightyHive in The UK and in Korea.
And you can expect, you know, we have a pipeline. You can expect a similar, a similar approach, outside The United States in data and analytics and indeed in any programmatic opportunities that arise. So I don't think there will be significant or large transactions in the short to medium term, but I think there will continue to be those areas in in in content, which is probably the German focus, and in data and program data and analytics, which is a a fast growing area and because of the third party cookie decision by Google increasing prominence, and in the programmatic, media area. So I think a a continuation of what we've seen. Does that answer your threefold question?
It does. Thank you. So you can use your extra time to brush up on your German. Perfect. Thank you.
Julia, any further questions?
Yes, sir. One final question from Steve Lechty from Numis. Please go ahead. Your line is open.
Good morning, everybody. Sorry. I've got two quick well, one quick one, hopefully. What did you say, percentage of sales was from tech clients? I missed it.
There was
One one one half, Steve. One half.
Okay. Fine. That's That's sales as opposed
to number of customers or anything
like that. So that's actual revenues.
Yes. No. That is net revenues gross profit. Yes. Correct.
Perfect.
And then just trying to understand, the way that your business works between the two different, verticals. I understand it is much more project based, and you've talked about the pitches that you're involved in now that are underway and probably more virtual. But do you track, a pitch pipeline on a, I don't know, a one month, two month, three month basis? And and I understand your comments that the long term trend is towards probably more digital and transformation. But has your has your pitch pipeline gone down or up, in the last sort of few weeks given what's been going on?
We we we we said in the statement the pipeline was stronger than this time last year, and I think that remains the case. Victor, do you want to talk about your pipeline and and Pete, your pipeline too? So Victor?
Yeah. Yeah. Thanks for your question. No. It's completely in line with with with last year and and and a and a little bit up, and we keep on monitoring if we go from pipeline to to deals.
So that's our major objective. But it's looking it's looking healthy so far. Pete, do you want to respond on
Sure. You know, like most companies, we track our opportunities whether they be upsells of existing clients or brand new clients on a day to day and week to week basis. And so as as of this moment, we are seeing, you know, a strong growth and a strong start to 2020. But as Sir Martin and Scott both said, with COVID-nineteen sort of changing things, not even day to day, but hour to hour oftentimes, we're watching it like a hawk, and we'll continue to monitor and see how things shape up.
Okay. Steve, do you want any further detail?
No. That's fine. Thank you.
Okay. Julia, anything else? Are we clear?
Thank you. There are no further questions, sir.
Okay. All right.
Thank you very much, Julia. Thank you, Julian, for pushing the slides. I think we're going to put up the COVID-nineteen, the two slides at the end that we went through on the website now that we've, exposed you all to it. So, thank you for joining us again. Just and finally, I think, our next view is that this accelerates the importance of digital and being a purely digital operation.
We think we're in the right position in the right way, but we'll we'll we'll join you for q one, in a few weeks' time. So thanks for joining us today. We have a further call with US analysts in an hour or so. I think at what is it? At 12:00 or at 12:00 London time, 08:00 East Coast time, if any of you want to join that too.
Thank you very much. Thank you, operator. Thank you, Julia. Thank you, Julian.