S4 Capital updates
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Sir Martin Sorrell’s digital ad group S4 Capital has increased revenue forecasts for a third time this year, saying it was delivering growth more akin to that of Google and Facebook than traditional advertising groups.
S4, which the 76-year-old launched three years ago following his acrimonious departure from WPP, said on Monday that it expected to deliver a year-on-year, like-for-like rise in full-year net revenue of 40 per cent, an increase from the start of the year of 25 per cent.
Shares in the company were down 8 per cent in morning trading but have risen more than 50 per cent this year, and more than six-fold since it listed in 2018.
Advertisers have ramped up spending again to position brands for the economic recovery, boosting the wider industry. Yet Sorrell said S4’s “digital-only” strategy had allowed it to outpace rivals.
Assignments from clients including Procter & Gamble, Netflix and BMW helped first-half revenues rise from £141.3m a year ago to £279.3m, yet S4 said its performance had not been flattered by comparisons with the onset of the pandemic, noting that revenues were also up strongly from 2019 levels.
The company said it was “more of a proxy on the growth of the digital platforms” such as Google and Facebook “rather than the ad holdcos, which were generally flat”.
“It is clear that the tragedy of Covid-19 has accelerated the speed of digital transformation,” Sorrell, who is executive chair, said in a statement.
He added that the company, which has rolled up several digital agencies including MightyHive and Firewood, was planning more deals. Its headcount has risen from 2,600 at the end of the first half last year to almost 6,000.
The company, which operates under the Media.Monks brand, posted a pre-tax loss in the period of £19.4m, including acquisition-related costs and other “adjusting” items of £47.6m. Excluding the adjusting items, operating profit rose from £16.3m to £31.3m.
S4 said it was “prioritising revenue and gross profit [net revenue] growth at this early stage of the company’s development”. The loss per share was 3.9p and no dividend was declared.
The company’s revenues remain a fraction of those at WPP, which Sorrell led for 33 years. But its market capitalisation is now about a third of that of his former group.
WPP last month announced first-half revenues of £6.1bn, a year-on-year increase of 16 per cent on a like-for-like basis.