Sir Martin Sorrell’s S4 Capital sees losses widen to £82m as takeovers and hiring boom weigh on group’s costs

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  • Sir Martin Sorrell’s business reported an £82.4m loss for the first half of 2022.
  • S4 Capital said it has frozen recruitment and put discretionary spending under control.
  • Known reported a net debt of £135.5m.

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S4 Capital’s losses have accelerated due to a constant stream of acquisitions and an increase in headcount.

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Sir Martin Sorrell’s advertising business reported an £82.4m loss in the first six months of 2022, compared to a £23m loss last year, as staff investment outpaced net revenue growth.

S4 announced that it had put in place a moratorium on recruitment and discretionary spending controls, which had the “desired effect” of total headcount for the past month remaining at around 9,100.

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Titan: Sir Martin Sorrell’s business posted a half-year loss of £82.4m as hiring investment outperformed net revenue growth by more than expected.

This is still almost 60% more people than the company employed at the end of June 2021, when its net cash total was £6.6m.

Twelve months later, the group posted a net debt of £135.5m due to the high number of M&A it completed this year, including one involving Los Angeles-based software developer TheoremOne.

These deals continued to help overall sales for the last half of the year climb 59.8% to £446.4m, with bills jumping nearly 40% to £765.6m.

S4 Capital has also benefited from new contracts with large corporate clients such as pub chain Brewdog, computer software provider Adobe and social media platform TikTok.

On top of that, he has received two so-called “colossal” contracts, each worth at least $20 million a year, which are scheduled to become fully operational in 2023.

The London-listed company said it has five more clients with transactions close to reaching “colossal” status, with another 14 identified as “potential giants.”

Despite the economic climate of higher interest rates, higher inflation and slower growth, Sorrell said the moment could be a windfall for the advertising sector.

He said: “The outlook for digital advertising and transformation remains relatively bright while traditional media languishes, and there is evidence that demand is picking up during times of economic uncertainty, as we saw with Covid in 2020 when we performed well.”

Sorrell, 77, founded S4 Capital four years ago after leaving WPP, the agency he helped build and grow into the world’s largest advertising company.

His new firm has undergone rapid expansion, having bought 30 media organizations since its inception and won clients such as tech giants Google and Meta, owner Cadbury Mondelez, and German automaker BMW.

The company’s credibility took a hit earlier this year when a series of accounting errors delayed the release of its full-year results – a fiasco that analysts blame on S4 Capital’s breakneck growth.

To try to restore credibility, the group hired more accountants, appointed former WPP director Colin Day to head its audit and risk committee, and changed its financial controls, risk management, and governance procedures.

Shares C4 Capital rose 12.5% ​​to 161.4 pence on Wednesday, although their value has fallen by more than 62% over the past 12 months.


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