S4 Capital sees losses jump as takeovers and hiring boom weighs on costs

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

  • Sir Martin Sorrell’s business posted a loss of £82.4million for the first half of 2022
  • S4 Capital said it froze recruitment and implemented discretionary cost controls
  • The eminent posted a net debt of £135.5m

S4 Capital has seen its losses accelerate following a steady stream of acquisitions and increased headcount.

Sir Martin Sorrell’s advertising business recorded a loss of £82.4million for the first six months of 2022, compared to a loss of £23million last year, as investment in staff exceeded the net income growth.

S4 said it has implemented a hiring freeze and discretionary cost controls, which has the “desired effect” of keeping total headcount at around 9,100 over the past month.

Titan: Sir Martin Sorrell’s business posted a half-year loss of £82.4million as investment in hiring outpaced net revenue growth more than expected

This is still almost 60% more people than were working for the business at the end of June 2021, when its total net cash was £6.6million.

Twelve months later, the group posted a net debt of £135.5 million due to the high level of mergers and acquisitions it carried out this year, including one involving software developer TheoremOne, based in Los Angeles.

The deals still helped total sales in the recent half to climb 59.8% to £446.4m and billings jumped almost 40% to £765.6m.

S4 Capital has also won new contracts with major corporate clients, such as pub chain Brewdog, IT software provider Adobe and social media platform TikTok.

On top of that, he wins two so-called “whopper” contracts, each worth at least $20 million per year, which are expected to become fully operational in 2023.

The London-listed company said it had five other clients with deals close to achieving such status, while 14 more were identified as “potential” whoppers.

Despite an economic climate characterized by rising interest rates, rising inflation and slowing growth, Sorrell said the present moment could be a boon for the advertising industry.

He said: “The outlook for digital advertising and transformation remains relatively bright, while traditional media languishes, and there is evidence that demand accelerates during times of economic uncertainty as we have seen with Covid in 2020 when we had good performance.”

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

His new venture has expanded rapidly, buying up 30 media organizations since its inception and gaining clients including tech giants Google and Meta, Cadbury owner Mondelez and German automaker BMW.

Shares of S4 Capital had climbed 11.1% to 159.5p by late Wednesday afternoon, although their value is down around 60% in the past 12 months.

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