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Sir Martin Sorrell's ad agency S4 Capital sees headcount grow 26% as profit, sales jump

Saleha Riaz
·3-min read
British businessman Martin Sorrell's ad agency said it "continued to hire aggressively around strong gross profit growth and significant new business wins.” Photo: Isabel Infantes / AFP
British businessman Martin Sorrell's ad agency said it "continued to hire aggressively around strong gross profit growth and significant new business wins.” Photo: Isabel Infantes / AFP

Advertising tycoon Sir Martin Sorrell’s agency S4 Capital (SFOR.L) reported strong performance so far in 2020 despite the impact of the coronavirus pandemic, with revenue, profit and number of employees all improving significantly.

Revenue was up almost 53% to £86.4m ($113.8m) and gross profit up almost 79% to £75.3m. Gross profit improved sequentially each month in the third quarter, up 18% in July, 24% in August and 25% in September.

The number of people in the firm was 2,870 at the end of the third quarter, up 26% like-for-like compared to the same time last year.

The firm said it “continued to hire aggressively around strong gross profit growth and significant new business wins.”

Chart: Yahoo Finance UK
Chart: Yahoo Finance UK

Year to date, revenue was up almost 58% to £227.7m and gross profit up almost 78% to £199.3m. Like-for-like revenue is up over 9% and gross profit up almost 16%.

Both reported and like-for-like earnings before interest, depreciation and amortisation (EBITDA) and operating gross profit margins were up in Q3, as growth rates accelerated and Covid-19 reduced travel and office costs, the agency said.

This was in line with the improvement indicated in the half-year results statement in September, it added.

Europe, the Middle East and Africa grew significantly in the third quarter, with gross profit up over 34% to £13.0m. Year-to-date gross profit was up almost 40% to £37.0m.

The Americas showed exceptionally strong growth in the third quarter with gross profit up over 93% to £55.1m. Year-to-date the Americas gross profit was up almost 90% to £143.9m.

Asia Pacific also grew very strongly from a smaller base, with gross profit up almost 83% to £7.3m in the third quarter. Year-to-date gross profit grew over 85% to £18.4m.

The company said it “continues to trade extremely well in line with its post COVID-19 forecasts and objectives for 2020.”

Given the return of levels of activity to pre-covid-19 levels, its board has decided to return executive and non-executive directors' compensation to the levels they were in March, when they were cut by 50% and no cash bonuses were taken for 2019, with effect from 1 October.

The firm added that recruitment, raise and promotional policies were also restored in Q3.

READ MORE: Advertising tycoon Martin Sorrell predicts 'permanent' digital shift

S4 Capital describes itself as a “tech-led, new age/new era digital advertising and marketing services company” and was established by Sorrell in May 2018.

In September, Sorrell slammed the UK government’s campaign to get people back to their offices, saying it has “itself to blame” as workers shun public transport over COVID-19 safety fears.

He said there will be no widespread return to city centre offices until the UK government tackles worries over coronavirus infection on transport.

Earlier this year Sorrell had predicted that the pandemic will prompt firms to accelerate their digital transformation as part of a permanent shift in consumer and business behaviour.

His comments came after his new firm MightyHive announced plans to merge with Digodat, a Latin American data and analytics consultancy.

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