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‘Whoppers’ drive sales surge at Sir Martin Sorrell’s S4 Capital as it signs up Facebook and HP

·2-min read
Sir Martin Sorrell  (Harry Murphy/Web Summit via Sportsfile)
Sir Martin Sorrell (Harry Murphy/Web Summit via Sportsfile)

Revenues continue to surge at Sir Martin Sorrell’s new digital advertising company S4 Capital, which today said it plans to double in size by 2024.

S4 said like-for-like revenue was up 56% in the third quarter to £178 million. Gross profits were up 42% to £144 million. Trading was above previous guidance of revenue growth of 40%.

The business, which specializes in digital advertising and services like data, is benefiting from winning what it calls “whoppers” - major clients that deliver over $20 million in revenue to the business. S4 now has six “whopper” clients, up from two this time last year. New client wins this year include Facebook and HP. Google, BMW Mini, and Mondelez are other “whoppers”. The likes of Amazon, Netflix and Burberry are customers too.

S4 has identified 19 other “whopper” clients it is hoping to win, which would push it above its short-term target of winning 20.

Sorrell told the Standard his business was benefiting from the “two tailwinds” of global GDP growth and the shift towards digital, which has been accelerated by the pandemic. S4 capital said today it hoped to double the size of its business over the next three years.

However, investing in winning big customers and expanding headcount squeezed S4’s profit margins in the quarter. Sorrell said that was likely to continue as S4 chases big new customers. Operational earnings margin, S4 preferred metric, is now forecast to be 18.6% for the full year. That’s down from prior guidance of 20% before and 21.1% last year.

S4 shares dropped 90p or 11.5% to 693p. Before today’s fall, the stock had rallied over 60% so far this year.

“We see continuing strong S4 momentum, good digital positioning and macro/client spend recovery post lockdown but share price looks to have discounted some mid-term upside,” Numis analyst Steve Liechti wrote in a note.

The global advertising market has been shaken by a change in settings for the iPhone that now mean users have to opt in to letting companies track their browsing habits. Experts have estimated the changes have cost Facebook, Twitter, Snap and YouTube almost $10 billion in lost revenues.

Sorrell said S4 had “not seen any impact” from the changes and said: “We’ve not noticed significant changes in the pattern of client demand. When you look at the alternatives, there are very few. The only platform that’s really gained any traction is TikTok.”

Sorrell set up S4 in 2018 after an acrimonious exit from WPP, the advertising holding company he built up over decades. He has grown S4 rapidly through a series of deals. The company has struck 10 in 2021 already and today said it had signed six letters of intent on future deals.

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