Thursday 7 May 2020 9:32 am

S4 Capital shares rise as advertising firm shrugs off Covid-19 hit

Shares in S4 Capital rose as much as six per cent in early trading as the advertising firm boosted first-quarter revenue despite the impact of the coronavirus crisis.

S4 Capital’s like-for-life revenue increased 17 per cent in the first three months of the year to £71m, while gross profit was up 22 per cent on a like-for-like basis to £60.7m.

Read more: Coronavirus will ‘accelerate the digital revolution’, says ad mogul Martin Sorrell

The figures mark a sharp slowdown in growth for Sir Martin Sorrell’s advertising firm, which has been expanding rapidly amid a spate of acquisitions.

S4 said its tech clients — which account for roughly half its revenue — had largely continued to invest in digital services during the Covid-19 crisis, though some had postponed their campaigns to the second half of the year.

But there was a larger impact among the company’s fast-moving consumer goods, retail and pharmaceutical clients, with some cutting or reducing spend. Ad spend from the travel and hospitality sectors had “virtually all stalled”, S4 added.

Shares initially rose sharply as markets opened, before settling up roughly 2.5 per cent.

The company said it had taken a number of measures to reduce costs, including cutting non-essential spend, reducing headcount and introducing pay cuts for executives.

S4 has also shut offices as its employees work from home and said this would likely continue beyond the pandemic due to staff preferences.

Sorrell, who founded S4 after his acrimonious departure from WPP, has said that coronavirus crisis will accelerate digital transformation in the business world.

During the first quarter, the London-listed company completed its merger with Latin America-based digital content agency Circus Marketing.

Its acquisitions of Biztech and Indian digital agency White Balance are expected to complete in the coming quarter.

New business wins over the first three months of the year included Paypal, Twitch, Quibi and Domino’s.

Read more: Sorrell’s S4 Capital appoints two new directors as it turns focus to Asia

Despite the slowdown caused by Covid-19, S4 said it still had a “fighting chance” of hitting its target of doubling in size by 2021.

The company said it still expected double-digit revenue and profit growth for the year, as well as “reasonably strong” operating earnings.