Wednesday 11 September 2019 8:06 am

Sorrell’s S4 Capital sees earnings slip amid rapid expansion

Sir Martin Sorrell’s S4 Capital has posted a decline in earnings for the first half as the advertising company splashed the cash on acquisitions and staff expansion.

Read more: Martin Sorrell’s S4 Capital buys influencer agency IMA

The figures

S4 Capital’s revenue rose 42 per cent to £88m in the six months to the end of June.

Gross profit jumped 44 per cent to £70m.


Earnings before interest, tax, depreciation and amortisation (Ebitda) were £12m, down 8.5 per cent against the same period last year.

S4 posted a pre-tax loss of £8.5m, compared to a £12.2m profit last year.

Net debt reduced by half to roughly £20m.

Why it’s interesting

S4 Capital, the advertising company set up last year by veteran ad boss Sorrell, has enjoyed a period of rapid expansion as it pursues its digital-first strategy.

The first half figures mark a continuation of this growth, with a surge in both revenue and gross profit.

However, the fast-paced growth has taken its toll on S4’s earnings for the first time, with Ebitda dropping from £13.2m to £12.1m and the company swinging to a loss.

S4 said the decline was largely due to its burgeoning headcount, which increased more than 60 per cent to 1,375 people at the end of the first half.


The rising staff numbers reflect the company’s geographical expansion, with 22 locations now open.

Almost 70 per cent of S4’s profit was booked in the Americas over the period, while the firm enjoyed a surge in income from the Asia Pacific region.

Earnings were also impacted by fierce merger and acquisition activity, as Sorrell’s firm looks to beef up its offering in both the programmatic and content sectors.

In April S4 snapped up Dutch robotic food and drink studio Caramel, as well as Sao Paolo-based ad firm Progmedia. This was followed by the purchase of IMA, an Amsterdam-based influencer marketing company, for €10m (£9.3m). 

S4 said it continued to strengthen its roster in the technology industry, as well as fast-moving consumer goods, telecoms and pharmaceuticals.

The firm now counts Procter & Gamble, Nestle and Coca Cola among its clients, and expanded its contracts with Google, Netflix and Uber.

S4 said the second half had started strongly, with July revenue and gross profit up 68 and 60 per cent respectively, and said it is on track to meet its target of doubling the size of the company by 2021.

Shares in S4 Capital ticked up just over two per cent in early trading.

Read more: Shares in Sorrell’s S4 Capital get boost as rapid expansion continues

What S4 said

“These results confirm the power and relevance of the faster, better, cheaper, digital-only unitary advertising model, with first party data fuelling content and programmatic,” said executive chairman Sorrell.

“Now the task is to build significant scale organically, by broadening and deepening existing and new client relationships and adding resources through merger and acquisition. Your company is being increasingly involved in significant industry reviews.”

Main image credit: Getty

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