Sir Martin Sorrell has insisted demand for digital ad services remains robust this year despite forecasts of an economic slowdown as his company S4 Capital reiterated its profit growth target of 25%.
Describing new-business activity this year as remaining “frenetic”, Sorrell said today S4’s prospective client pipeline is above the level at this time last year.
S4 reported revnue up 70.1% year on year to £206.8m for the first three months of 2022, which is up 40.6% on a like-for-like basis. Reported gross profit (or net revenue) was up 64.6% to £171.1m, up 34.5% like-for-like. The company has a net debt of £48m as of the quarter’s end.
Despite the slowdown in forecasts for global GDP growth for this year and next, S4 is forecasting demand for digital advertising and marketing transformation to expand at 10-15% per year, with digital increasing its share of total advertising spend from 61% to 68% by 2025 in the US.
Sorrell said the company had won “significant new work” with its larger clients, which include Alphabet, Meta, Netflix, and Amazon.
During the quarter, S4 has won new business from Brewdog, Tiktok, Diageo, Booking.com, Tim Horton’s, Commonwealth Bank Australia, Beam Suntory, and Golden Goose.
He said S4 had also won “the US media account of a large FMCG which will become a leading account in 2023”. This is one of two “whopper” accounts wins secured during the quarter.
“New business activity remains frenetic and the pipeline is above the level at this time last year, with considerable current pitch and land and expand opportunities across the board,” Sorrell added.
S4 is also about to appoint a non-executive chairman to its Audit Committee, having taken several weeks longer than expected to produce its full-year earnings. Sorrell described this as “embarrassing” and “unacceptable”.
Sorrell said: “We are strengthening our Company financial control, treasury and legal, risk and governance functions, with internal audit enhancements to come and at the Content practice level strengthened control, pricing and IFRS15 functions. We will be adding a new Non-Executive Chairman to the Audit Committee shortly too.”
