S4 Capital has seen rapid losses following a steady stream of acquisitions and an increase in headcount.
Sir Martin Sorrell’s advertising business reported a loss of £82.4m for the first six months of 2022, compared with a loss of £23m last year, as investment in staff outpaced revenue growth net.
S4 announced that it has implemented a discretionary hiring and cost control freeze, which has the ‘desired effect’ of keeping total staff at around 9,100 over the past month.
Titan: Sir Martin Sorrell’s business reports a half-year loss of £82.4m as investment in hiring has outpaced net revenue growth more than expected
This is still nearly 60% more than the number of people working for the company at the end of June 2021, when its total net cash stood at £6.6 million.
Twelve months later, the group posted a net debt of £135.5 million due to the weight of mergers and acquisitions it completed this year, including one involving a developer TheoremOne software developer is based in Los Angeles.
These transactions still helped total sales in the recent half-year increase by 59.8% to £446.4m and invoices by almost 40% to £765.6m.
S4 Capital also won new contracts with large corporate clients, such as pub chain Brewdog, computer software provider Adobe and social media platform TikTok.
In addition, it landed two so-called ‘whopper’ contracts, each worth at least $20 million per year, scheduled to go into full operation in 2023.
The London-listed firm said it had five other customers with deals close to achieving such status, while another 14 were identified as ‘potential’ sellers.
Despite the economic backdrop of rising interest rates, rising inflation and slowing growth, Sorrell said the current time could be a favorable opportunity for the advertising sector.
He said: ‘The outlook for digital advertising and conversions remains relatively bright, while traditional media weakens and there is evidence of rapid demand growth in uncertain economic times such as we have seen with Covid in 2020 when we are going strong. “
Sorrell, 77, started S4 Capital four years ago after leaving WPP, the company he helped found and transform into the world’s largest advertising business.
His new company has undergone rapid expansion, purchasing 30 more media organizations since its inception and winning clients such as tech giants Google and Meta, owner of Cadbury, Mondelez and German automaker BMW.
Shares of S4 Capital rose 11.1% to 159.5p late Wednesday afternoon, although their value has fallen about 60% over the past 12 months.
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