Sir Martin Sorrell has described the twice-delayed reporting of S4 Capital’s annual results as “unacceptable and embarrassing” and pledged to restore investor confidence in the advertising group after almost $1bn (£810m) was wiped off its market value.
S4 Capital, the digitally-led ad group Sorrell launched after resigning from WPP four years ago, was forced to delay the publication of its results twice after its auditors, PwC, said it was “unable to complete the work necessary”.
The delays stoked investor fears, and for Sorrell, a finance man driven to make a success of S4 Capital after his bitter departure from WPP, the accounting delays have been a blow that also wiped £90m from the value of his stake in the business.
“Delay in producing our 2021 results is unacceptable and embarrassing,” he told investors and analysts in a presentation on Friday.
Reasons cited for the delay include control weaknesses, staff turnover and lack of detailed documentation, “particularly relating to revenue and cost of sales recognition”.
Sorrell said an “upskilling” of the finance team was in progress, with a number of senior hires already made, as the number-crunching side of the operation attempts to keep up with the blistering pace of growth of S4 Capital.
“Significant changes in our financial control, risk and governance structure and resources at board, company and practice level are being implemented and planned to try to ensure this never happens again and we return to a normal financial calendar,” Sorrell said. “[A] full debrief [is] planned to ensure all suggestions from PwC are captured.”
S4 Capital reported a doubling of revenues to £686m last year. However, the company swung to a pre-tax loss of £56.7m after incurring £136.9m in charges relating to acquisitions, amortisation and share based payments.
The company’s share price rose 4% to 339p on Friday but remains well down on the high of 870p in September last year.
“S4 Capital’s results are solid but unspectacular,” said Thomas Singlehurst, a media analyst at Citi. “Our call on S4C was … that the delay to results would likely be procedural and, in this context, the market was overstating risk. We think this is borne out by today’s results and would expect a gradual rerating as the market reengages with fundamentals.”
