Sorrell's S4 Capital raises annual profit outlook for a third time

09/13/2021 | 04:35am
Martin Sorrell

LONDON, Sept 13 (Reuters) - Martin Sorrell's S4 Capital marked its third birthday with a third increase to its profit forecast this year, driven by major brands and tech platforms using the digital-only advertising group to target customers during the pandemic.

Shares in the British company, however, fell 6% after it reported an operating loss of 16.1 million pounds in the first half ($22.25 million) compared with a profit of 1.3 million pounds last year, due to acquisition payments, reflecting its rapid rate of growth.

It said gross profit had jumped from an increase of 33% in the first quarter to 66% in the second as clients including Alphabet's Google, Facebook, HP, Netflix , Burberry and Amazon Fashion booked more work.

Built by Sorrell, the founder of the world's biggest advertising company WPP, S4 is a purely digital group that uses data analysis and technology to place ads on the best sites, at the best time of the day, to influence spending decisions.

It has benefited as major groups switched their operations online during the pandemic. It now expects gross profit to rise by 40% this year, the third time it has increased its forecast from an original target of 25%.

"Half of our growth is coming from organic and half is coming from deals, so it's very good, we're doubling our headcount," Sorrell told Reuters.

Sorrell founded S4 after he left WPP in 2018, and the group has a mid-term target of doubling organically over the 2021-23 period. It now has a market value of 4.5 billion pounds ($6.2 billion) after its shares rose by 103% in the last year.

Analysts at Jefferies said S4 benefited from the rapidly growing digital and tech advertising spend and that the company would track global digital transformation generally.

"In the backdrop of this and other advertising market eco-system changes (eg death of third party cookies), digital marketing and data consultancy have never been more relevant," they said in a note. ($1 = 0.7242 pounds) ($1 = 0.7237 pounds) (Reporting by Kate Holton; editing by Guy Faulconbridge and Emelia Sithole-Matarise)

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