Sir Martin Sorrell has called the delay to his new advertising group’s accounts “unacceptable and embarrassing” and promised “significant” improvements to financial control, risk and governance at the company.
S4 Capital on Friday published its annual results just over a month after it pulled the plug on their release hours before they were due, which wiped roughly a third off the start-up’s market value. Shares recovered some of their value in early morning London trade, rising 4 per cent to 339.4p.
A presentation linked to the company’s results stated that reasons behind the delay included control weaknesses, staff turnover and a lack of documentation, particularly relating to revenue and cost of sales recognition.
The discovered issues “concentrated” on the rapid expansion of MediaMonks, a Netherlands-based digital production company that Sorrell has used to merge with dozens of other companies.
The London-listed company, which Sorrell founded after he was ousted from WPP in 2018, has since its launch bought 29 media companies and relied heavily on its previously buoyant share price to strike deals.
To ensure no further issues with its accounts, the company said it was “upskilling” its finance team. Debriefs were planned to make sure that all “suggestions” from its auditor PwC were “captured”.
Sorrell declined to give further detail as to why PwC had in March failed to sign off on its accounts. “It’s all laid out in front of you, there is no longer any need to speculate,” the advertising veteran said.
S4 Capital said that revenue doubled to £686mn in the year ending December and attributed roughly half to organic growth, rather than the aggressive acquisition strategy that the company has pursued since its launch.
Losses before tax swung to £56mn, compared with a profit of £3mn the year before, and the company stated that it would have liked to improve its operational earnings before interest, taxes, depreciation and amortisation margin “which was impacted by the significant investment required to bed down our growth”.
Analysts at Citi called the company’s results “solid but unspectacular” and said the its assurances of tighter financial controls were “the key point”.
