Sorrell’s S4 Capital defies tech turmoil to maintain momentum

6:15 am Monday, November 14th, 2022

By Paul Sandle

LONDON (Reuters) – Martin Sorrell said his digital ad group S4 Capital had maintained momentum in a third quarter marked by disappointing results from major platforms including Alphabet’s Google and Facebook’s Meta.

“The prospects for Alphabet, Meta, Amazon in particular, and for TikTok are not as good as they were – there has been a slowing of growth – but it continues to be pretty strong,” he told Reuters on Monday.

“And then the other side of it, in technology services and digital transformation, most of the prognostications of that are around growth of 20 to 25% over the next four or five years, so we think we’re well positioned to take advantage of both those things.”

S4, launched by Sorrell in 2018 after he left the world’s biggest ad holding group WPP, said like-for-like gross profit/net revenue rose more than 29% in the three months to end-September, keeping it on track for growth of 25% for the year.

It said it would produce operational core earnings of about 120 million pounds ($142 million) this year, in line with guidance cut in July, reflecting the costs of a hiring spree.

Shares in S4 rose 9% to 229 pence in early deals, the highest level since the downgrade in the summer.

Sorrell said Twitter and Snap, which each account for around 1% of the digital ad market, were not a good indicator for the sector.

He said advertisers were pausing spending on Twitter pending clarity on how new owner Elon Musk would moderate content.

Musk had three main problems, Sorrell said, namely ad revenue and content moderation, the loss of some good people in the recent layoffs and the opportunity costs for his other ventures like Tesla and SpaceX.

“But it doesn’t pay to bet against him,” he said. “So I think he’ll get it right in the end, but it’s going to be very bumpy.

“At the moment most clients are suspending their activities because they’re worried about extreme content and content moderation on the site.”

($1 = 0.8467 pounds)

(Reporting by Paul Sandle; Editing by Kate Holton and Emelia Sithole-Matarise)