The industry was watching closely for the financial results finally announced late last week for Martin Sorrell's S4 Capital. The results had been postponed twice, with S4 citing the company's auditor, PricewaterhouseCoopers, as unable to finish the audit in time.

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The final figures showed results in line with analysts' expectations—but the delay resulted in a loss of what Bloomberg estimated on May 6 was $1.5 billion in market value, leaving Sorrell to answer for what he called an  "unacceptable" and "embarrassing" delay.

Ad Age interviewed Sorrell, S4's executive chairman, in the wake of the earnings report on May 6. This interview is edited for clarity and length.

This must have been a tough day for you.

We said it was unacceptable and embarrassing, which it was. So we've got to get our house in order.

Do you think you might have built S4 a little too fast?

Well, you can say that. I'm more interested in the long run. You may be focused on the short term. I'm more concerned about building a business over a long period of time, not that I have a long time ahead of me. We started this thing, what was it—three or four years ago. Look at where we've started, which was zero. We have a company which, in terms of market value is worth about £2 billion. That's over three years. Now, it was worth more than that, but markets have come down and we've had this chastening experience so we have to build. We're not starting again from zero. But we have to build again from the level that we've established.

Our two-year stack, as everybody likes to talk about, was 63%. [Editors’ note: S4 later clarified that it defines a two-year stack as adding the comparable growth rates for the past two years together, or a three-year stack as adding the growth rates for the past three years, to better compare to pre-COVID conditions.] Our three-year stack was 100%. The two-year stack for the holding companies that you follow avidly is 3%, and the three-year stack is 3%. And so on that basis, last year our two-year stack was 21 times greater than the holding company's average and 33 times for the three years. And the holding companies, and indeed Ad Age, applauds them for their magnificent top-line growth. So it's not all bad news.

Can you shed some more light on the accounting issues?

We've talked about control weaknesses and staff turnover and lack of detailed documentation, particularly in relation to what is known as IFRS 15, which is the recognition of revenue and cost of sales across the year end. Most of it was in relation to what we call the legacy Media.Monks operation in Amsterdam. That doesn't mean that there weren't other issues that we had to deal with, but the majority of the issues were around that.

Did your single P&L make the accounting more difficult?

No, it's nothing to do with the single P&L. It’s in relation to IFRS, it's in relation to how much revenue you accrue. Let's say you have a project that's worth a hundred, and you let's say you've done half of the work. You would accrue 50% of the revenue and 50% of the costs. But that's a question of judgment. We're not making airplanes. It's easier when you're making airplanes because you know precisely [your revenue and costs.] I would say, if we are being self-critical, that our people were not schooled enough or were not aware enough of the implications of IFRS 15. And that was heightened by the fact that in ’21, we probably had more longer-term projects than we had in '20. 

What's your plan then for acquisitions? Are you continuing on?

We don't make acquisitions.

Oh, yes. You've made it quite clear they are to be called mergers. What's your plan for mergers?

Well, we had a couple lined up when we had our results. The principals of those companies remain interested. Our share prices recovered about 25% in the last two days. We'll see what happens to it in the future. Our structure of 50% cash and 50% equity will remain in place. 

You talked about having to regain confidence. Would that also apply to potential merger partners?

There's considerable outbound, but that's by us reaching out, and considerable inbound. And I would say the inbound, over the last eight weeks, has not lessened. There have been some things referred to in the press that we've either passed on or looked at. So I would say the degree of inbound interest remains at a very high level. And we're looking for people who don't want to sell. We're looking for people who want to buy into our model. It's really important that they want to buy into the disruptive model. We're not interested in people who want to become part of IPG, or Omnicom, or Publicis or WPP. Those are different types of people. Those are people who want to sell. 

You position S4 as the un-holding company. You were trying to prove that the model that your former company had was not the right way to go, and then you hit this stumble.

You refer to "stumble." Look at the record. I mean, is it a stumble to grow? We're talking about organic growth rates here. The [holding companies] that you follow are full of how well they've done if they've done 3% compound for three years’ organic growth. Their average for the two-year stack is 3, and the average for their three-year stack is 3. And here we are sitting on 63% and 100%. So I think you have to look at it in its entirety.

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Of course, there's a scale difference between S4 and the larger holding companies.

Absolutely. But at the end of the day, it's not about scale, it's about value, isn't it? It's about the value that we do deliver to our clients and the value that we deliver to ourselves. Otherwise, all we do is have a job that we get highly paid for.