S4 Capital reports 2021 results after 'unacceptable' and 'embarrassing' delay

S4 Capital has finally announced its 2021 results, after two postponements, a delay that Executive Chairman Martin Sorrell said was “unacceptable” and “embarrassing to all of us.” Speaking on an earnings call in London this morning, Sorrell said the company was implementing "significant changes" to its financial process in an attempt to ensure that "this never happens again." He told analysts the last two months had been "a difficult period ... and it's been difficult to detail the aspects of the audit that have been causing concern." According to Chief Financial Officer Mary Basterfield, while the first delay was caused by resource shortage due to COVID and lockdown in the Netherlands, the second delay was down to "issues within our content practice" including "control weaknesses, staff turnover and lack of detailed documentation." These issues were related to the "legacy MediaMonks business," she said, and were primarily around "cutoff and timing around accounting periods" and a "lack of understanding of the accounting standards." The delayed results were in line with analyst expectations. The company doubled its revenue to £687 million ($847 million), which Basterfield said was within the range of market estimates. Gross profit was £560.3 million, up 44% on a like-for-like basis. However, S4 recorded a pre-tax loss of £55.7 million ($68.7 million) after adjustments. Register for upcoming Ad Age events Ad Age Next: Multicultural Marketing on May 9 Ad Age In-Depth: TV Pivot on May 24 and 25 'Whopper' clients The company was bullish about the coming year and said it hoped to land more "whopper" clients (those that generate revenue above $20 million) in addition to the six it already has, which include BMW and Mondelēz, Meta and HP, which it won in 2021. The company has identified 19 more, said Sorrell, and has its sights on five more this year. In response to an analyst question, Sorrell said that to his knowledge, the company's reporting delay had had "little or no impact" on clients. But he acknowledged that in terms of raising capital it had affected confidence, saying: "It would be naive to say that this can't have had some impact. We have to rebuild confidence and trust." Areas of growth The company, which expanded significantly with acquisitions last year including digital creative agency Jam3, culture and creative marketing agency Cashmere and data analytics business Datalicious, now numbers 8,400 employees. In terms of the different areas of its business, data and digital media grew by 35% and content grew by 47% on a like-for-like basis, while technology services grew by 79%. S4 stated that areas such as Unreal Engine, the metaverse, blockchain, crypto and NFTs were placing it at the forefront of "significant disruptions" in the industry. While the U.S. was S4's biggest region, Europe the Middle East and Africa was its fastest growing and became 21% of the geographical mix in 2021. Basterfield said that 2022 had started well with first quarter net revenue growth ahead of full-year guidance. However, S4 will not release its first quarter results until the end of May, due to the delay in the full year results.

S4 Capital reports 2021 results after 'unacceptable' and 'embarrassing' delay

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