Sir Martin Sorrell’s digital-led S4 Capital has revealed its financial numbers for the second quarter and first half of 2022. The numbers revealed that as revenues ballooned, so did operating and hire costs.
S4’s operational EBITDA was “lower than predicted”, and that was due to “investment running ahead” of earnings. EBITDA was £30.1 million ($A51.1 million), down over 41 per cent and £4 million ($A6.8 million) on the same period last year.
Its operating margin was down from 14.5 per cent last year to eight per cent. S4 had previously declared its full year EBITDA to reach 25 per cent. Costs associated with “hiring against the curve” impacted its profits, while it spent millions on new offices, namely in London, Buenos Aires and New Delhi, as well as on updating its IT systems.
In the wash-up, the company made an operating loss of £75.4 million ($A128 million), with total losses for the last six months reaching £82.4 million ($A140 million).
Net revenue reached £375.3 million ($A638 million), which was up 27.8 per cent like-for-like and 89 per cent compared with 2019. Billings were up to £765.6 million ($A1.3 billion), up 22.2 per cent like-for-like.
Shares in the London-based company were 9.4 per cent higher as of Wednesday morning to 157 pence.
Commenting on the numbers, Sorrell said: “Our top line growth continues to outperform the digital advertising and transformation markets. This momentum is underlined by the increasing recognition of the success of our new age/new era model in industry surveys such asthe Forrester Waves (the guide for buyers considering their purchasing options in a technology marketplace) and increasing conversion of client relationships at scale as we land more ‘whoppers’.
“In the first half of 2022, we continued to invest in increased human capital ahead of further top line advances and in management infrastructure, which impacted our Operational EBITDA. In the second half, we are focused on a better balance between top and bottom-line growth to ensure we reach our revised targets for the year. Combinations remain a key part of our growth strategy, however, for the time being we are focused on organic growth and maximising value from our existing businesses, where momentum remains strong.
“Whilst the global economy faces many significant challenges in areas such as climate change, a lengthy war on Continental Europe, rising inflation and interest rates, energy shortages, fractious US/China and Western/Russia relationships and with Iran, the prospects for digital advertising and transformation remain relatively bright, whilst traditional media languish, and there is evidence that demand accelerates during periods of economic uncertainty as we saw with COVID in 2020, when we performed strongly”.
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