Martin Sorrell’s S4 Capital optimistic as March quarter growth hits 40%

Credit: Bill Jelen via Unsplash

S4 Capital, Martin Sorrell’s pure-play digital advertising group, reported like-for-like revenue growth of 40% in the March quarter, with an upbeat outlook for the full year.

The company experienced “strong” growth and ahead of market expectations.

Reported revenue rose 70.1% to £206.8m and gross profit/net revenue rose 64.6% to £171.1m. Like-for-like and proforma revenue and gross profit/net revenue were up 40.6% and 34.5% respectively.

S4 Capital has maintained its objective of growth in gross profit/net income at constant scope of 25%.

Sir Martin, the executive chairman, says client demand for digital marketing transformation is intensifying as GDP growth slows and organic volume gains shrink and become more difficult.

“Business change agents who were ignored when times were good are getting more oxygen as the need to increase efficiency becomes critical,” he says.

He says GDP growth is a driver of S4 Capital’s four addressable markets: Global Media, Marketing Services, Trade Budgets, and Digital Marketing Transformation.

However, the digital segments of these markets, as opposed to analog, are expected to continue to grow significantly.

Digital advertising is expected to grow 10% to 15% in the US and internationally, while analog growth will be anemic.

Advertising as a share of US GDP is still expected to grow from less than 1% to around 1.5%, more like before, solely due to the continued increase in digital advertising == to a 68% share in 2025 from 61 % This year.

Other addressable markets are expected to grow at significantly higher rates, such as growth in cloud platforms (34%), marketing technology software (32%) and digital transformation spending (20%).

“We remain optimistic about our outlook for this year, especially as consumer and business balance sheets remain strong, cushioned by the Covid stimulus,” says Sir Martin.

“The chickens could well come home to roost in 2023 as interest rates rise again this year to counter the surge in inflation.

“But digital marketing spend remains robust even in a recession, as demonstrated for example by our results in 2020, given its secular growth trend.”

capital s4 q1 2022

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