How Sir Martin Sorrell came unstuck – and what happens next

sir martin sorrell
sir martin sorrell

In This Article:

When Sir Martin Sorrell launched S4 Capital in 2019, he promised clients a “faster, better, cheaper” digital advertising business.

With a vow to overhaul the old ad agency model and an unrivalled contacts book, the former WPP boss embarked on an aggressive growth plan, snapping up smaller businesses and winning big-name clients. His early success catapulted the business to a valuation of £5bn.

Yet S4 quickly came unstuck after problems with its accounting emerged last year, forcing it to delay the publication of its accounts.

Investors had hoped it was simply a hiccup caused by breakneck growth. But in recent months, deeper issues have emerged.

Last week, S4 issued its second profit warning in just three months and announced a round of job cuts. Shares are now down 60pc from their peak and close to record lows.

“There is a pattern here of slightly over-optimistic budgeting and forecasts which they can’t deliver on, and I think investors are quite troubled by that,” says media analyst Alex DeGroote

More fundamentally, analysts have begun to question whether Sir Martin’s company is really offering anything new and ask where the future prospects lie for a business that has largely hinged on the Rolodex of its 78-year-old founder.

“S4 was supposed to be different. It was supposed to be agile, nimble,” says DeGroote. “But that hasn’t really played out.”

For many industry watchers, S4 Capital has always been a revenge play for Sir Martin as he looks to retain his status as doyen of the advertising industry following an acrimonious exit from WPP.

While the ad tycoon promised a more agile, digitally focused approach, he has largely followed the same playbook of growth through acquisition that he used to build up WPP.

Sir Martin has also used his reputation and connections to land major tech clients that became the cornerstones of S4.

The agency counts Facebook, Amazon and Google among its biggest clients and has outlined aims to target more “whoppers” – clients who spend more than $20m (£16.3m) a year with the company.

More recently, Sir Martin has heralded the opportunities offered by artificial intelligence (AI). He has tacked the word “more” onto the end of S4’s “faster, better, cheaper” tagline in a nod to the potential for AI to supercharge campaigns.

But behind the tech spiel, the numbers tell a different story. S4 is being burned by a downturn in the tech sector prompted by rising interest rates.

Ian Whittaker, a media analyst, says: “The problem is that many of the clients he was going for, as you had the rise in interest rates, they suddenly change strategies.