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Ad guru Sir Martin Sorrell predicts big rebound in digital advertising

·3-min read
Sir Martin Sorrell attends a conference at the Cannes Lions International Festival of Creativity, in Cannes, France, June 22, 2018.  REUTERS/Eric Gaillard
Sir Martin Sorrell, 76, said: “We are extremely optimistic about our prospects for this year and next. Photo: REUTERS/Eric Gaillard

Sir Martin Sorell’s S4 Capital (SFOR.L) has predicted that there will be a rebound in digital advertising, growing as much as 20% a year, due to an increase in online spending thanks to the pandemic.

The company added that a strong bounce back in global GDP growth in 2021 and 2022 will also help drive spend. Global growth is predicted to rise to 6% this year and as much as 5% next year.

It came after S4 Capital upgraded its full-year revenues outlook after a strong first quarter. It now expects 30% like-for-like revenue, up from a previous forecast of 25%, and expects gross profit growth this year.

The group posted a 35% surge in like-for-like revenues to £122m ($169m) for the first three months, with comparable gross profits up 33% to £104m.

It said new business activity had been “frenetic,” with a pipeline of business “significantly” ahead of a year earlier. The firm added that there was now a “strong” chance of achieving its target to double in size within three years.

It saw solid growth in the period across all regions, with like-for-like revenues up 30% in the Americas, 44% across Europe, the Middle East and Africa, and 34% higher in Asia Pacific.

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Sorrell, who is the former boss of global ad giant WPP (WPP.L), said: “We are extremely optimistic about our prospects for this year and next, given the huge global fiscal and monetary stimulus introduced to counter the impact of the pandemic and the subsequent increase in consumer savings ratios and stagnation of corporate capital investment.”

However, the 76-year-old did warn of a tougher year in 2023 when governments are set to impose tax rises to pay for their emergency borrowing.

“The chickens may well come home to roost in 2023, given the debt burden that most countries will have and the tax increases that will have to be implemented,” he said.

“But, digital marketing expenditure remains robust, even in a recession, as our results last year demonstrate, given its secular growth trend.”

Shares jumped more than 2% on the back of the news.

S4 Capital shares rose on Tuesday after the positive trading update. Chart: Yahoo Finance
S4 Capital shares rose on Tuesday after the positive trading update. Chart: Yahoo Finance

S4 Capital also separately announced a new deal in Brazil. Its MightyHive digital media services arm agreed to merge with Brazil’s Raccoon Group for an undisclosed sum, in a move that will boost its presence in Latin America.

Raccoon, founded in 2013 by two ex-Google executives, specialises in digital paid media, inbound marketing, and IT/business intelligence.

Sorrell said: “It is a crucial market for us at S4 Capital and one we have history in and love to work in.”

The company employs around 5,000 people across 31 countries, after hiring 2,500 over the past year. Sorrell founded the business just months after resigning from WPP after an investigation into alleged personal misconduct in 2018, which he denies.

He has been feuding with his former company in recent weeks over a payout. WPP has refused to pay Sorrell hundreds of thousands of pounds in share awards after claiming that he leaked confidential information to the media after his departure.

In its annual report last month, WPP said awards granted in 2016 and 2017 under its executive performance share plan will lapse. Sorrell hit back at the decision, calling it “petty”, and driven by "blind rage". He has called in lawyers to contest the move.

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