Martin Sorrell’s pure play digital advertising group S4 Capital has reported more “modest” revenue growth in the first four months of 2023.
Sir Martin, executive chairman and founder, told the company’s AGM that 2022 was a very strong fifth growth year, posting like-for-like net revenue growth of 26%.
“The pace of like-for-like net revenue growth in the first four months of 2023 has been more modest, reflecting the slowdown in the growth rates of our two main addressable markets, with technology platforms around 6% and technology services to 7%-10%,” he told shareholders.
However, the company is maintaining like-for-like 2023 net revenue growth guidance of 8%-12% excluding the impact of one "whopper" client reduction, and 6%-10% including it.
S4 Capital lifted like-for-like revenue 6.1% to £261.7 million in the March quarter. Net revenue grew 6.8%, driven by technology services.
Sir Martin says forecasts for 2023 and 2024 global GDP growth have been continuously reduced to about 2%-2.5%, reflecting central banks raising interest rates sharply and government-driven fiscal tightening.
“The impact of these financial policies has been deepened by three geo-political forces - the deterioration in US/China relations, particularly over the future of Taiwan, the war in Ukraine and Russia's territorial ambitions and the potential nuclear capability of Iran," he says.
“For the foreseeable future the world is going to be very different to the previous 50 or so years of globalisation. Growth will be lower and inflation and interest rates higher than previously.
“As a result, geographical growth will be more difficult to find and fragmented, with focus on the higher growth Americas, the Middle-East and Asia Pacific.
"And in that lower overall growth world, the pace of digital transformation will intensify, facilitated by AI/AGI, as clients seek to reduce costs and maintain margins.
“Our two major addressable markets, digital advertising driven by the technology platforms and digital transformation look set to grow this year by 7%-10%.”
According to analysts, it will then re-accelerate in 2024 and 2025 to 10%-15% in the key US media market, as digital advertising reaches 75% of client budgets by 2025.
“This tends to favour digitally-focused businesses like ours, which focus on so-called ‘lower funnel’ or performance and activation work and which is understandably performance and results orientated,” he says.
Sir Martin says S4 Capital continues to expand capabilities in technology services to fully provide digital marketing transformation services.
“The unique, transformational shift to artificial intelligence (AI) and artificial generative intelligence (AGI) will only accelerate the pace of digital change,” he says.
“Our mantra or strap line has now been modified to ‘faster, better, cheaper and more’ to reflect our enhanced ability to accelerate copywriting and visualisation, to automate media planning and buying, to use AI/AGI as a super tool in our operations, to provide hyper-personalisation at greater scale and provide data to all our almost 9,000 Monks in 57 offices in 32 countries.”
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