• by Richard Whitman , Columnist, May 19, 2022

S4 Capital issued its 2021 Annual Report this week and company executive chairman Martin Sorrell in his letter to shareholders strenuously sought to mange growth expectations given recent huge reversals on the macroeconomic front. 

Sorrell said that events and circumstances have developed to create a “perfect storm” that will dampen the “strong bounce-back previously expected this year and over the horizon in 2023 the clouds look even darker.” 

Sorrell noted that GDP forecasts have recently been cut by the IMF and others to 3.6% from 5% just six months ago. “Less robust economic growth is important as it’s one of the drivers of S4 Capital’s growth,” Sorrell cautioned. 

Sorrell also noted the estimate of Goldman Sachs of a 35% risk of recession in the next two years. 

At S4 Capital, Sorrell added, “we’ll trim our sails accordingly and won’t be blown off course. But navigation will as ever, be challenging.” 

The company also announced that it will hold its annual meeting in London (and virtually) on June 16. The firm noted that Peter Kim, CEO, Data.Monks, is stepping down from the board but will still retain oversight of the firm’s data division. Former CFO Peter Rademaker is also leaving the board. He was replaced as CFO by Mary Basterfield at the beginning of the year. 

The firm is likely to face a lot of shareholder questions at the annual meeting about the company’s unusual delay in reporting full-year 2021 results—a delay Sorrell has called “embarrassing” and “unacceptable.” 

In its annual report the firm said some of the issues for the delay were “control weaknesses, inadequate documentation and a lack of understanding in the application of the accounting standards.” 

That’s quite a mea culpa and quite a different tune from the “COVID interfered with our gathering of the numbers” excuse that the company initially blamed for the delay. And Sorrell is a numbers guy by training and inclination. He must have been pretty steamed at his financial team’s shortcomings when he was first apprised of them. 

New CFO Basterfield is on the case, taking steps to shore up the firm’s competence on the financial stewardship front. There’s a new group financial controller, a new CFO for the Content practice (where much of the ineptitude took place), a new global finance transformation lead, a new group treasurer and a new global compliance lead. The company’s Audit and Risk committee is also getting a new non-executive chair. 

The company’s accountant, PwC, is also making a bunch of recommendations. 

Yeah, I’m betting the Q&A at the annual meeting will be pretty pointed.