S4 Capital audit delay: what stock market analysts are saying

Stock market analysts have warned that S4 Capital’s shares are likely to remain under pressure until the company publishes its financial results for 2021.

On March 30th, the digital advertising company, owned by Sir Martin Sorrell, postponed the publication of its full year results just hours before it had planned to present them to investors. 

This was the second time in a month that the business delayed its results announcement, which was originally scheduled for 18 March.

S4 Capital’s share price initially plunged by one third on the news to £3.10, but on April 1st the share price had rebounded to £3.24, which is still significantly lower than the £4.74 pre-announcement price on 30 March.

In a statement published on 1 March, S4 Capital said the first delay was due to auditor PwC needing more time "because of the impact of Covid and Omicron on travel and resource allocation”.

However, Omar F Sheikh, equity analyst at Morgan Stanley, said in a statement that the reason for the most recent delay is “no longer a resource issue”. 

He added: “The lack of a revised date for the publication of results suggests the aspect of the audit in question is non-trivial and means the auditors are unable to complete their work within a specified timeframe.”

According to Sheikh, the postponement also creates “a degree of uncertainty over forecasts for S4's financial performance” in 2021.

He continued: “For us, the bottom line from here is S4 needs to work with its auditors to resolve all outstanding issues as quickly as possible. 

“As long as there is any uncertainty about the company's 2021 performance, it is likely the shares will remain under pressure.”

Meanwhile, analysts at Barclays stated that they were “not aware of any company postponing results twice because of auditors’ resource allocation issues”.

They added that the fall in share price suggested that the market “may be concerned that the delay is the result of an accounting issue”. 

In a note for investors, Barclays concluded: “Additional delay is clearly unhelpful and creates uncertainty and investor nervousness. A swift publishing of the 2021 accounts would allow the stock to go back to fundamentals, which we view as attractive on current numbers.”

Analysts further highlighted that S4 Capital still expects that its financial results will “remain in the range of market expectations”.

Sorrell launched S4 Capital in 2018 after leaving WPP, the advertising and communications group he founded and led for three decades.

S4 Capital, a self-styled, new-era digital marketing services company, has made more than two dozen acquisitions, including MediaMonks, Mighty Hive and Firewood.