Directors’ Business: S4 Capital boss cuts stakes

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S4 Capital’s chief operating officer has divested nearly a quarter of his stake in the ad group “to cover taxes, assets and personal financial obligations.” Christopher S Martin sold over 2 million shares on May 12 for a total of £2.8 million. He currently owns 6.5 million shares, which represents approximately 1.13% of the issued share capital.

S4 Capital’s share price is down 55% year over year and is 85% lower than its highs recorded in September 2021.

Investors started to get anxious early last year when the group twice delayed the release of its 2021 results. Nerves had calmed down when the figures finally emerged last May. Its 2022 annual report was released on time this spring.

However, the report was preceded by a profit warning and revealed a statutory operating loss of £135m, despite a 24% increase in comparable billings. Acquisitions were partly to blame, and also high payroll costs: after a rush to recruitment, total payroll costs rose by 65% ​​in 2022. Net debt also increased six-fold to £110m and it is expected to increase further this year.

The big question for investors is whether they are convinced by S4 Capital’s growth story, given the challenging environment for advertisers and the company’s issues with internal controls. The group reported solid revenue growth in the first quarter of 2023, with technology services posting particularly strong results. However, comparable sales of the content and data and digital media divisions were significantly weaker and profitability was not mentioned.

Chairman and founder Sir Martin Sorrell recently reduced his travel schedule after “successful keyhole surgery” to remove a tumor in February. The marketing veteran will receive preventive treatment in the coming months, “Otherwise, business as usual,” he said.

The CLS family adds to the stakes

The family of European office owner CLS Holdings has tightened its grip on the company, buying £1.34m in shares just two months after buying it worth £1.86m.

The combined purchases amount to 2.4 million shares at 133 pence each and were made through an investment vehicle closely associated with Anna Seeley, vice chairman, non-executive director and daughter of late CLS founding shareholder Sten Mortstedt. The vehicle is part of The Sten and Karin Mortstedt Family and Charity Trust, which increased its ownership of the company to 52.06% as a result of the two purchases.

A further 6.58% of the shares are owned by family member and non-executive director Bern Mortstedt, bringing total family ownership of the company to 58.64%.

The family’s decision to double down on the business it founded comes at a difficult time for both the owner and the real estate industry at large. Last year’s spike in interest rates sent real estate valuations plummeting across the board and resulted in heavy pre-tax losses for real estate companies. CLS was no different, moving to an £82m pre-tax loss thanks to a £137m valuation hit.

However, CLS was an outlier for its poor performance. The company experienced a marginal decline in net rental income due to an increase in vacancy rates at a time when many peers have experienced increases in net rental income driven by inflation.

Additionally, CLS’s net debt to net assets ratio is much higher than many of its publicly traded counterparts, while the consensus forecast for dividend growth is much lower at 2.5% calendar year 2022 to year. solar 2024. The company said the decision to pay a fixed final dividend for 2022 “reflects[ed] the most difficult economy currently”.