S4 share price falls further after auditor fails to approve results

Shares in S4 Capital slid further on Thursday, as investor concern grew over Sir Martin Sorrell’s advertising company after it delayed publishing its results for a second time this month.

The London-listed group’s share price was down by more than 12 per cent on Thursday, following a decline the previous day that wiped more than a third — or almost £1bn — from its market value.

S4, which hired a new chief financial officer in January, had said on March 1 that its auditor PwC needed more time to sign off on the digital-only advertising company’s results due to the impact of coronavirus on “travel and resource allocation”.

On Wednesday, S4 issued a second statement saying PwC had not been able to complete “the work necessary” for it to go ahead with a planned release of preliminary full-year results the following morning.

The second statement did not mention any issues relating to the pandemic and did not give any indication of when the company would release the results. It said S4 would publish them “as soon as PwC have completed their work.”

The company declined to provide further comment on Thursday.

Sorrell launched S4 in 2018 following a tumultuous departure from WPP, the world’s largest advertising group that he had founded three decades earlier. His new venture has expanded rapidly, acquiring 29 media companies since its inception.

Many of these deals have been carried out by the company issuing more shares rather than paying in cash, indicating that a sustained fall in its share price could complicate further acquisitions.

Analysts expected S4’s share price to be valued at 772p in 12 months, almost three times the level it was trading at on Thursday morning, according to a consensus compiled by Bloomberg.

One industry executive said the hold-up could be related to an issue such as producing the paperwork and evidence required by PwC to justify accounting assumptions underpinning some of the media group’s acquisitions. This was more likely the reason for the delay than a fundamental problem with its books, he suggested.

S4 said on Wednesday that its financial performance would “remain within the range of market expectations”.

Some UK companies’ results are being held up because of audit delays in the current reporting season, said a senior accountant at another firm. The problems were not generally caused by Covid-related disruption or large errors but by “management pushing to release before auditors have completed final checks”, he said.

Auditors have become more willing to push back against clients following increased regulatory pressure and fines for substandard work in recent years.

“In the past auditors might have taken a view if they were 99 per cent [certain], as long as numbers are final,” the accountant said. “Now you need to be 101 per cent certain and a number of management teams have not realised the [corporate] reporting world has changed.”

Accounting firms have also faced a shortage of qualified auditors. PwC’s UK boss said in December that attrition levels for recently qualified auditors had increased in the past year and that 85 per cent of its newly hired qualified auditors in the first quarter of 2021 would be from overseas, suggesting a lack of suitable candidates domestically.