Directors’ Deals: S4 Capital boss cuts stake
The chief operating officer of S4 Capital has sold almost a quarter of his stake in the advertising group “to cover tax, estate and personal financial obligations”. Christopher S Martin disposed of over 2mn shares on May 12 for a total of £2.8mn. He now owns 6.5mn shares, representing about 1.13 per cent of the issued share capital.
S4 Capital’s share price is down by 55 per cent year-on-year and is 85 per cent lower than the highs seen in September 2021.
Investors started to get anxious early last year, when the group twice delayed publication of its 2021 results. Nerves were settled when the figures eventually emerged last May. Its 2022 annual report was published this spring on time.
However, the report was preceded by a profit warning and revealed a statutory operating loss of £135mn, despite a 24 per cent jump in like-for-like billings. Acquisitions were partly to blame, and staff costs were high, too: after a hiring spree, total personnel costs jumped by 65 per cent in 2022. Net debt also increased sixfold to £110mn and is expected to rise further this year.
The big question for investors is whether they are convinced by S4 Capital’s growth story, given the difficult backdrop for advertisers and the company’s own issues with internal controls. The group reported solid revenue growth in the first quarter of 2023, with technology services performing particularly well. However, like-for-like sales from the content and data & digital media divisions were significantly weaker, and profitability was not mentioned.
Chair and founder Sir Martin Sorrell has recently reduced his travel schedule after “successful keyhole surgery” to remove a tumour in February. The marketing veteran will receive preventative treatment in the coming months, “Otherwise, business as usual,” he said.
CLS family adds to stake
The family of European office landlord CLS Holdings has tightened its grip on the company, snapping up £1.34mn in shares just two months after buying £1.86mn worth.
The combined purchases amounted to 2.4mn shares at 133p each and were made via an investment vehicle closely associated with Anna Seeley, deputy chair, non-executive director, and daughter of CLS’s late founding shareholder Sten Mortstedt. The vehicle is part of The Sten and Karin Mortstedt Family and Charity Trust which has increased its ownership of the company to 52.06 per cent as a result of the two purchases.
A further 6.58 per cent of shares are owned by family member and non-executive director Bern Mortstedt, taking the total family ownership of the company to 58.64 per cent.
The family’s decision to double down on the business it founded comes at a difficult time for both the landlord and the wider real estate sector. Last year’s jump in interest rates caused real estate valuations to plummet across the board and resulted in heavy pre-tax losses for property companies. CLS was no different, swinging to an £82mn pre-tax loss thanks to a £137mn valuation hit.
However, CLS has been an outlier for its poor performance. The company posted a marginal drop in net rental income due to an increase in vacancy rates at a time when many peers recorded inflation-driven increases in net rental income.
Moreover, CLS’s net debt-to-net assets ratio is much higher than many of its listed peers while the consensus forecast for dividend growth is much lower at 2.5 per cent from the 2022 calendar year to the 2024 calendar year. The company said the decision to pay a flat final dividend for 2022 “reflect[ed] the more difficult economy currently”.