Martin Sorrell established S4 Capital in 2018 following his departure from WPP © Bloomberg

Digital marketing company S4 Capital has reported its first pre-tax profit since being founded two years ago, as it bucked the trend of falling revenues seen at many of the world’s largest advertising agencies.

Martin Sorrell set up the company in 2018, shortly after allegations of misconduct led to his abrupt departure from WPP, the advertising group he had founded three decades earlier. He has denied any wrongdoing.

S4 on Wednesday said like-for-like sales in the six months to the end of June were up 7 per cent to £141m, or 61 per cent when including revenues by businesses acquired in the past year.

The company reported a pre-tax profit of £100,000 in the first half, compared with a loss of £8.5m last year, after it was boosted by new work from clients including PayPal, Shopify and the Los Angeles 2028 Olympics.

Sir Martin told the Financial Times that the pandemic had led companies to pull back on traditional advertising in print and television but that digital marketing, which it specialises in, was holding up well.

He added that S4 had in the past few months been busy helping brands convert cancelled events into virtual shows and that it had worked with the National Basketball Association to live stream games.

“Either by luck or judgment we find ourselves in a digital sweet spot,” Sir Martin said. “Brands are taking back marketing [spending] from advertising holding companies and digital specialists such as ourselves are flowering in that environment.”

Sir Martin said S4 would soon announce a new large contract that would represent roughly 10 per cent of the group’s revenues and that it would subsequently be looking to hire 300 people in Europe.

The upbeat update contrasts with recent results from WPP, which last month reported a 9.5 per cent drop in adjusted revenues to £4.7bn in the first half.

Since his departure from the group Sir Martin has showered criticism on WPP, saying it and its peers have failed to keep up with the rapidly changing advertising landscape as previously loyal clients shift their marketing spending towards data-driven online advertising.

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