standard.co.uk1 Apr 2022 22:13
Reading this, is sounds quite possible that S4 are not providing PWC with enough information on past acquisitions in order for them to do their job and sign off the accounts. Not hiding information because it's dodgy, but trying to give the auditors the minimum information they think they can get away with, which turns out to be not enough, and PWC have to keep coming back to ask for more information. This is what the analyst that spoke to the FT was suggesting too.
"Whatever is behind S4 Capital’s audit delay, Sir Martin Sorrell should be more up front about deal spree"
Auditors PwC “were unable to complete the work necessary”. No explanation was given as to why or when the accounts might eventually see the light of day. Mutliple inquiries since are met with a simple “no comment”.
This was the second delay in less than a month. The first time around, the company blamed “resource issues” at PwC. This time there was no such wording.
The backdrop is important. S4 has grown rapidly through a dizzying deal spree since Sorrell set it up in 2018. The company struck a deal a month last year.
Financial details are thin on the ground at the time of these transactions. S4 usually acquires companies through share-based mergers without disclosing a price. Revenue and profits at the businesses joining the fold are also usually not mentioned.
The companies being acquired are small, meaning S4 is under no obligation to disclose these details. Fuller information eventually comes out in the company’s annual report.
But annual reports come long after the fact and the pace of S4’s deal making means that, while small individually, these transactions add up.
More up to date financials are shared with analysts who cover S4 though inquiries from humble journalists seeking more details are rebuffed. There’s no suggestion of impropriety, but the information does seem closely held.
This opacity can be tolerated when S4 is delivering strong growth, as it did last November when Sorrell reported a 56% jump in third quarter revenues.
But investors will be putting huge faith in the word of auditors to verify that growth.
The minute any doubt starts to creep in, a relative lack of transparency becomes a huge issue.
The auditing delay may turn out to be totally innocuous. It may not. Either way, Sorrell should be more up front about how his business works.
https://www.standard.co.uk/business/s4-capital-pwc-audit-delay-sir-martin-sorrell-deals-advertising-transparency-b991976.html