Shareholders in S4 Capital (LSE: SFOR) such as myself have had some bad news recently. First it was announced that the digital ad agency network’s annual results would be delayed. The afternoon before the rescheduled release date, they were again delayed. The S4 share price crashed.
Given my long-term bullish outlook on S4 Capital, I have been considering whether the share price tumble makes it attractive for me to add more shares to my portfolio at the moment. But I have also been thinking about selling my whole S4 position.
What’s going on at S4 Capital
It is not common for companies to delay their annual results but it does happen. Changing working arrangements over the past couple of years have made it hard for auditors to access the information they need on time.
At the start of last month, S4 delayed its accounts until 31 March. It pinned this on “the impact of Covid and Omicron on travel and resource allocation, particularly in the Netherlands, PricewaterhouseCoopers has requested a further period to complete its audit work.” The Netherlands is home to an important part of S4’s operation.
Last week, S4 put out an announcement that said: “PwC informed us that they were unable to complete the work necessary for S4 Capital to release the Preliminary Statement tomorrow morning.”
It is highly irregular for an auditor to inform a listed client the afternoon before it is due to publish its results that the work cannot be completed on time.
Why the results are delayed
I think three points are noteworthy. First, the latest statement no longer specifically links the ongoing delay to auditor resource and travel constraints. Secondly, the late announcement timing makes me expect S4 and PwC had been in discussion about the results sign-off for some time already.
Thirdly, in last week’s announcement, S4 said “it believes that the results for 2021 remain within the range of market expectations and continued to trade strongly in the first two months of 2022.”
The S4 Capital share price has tumbled
Despite that reassurance, the market responded with predictable dissatisfaction to the latest delay and marked S4 down sharply on Wednesday. The shares have clawed back some ground but remain 38% down over the past 12 months.
That could look like a buying opportunity. The growth story at S4 has been very strong to date and I like the company’s strategy. I have been an enthusiastic S4 shareholder and indeed was considering buying more shares before the results were delayed.
Many other investors are clearly now fearful. But like Warren Buffett, should I therefore be greedy and load up on S4 shares?
My next move
As an investor, being honest with oneself is critical. My enthusiasm for S4 Capital has largely been based on its reported results.
The PwC delay may not reflect at all on S4’s business. Indeed, S4 has said trading remains strong. But this delay is highly unusual. It is a big red flag for me as an investor.
Until the auditor signs off the accounts for publication, I will not buy any more S4 shares. If there is a further substantial delay to the results, no matter what the stated reason, I will consider dumping my S4 shares.
