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Surging demand helps Sorrell's S4 to hike profit target

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Surging demand helps Sorrell's S4 to hike profit target

LONDON (Reuters) -Martin Sorrell's S4 Capital raised its annual revenue and gross profit targets on Tuesday after the pandemic forced customers to invest more in digital advertising, helping to create demand not seen since the 1980s.

The British ad executive said client wins from BMW and Mondelez had driven income in March, meaning it would now target 30% organic revenue and gross profit growth for the year, up from 25% previously.

Sorrell, who built the world's largest advertising group WPP before he left in 2018 and set up the purely digital S4, said the company was benefiting from the rapid shift to digital services that had accelerated during COVID-19.

Major client wins from the likes of Google, Facebook, BMW and Mondelez meant gross profit rose by 33% on an organic basis in the first quarter, meaning it should hit its three-year target of doubling organically.

"We haven't seen this level of activity in the pipeline in many, many years, if ever," Sorrell told Reuters. "It's strong. April looks like it will be huge."

S4 said it was prepared to leverage the group to around 2 times core earnings and is preparing a bond issue of around 250 million pounds to increase its firepower for acquisitions.

It also announced the acquisition of Brazilian agency Raccoon, which provides digital search and data analytics.

Shares in the company were trading up 3% in early deals.

(Reporting by Kate Holton; editing by Sarah Young and Paul Sandle)

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