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Shares in Sir Martin Sorrell’s S4 Capital fell to a record low after the UK marketing group warned that earnings and revenues would be lower than expected this year.
Sorrell said technology clients continued to cut marketing spending amid challenging global macroeconomic conditions and high interest rates, but promised to cut costs in the group so that headcount matched the new lower revenues.
S4 shares dropped almost 15 per cent in early trading on Thursday after the profit warning, its second in less than two months, which is likely to raise further questions among executives in the advertising industry about the long-term future of the group. S4 has had approaches from rivals in the past, including New York-listed Stagwell.
Overall the group’s shares have plunged by almost half in the past 12 months.
The advertising group, which was created by Sorrell after he left WPP in 2018, said net revenue for 2024 would fall “by low double digits” and earnings would be slightly lower than last year.
S4 said it would continue to cut costs, with a “significant reduction in the number” of staff reflecting the lower revenues.
Revenue fell 19.3 per cent reported to £198.4mn in the third quarter, S4 said in a trading update. The company is heavily exposed to clients in the tech sector and has sought to use new technology such as artificial intelligence in its processes.
Sorrell said: “Trading in the third quarter reflected the continued impact of trends we saw in the first half, namely challenging global macroeconomic conditions and high interest rates, as well as some underperformance when compared to our addressable markets.”
Analysts at Peel Hunt said trading at S4 was slower than expected in the third quarter, which would lead them to trim their estimates for earnings in 2024 by between 4 and 6 per cent.