Yahoo Finance Deepening crisis for Sir Martin Sorrell as S4 Capital’s sales plunge
Sir Martin Sorrell’s S4 Capital has suffered a 15pc fall in sales after a slowdown in the advertising sector intensified.
The digital ad agency said revenues in the third quarter fell to £211.5m as clients continued to cut back.
The London-listed company also warned that its full-year profit margins will be between 10pc and 11pc – down from previous forecasts of 13.5pc.
Shares in S4 plunged after Thursday’s update, dropping by 24pc.
The company is now valued at around £340m, a sharp reduction from its high of £5bn in 2021.
S4 blamed its lacklustre figures on the ongoing downturn in the advertising market, particularly among tech firms.
Sir Martin said: “Trading in the third quarter was difficult, reflecting the global macroeconomic conditions with continued client caution to commit and extended sales cycles, particularly for larger projects and to some extent clients in the technology sector.”
It echoes similar warnings from ad giant WPP, which cut its forecast last month after lower spending by tech firms and a slowdown in China.
But S4’s focus on digital advertising services and reliance on major tech clients such as Amazon and Google has left it particularly vulnerable.
The company has embarked on a round of job cuts in a bid to shore up its balance sheet.
Its total workforce fell by 4pc in the third quarter, and bosses said more actions were being taken in the final months of the year.
Sir Martin, who founded S4 following his acrimonious departure from WPP, insisted the ad firm was still seeing growth among its biggest clients.
However, he admitted S4’s forecasting had to be improved after the company was too optimistic in its estimates.
He said: “We have fairly sophisticated systems for forecasting, but obviously they haven’t been sophisticated enough.”
The advertising boss added: “Obviously given the profit warnings and everything we’ve gone through, it hasn’t been good, it hasn’t encouraged confidence, to say the least.
“But we’re trying to deal with the issues that we think we need to face, which is basically the forecasting side of it and the costs.”
Sir Martin said the company would treat 2024 as a “year of efficiency” as it looks to turn around its ailing share price.
Revenue from its top 20 customers rose 2.9pc over the quarter, while its top 50 were up 4.6pc.
S4’s net debt stood at £185m and is expected to rise further in the fourth quarter due to payments from further acquisitions.
However, the company is forecasting higher profitability in the final three months of the year due to higher ad spend in the run-up to Christmas.
Sir Martin added: “We remain confident our strategy, business model and talent, together with scaled client relationships, position us well for above-average growth in the longer term, with an emphasis on deploying free cash flow to dividends and share buybacks, especially as in 2024 will have no further merger payments.”
