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Shares in Sir Martin Sorrell’s S4 Capital fell to a record low after the British marketing group warned that profits and revenues would be lower than forecasts this year.
Sorrell said technology clients continued to cut marketing spend amid tough global macroeconomic conditions and high interest rates, but promised to cut costs across the group to match headcount with the further decline in income.
S4 Shares fell nearly 15 percent in early trading Thursday after the earnings warning, the second in less than two months, which is expected to raise new questions among advertising industry executives about the future long term of the group. S4 has already been contacted by competitors, notably Stagwell, listed in New York.
In total, the group’s shares have fallen by almost half in the past 12 months.
The advertising group, created by Sorrel after leaving WPP in 2018, he said net revenue for 2024 would decline “by double digits” and profits would be slightly lower than last year.
S4 said it would continue to cut costs, with a “significant reduction in the number” of employees reflecting the fall in revenue.
Revenue fell 19.3 per cent to £198.4 million in the third quarter, S4 said in a trading update. The company has significant exposure to clients in the technology sector and has sought to use new technologies such as artificial intelligence in its processes.
Sorrell said: “Trading in the third quarter reflected the continued impact of the trends we saw in the first half of challenging global macroeconomic conditions and high interest rates, as well as some underperformance by in relation to our addressable markets.
Analysts at Peel Hunt said trading in H4 was slower than expected in the third quarter, which would lead them to cut their 2024 profit estimates by 4 to 6 percent.
