S4 Capital shares tank 40 per cent as Sorrell’s brainchild issues profit warning
Shares in S4 Capital tanked over 40 per cent this afternoon after the advertising giant issued a brutal profit warning to its investors.
The company, which is the brainchild of former WPP chief Martin Sorrell, said staff costs were ahead of profit and revenue growth, knocking confidence in the turbulent stock.
S4 lowered its full-year guidance on earnings before interest, taxes, depreciation and amortisation to £120m, compared with estimates of £154m to £165m.
Net debt at 30 June 2022 was also towards the bottom end of previous guidance of £140-190m, due to “an improvement in working capital”.
Adding salt to its wounds, S4 said in trading update that “significant cost reduction measures, including a brake on hiring and discretionary cost controls” had already been taken to balance growth in revenue, gross profit / net revenue and costs.
The London-listed firm has been criticised in recent months for its intense acquisition strategy, having snapped up 30 media groups in the last four years.
A recent Sunday Times investigation revealed the finance team failed to accurately record sales on the computer system, and accused the S4-owned MediaMonks of regularly failing to pay social media influencers and other creditors on time.
Nonetheless, analysts at Peel Hunt appeared to back Sorrell’s brainchild, and asserts the view that the market “undervalues the business”, maintaining its Buy rating.
Shares are currently down 41 per cent, roughly halving their value.