S4 Capital: Sir Martin Sorrell’s marketing giant slashes earnings forecast again
Digital marketing giant S4 Capital has lowered its core earnings margin forecast again after revenue fell over 18 per cent in the third quarter, due to poor content and digital media performance.
Shares tumbled 16 per cent on Thursday at the opening bell.
In the three months July to September, Sir Martin Sorrell’s company has slashed its full year core earnings margin forecast to 10 to 11 per cent, down from the previous 12 to 13.5 per cent guidance.
S4 said difficult trading conditions “intensified” in the third quarter, hitting its Content and Data & Digital Media units which tumbled 22.7 per cent and 14.5 per cent, respectively.
It comes after Sorrell’s company already slashed annual growth forecasts back in July due to a tech slow down, which has impacted its technology business too – although this did see mild growth in the third quarter.
Total revenue fell 18.1 per cent from the same period last year, down to £246m.
Sorrell, executive chairman of S4 Capital, 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.”
S4 said they have lowered headcount by nine per cent since June 2022 and “further actions are being taken in Q4” to drive cost savings and efficiency.
Third quarter trading for S4 was “worse than expected” said Jessica Pok, analyst at Peel Hunt.
“Market conditions remain challenging, and momentum has not improved at S4. Despite seeing growth for the top clients, weaker spending is persisting with the longer tail.
“Until investors are assured of stabilisation, we expect the shares’ performance will remain muted,” Pok explained.