Digital ad firm S4 Capital cuts jobs, warns over full year outlook
Executive chairman Martin Sorrell said the figures reflect ‘clients’ caution’ around spending, particularly on large projects
The digital advertising firm run by Martin Sorrell has warned over its full-year outlook for the second time in as many months, after slower-than-expected summer trading as firms slash their marketing spend.
S4 Capital said it now expects annual like-for-like net revenues to be below the previous year’s out-turn, and it further cut guidance for its underlying profit margin, to between 12 and 13.5 per cent.
It also revealed it is cutting its workforce, with its content division bearing the brunt. S4 said it had reduced the number of staff in its Media.Monks division by 5 per cent to 8,551, and “continues to take action”, on staffing numbers.
The results alert follows a downgrade in July, which sent shares in the group tumbling after it trimmed its guidance for like-for-like net revenue growth to between 2 and 4 per cent, compared with an earlier forecast of 6 to 10 per cent.
In July, it also cut expectations for underlying profit margins to between 14.5 and 15.5 per cent, down from the 15 to 16 per cent range guided for previously.
“We had a very mixed first half of the year reflecting challenging global macroeconomic conditions and consequent fears of recession, which resulted in client caution to commit and extended sales cycles, particularly for larger projects,” Sorrell said.
“We expect the year as usual to be weighted to the second half, especially the fourth quarter, stimulated in particular by increased seasonal levels of clients’ activity, our artificial intelligence initiatives, and the use cases we are developing with our clients.”
The firm’s half-year results showed like-for-like sales lifted 2.5 per cent in the six months to June 30, with net revenues up 5.1 per cent. It said profitability was below its targets in the first half due to slower sales growth, but it still narrowed pre-tax losses to £23.2 million, against losses from £85.6 million.
It said the slower-than-forecast sales performance reflected the “more challenging global macroeconomic conditions and clients’ caution, reflecting fears of recession”.
“We see longer sales cycles, particularly for larger transformation projects, and whilst all practices have seen some impact, this is most evident in content and in particular with one or two technology clients and regional and local opportunities,” it said.
