S4 Capital shares hit after alert as tech clients clamp down on spending

Sir Martin Sorrell’s firm now expects full-year like-for-like net revenue growth of between 2% and 4%, compared with 6% to 10% previously guided for.

Sir Martin Sorrell, whose marketing firm, S4 Capital, has warned over sales and profitability as technology clients slash their marketing spend (Anthony Devlin/PA) (PA Wire)

Shares in Sir Martin Sorrell’s digital advertising firm, S4 Capital, have tumbled after the firm warned over sales and profitability as technology clients slash their marketing spend.

The group’s stock slumped by as much as 26% in morning trading on Monday before settling around 18% lower after S4 Capital said it now expects full-year like-for-like net revenue growth of between 2% and 4%, compared with an earlier forecast of 6% to 10%.

It expects an underlying profit margin of between 14.5% and 15.5%, down from the 15% to 16% range guided for previously.

S4 said the alert reflects the “challenging macroeconomic conditions and clients, especially those in the technology sector, remaining cautious and very focused on the short term”.

A raft of technology firms have been slashing costs and shedding jobs worldwide this year, with marketing budgets cut and fewer big product launches on the horizon.

We continue to see longer sales cycles, particularly for larger transformation projects

S4 Capital

S4 said it would keep a tight lid on costs, including staffing numbers and discretionary spending.

“We expect these actions to support the out-turn in the second half,” the firm said.

Its first-half trading update showed it expects like-for-like revenues of about 5% for the first six months, with net sales worse than expected, particularly in May and June.

S4 said it was seeing “longer sales cycles, particularly for larger transformation projects”, while its content arm has been particularly impacted by the client caution.

But it said it was confident over growth in the medium term and flagged an encouraging response so far to its artificial intelligence initiatives.