Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sir Martin Sorrell’s S4 Capital warned of another fall in revenues this year because of a “challenging” economic outlook, sending the digital advertising agency’s shares down 15 per cent.
The agency said that it expected “clients to remain cautious in the near term” amid “challenging macroeconomic conditions”. It predicted a “broadly similar overall level” of operational earnings before interest, tax, depreciation and amortisation this year and a fall in like for like net revenue.
Sorrell, executive chair, said “fears of recession” had made clients less likely to commit to projects in 2023. The agency reported operational ebitda fell 25 per cent last year, to £93.7mn, after a 2 per cent fall in net revenue to £873mn.
Jean-Benoit Berty, a former senior partner at EY, was appointed chief operating officer and several managers stepped down from the board following an “effectiveness review” that recommended “a more traditional, streamlined board structure, where directors are primarily non-executive”.
The fall in the company’s share price means that, in early afternoon trading, the shares had lost 79 per cent of their value over the past year, giving the business a market cap of £220mn.
Sorrell founded S4 after being ousted from WPP in 2018, with the goal of creating one of the world’s largest digital advertising companies. As part of his aggressive acquisition strategy, he bought dozens of media groups and expanded operations around the world.
Yet the company has since raised concerns over costs and its short-term strategy to drive profit margins, after a series of profit warnings and an accounting issue last year.
Sorrell told the Financial Times that S4 had received “no credible takeover approaches”, following a recent Wall Street Journal article that said he turned down merger offers from US rival Stagwell.
Sorrell said S4 performance’s was likely to improve in the second half of this year, as central banks begin to ease monetary policy. He also said the company is working to incorporate artificial intelligence technologies, which he expects to bear fruit later this year.
He said the outcome of the upcoming election in the US would play an important role in determining businesses’ outlook. “I think American business, deep down, would be more in favour of a Trump presidency than a Biden presidency, because he represents low rates and low tax,” he said.
While he admitted that some corporate leaders are concerned over Donald Trump’s foreign policy plans, he said business “can’t do anything about geopolitics.”
“Regulation is the biggest issue for US business,” said Sorrell.
