Sorrell’s S4 Capital Shares Tumble Almost A Quarter Following Earnings Warning
Shares in Sir Martin Sorrell’s (pictured) S4 Capital have tumbled by more than 20 per cent overnight following a trading update that showed it now expected its net revenue to grow between two and four per cent, compared to the six to 10 per cent year-on-year that it had predicted.
Similarly, its operational EBITDA margin now stood at 14.5-15.5 per cent, compared to between 15-16 per cent.
The company blamed the “challenging macroeconomic conditions” and technology clients who remained “cautious and very focused on the short term” for the slower earnings growth.
It also said it is continuing to see longer sales cycles, particularly for larger transformation projects. All told, S4 said its technology services division continues to perform well, while Data&digital was seeing slower growth compared to last year but is still “trading satisfactorily.”
The Content division, which covers its creative advertising and marketing operations, however, was going through a “more difficult period” and was generating results below budget. It usually makes up around 60 per cent of S4’s business.
Sorrell, former boss of WPP and speaker at B&T‘s Cannes in Cairns, said that he was “not pleased” with the trading update.
“It’s lower growth than before. The tech sector has found growth a little bit harder to come by; [executives] more hesitant to commit,” he added.
While S4 Capital has spent the last five years swallowing up smaller digital media groups, Sorrell said that it had now paused acquisitions while it integrated the various companies and that its low share price made it difficult to do deals using stock.
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