Shares in S4 Capital (SFOR) tumbled by 20 per cent in early trading following a profit warning. The advertising agency reported slow top line growth for the first six months of 2023, with clients in the technology sector proving particularly cautious and “very focused on the short term”.
As a result, management is braced for full-year profits and margins to be below budget. Like-for-like net revenue growth is expected to be in a range of 2-4 per cent, as opposed to 6-10 per cent. Meanwhile, the group is targeting an operational Ebitda margin of 14.5-15.5 per cent, as opposed to 15-16 per cent.
The content division has been particularly affected by the “challenging” backdrop, but all practice areas have experienced “some impact”. S4 Capital issued a profit warning last July as well, after staff costs overtook profit and sales growth.
Elsewhere in the sector, the chief executive of M&C Saatchi (SAA), Moray MacLennan, has announced his retirement after 28 years at the agency. Non-executive chair Zillah Byng-Thorne – who recently arrived from magazine publisher Future (FUTR) – will act as executive chair from September until a replacement is found.
Analysts at Peel Hunt said MacLennan’s departure is “not ideal” given the difficult trading environment. “Today’s news adds further uncertainty in an already challenged backdrop. Even though the search for the new chief executive has kicked off, it could be months before a suitable candidate is found.”
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