Martin Sorrell’s S4 Capital applies emergency brakes
Credit: Logan Weaver via Unsplash
S4 Capital, the pure-play digital advertising firm, issued a profit warning as cost growth outpaced revenue.
The company, known for its rapid growth since its inception in 2018 after Sir Martin Sorrell left global advertising group WPP, has applied a brake on hiring and discretionary cost controls.
S4’s market capitalization fell to £700m from £1.26bn as the shares fell 47% to 118.42p.
In May, the company reported like-for-like revenue growth of 40% in the March quarter, with an optimistic outlook for the full year.
However, the latest trading update says earnings and margins were “below its expectations for the first half of the year.”
Like-for-like sales and gross profit/net income growth were in line with expectations of 25% on a full-year basis.
However, continued heavy investment in hiring, particularly in content practice, negatively impacted first half EBITDA (earnings before interest, tax, depreciation and amortization) and operating margin. EBITDA.
S4 lowered its expectations for its full-year EBITDA target to £120m while maintaining a 25% like-for-like gross profit/net sales growth target.
Market analysts currently expect EBITDA to be between £154m and £165m.
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