Martin Sorrell’s S4 Capital expects difficult trading conditions to persist in 2024.
The executive chairman of the pure-play digital advertising group forecasts a like-for-like net revenue decline of around 4% for 2023.
The company had expected growth of 2% to 4% before downgrading in November.
In response, S4 has been cutting costs, with staff numbers in November reported to be down 4% to 8,187.
"After four years of very strong growth, 2023 was a difficult year impacted by volatile macro conditions and, consequently, cautious spending from clients, particularly those in the technology sector and from smaller project-based assignments,” Sir Martin told the London Stock Exchange.
Those advertising groups with strong exposure to the technology sector have felt the cost cutting knife applied to ad spend.
IPG’s reported a 0.4% fall in organic revenue growth for the September quarter, weighed down by cautious technology clients and marketers concerned about dark economic winds.
Omnicom posted "strong" organic revenue growth of 3.3%, Publicis reported organic growth up 5.3% and Havas 4.5%.
Sir Martin says S4’s client relationships remain strong and the company is “tightly” managing costs.
"While it is early in the year, we are not expecting 2024 to show macro-economic improvement, and client caution on marketing spend will likely persist, although not at last year's level given interest rates are likely to fall over time,” he says..
“Initial indications are for an improvement in performance in the Content practice, reflecting cost reductions, broadly similar performance in Data&Digital Media to last year and a more challenging outlook for Technology Services.
"In these unpredictable times, we are focused on positioning the company for medium term growth, improving profitability and returning funds to shareowners."
S4 Capital says trading in the December quarter of 2023 was in line with expectations.
The company’s earnings margin performance in the second half of the year improved as a result of significant cost reductions.
Annual results for 2023 will be announced in March.
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