Martin Sorrell’s pure play digital advertising group S4 Capital sounded a warning on profit as clients turned be cautious in a difficult economic climate.
September quarter reported net revenue was down 15.4%, and 10% like-for-like, to £211.5 million, reflecting lower activity in the content and data and digital media businesses.
Full year like-for-like net revenue is now expected below last year. However, cash flow in 2024 will allow for buybacks and dividends.
Results by other global advertising groups have been mixed.
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%.
S4 Capital, founded by Sir Martin in 2018 after he left WPP, has felt the squeeze as technology clients pull back from advertising spend.
The company, in a trading update, says challenging trading conditions have intensified.
Staff numbers are down 4% to 8,187, compared to the end of June, and are 9% lower than in June 2022.
Further cost cutting is planned and takeovers, or mergers as it calls them, have been halted.
"Trading in the third quarter was difficult, reflecting the global macroeconomic conditions with continued client caution to commit and extended sales cycles, particularly for larger projects and to some extent clients in the Technology sector,” says Sir Martin, executive chairman,
“Despite the slowdown in Q3, we continue to see year to date growth from our top clients with like-for-like revenue growth at our top 20 clients up 2.9% and at the top 50 up 4.6%.
“We expect, as usual, Q4 profitability to be the strongest quarter of the year – stimulated by the usual seasonal levels of client activity and the artificial intelligence initiatives and use cases we are developing with our clients, along with the actions taken on cost management.
“We remain confident our strategy, business model and talent, together with scaled client relationships position us well for above average growth in the longer term, with an emphasis on deploying free cash flow to dividends and share buybacks, especially as in 2024 will have no further merger payments.”
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.