S4 Capital revenues sink as corporates slash ad spending

S4 Capital’s turnover fell last year for the first time since its founding as clients cut back on advertising spend amid  greater economic uncertainty.

Sir Martin Sorrell’s firm revealed like-for-like net revenues declined by 4.5 per cent to £873.2million in 2023, following double-digit growth over the previous four years.

The advertising agency said corporate customers were taking an increasingly short-term attitude towards ‘larger transformation projects’, leading to longer sales cycles and spending cuts among some smaller clients. 

S4 Capital shares were 6.6 per cent down at 41.6p on early Wednesday morning, meaning they have plunged by more than three-quarters over the past 12 months. 

This particularly impacted the group’s content practice, which saw net sales slump by 10 per cent as some technology companies cut their marketing budgets.

Technology firms have dramatically rolled back expansion since pandemic-related restrictions were loosened and higher interest rates began significantly pushing up borrowing costs.

Although central banks are forecast to cut interest rates soon, S4 Capital anticipates its total like-for-like net revenue falling in 2024 due to market unpredictability and a poor outlook for its technology services division.

‘The comparatives with 2023 will be difficult in the first-half and will be easier in the second-half,’ the London-listed group told investors. 

‘We expect the year to be heavily second-half weighted, with improving end markets and our normal seasonality.’ 

Sir Martin Sorrell said: ‘After our first four strong net revenue growth years, we had a difficult 2023 reflecting challenging global macroeconomic conditions, fears of recession and high interest rates. 

‘This resulted in client caution to commit and extended sales cycles, particularly for larger projects, a difficult year for new business, as well as spend reductions from some regional and smaller client relationships. 

‘We are targeting like-for-like net revenue for 2024 to be down on the prior year, with a broadly similar overall level of profit performance to 2023.’