S4 Capital cut 500 jobs ahead of its profit warning today with more to follow if business does not pick up, executive chair Sir Martin Sorrell indicated.
Staff numbers have fallen to 8,550 from around 9,040 a year ago, with plans for “further actions in the second half, particularly in content, given the current market conditions”, said the company.
In its second profit warning in two months, S4 said full-year like-for-like net revenue is now expected to be down on the prior year with margins well below its long-term 20% target.
In July, the company forecast revenue growth between 2% and 4%.
Peel Hunt downgraded its annual net revenue estimates by 6%, underlying profit by 22% and EPS by 36%, while its target price is now 110p (180p).
“It is disappointing to see another significant downgrade for S4,” it said.
US broker Jefferies added the second warning will be a knock to the already fragile market confidence in S4's "all-important march" towards longer-term margins.
“We've lowered our FY23-25 revenue/EBITDA forecasts by -2%/-12%,” it added while cutting its share price target to 160p from 195p.
Sorrell, now 78, set up S4 in 2018 after an abrupt departure from WPP, the FTSE 100 ad agency he founded and ran for 33 years.
During that period, he built it into the world’s largest advertising and marketing services company.
The plan was for something similar at S4, but after peaking at more than 830p in 2021, following another rush of acquisitions, the shares have shed more than 90% of their value after growth slowed.
S4 has also struggled to shake off the 'embarrassment' of having results delayed twice in March 2022.
The shares were down another 25% today at 71p even though Sorrell said S4 planned to pay a dividend this year,