S4 Capital PLC (LSE:SFOR)’s share price plunged after it said in a trading update that billings and net revenue declined on a reported and like-for-like basis.
Its share price had fallen by 17.8% to 55.19p by 10 am, after hitting a nadir in early trading of 51.24p per share.
The company said it has taken action to cut costs by reducing its headcount by 9% compared to June 2022 with plans to implement further measures in the fourth quarter.
It said it expects lower like-for-like net revenue and an operational earnings before interest, taxes, depreciation and amortisation (EBITDA) margin of up to 11% for 2023, with the fourth quarter being heavily weighted for profits.
S4 Capital suffered from lower activity and the impact of foreign exchange effects in all regions, with the Americas being the largest market and Asia Pacific being the smallest.
In its Content business, the company said it experienced lower demand from newer regional and local clients and the technology sector and underwent leadership changes to accelerate growth.
The Data & Digital media business saw lower activity in the activation and performance business lines, which it said affected revenue.
The Technology services practice achieved positive growth in revenue and net revenue, both reported and like-for-like, which grew 6.6% on a reported basis.
It combined with Formula Consultants in October, an enterprise software supplier that also services public sector clients, in a deal that values the company at up to US$2.5 million in an all-cash deal based on performance through to the end of 2024.
The company said it will continue to look for opportunities to boost its capability set and growth potential.
Sir Martin Sorrell, executive chairman of S4 Capital PLC (LSE:SFOR), said: "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.
“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."
S4 Capital reduced its net debt to £185 million, or 1.7 times net debt per year of proforma operational EBITDA, and said it aims to reduce leverage further to about 1.5 times operational earnings over the medium term.