Sir Martin Sorrell's S4 Capital PLC (LSE:SFOR) provides investors with an update on Monday as its founder looks to wrestle the digital marketing group back onto an even keel after a tough couple of years.
Having floated S4 in 2018 not that long after Sorrell left FTSE 100 giant WPP under a distinct cloud, shares in the startup soared from around £1 to above £8 by late 2021 but have plunged more than 90% since.
Having started on an encouraging footing last year, a succession of profit warnings followed, the latest being in November, which sent the shares under 50p for the first time.
This third-quarter update revealed that with billings and net revenue declining, action had been taken to cut costs by axing around 500 staff by mid-year (around 9% of jobs) with more such measures still to come.
Sorrell said the full-year result for 2023 should see lower like-for-like net revenue and an EBITDA margin of up to 11%, noting that the coming fourth-quarter profitability should be the strongest of the year.
The executive chairman said despite the slowdown, the group continue to see growth from top clients with like-for-like revenue growth at our top 20 clients up 2.9% and at the top 50 up 4.6%.
Broker Peel Hunt said S4 has been "massively impacted by the reduction in spend by its tech clients and the longer tail of regional and localised clients" and "we do not expect trading to have improved [in the fourth quarter]".
Analysts forecast a decline of 5% in LFL revenue growth for the year, assuming a worsening of performance for the fourth quarter, with EBITDA margin anticipate to have reduced to 10.5% from 14% in 2022.
"We do not expect much clarity on the outlook for FY24E, as visibility on client budgets will likely be low."