S4 Capital piled on the agony for its investors today as Martin Sorrell’s acquisitive firm lowered its forecasts for the year due to rising costs from taking on on more staff.
Shares in the ad agency slumped almost 40% to a new twelve-month low as it warned that “significant investment in hiring and consequent expansion of the company's cost base, particularly in the Content practice, have had a negative impact on first half EBITDA and EBITDA margin”.
Revenue and gross profit/net revenue growth remain robust, it added, but to meet the previous target the second half contribution would have to be greater than normal and hence the reset.
Underlying profit or EBITDA for the full year will be approximately £120mln against forecasts of £154-165mln, said the statement, with significant cost reduction measures intorduced, including a brake on hiring and discretionary cost controls.
Net debt at 30 June 2022 was towards the bottom end of the previous guidance of £140-190mln, due to an improvement in working capital.
S4 investors have had a miserable year so far including two delays to its accounts, which Sorrell, the former WPP boss and an accountant by trade, described as “unacceptable and embarrassing".
Shares were trading at 133.8p, down 90p, at lunchtime.