S4 Reports First Quarter Declines

Sir Martin Sorrell's S4 Capital has reported a sharp drop in first quarter net revenue - down 11.7% (like-for-like) to £186.4m, the result it says of macro-economic uncertainty and resultant client caution. Cost-cutting measures have however kept EBITDA 'in line with expectations'.

The group, which was set up by Sorrell within weeks of his departure from WPP in May 2018, said in January that 2023 had been a 'difficult year' - with revenue down about 4% - and that it did not expect any improvement in macro-economic conditions this year. Sure enough in Q1, of its three divisions the newest, Technology Services, slumped 28.4% to £24.2m, while the other two each declined (LFL) by 8.5% - Data & Digital Media to £46.5m and Content to £115.7m.

Overall net revenue in the Americas was £146.7m, down 12.3% LFL, in EMEA £29.4m, down 7.8%, and in Asia Pacific £10.3m, down 13.4%.

Sorrell says of the challenges: 'As indicated previously, trading in the first quarter reflects the continuing impact of volatile global macroeconomic conditions, general client caution, particularly amongst technology clients and a reduction in activity with some of our larger Technology Services clients, although there has been some sequential improvement in the Content Practice during the first quarter. We continue to develop our larger, scaled relationships with leading enterprise clients and are increasing our focus on margin improvement through greater efficiency, utilisation, billability and pricing... We remain confident in our strategy, business model and talent, which together with scaled client relationships position us well for growth in the longer term... In addition to significant new business activity, we continue to capitalise on our prominent AI positioning, developing multiple initial assignments as clients start to experiment with and implement applications'.

The company has reduced its headcount, with around 7,600 'monks' employed as of March 31st, down from 8,713 a year earlier and 7,707 at the turn of the year, as it 'aligns cost base with the demand seen from clients'. During the quarter it has appointed former Publicis Groupe CMO Justin Billingsley as Chief Growth Officer, which appointment it says 'will speed up achievement of its goals around integration, streamlining and enhancing client offerings, as well as securing more client gains'.

In the medium to long term, S4 says it 'continues to expect its growth to outperform its markets and operational EBITDA margins to return to historic levels of around 20%'.

Web site: www.s4capital.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.