S4 Declares First Dividend Despite Revenue Fall

Sir Martin Sorrell's S4Capital has announced an 11% decline in like-for-like full year net revenue, to £756.4m, while operational EBITDA was flat (down 0.6% LFL) at £87.8m. The Board also declared its confidence in its cash flow position by declaring the group's first ever dividend, at 1p per share.

The group reduced net debt to £142.9m, a figure below the lower end of its target range of £150-190m. Sorrell said uncertain macroeconomic conditions and client caution had 'ratcheted up recently', but also that S4's 'prominent positioning in AI' was driving new business opportunities and 2025 net revenue and profit were expected to resemble those of 2024.

Net revenue fell fastest in the Technology Services practice - down 35.3% like-for-like - while the Content and Data & Digital Media practices saw single-figure declines. Americas net revenue at £587.9m was down 11.8% LFL, despite strong growth in Latin America, while the EMEA region fell 5.4% LFL to £123.4m despite growth in the UK and Ireland, and Asia Pacific fell 13.4% to £43.3m, with Australia and Singapore leading the downward trend.

S4 has shed more than 500 staff (net) this year, with current headcount at around 7,170. The group says its overall strategy remains the same: 'We continue to believe that a purely digital advertising and marketing services business for global, multinational, regional, and local clients and millennial-driven influencer brands resonates with clients'. Those clients are expected to remain cautious in the short term, with increasing concerns about macro uncertainty and the impact of tariffs, as well as a focus on 'AI-related capital expenditure, rather than operating expenditure such as marketing' among big tech clients. However, over the longer term the company says it expects its growth 'to outperform our markets and operational EBITDA margins to return to historic levels of around 20%'.

According to Sorrell, who is Executive Chairman: 'Our performance in 2024 reflected the impact of challenging global macroeconomic conditions, continued high interest rates and some underperformance, when compared to our addressable markets. Technology clients prioritised capital expenditure over operating expenditure, such as marketing and our Technology Services Practice was affected by a reduction in one of our larger relationships. Despite this, the Company reduced its cost base significantly, increased its operating margins and reduced its net debt markedly. Our liquidity and cash flow was much improved and net debt was below the lower end of our target range due to our focus on working capital and cost control'.

The dividend has so far contributed to a share price rise of around 10% since the results were announced.

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.