6 days ago
Sir Martin Sorrell's ad agency hit by big tech marketing cutbacks
S4 Capital cut its annual turnover guidance on Wednesday as technology companies remained cautious amidst heightened uncertainty.
Sir Martin Sorrell's advertising agency expects its like-for-like net revenues to decline by a low single-digit percentage figure in 2025, having previously anticipated them to be roughly similar to last year's levels.
Sorrell said tech clients, which account for around half of S4's turnover, are prioritising spending on expanding their artificial intelligence capacity.
A lower spend from one large customer is likely to mean comparable sales from the firm's tech services segment will be 'down more significantly', Sorrell added.
By comparison, the former WPP boss forecasts like-for-like sales in S4's marketing services arm to be 'only slightly down'.
Sorrell noted that trading in the opening five months of 2025 reflected the 'volatile global macroeconomic conditions' resulting from Trump's tariffs, US-China relations, the Ukraine war and Middle East tensions.
He told investors: 'Once the levels of tariffs are negotiated and the impacts assessed, we believe clients will become much more selective about the geographies in which they operate in order to find growth and focus on implementing technologies, such as, but not only AI.'
Despite this backdrop, S4 Capital continues to expect its operational earnings before nasties will be broadly close to 2024 levels.
It additionally forecasts an improved performance over the second half of the year due to the timing of revenue from major new business wins, such as Amazon, General Motors, and T-Mobile.
Among other contract wins this year are Samsung, Buscopan developer Opella, and Jack Dorsey's payments platform, Square.
S4 Capital shares were 4.85 per cent higher at 27p on Wednesday morning, although they have still shrunk by more than 97 per cent from their peak four years ago.
Sorrell founded S4 in 2018 after spending over three decades growing WPP into the world's biggest advertising business.
The London-based company encountered significant difficulties in 2022 after delaying the publication of its annual results twice because of accounting issues.
A Sunday Times investigation found S4's breakneck expansion had left the firm's finance team struggling to cope, with employees not accurately recording sales and MediaMonks, a subsidiary, failing to pay influencers and creditors on time.
Following the scandal, S4 made redundancies, instituted stronger financial controls, and halted its aggressive strategy to grow through acquisitions.
In the last financial year, the group's reported net revenue decreased by 13.6 per cent to £754.6million.
And its losses skyrocketed from £14.3million in 2023 to £306.9million as poor trading conditions in the second half and the medium-term outlook following the completion of its budget led to S4 Capital declaring massive impairment charges.
