S4 Capital shares hit new low on profit alert

Sir Martin Sorrell’s advertising group S4 Capital has seen shares sink to fresh all-time lows after warning over profits.

S4 Capital – founded by former WPP boss Sir Martin – said it now expects like-for-like net revenues to fall by just under 10% over the full year.

Despite ongoing cost-cutting measures, it cautioned the sales drop will have an impact on underlying earnings and cut its guidance to around £75 million for the year – lower than the £81.6 million expected in the City.

Shares in S4 fell 8% in Monday morning trading, with the stock sinking to yet another record low, having already halved in value over the past year.

S4 said the worse-than-expected trading was “mainly as a result of lower project-based revenue, continued client caution and a slower ramp up of our new business wins than expected”.

Fellow advertising firm M&C Saatchi also alerted over profits on Monday, blaming the “unprecedented” US government shutdown, which left it nursing hefty share price declines.

It said the longest-running shutdown in history has seen it lose revenue that it is unable to recover, which will “materially impact our prior growth and profitability expectations”.

M&C Saatchi now expects like-for-like net revenues to fall by around 7% and operating profits of between £26 million to £28 million.

It had previously guided for flat profits, for the year, at £35.2 million.

Zaid Al-Qassab, chief executive of M&C Saatci, said: “A challenging macro environment has been further compounded by the unprecedented US government shutdown, which adversely impacted our high-margin Issues specialism in the fourth quarter.”

The group’s shares fell as much as 20% on opening before later settling around 13% lower in early trading on Monday.

Advertising and marketing firms have been hit hard over the past year as companies have cut back their spend in the face of economic uncertainty, US president Donald Trump’s trade war and the shift towards artificial intelligence.

Global marketing communications giant WPP – which owns agencies such as Ogilvy and VML – last month slashed its annual outlook once again as it saw trading worsen through the year and pledged to move “at pace” with a turnaround plan.