S4 Capital PLC on Thursday backed full-year guidance, despite volatile global macroeconomic conditions and general client caution, but said financial performance would be ‘significantly second half weighted.’
Shares in the London-based advertiser run by Martin Sorrell fell 2.7% to 50.50 pence each in London on Thursday.
In an update ahead of Thursday’s annual general meeting, S4 Capital said that trading in the first four months ‘continues to reflect the impact of volatile global macroeconomic conditions, general client caution, continuing amongst technology clients and a reduction in activity with some of our larger technology services clients.’
However, the company did note ‘some improvement in the profitability of the Content Practice during this period.’
‘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,’ S4 Capital added.
‘We maintain our targets for the full year and, as in prior years, financial performance will be significantly second half weighted reflecting both our normal seasonality and an expected improvement in market conditions.’
S4 Capital said new business activity continues at ‘healthy levels,’ and the continues to capitalise on its strong artificial intelligence positioning winning multiple exploratory assignments as clients experiment and explore applications and develop use cases.
For 2024 at a Practice level, S4 Capital continues to expect Content to show a profitability improvement reflecting the benefit of cost reductions made in 2023 and in 2024.
Data & digital Media will show a similar top and bottom-line performance to the prior year with some modest margin improvement, while the outlook for Technology Services remains challenging and the performance will be lower, following a significant reduction in activity with some key clients, the company added.
‘For the company as a whole, given the current outlook for Technology Services and wider market uncertainty, we continue to target like-for-like net revenue to be down on the prior year with a broadly similar overall level of operational [earnings before interest, tax, depreciation and amortisation] as 2023, as a result of cost improvements made last year. The comparatives with 2023 will continue to be relatively harder in the first half and will ease in the second half.’
S4 Capital expects net debt to fall in the second half of 2024 reflecting positive free cash flow and significantly lower combination payments. The targeted range for the year end remains £150 million to £190 million.
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