- Guidance in line with expectations
- Shares down 80% over the past year
- Net debt is expected to be towards the lower end of the guided range
Shares in Martin Sorrell’s S4 Capital (SFOR) were up over 6% to 42p in morning trading after the advertising group said that trading in the fourth quarter of 2023 ‘was in line with expectations’ outlined in the last trading update in November.
The latest share price movement could be viewed as a ‘sigh of relief’ from the markets after Martin Sorrell’s company issued three profit warnings last year and cut its full year guidance after slower than expected trading.
S4 Capital’s share performance is ‘nothing to write home’ about either falling 80% over the past year.
Net debt is expected to be towards the lower end of the guided range of £180 million-to-220 million, with circa £10 million of merger payments delayed to 2024.
CONTENT PRACTICE IN BETTER SHAPE
Fiona Orford-Williams, director of TMT at research firm Edison signalled the worst might be over: ‘S4's content practice is now in better shape to deal with external conditions, but there remains some caution over the current year prospects for the technology services.
‘The group's target performance horizon is now on the medium-term, so two years and beyond, with improving profitability funding higher returns to shareholders.’
‘Guidance is confirmed at like-for-like net revenue decline of 4% and an earnings before interest taxation depreciation and amortisation (EBITDA) margin in the 10%-11% range.’
The ‘jury is out’ as to whether S4 Capital is in full recovery mode, but it is still ‘worth listening to Sorrell on the outlook for the wider market, says AJ Bell’s investment director Russ Mould.
EARLY DAYS
‘While it is early in the year, we are not expecting 2024 to show macro-economic improvement, and client caution on marketing spend will likely persist, although not at last year's level given interest rates are likely to fall over time.
‘In these unpredictable times, we are focused on positioning the company for medium term growth, improving profitability and returning funds to shareowners,’ said S4 Capital CEO, Martin Sorrell.
The annual results for 2023 will be announced on 27 March.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
