S4 Capital reports £23.2m pre-tax loss as big tech continues to cut spend

Results reveal around 500 job cuts, with executive chair Martin Sorrell expecting continued client caution  

By Ben Bold

Sir Martin Sorrell’s S4 Capital made a loss before tax of £23.2m in the six months ending June 2023, due in part to technology companies continuing to cut marketing spend.

With performance falling short of its own budgets, the group said it had cut around 500 jobs since this time last year, marking a “disciplined approach to cost management, including headcount and discretionary costs.”

Describing the half-year as “mixed,” and “reflecting challenging global macroeconomic conditions and consequent fears of recession,” executive chairman Sorrell stressed that like-for-like revenue growth for its top 20 clients was up 8.9% and grew 11.4% for the top 50.

Speaking to the BBC’s Today programme, he noted that EBITDA was up 20% in “reported terms” to £36.5m. “But on a like-for-like basis it was down, and down significantly,” he added. “That reflected the pressure that we’ve seen on tech clients and, to some extent, smaller, regional clients across the world.”

The MediaMonks owner reported a 5.1% like-for-like increase in net revenues, to £445.5m, with content down 2.5%, data and digital media up 2.4%, and technology services up 54.3%.

Geographically, the Americas experienced the most pronounced growth, with revenue up 6.8%, while EMEA grew 1.7%. But Asia-Pacific saw revenues fall 6.9%, which Sorrell told the BBC reflected the “lack of post-Covid recovery in China.”

Asked about whether clients plan to cut their festive spending, Sorrell did not think they were, but added that they were cautious.

“CEOs of clients are, on balance, on the positive side. But in terms of operations, I think clients have been quite cautious in the first six months of the year as they’re worried about the possibility of recession,” he said. “We had three major geopolitical issues around the US and China, around Ukraine and Russia, and around Iran, and that’s apart from the issues around climate change, North Korea and other things we have to deal with.”

Sorrell also highlighted a degree of uncertainty ahead of elections in America and the UK, which is affecting economic prospects.

“So caution is the rule, and I don’t think it’ll improve much before we see the results of the American election in November of 2024 and the UK election, which will probably be around the same time in autumn of 2024. So in advance of that I think there will be continued caution.

“But afterwards we’ll probably see interest rates probably coming down in the US in Q2 or Q3 of next year, and maybe later in Europe in Q4 of next year.”

News of S4’s half-year results sent the group’s share price down 24% this morning.

The article was originally published at Campaign U.K.