S4 Capital shares jump on hopes for margin improvement in 2026

S4 Capital PLC shares jumped on Tuesday as it reported a narrower pretax loss for 2025 despite a fall in revenue, and said it expects profitability to improve further in 2026.

Shares in S4 Capital jumped 22% to 25.00 pence on Tuesday morning in London.

The London-based advertising agency said its pretax loss for 2025 narrowed to £23.8 million from £330.9 million in 2024, while the basic loss per share slimmed to 3.7 pence from 45.7p.

Revenue fell 11% to £754.8 million from £848.2 million, while net revenue was down 11% at £673.0 million from £754.6 million. On a like-for-like basis, revenue fell 8.7%, and net revenue was 8.4% lower.

S4 Capital proposed a final dividend of 1.1p per share, up 10% from 1.0p a year prior. There was no interim dividend.

The firm said the decline in revenue was driven by continued client caution, especially among technology clients who are allocating more money to artificial intelligence infrastructure, client losses and challenging global macroeconomic conditions.

It added that costs ‘continued to be tightly controlled’ and noted that the number of ‘Monks’, or employees, was down 11% to 6,345 at the end of 2025 from 7,166 a year prior.

Direct costs fell 13% to £81.8 million in 2025 from £93.6 million in 2024, while personnel costs were down 13% to £503.9 million from £581.5 million.

Costs from depreciation, amortisation and impairment were 82% lower at £67.3 million from £373.5 million.

Looking ahead, S4 Capital said it expects clients to remain cautious in the near term, due to heightened macroeconomic uncertainty from the conflict in the Middle East.

It expects 2026 like-for-like net revenue to be in line with the current analyst consensus, slightly below 2025.

However, it expects the operational earnings before interest, tax, depreciation and amortisation margin to increase by at least 100 basis points in 2026, mostly due to the annualised impact of cost actions in 2025.

S4 Capital reported operational Ebitda of £81.2 million in 2025, down 7.5% from £87.8 million in 2024. The operational Ebitda margin widened by 50 basis points to 12.1% from 11.6%.

It expects like-for-like net revenue to be down in the first quarter, due to the conflict in the Middle East. However, it expects cost management initiatives to partially mitigate the full impact of the decline in revenue.

The proportion of operational Ebitda in the first half of 2026 is expected to increase compared to a year prior.

‘Throughout 2025, our trading reflected the continuing impact of increasingly volatile global macroeconomic conditions, heightened by tariff negotiations and increasing geopolitical risks. Clients remained cautious amid this uncertainty, with technology clients - representing almost half our revenue - continuing to prioritise capital expenditure on expanding AI capacity over operating expenditure,’ said Executive Chair Martin Sorrell.

‘We remain confident in our strategy, business model and talent. Together with our scaled client relationships and the strong momentum behind our new go-to-market propositions, we believe we are well positioned to deliver sustainable long-term growth.’

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