S4 Capital slumps as "cautious" clients hold back on advertising spend

S4 Capital PLC on Wednesday lowered full-year sales guidance, despite providing a brighter earnings outlook, amid "cautious" client activity.

"We anticipate that clients will remain cautious in the near term reflecting this heightened macroeconomic uncertainty, including the continuing conflicts in Ukraine and the Middle East," the London-based advertising agency said in a trading statement.

In response, shares in S4 Capital plunged 21% to 42.60 pence each in London on Wednesday afternoon.

Revenue in the third quarter ended September 30 was £156.3 million, down 6.4% from £167.0 million the year prior, or 7.3% like-for-like.

Billings fell 12% to £430.0 million from £490.9 million, or 13% LFL.

Executive Chair Martin Sorrell said trading continued to reflect increasingly volatile global macroeconomic conditions, heightened by rising geopolitical risks.

"Clients remained cautious amid this uncertainty, with hyperscalers and other technology clients continuing to prioritise capital expenditure on expanding AI capacity over operating expenditure," he added.

S4 Capital now expects 2026 like-for-like net revenue to be marginally below previous guidance at down high-single digits. It had previously forecast a mid-single digits decline.

Operational earnings before interest, tax, depreciation and amortisation is seen at current analyst consensus level of £85 million and operational Ebitda margin is now expected to increase by at least 160 basis points to 13.7%. It had previously forecast a 140bps improvement.

Adjusted basic earnings per share is expected to be in excess of current analyst consensus of 6.1 pence per share and the firm continues to target a year end net debt range of £50 million to £80 million.

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