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S4 Capital shares surge with debt expected to fall amid cost management

S4 Capital shares surged in early trading on Monday after the group said revenue would be in line with estimates and they were taking steps to manage costs.

Digital marketing firm S4 Capital saw its revenue decline in the fourth quarter of 2023, but met its own forecasts. The London-based company said its net revenue fell about 4% compared to the same period a year earlier. But that dropoff was in line with the guidance it gave in November.

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S4 Capital said cost-cutting helped improve its profit margin in the second half of 2023. It expects its full-year operating profit margin to be 10-11%. The company also anticipates its debt load will be at the lower end of its previous guidance of £180-220 million.

S4Capital plans to announce full 2023 results on 27th March.

Advertising and marketing firms globally have been facing setbacks as advertisers hold back on spending amid economic uncertainties. S4’s update today will be taken positively as far as the Chairman’s comments suggest the worst may be behind the sector.

“After four years of very strong growth, 2023 was a difficult year impacted by volatile macro conditions and, consequently, cautious spending from clients, particularly those in the technology sector and from smaller project-based assignments. Our client relationships remain strong and we have also managed costs tightly,” said Sir Martin Sorrell, S4 Capital Executive Chairman.

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“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. Initial indications are for an improvement in performance in the Content practice, reflecting cost reductions, broadly similar performance in Data&Digital Media to last year and a more challenging outlook for Technology Services. In these unpredictable times, we are focused on positioning the Company for medium term growth, improving profitability and returning funds to shareowners.”

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