S4 Capital reports 15.6% revenue drop to £375.1 million in first half of 2024

S4 Capital, the London-listed media holding group founded by ad mogul Martin Sorrell, reported a 15.6% drop in net revenue, falling from £445.5 million to £375.1 million in the six months ending June 30. 

The company, which generates nearly half of its revenue from the tech sector, also indicated that like-for-like net revenue for the year would see a larger-than-anticipated decline compared to its May forecast.

S4 Capital’s operational EBITDA stood at £30.1 million, down 17.5% on a reported basis and 8.2% like-for-like. 

Billings at the ad group, which has primarily expanded by acquiring smaller digital marketing firms and integrating them into its flagship agency, Media Monks (now Monks), dropped by 1.8% to £908.9 million.

Despite these declines, S4 Capital saw improved free cash flow and net debt amounting to £182.9 million, following the company's first share buyback and planned combination payments. 

In a positive development, the company secured a major new AI-driven client account, marking a significant win as it continues to navigate challenges in the market.

S4 reported continued growth in new business, particularly in the area of artificial intelligence. The company secured a significant deal with General Motors, which it described as its latest "whopper"—a client expected to generate over $20 million (£15 million) in annual revenues.

The other new business wins include Qiddiya, Marriot, Burger King, Panasonic, FanDuel, AliExpress, Decathlon, Santander, SC Johnson, PepsiCo and ICBC. 

Sir Martin Sorrell, Executive Chairman of S4Capital, said, "As highlighted previously, trading in the first half reflects the continuing impact of both challenging global macroeconomic conditions and high interest rates. This particularly impacted marketing spend by some technology clients and our Technology Services practice was affected by a reduction in one of our larger relationships." 

He added that there has been an improvement in Content Practice first half margins, reflecting the actions taken on the cost base both last year and this year. “We continue to develop our larger, scaled relationships with leading enterprise clients and are maintaining our focus on margin improvement through greater efficiency, utilisation, billability and pricing,” said Sorrell. 

He further said, “We maintain our profit target for the full year and, as in prior years, financial performance will be significantly second-half weighted. We remain confident in our strategy, business model and talent, which, together with scaled client relationships, position us well for growth in the longer term, with an emphasis on deploying free cash flow to improve shareowner returns. Now all significant combination payments have been made. In addition to a very significant new account, we continue to capitalise on our prominent AI positioning and we continue to see multiple initial AI-related assignments as clients start to use our MonksFlow tools and our experience to implement applications."