Advertising mogul Sir Martin Sorrell has warned that he does not expect the macroeconomic environment to improve this year after a difficult 2023.
Sorrell’s S4 Capital told investors on Monday that fourth quarter performance was in line with expectations, with the ad group’s 2023 like-for-like net revenue on track for a decline of around 4 per cent.
It expects an operational earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin to be in the range of 10-11 per cent range.
The digital advertising agency, founded by Sir Martin Sorrell (pictured), said anticipates a like-for-like net revenue decline of around 4 per cent for 2023
A deteriorating economic environment has seen companies around the world cut back on marketing spend in 2023, hitting the bottom line of S4 rival WPP, as well as media companies and broadcasters like ITV.
Sir Martin Sorrell, executive chairman at S4Capital, said: ‘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.’
‘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.’
He added: ‘In these unpredictable times, we are focused on positioning the Company for medium term growth, improving profitability and returning funds to shareowners.’
S4 Capital shares plummeted in November after the group trimmed its outlook on the back of a worsening advertising market.
The November results meant that Sorrell saw another £5million wiped off the value of his stake in S4 Capital.
This meant that Sorrell, who previously spent three decades in charge at WPP, saw his paper wealth plunge by more than £70million in 2023.
S4 Capital shares were up 3.31 per cent to 41.78p in Monday morning trading.
Maintaining a ‘hold’ rating and a target price of 55p, analysts at Peel Hunt said: ‘We find it comforting that trading has not got worse.
‘Expectations are low for FY24E, and an acceleration in client spend combined with S4’s cost control could materially lift profits.
‘However, [there is] no clear sign of a material improvement yet.’
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