(Alliance News) - Martin Sorrell's S4 Capital PLC on Thursday lowered full-year earnings expectations due to an increase in hiring costs.
Shares in S4 Capital slumped 43% to 127.25 pence in London early Thursday, leaving the digital advertising company with a market capitalisation of around GBP700 million.
S4 said like-for-like revenue and net revenue growth at the half-year stage is in line with full-year run-rate expectations of 25%, but "it is clear" earnings before interest, tax, depreciation and amortisation and its Ebitda margin will be below expectations in the first half.
"Continued significant investment in hiring and consequent expansion of the company's cost base, particularly in the Content practice, have had a negative impact on first half Ebitda and Ebitda margin," the digital advertising firm explained.
London-based S4 Capital is an advertising agency started and led by Sorrell, the former chief executive of FTSE 100-listed WPP PLC.
S4 now targets annual Ebitda of GBP120 million, below the current analyst forecast range of GBP154 million to GBP165 million. Operational Ebitda in 2021 amounted to GBP101.0 million.
"The board expects Data&digital media and Technology services to deliver healthy Ebitda margins for the full year, but increased costs at our Content practice will impact the company's overall Operational Ebitda margin in 2022," it said, explaining that hiring and staff costs in the Content practice have continued to increase ahead of net revenue growth.
It has introduced a brake on hiring and cost controls to "better balance" the growth in revenue against costs.
By Lucy Heming; lucyheming@alliancenews.com
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S4 Cap. (SFOR)