(Alliance News) - S4 Capital PLC on Monday once again cut guidance, as the advertising agency struggled with "slower than expected trading over the summer months".
Shares in the company slumped 25% to 71.48 pence each in London on Monday morning.
It is the second time in two months that S4 has warned on its net revenue performance. The company did, however, announce it will consider a final dividend to reflect its "confidence" going forward.
In the six months to June 30, S4 Capital's revenue rose 16% on-year to GBP517.1 million from GBP446.4 million. Net revenue, which excludes direct costs, increased 19% to GBP445.5 million from GBP375.3 million.
S4's pretax loss narrowed to GBP23.2 million from GBP85.6 million.
"We had a very mixed first half of the year reflecting challenging global macroeconomic conditions and consequent fears of recession, which resulted in client caution to commit and extended sales cycles, particularly for larger projects," Executive Chair Martin Sorrell said.
"We expect the year as usual to be weighted to the second half, especially Q4 - stimulated, in particular, by increased seasonal levels of clients' activity and our Artificial Intelligence initiatives and the use cases we are developing with our clients. We remain confident our talent, business model, strategy and scaled client relationships position us well for above average growth in the longer term, with a new emphasis on deploying free cash flow to dividends and share buybacks."
Looking ahead, S4 Capital now expects like-for-like net revenue to decline in 2023, and an operational earnings before interest, tax, depreciation and amortisation margin between 12% and 13.5%.
Back in July, S4 Capital said it was now targeting full-year like-for-like net revenue growth in a range of 2% to 4%, as opposed to 6% to 10% previously, and operational Ebitda margin of 14.5% to 15.5%, compared to a previously guided 15% to 16%.
"Over the longer term we continue to expect our growth to outperform our markets and operational Ebitda margins to return to historic levels of 20%+," it added on Monday.
S4 said it will consider a dividend of 1p per share with its final results, "reflecting its confidence in the strategy for the group and that we expect to be cash generative in 2024 with no material combination payments".
By Eric Cunha, Alliance News news editor
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S4 Cap. (SFOR)