S4 Capital Q1 revenues drop amid continued client caution

(Sharecast News) - Martin Sorrell's S4 Capital reported a drop in first-quarter revenue on Thursday amid continued client caution and reduced spending by technology clients in particular, but reiterated its full-year guidance. In the three months to the end of March, reported net revenue was £149.2m, down 8.9% on the same period a year earlier, or 5% on a like-for-like basis.

The digital advertising and marketing company said its performance reflected heightened macroeconomic uncertainty caused by the conflict in the Middle East and continued client caution, especially among technology clients, as they allocate even more spend to building AI infrastructure.

The company reiterated its full-year guidance. It expects 2026 like-for-like net revenue to be in line with current analyst consensus, slightly below 2025, with operational EBITDA margin targeted to increase by at least 100 basis points, mainly reflecting the annualised impact of the 2025 cost actions. S4 is targeting 2026 year-end net debt of £60m to £90m.

Executive chairman Martin Sorrell said trading had been in line with board's expectations despite client caution.

"Technology clients continue to increase capital expenditure on expanding AI infrastructure and capacity, with the four main hyperscalers alone planning to spend well over $700 billion in 2026. We anticipate that clients will remain cautious in the near term, as global GDP growth slows, inflation increases and interest rates stubbornly refuse to fall or even increase," he said.

"However, we remain confident in our strategy, business model and talent, together with our scaled client relationships and strong momentum behind our new go-to-market proposition.

"We see significant opportunities as clients become more selective about growth geographically and increasingly focused on implementing technologies such as AI, Blockchain and Quantum to drive efficiency. We are also seeing the benefits of our own restructuring and cost programmes and continue our focus on cost control and margin improvement."

At 0940 BST, the shares were down 11% at 37.02p.

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