S4 Capital reports 13.5% revenue fall and increased debt

S4 Capital saw first-half revenue continue a pattern of decline, as like-for-like net revenue fell 13.5% – from £445.5 million ($590.5 million) in the first half of 2023 to £376.1million ($498.5 million) in the same period this year. 

Actual, reported, net revenue was down 15.6% to £376.1 million ($498.5 million) in the six months ending 30 June 2024, the group said. Billings grew 0.8% on a like-for-like basis and fell 1.8% on a reported basis, to £908.9 million ($1.2 billion).

The results come after the group, led by executive chairman Sir Martin Sorrell, reported Q1 like-for-like revenue decline of 11.7%.

In today's report, S4 said operational Ebitda was as expected at £30.1 million ($39.8 million), down 17.5% reported and down 8.2% like for like. Headcount, or the number of “Monks”, was down 11.7% to 7,533 (from 8,551 in H1 2023).

S4 attributed its performance to continuing uncertainty around global macroeconomic conditions, high interest rates and caution from tech clients in particular.

Sorrell said that 2024 would experience a more dramatic fall in net revenue than previously forecast in May. He said its profit target for the year remained unchanged.

Debt increased during the period, up from £109.4 million ($144.9 million) in H1 2023 to £182.8 million ($242.1 million) in H1 2024. The group said this partly reflected its first share buy-back scheme.

New business activity continued at “significant levels”, the group said, “particularly with a focus on AI-driven hyper personalisation at scale”. Wins included General Motors, Marriot, Burger King, Panasonic, AliExpress, Decathlon, Santander, SC Johnson and PepsiCo.

Geographically, the Americas (78% of the company’s business) experienced a 14.9% fall in like-for-like net revenue, EMEA (accounting for 16%) saw revenues down 7.9% and Asia Pacific (6% of the business) fell 8.6%.

Sorrell 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. 

"There has been 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.

"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."