Shares in S4 Capital tank as guidance lowered again, 500 jobs axed

Shares in Martin Sorrell's S4 Capital tanked by almost a third on Monday as the digital advertising agency cut full-year earnings guidance again and axed 500 jobs as clients pull spending over recession fears.

The company said like-for-like net revenue was now expected to fall year-on-year and its operational core earnings margin would be 12% - 13.5%, down from 14.5% - 15.5%. Shares plummeted 27% on the London Stock Exchange.

The company said it had staff, which it calls Monks, to 8,550 from 9,041 at the end of June compared with the same period last year.

Inflation in staff costs and higher IT bills meant more job cuts were likely and the firm would continue to take action, especially in its content division, “given the current market outlook”.

Interim operating losses came in at £6.4m in the first half, down from £69m a year earlier. Revenue rose to £445.4m, up 18.7%.

“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,” Sorrell said.

Reporting by Frank Prenesti for Sharecast.com