Sorrell reels from ANOTHER profit alert as £430m is wiped off his S4 Capital stake
Sir Martin Sorrell saw a further £11million wiped off his fortune yesterday as shares in his advertising firm crashed after it issued a second profit warning.
S4 Capital shares tumbled 21.7 per cent, or 20.7p, to 74.8p – taking Sorrell’s losses over the past two years to more than £430million.
The latest slump came as the company warned revenue and earnings will be lower than expected this year as firms have slashed their marketing spend amid fears of a recession.
Sorrell owns a stake of more than 9 per cent in S4 Capital, a digital marketing company he set up in 2018 after leaving advertising giant WPP following allegations of personal misconduct.
The British businessman, who took control of WPP in 1985, denies the allegations.
Rollercoaster ride: Sir Martin Sorrell set up digital marketing company S4 Capital after leaving WPP
Yesterday’s share price slide knocked £11million off the value of Sorrell’s stake, valuing it at £41million.
His shares were worth £472million in September 2021 when the price peaked at 870p, meaning he has lost £431million in the last two years.
The share price drop was sparked by S4 Capital reducing its earnings margins guidance for 2023 to between 12 per cent and 13.5 per cent, down from 14.5 per cent to 15.5 per cent.
The firm said revenue is forecast to be below the previous year as clients spent less on advertising and marketing campaigns.
S4 Capital blamed the slump on ‘slower than expected trading over the summer months’ as potential clients have reduced their advertising budgets due to economic uncertainty.
It is the second time in two months that the firm has downgraded expectations after cutting sales growth and profits guidance in July, blaming the downturn on reduced tech sector client spending.
The company also revealed yesterday that it had cut at least 450 jobs and is planning on axing more roles in the second half of the year.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: ‘Sir Martin Sorrell’s incredible success at WPP was always going to be a tough act to follow.
‘The five years since he launched rival S4 Capital have been something of a rollercoaster ride.
‘While advertising spend has been proving relatively resilient, the results statement sees some headwinds forming and the market hasn’t taken too kindly.’
He added that net debt, which stood at £109million in the latest results for the six months ending June 30, is ‘starting to become a bit of a concern as financial performance fails to keep up with payouts for previous acquisitions’.
Investors are likely to want to see the core business starting to deliver before stumping up for further consolidation opportunities, Nathan said.
Sorrell said it had been a ‘mixed picture’ across clients and regions, with three factors influencing the market.
‘One, tech clients have been more hesitant on spending,’ he said. ‘Second, packaged goods companies have been increasing prices in line with inflation or above and they fix their ad budgets on net revenues.
‘The third is that regional and local clients have been quite soft, that’s the big difference we’ve seen between last year’s first half and this year’s.’