Sir Martin Sorrell's ad group sees losses climb as tech clients bet on AI
S4 Capital faced declining revenues last year due to ongoing economic uncertainty and reduced spending from its technology businesses. The ad group's financial performance was negatively impacted by these factors. The company struggled to maintain its revenue streams in the face of challenging market conditions. S4 Capital's financial results were reflective of the broader economic challenges affecting the industry.
Sir Martin Sorrell's ad group sees losses climb as tech clients bet on AI
S4 Capital reported its net revenue declined by 13.6% to £754.6m in 2024. S4 Capital's revenues shrank again last year amid continued economic uncertainty and weaker spending from the ad group's technology businesses. Sir Martin Sorrell's advertising agency, which he founded after his departure from WPP, reported its net revenue declined by 13.6 per cent to £754.6 million in 2024 after falling by 2.1 per cent the previous year.
The London-based group said the result reflected the spending priorities of tech-focused clients, which are 'investing significantly in capital expenditure to build Artificial Intelligence (AI) capacity' at the expense of marketing. Revenue was also hit by lower spending from one major tech services business in the Americas, high interest rates, and greater caution among clients across all regions.
While trading improved in the fourth quarter, subdued conditions in the second half and the medium-term outlook following the completion of its budget led to S4 Capital declaring £280.4 million in net impairment charges. As a result, its losses soared from £14.3 million in 2023 to a whopping £306.9 million last year.
Challenging Outlook
Sir Martin Sorrell warned: 'The macroeconomic environment in 2025 will remain challenging given significant volatility and uncertainty in global economic policy.' S4 Capital expects continued cautionary behavior from clients in the near term due to worries about tariffs and economic uncertainty.
Since President Donald Trump returned to office in January, his administration has imposed massive tariffs on China, Canada, and Mexico, as well as a 25 per cent tax on steel and aluminum imports entering the US. This has led to retaliatory measures by the Canadian and Mexican governments, as well as the European Union.
Sir Martin also pointed to geopolitical factors such as the Ukraine war, cooling relations between the United States and China, and elevated tensions with Iran as impacting client behavior. Despite these challenges, he expects S4 to generate new business, particularly in the second half of this year, with net revenue and operational earnings before nasties being 'broadly similar' to 2024 levels.
Analyst Views and Company History
S4 Capital shares soared 11.95 per cent to 36.9p on Monday morning, although they have contracted by around three-quarters over the past five years. Analysts at Peel Hunt maintained a hold rating on S4 shares with a target price of 40p, stating that the group 'has made progress with cost control, and margins remained resilient despite the revenue decline'.
S4 Capital was founded in 2018 and expanded rapidly through acquisitions of companies such as MediaMonks and Los Angeles-based MightyHive, winning large contracts from big names like Google, Meta, and Allianz. However, growth came to a halt in 2022 after the firm had to delay the publication of its annual results twice due to accounting issues.