Sorrell Reels from Another Profit Alert as £430m is Wiped Off His S4 Capital Stake
Sir Martin Sorrell experienced a substantial loss of £11 million to his fortune as shares in his advertising firm plummeted following a second profit warning.
Shares in S4 Capital, Sorrell’s firm, dropped 21.7%, or 20.7p, to 74.8p. This loss adds to Sorrell’s total losses of over £430 million in the past two years.
The company issued the profit warning as it anticipates lower revenue and earnings due to decreased marketing spend from companies amid concerns of a recession.
Sorrell, who founded S4 Capital in 2018 after leaving advertising giant WPP following allegations of misconduct, owns a stake of over 9% in the company. He denies the allegations.
Rollercoaster ride: Sir Martin Sorrell set up digital marketing company S4 Capital after leaving WPP
The decline in share price reduced the value of Sorrell’s stake to £41 million, down from the peak of £472 million in September 2021 when the shares were trading at 870p. This means Sorrell has lost £431 million in the past two years.
S4 Capital attributed the decrease in earnings margins guidance for 2023 to 12% – 13.5%, down from the previous range of 14.5% – 15.5%. The company also cited reduced advertising and marketing spend from clients as the reason for lowered revenue expectations.
This is the second time in two months that S4 Capital has downgraded its expectations, with sales growth and profits guidance in July being adjusted due to reduced spending in the tech sector.
The company has also announced job cuts, with at least 450 positions being eliminated, and more job losses expected in the second half of the year.
Analysts have expressed concerns over S4 Capital’s increasing net debt, which stood at £109 million at the end of June 2023. They state that the company needs to show improved financial performance before considering further consolidation opportunities.
In response to the recent developments, Sorrell mentioned that the market has been impacted by hesitant spending from tech clients, increasing prices from packaged goods companies, and softness in regional and local clients.
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