REG - S4 Capital PLC - Third Quarter Trading Update
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RNS Number : 3938G S4 Capital PLC 06 November 2025
S(4)Capital plc
("S(4)Capital" or "the Company" or "the Group")
Third Quarter Trading Update
Third quarter billings(1) up 1.9% reported and up 5.1% like-for-like(3)
Third quarter revenue down 3.4% reported and down 1.0% like-for-like(3)
Third quarter reported net revenue(2) down 6.9% and down 4.4%
like-for-like(3), representing a sequential improvement over the second
quarter, with Marketing Services(9) down 2.8% like-for-like(3) and Technology
Services down 16.5% like-for-like(3)
Nine months billings(1) up 1.9% reported and up 5.1% like-for-like(3)
Nine months revenue down 11.1% reported and 8.4% like-for-like(3)
Nine months net revenue(2) down 10.8% reported and like-for-like(3) 8.2%,
with Marketing Services(9) down 5.2% like-for-like(3) and Technology Services
down 29.6% like-for-like(3)
2025 like-for-like(3) net revenue(2) growth rate expected to be down by upper
single digits
Marketing Services(9) like-for-like(3) net revenue(2) expected to be down
mid-single digits reflecting the timing of significant new business wins,
particularly General Motors, Amazon, T-Mobile, PIF and now two unannounced
leading US-based Global FMCG companies
Technology Services like-for-like(3) net revenue(2) expected to be down more
due to longer sales cycles and the previously disclosed revenue reduction by a
major client, which will cycle out in the second half of the year
Americas which represent over 80% of reported net revenue(2), like-for-like(3)
net revenue(2) growth 1.6% in the third quarter, with EMEA down 26.2% and
Asia-Pacific 16.2%. For nine months, on a like-for-like(3) basis, Americas
down 5.6%, EMEA 17.3% and Asia Pacific 15.3%
2025 like-for-like(3) operational EBITDA(5) target remains unchanged(8),
broadly similar to 2024, with a stronger performance expected in the second
half reflecting new business wins and implemented cost reductions
New business activity continues at significant levels, with a particular focus
on AI-driven visualisation and copywriting and hyper-personalisation at scale
Nine month period end net debt(7) at £151 million versus £180 million last
year (£194 million on a like-for-like(3) basis), but slightly higher than at
half year end of £146 million driven by inaugural dividend payment,
restructuring costs and continuing FX headwinds. Month end average net debt(7)
for the third quarter £154 million versus £184 million last year (£197
million on a like-for-like(3) basis). Month end average net debt(7) of £147
million for first nine months of the year versus £192 million last year
(£196 million on a like-for-like(3) basis) and leverage at 1.8x EBITDA with
covenant at 4.5x EBITDA. Year end net debt(7) target remains unchanged in the
range of £100 to £140 million(7)
( )
The Board will consider approving an enhanced final dividend for 2025, if the
improved second half performance and liquidity targets are delivered
£ millions Three months ended 30 Sep 2025 Restated(9) Three months ended 30 Sep 2024 change Reported change change
Like-for-like(3)
Pro-forma(4)
Billings(1) 490.9 481.6 1.9% 5.1% 5.1%
Marketing Services 175.5 178.3 (1.6%) 0.7% 0.7%
Technology Services 16.2 20.1 (19.4%) (16.5%) (16.5%)
Revenue 191.7 198.4 (3.4%) (1.0%) (1.0%)
Marketing Services 150.8 159.2 (5.3%) (2.8%) (2.8%)
Technology Services 16.2 20.1 (19.4%) (16.5%) (16.5%)
Net revenue(2) 167.0 179.3 (6.9%) (4.4%) (4.4%)
Americas 136.1 138.5 (1.7%) 1.6% 1.6%
EMEA 22.6 30.4 (25.7%) (26.6%) (26.6%)
Asia-Pacific 8.3 10.4 (20.2%) (16.2%) (16.2%)
Net revenue(2) by Geography 167.0 179.3 (6.9%) (4.4%) (4.4%)
£ millions Nine months ended Restated(9 ) change Reported change change
Pro-forma(4)
30 Sep 2025 Nine months ended Like-for-like(3)
30 Sep 2024
Billings(1) 1,416.8 1,390.5 1.9% 5.1% 5.1%
Marketing Services 506.6 554.7 (8.7%) (5.9%) (5.9%)
Technology Services 45.5 66.2 (31.3%) (29.3%) (29.3%)
Revenue 552.1 620.9 (11.1%) (8.4%) (8.4%)
Marketing Services 449.8 489.2 (8.1%) (5.2%) (5.2%)
Technology Services 45.4 66.2 (31.4%) (29.6%) (29.6%)
Net revenue(2) 495.2 555.4 (10.8%) (8.2%) (8.2%)
Americas 394.3 432.5 (8.8%) (5.6%) (5.6%)
EMEA 74.4 90.1 (17.4%) (17.3%) (17.3%)
Asia-Pacific 26.5 32.8 (19.2%) (15.3%) (15.3%)
Net revenue(2) by Geography 495.2 555.4 (10.8%) (8.2%) (8.2%)
Sir Martin Sorrell, Executive Chairman of S(4)Capital plc said:
"Market conditions in the third quarter reflect the continuing impact of
volatile global macroeconomic conditions. As a result, clients remain
generally cautious given the uncertainty, with technology clients, which
account for almost half our revenue, in particular, continuing to prioritise
capital expenditure on expanding AI capacity. The hyperscalers are forecast to
spend over half $1 trillion on expanding AI capacity. Our liquidity and
cashflow continued to improve compared with the third quarter of 2024 and
month-end average net debt was down almost 16% by £29 million, from £180
million to £151 million, reflecting our focus on working capital and cost
control. Third quarter month end average like-for-like net debt fell by £43
million, from £197 million to £154 million, despite payment of the inaugural
dividend.
The global macroeconomic environment has been challenging in 2025. Assessing
the impact of US imposed tariffs was added to the three key risks around
US/China relations, Russia/Ukraine and Iran/Middle-East. Clients, therefore,
are likely to continue to remain cautious. However, once the levels of tariffs
are negotiated and the impacts assessed, we believe clients will become much
more selective about the geographies in which they operate in order to find
growth and focus on implementing technologies, such as AI, Quantum computing
and Blockchain, to drive efficiency in a slower growth, higher inflation and
higher interest rate environment. This may be the time when AI-adoption
accelerates at scale.
We are seeing significant opportunities for new business, particularly driven
by our AI tools and capability. New business wins so far this year include new
or broadened relationships with Asana, Amplifon, Samsung, Square, NCS, Opella,
Visa, Cinemark and HelloFresh. We also continue to expand many of our existing
relationships, in particular General Motors, Amazon, T-Mobile, PIF, and now
two unannounced leading US-based Global FMCG Companies, which are ramping up
significantly in the second half of the year.
We maintain our operational EBITDA and net debt guidance reflecting continued
cost control and cash management. As in previous years, financial performance
will be weighted to the fourth quarter. Liquidity is also forecast to improve,
which will give us the ability to consider proposing an enhanced final
dividend once the results for 2025 are announced, if targets are met."
Notes:
1. Billings is gross billings to clients including pass through costs.
2. Net revenue is revenue less direct costs.
3. Like-for-like is a non-GAAP measure and relates to 2024 being
restated to show the audited numbers for the previous year of the existing and
acquired businesses consolidated for the same months as in 2025 applying
currency rates as used in 2025.
4. Pro-forma numbers relate to audited non-statutory and non-GAAP
consolidated results in constant currency as if the Group had existed in full
for the period and have been prepared under comparable GAAP with no
consolidation eliminations in the pre-acquisition period.
5. Operational EBITDA is operating profit or loss adjusted for
acquisition related expenses, non-recurring items (primarily acquisition
payments tied to continued employment, amortisation and impairment of business
combination intangible assets and restructuring and other one-off expenses)
and recurring items (share-based payments) and includes right-of-use assets
depreciation. It is a non-GAAP measure management uses to assess the
underlying business performance. Operational EBITDA margin is operational
EBITDA as a percentage of net revenue.
6. Adjusted figures are adjusted for non-recurring and recurring items
as defined above.
7. Net debt excludes lease liabilities.
8. This is a target and not a profit forecast.
9. Comparative information for the prior period has been represented
to reflect the Group's revised segment structure.
Third Quarter Trading Update
The challenging conditions witnessed in the first half have continued in the
third quarter. Third quarter reported billings were up 1.9%, up 5.1%
like-for-like. Revenue was down 3.4% to £191.7 million, down 1.0%
like-for-like. Net revenue was down 6.9% on a reported basis to £167.0
million, down 4.4% on a like-for-like basis. Year-to-date revenue was down
11.1% reported to £552.1 million, down 8.4% like-for-like. Year to date net
revenue declined 10.8% on a reported basis, 8.2% like-for-like. Reported
revenue and net revenue were both significantly impacted by FX, in particular
the USD to GBP.
Third quarter revenue and net revenue reflect ongoing client caution and
timing of significant new business wins, however third quarter earnings before
interest, tax, depreciation and amortisation (EBITDA), both on a reported
basis and like-for-like reflect significant improvement primarily due to the
cost restructuring programme implemented to mitigate revenue challenges and
right-size the cost base to bring staff cost to net revenue ratios to the
industry average of 65%. These actions have reduced the number of Monks to
around 6,500, down 5% from circa 6,900 at June 2025 and down 13% from circa
7,500 at this time last year. This programme has been primarily focused on a
range of non-billable roles across the business and further back-office
efficiencies.
Performance by Practice
Marketing Services practice revenue was down 1.6% in the third quarter to
£175.5 million, with like-for-like up 0.7%. The quarter's performance was
below expectations. This reflected ongoing client caution and lower activity,
particularly with some of our larger technology clients. Reported third
quarter net revenue was down 5.3% to £150.8 million and 2.8% like-for-like.
Year-to-date the Marketing Services practice reported revenue was down 8.7% to
£506.6 million and 5.9% like-for-like. Marketing Services reported net
revenue was down 8.1% to £449.8 million and 5.2% like-for-like.
Technology Services practice third quarter reported revenue was down 19.4%, or
16.5% like-for-like, to £16.2 million. Third quarter reported net revenue was
down 19.4% to £16.2 million, down 16.5% like-for-like, impacted by client
negotiation delays as well as longer sales cycles for new business reflecting
the challenging ongoing macroeconomic conditions. Year-to-date Technology
Services reported revenue was down 31.3% to £45.5 million, like-for-like down
29.3%. Reported net revenue was down 31.4% to £45.4 million, with
like-for-like down 29.6%, impacted by client negotiation delays and the
anticipated lower business from one key client.
Performance by geography
The Americas, our largest region accounting for over 80% of net revenue was
slightly up, like-for-like, in the third quarter with reported net revenue
down 1.7% to £136.1 million and up 1.6% like-for-like, and with stronger
growth in Latin America. Year-to-date, the Americas reported net revenue was
down 8.8% to £394.3 million and 5.6% like-for-like. Europe, the Middle East
and Africa was down 25.7% in the third quarter to £22.6 million and 26.6%
like-for-like. Year-to-date reported net revenue was down 17.4% to £74.4
million and like-for-like down 17.3%. Asia-Pacific, our smallest region also
saw lower activity, with reported net revenue down 20.2% to £8.3 million in
the third quarter and 16.2% like-for-like. Year-to-date reported net revenue
declined 19.2% to £26.5 million and like-for-like was down 15.3%.
Balance Sheet
Net debt ended the third quarter at £151.1 million, or 1.8x net debt/12 month
proforma operational EBITDA. Compared to half year end net debt of £145.9
million, net debt increased £5.2 million, reflecting additional cash outflows
from the Group's inaugural dividend, restructuring costs and continuing FX
headwinds. The trailing 12 months proforma operational EBITDA was £83.4
million. The balance sheet has sufficient liquidity and long-dated debt
maturities to facilitate growth with our key covenant being net debt not to
exceed 4.5x the 12 month proforma operational EBITDA. Our Term Loan B matures
in August 2028 and our undrawn revolving credit facility ("RCF") in August
2026, with the £80 million RCF facility having been extended to February
2028.
New business and AI
Continuing the trends seen during the first half of the year, we are seeing
our AI initiatives improve visualisation and copywriting productivity, deliver
considerably more effective and economic hyper-personalisation, delivering
more automated and integrated media planning and buying, improving general
client and agency efficiency and democratise knowledge. We are now producing
high quality commercials using AI technologies such as Runway, Luma, Flux,
Omniverse (Nvidia), Substance (Adobe) and Unreal that take hours and days to
produce at significantly lower cost rather than traditional production
techniques, which take weeks and months at significantly greater cost. The
quality continues to improve in real time and clients that are exposed to the
results of these AI technologies are very excited about their implementation
and the commercial impact on their marketing budgets and return on investment.
As a result, we are changing our revenue model from a purely, time-based
approach to one more based on outputs - i.e. use of assets.
We are seeing significant opportunities for new business, particularly driven
by our AI tools and capability. New business wins so far this year include new
or broadened relationships with Asana, Amplifon, Samsung, Square, NCS, Opella,
Visa, Cinemark and HelloFresh. We also continue to expand many of our existing
relationships, in particular General Motors and Amazon, which is ramping up
significantly in the second half of the year. In April, we won a large "Real
Time Brands" assignment with our existing client T-Mobile. In July we were
engaged by a leading US-based Global FMCG, as their Content Studio Agency
Partner, which draws on both our "Real Time Brands" and "Orchestration
Partner" propositions with a focus on quality creative combined with dimension
and cultural relevancy, beyond simply making assets at scale. These new wins
are contributing to our second-half performance and over time are expected to
be significant relationships for us. In October, another existing US-based
Global FMCG client appointed us to help implement AI throughout its marketing
supply chain, a partnership based on a new subscription-based model focussing
on outputs and outcomes. We continue to win multiple exploratory assignments
and AI film projects, as clients experiment and explore AI applications and
develop AI use cases. AI capability is becoming more central to the agency's
way of working and new business efforts. In this regard the Company's early
adoption of AI and proactive approach to staff training on AI is beginning to
pay off. We have won four major AI industry awards in the last two years.
Our new Go-To-Market propositions, Orchestration Partner, Real Time Brands,
Glass Box Media and Digital Transformation are all starting to resonate
strongly with clients. These are built around hyper-personalisation at scale,
social media, brand strategy, transparent media buying and planning and the
leveraging of technology.
ESG
We remain committed to the pillars of our ESG strategy: people fulfilment, our
responsibility to the world and one brand. We continue to focus on improving
our external reporting, our reporting tools and governance to help us move
towards increased transparency and effective reporting and to comply with
future global regulatory requirements. We continue to enjoy and maintain our B
Corp status and we have significantly improved our Ecovadis score. The B Corp
status recognises our achievements in governance and accountability,
environmental performance, social impact and DE&I, that we are accountable
to all stakeholders, not just shareowners and that we are transparent in our
reporting.
Summary and outlook
For the Company as a whole, despite the wider market uncertainty and
significant volatility in global economic policy, particularly as a result of
the US-imposed tariffs, we expect that full year like-for-like net revenue
will be down by upper single digits. Despite this, we continue to target
le-for-like operational EBITDA(8) to be broadly similar to 2024. We will
continue to focus on our cost base and have taken further action to support
profitability. Our targeted range for the year end net debt remains £100
million to £140 million, despite restructuring cost payments and the
continuing FX headwinds witnessed so far this year. We target medium term
financial leverage at the lower end of our previous range of around 1.5 times
operational EBITDA. Over the longer term we continue to target growth to
outperform our markets and operational EBITDA margins to return to historic
levels of around 20%(8), with a staff cost to net revenue ratio of 65%.
The strategy of S(4)Capital remains the same. The Company's unitary, purely
digital transformation model, based on first-party data fuelling the creation,
production and distribution of digital advertising content, distributed by
digital media and built on technology platforms to ensure success and
efficiency, resonates with clients.
We continue to streamline and integrate our businesses, we have rebranded to
Monks and are focusing all our current capabilities into two Practices:
Marketing Services and Technology Services. Our tagline 'faster, better,
cheaper and more' or 'speed, quality, value and more' and a unitary structure
both appeal strongly, even more so in challenging economic times.
Results webcast and conference call
A webcast and conference call covering the results will be held today at 09:00
GMT. The webcast of the presentation will be available at www.s4capital.com
(https://url.avanan.click/v2/r02/___http:/www.s4capital.com___.YXAxZTpzNGNhcGl0YWw6YTpvOjBhZDFiYzk5OGM4NWEzYTkwOWRlYjM5ZTE2NjVjZGU3Ojc6YmQ4YzpmN2I3NmEzN2Y2NDBiMzkwYzljMmJkOTA4M2MxMmI0MzRlNWNiZTcwNmEzZWRhM2VjODNmYWQ2ZmI4ZGI5M2RmOnA6VDpO)
during the event.
09:00 GMT webcast (watch only) and conference call (for Q&A):
Webcast: https://brrmedia.news/SFOR_Q3_25
(https://url.avanan.click/v2/r02/___https:/brrmedia.news/SFOR_Q3_25___.YXAxZTpzNGNhcGl0YWw6YTpvOjgyMjlhMTk4ZWY4ZTg1NzNhMjhlODY5MjM3OGZlMjgyOjc6Y2JmNzplMTkxNTk0NjE3ZGVmNzIxZTkyNDI2NDQ4MjdlMzU1OThjZWY4ZDQ5MDQ3ZmEwMTkwNTZkNGQ5OWE3M2MyOTRiOnA6VDpO)
Conference call:
UK: +44 (0) 33 0551 0200
US: +1 786 697 3501
Enquiries to
S(4)Capital
plc
Sir Martin Sorrell, Executive Chairman
+44 (0)20 3793 0003/+44 (0)20 3793 0007
Radhika Radhakrishnan, Chief Financial Officer
Scott Spirit, Chief Growth Officer
Sodali & Co (PR Advisor)
Elly Williamson
+44 (0)7970 246
725
Pete Lambie
About S(4)Capital
Our strategy is to build a purely digital advertising and marketing services
business for global, multinational, regional, and local clients, and
millennial-driven influencer brands. This will be achieved by integrating
leading businesses in two synchronised Practices: Marketing Services and
Technology services, along with an emphasis on 'faster, better, cheaper, more'
execution in an always-on consumer-led environment, with a unitary structure.
The Company now has approximately 6,500 people in 33 countries with
approximately 80% of net revenue across the Americas, 15% across Europe, the
Middle East and Africa and 5% across Asia-Pacific. The longer-term objective
is a geographic split of 60%:20%:20%. Marketing Services accounted for
approximately 90% of net revenue, and Technology Services 10%. The longer term
objective is a practice split of 75%:25%.
Sir Martin was CEO of WPP for 33 years, building it from a £1 million 'shell'
company in 1985 into the world's largest advertising and marketing services
company, with a market capitalisation of over £16 billion on the day he left.
Prior to that Sir Martin was Group Financial Director of Saatchi & Saatchi
Company Plc for nine years.
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