Sorrell spooked by ANOTHER profit warning as £430m wiped from his S4 Capital stake

Sir Martin Sorrell saw another £11million wiped from his fortune yesterday when shares in his advertising agency crashed after it issued a second profit warning.

S4 Capital shares fell 21.7 per cent, or 20.7p, to 74.8p, ​​taking Sorrell’s losses over the past two years to more than £430m.

The latest slump came as the company warned that sales and profits will be lower than expected this year as companies cut marketing spend amid fears of a recession.

Sorrell owns a stake of more than 9 percent in S4 Capital, a digital marketing company he founded 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.

Yesterday’s share price drop has knocked £11 million off the value of Sorrell’s stake, valuing it at £41 million.

His shares were worth £472m in September 2021, when the price peaked at 870p, meaning he has lost £431m in the past two years.

The drop in share price was caused by S4 Capital cutting profit margins for 2023 to 15.5 percent from 14.5 percent to 13.5 percent.

The company said sales are expected to be lower than the previous year as customers spend less on advertising and marketing campaigns.

S4 Capital blamed the slump on “slower than expected trading over the summer months,” as potential clients reduced their advertising budgets due to economic uncertainty.

It is the second time in two months that the company has downgraded expectations after scaling back sales growth and profit expectations in July, with the downturn blamed on reduced customer spending in the technology sector.

The company also announced yesterday that it has cut at least 450 jobs and plans to cut more positions 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 difficult to follow.

‘The five years since he launched competitor S4 Capital have been something of a rollercoaster ride.

“While ad spend has proven relatively resilient, results are seeing some headwinds and the market isn’t taking too kindly to that.”

He added that net debt, which stood at £109 million according to the latest results for the six months ended June 30, “is starting to become a bit worrying as financial performance cannot keep pace with payouts for previous acquisitions.” .

Investors likely want to see the core businesses start to pay off before focusing on further consolidation opportunities, Nathan said.

Sorrell said it was a “mixed picture” for customers and regions, with three factors influencing the market.

“First, technology customers are more cautious about their spending,” he said. “Second, packaged goods companies have been raising prices in line with inflation or above, and they are aligning their advertising budgets with net revenues.

“The third is that regional and local customers have been quite weak, that’s the big difference we’ve seen between the first half of last year and this year.”