Shares in Sorrell's S4 Capital rise after group hails strong Q4 sales momentum

By Scott Kanowsky 

Investing.com -- Marketing group S4 Capital PLC (LON:SFOR) said top-line growth looks relatively strong into the fourth quarter despite macroeconomic headwinds and a recent tumbling of its share price that has put a stopper on potential mergers.

Operational earnings before interest, tax, depreciation and amortization is also seen progressing in line with the firm's full-year target of about £120 million (£1 = $1.1813). S4, which was started by major advertising figure Sir Martin Sorrell after his departure from WPP (LON:WPP) in 2018, had lowered that outlook from a range of £154M - £165M earlier this year due to high staff costs.

In a statement, Sorrell argued that a potential upcoming recession in some parts of the world will cause more companies, particularly large technology sector players, to use S4's services.

"We believe this changing market environment will continue to offer significant growth opportunities given our client profile, relative size and disruptive model," Sorrell said.

S4's third-quarter sales, which grew by 26.5% to £300.1M on a like-for-like basis, helped undergird this sentiment. Sorrell added that momentum in revenues was "more than maintained" during the three month period ended on September 30.

Headcount also dipped by 1% to 8,956 at the end of the quarter, which the company said reflected more active and measured control of hiring.

However, acquisitions - a key pillar of S4's growth strategy - are now currently "off the table," it said. The freeze comes after a nearly 70% plunge over the last one-year period in S4's share price, which has been used before as a bargaining chip in negotiations.

S4 said it would be willing to talk with potential partners if they accept a deal that values S4 equity at approximately 425p per share - or, their value before the recent decline.

As of 03:45 ET (08:45 GMT) on Monday, London-listed shares in S4 exchanged hands at around 219p after rising in early trading.