Credit: Dan Dennis via Unsplash
Ratings agency S&P Global has downgraded S4 Capital on a potential decrease in advertising spending.
S&P said it believes S4 Capital’s revenue and earnings will not recover in 2025 as previously expected.
Martin Sorrell's digital advertising pure play group in March posted a 11% fall to £848.2 million in revenue on a like-for-like basis for the year to December.
The company, caught by a downturn in marketing spend by the technology sector, is diversifying its client portfolio and filling its pipeline with bigger pitches.
Now S&P says S4 faces worsening macroeconomic conditions and potential cuts or delays in its clients' advertising spending.
“(We) believe the company might be more vulnerable than its peers to the deteriorating advertising market conditions,” said S&P Global in a ratings note.
S&P lowered its long-term ratings on S4 Capital and its senior secured debt to ’B’ from ‘B+’.
However, the agency gave S4 a stable outlook with the expectation that the company will return to organic revenue growth in 2026 and continue to prudently manage its cost base.
S&P said 78% of S4’s net revenue came from North America where there is a potential decrease in advertising spending amid an uncertain macroeconomic environment
“We also expect a slower recovery of spending by technology clients, which have significantly reduced spend over the past two years and that recent contract wins will contribute to the company’s revenue and earnings from the second half of 2025,” S&P said
“This could lead S4 Capital's organic revenue growth to continue significantly lagging peers.
“In addition, S4 Capital's business is smaller and less diverse than that of larger advertising holding companies. Therefore, we believe the company remains more susceptible to economic downturns and higher volatility in its operating and credit metrics.”
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