FTSE 250: S4 Capital shares dive on profit warning due to rising staff costs

·Finance Reporter, Yahoo Finance UK
·1 min read
Sir Martin Sorrell, Executive Chairman of S4 Capital , gestures as he speaks during a conference at the Cannes Lions International Festival of Creativity in Cannes, France, June 23, 2022.    REUTERS/Eric Gaillard
Martin Sorrell’s S4 Capital has issued a warning on profits. Photo: Eric Gaillard/Reuters

Media company S4 Capital (SFOR.L) has issued a warning on profits due to an increase in hiring costs.

The FTSE 250 company lowered its full-year guidance on earnings before interest, taxes, depreciation and amortisation to £120m ($143m), short of current consensus estimates of £154m to £165m.

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Shares in S4 Capital slumped 44% to 125.80 pence in London early Thursday, leaving the digital advertising company with a market capitalisation of around £700m.

"Continued significant investment in hiring and consequent expansion of the company's cost base, particularly in the Content practice, have had a negative impact on first half Ebitda and Ebitda margin," the digital advertising firm said.

"With the pattern of profitability already significantly skewed to the second half of the year, and as previously signalled more than the usual two-thirds weighting, this means that the profitability required for the second half of the year to meet market expectations will be even greater," the company added.

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In order to “better balance” growth in revenue, profits and costs the company had put in place a brake on hiring as part of “significant cost reduction measures”.

London-based S4 Capital is an advertising agency started and led by Martin Sorrell, the former chief executive of FTSE 100-listed WPP.

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