![]() ![]() “Initially, a lot of the work is around audits, workshops, examining the opportunities with AI because it is a significant change, not just for us and our people and the technologies that they use, but also for our clients, how they approach their marketing, how they structure it and how they build the relationships and even the remuneration models with their agencies.” “We’re seeing a lot of conversations, a lot of new business opportunities with clients, and we are starting to see those convert,” he said on a call this morning with investors. In today’s statement, the only parts of S4’s business that recorded growth in the last quarter were its technology services arm, which accounts for around $110m in net revenue its data, digital and media and content practices, which both saw third-quarter net revenue slide 1.4% and 4.4% respectively, account for the lion’s share. According to Scott Spirit, the company’s chief growth officer and executive director, it’s the number one topic of conversation between the company and clients. A more diverse portfolio of clients would insulate it against macroeconomic trends such as the tech sector slowdown, which has affected it and many of its rivals, but demand among its smaller, newer clients has been low.Īccording to the company statement, “overall demand was lower, particularly in the newer regional and local clients.” Given that layoffs were also targeted at its local and regional businesses, per Basterfield, its ability to turn that situation around may be limited.ĪI-related projects may provide some demand going forward. ![]() The bulk of S4’s revenue – 55% – comes from just 13 clients, according to Sorrell. It’s down almost 70% compared with its position at the beginning of the year. However, at the time of writing, S4’s share price had fallen 13.85%. ![]() Over a longer span, those efforts may aid its journey back to growth. Basterfield said that “expectations for Q4 from a revenue perspective are now lower than they were.” Given the current caution among CMOs across the globe, growth may not be forthcoming. “We remain confident our strategy, business model and talent, together with scaled client relationships, position us well for above-average growth in the longer term.” Sorrell said: “We expect, as usual, Q4 profitability to be the strongest quarter of the year. The company hopes that the fourth quarter will bring it some relief. Our media editor explores the biggest media buys and the trends rocking the sector. “They’re saying: we’re looking after the shareholders here and we’re not going to pile into more deals until things have turned around a little bit,” Dudley adds. Rival holding companies such as WPP or Omnicom, for example, typically buy new companies with cash. S4’s strategy of offering cash-and-share deals to the owner of agencies it acquires (and it was previously highly acquisitive) means that its ability to pursue future deals rests upon the value of its shares. So, too, are promises of cash earmarked for share buybacks and shareholder dividends next year. “It’s what they’ve got to do for the markets, unfortunately – taking action, cutting costs,” explains Dudley. In the short-term, attention to the company’s margins and cost base is intended to increase shareholder confidence. That’s not a business that can say it’s growing,” Barry Dudley, partner at Green Square, tells The Drum. “Losing people and the word ‘progress’ shouldn’t be in the same sentence in this industry. The layoffs mean the company must now find future growth with fewer staffers to service its clients. ![]()
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