The agency counts Facebook, Amazon and Google among its biggest clients and has outlined aims to target more “whoppers” – clients who spend more than $20m (£16.3m) a year with the company.
More recently, Sir Martin has heralded the opportunities offered by artificial intelligence (AI). He has tacked the word “more” onto the end of S4’s “faster, better, cheaper” tagline in a nod to the potential for AI to supercharge campaigns.
But behind the tech spiel, the numbers tell a different story. S4 is being burned by a downturn in the tech sector prompted by rising interest rates.
Ian Whittaker, a media analyst, says: “The problem is that many of the clients he was going for, as you had the rise in interest rates, they suddenly change strategies.
“I think that combined with perhaps one or two of his biggest clients pulling back spend, that’s had a disproportionate impact on the numbers.”
The latest profit warnings are a fresh blow to what analysts at Jefferies describe as an “already fragile market confidence” in S4.
This can be traced back to a series of accounting blunders that forced the company to delay its results twice last year. The saga sparked a sharp fall in S4’s share price, with its market value now languishing at £415m, down from a peak of around £5bn.
Sir Martin has said the company is taking a “disciplined” approach and going back to basics. But in the City, there is a feeling that the ad boss is now paying the price for his aggressive growth strategy.
DeGroote says investors’ underlying confidence in the company “started to erode some time ago”.
“It was a growth-at-all-costs approach, the impression of sort of frenzied growth, Sorrell obviously being a man in a hurry given he was in his mid-to-late 70s,” he says.
There are also concerns over the company’s ballooning debt pile, which is forecast to almost double to as much as £220m by the end of the year due to extra payments for previous acquisitions.
