S4 Capital, the advertising firm led by Sir Martin Sorrell, reported a significant drop in revenue attributed to reduced spending by technology clients, leading to a sharp decrease in share prices, nearing record lows.

The company experienced a decline of over 15 percent in net revenue, translating to 13.5 percent on a like-for-like basis, bringing the total to £376 million for the six months ending June 30. In tandem, debt surged to £183 million from £109 million, largely due to the company’s share buy-back initiative.

Following the announcement, S4 Capital’s share price plunged by as much as 16 percent in early trading before recovering slightly to close down 5.9 percent, at 42p per share.

Sir Martin Sorrell remarked: “The trading performance in the first half reflects the ongoing effects of challenging global macroeconomic conditions and elevated interest rates, particularly impacting marketing budgets among technology clients. Our technology services segment suffered due to a reduction in business from one of our prominent partnerships.”

The interim report revealed a statutory pre-tax loss of £17.2 million, an improvement over last year’s loss of £23.2 million. The technology services division alone saw revenues plummet by 37 percent to £46 million.

Regionally, the Americas contributed 78 percent of S4’s net revenue, while EMEA accounted for 16 percent, and Asia Pacific represented 6 percent. When asked about the potential relocation of the company’s stock listing to the US, Sorrell acknowledged it might make sense, but stressed that any such move must follow strategic improvements within the company.

He elaborated on the complexities of relocating, including necessary legal, accounting, and management adjustments. Sorrell added, “While a US listing may provide benefits, the outcomes vary significantly based on individual company circumstances. A well-managed and growing business is likely to perform better in the US market due to its greater liquidity.”

The firm remains focused on securing major clients, dubbed “whoppers,” with General Motors recently joining their roster. Additional new accounts include Marriott, Burger King, Panasonic, FanDuel, AliExpress, Decathlon, Santander, SC Johnson, and PepsiCo.

Regarding the General Motors partnership, Sorrell noted: “It is likely to become one of our two or three largest clients.”

Analysts at Liberum indicated that S4’s performance continues to lag behind competitors, mainly due to its substantial reliance on digital transformation spending. They expressed skepticism about a near-term improvement in investor sentiment, citing a projected 10 percent gap in like-for-like growth rates between S4 and the industry in the upcoming second half.

Sorrell also highlighted “small victories” involving the company’s AI capabilities, which, while promising, have yet to yield the revenue recovery anticipated.

To achieve cost efficiencies, S4 has been reducing its workforce, which saw the average number of employees decrease by 12 percent to 7,553 compared to 8,500 the previous year.

Established in 2018 following Sorrell’s exit from WPP, S4 Capital has rapidly expanded within the digital advertising sector, largely through acquisitions, including the €300 million purchase of Media.Monks, a digital campaign agency based in Amsterdam, and the $150 million acquisition of MightyHive, a company specializing in online advertising purchases.

This year, rival firm Stagwell, led by Mark Penn, evaluated a potential acquisition of S4 but was rebuffed by Sorrell, who holds the controlling stake. He described the offer as “a figment of his imagination, or a conversation in the shaving mirror.”