S4 Capital warns on EBITDA as investments weigh on margins

21st Jul 2022 08:46

(Sharecast News) - Media company S4 Capital warned on Thursday that it was now clear that both underlying earnings and its EBITDA margin would be below internal expectations for the first half of the year.

S4 Capital lowered its full-year EBITDA target to approximately £120.0m, short of current consensus estimates of £154.0m-165.0m, as continued "significant investment" in hiring and the consequent expansion of the company's cost base weighed, particularly in its content practice.

However, S4 opted to maintain its full-year target of 25% like-for-like gross profit and net revenue growth, even against very strong comparatives.

"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," said S4.

The London-listed group added that "significant cost reduction measures", including a brake on hiring and discretionary cost controls, had already been introduced as part of an effort to better balance its growth in revenue, gross profit/net revenue and costs.

As of 0850 BST, S4 shares had tumbled 47.67% to 117.32p.

Reporting by Iain Gilbert at Sharecast.com