The scale of the difficulties facing the advertising market was laid bare on Monday after two London-listed industry titans saw their share prices plummet after they slashed profit and sales expectations.
M&C Saatchi’s share price tumbled a staggering 11.9 per cent to 111p, with shares down 36.9 per cent this year to date, while shares in S4 Capital fell 7.1 per cent to 16.44 pence in early morning trading, with the stock down 49.8 per cent since January.
AIM-listed M&C Saatchi anticipates net revenue to decline by roughly 7 per cent, while profit before tax is expected to be in the range of £26m to £28m, with the firm crediting its losses to the longest US government shutdown in history.
The company provides communications and marketing services to the government but the shutdown halted the provision of their assistance, ultimately damaging fourth quarter revenue.
The firm does not expect to recover this revenue in the 2025 financial year, but has maintained its medium-term expectations, expecting its Issues specialism arm to generate double digit growth in 2026.
Russ Mould, investment director at AJ Bell, said: “This is a significant profit warning from M&C Saatchi, and it is striking to see management acknowledge that this is not a timing issue.”
“The lost revenue…is gone for good.”
The Board has also committed to a share buyback programme of up to £5m over the next 12 months, with the possibility of expanding the programme.
This late hit to profits follows a weak first six months of the year, where revenue fell 5.1 per cent to £103.8m, while profit before tax decreased 36 per cent to £10.3m.
The group blamed “client caution” caused by wider market conditions to the reduction in sales.
Similar story for S4 Capital
It’s a similar story for FTSE small cap S4 Capital who also slashed their full year forecast due to “client caution”.
The firm’s stock has nearly halved since the start of the year.
In its latest trading update, the London based firm said its 2025 like-for-like net revenue is now expected to be down by just under 10 per cent, while its pre-tax earnings were set to come in at £75m, below the market consensus of £81.6m.
The company said the cut was “mainly as a result of lower project-based revenue, continued client caution and a slower ramp up of our new business wins than expected”.
In the third quarter the firm saw revenue fall 5.1 per cent to £167m, with profits falling across all geographies.
Big tech ad spend
While the firms have credited the slump in client sales to tariff turmoil and wider market uncertainty, the industry has long been grappling with the rise of Big Tech becoming a more favourable avenue for ad spend.
Advertisers are opting to go straight to the likes of Google, Meta and Amazon, instead of dealing with media-buying intermediaries for ads and communications, due to their cheap reach and hyper-accurate targeting through cookies.
In 2024, Big Tech platforms were responsible for over half of global advertising.
Peel Hunt, which downgraded M&C Saatchi from buy to hold and maintained its hold for S4 Capital, said the “trading conditions for market services” will remain challenging.