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S4 Capital PLC on Thursday said market conditions in the first five months of 2026 have remained ‘challenging’, but that trading has been in line with expectations. The London-based advertising agency continues to expect full-year like-for-like net revenue of £632 million to £663 million, down as much as 6.1% from £673.0 million in 2025, but with targeted sequential improvement in the second quarter over first quarter. Chair Martin Sorrell said: ‘Market conditions in the first five months of 2026 have remained challenging, if more so, with clients generally cautious given continued geopolitical and macroeconomic uncertainty. However, trading has been in line with our expectations.’ Shares in the firm were down 6.6% to 40.45 pence in London on Thursday morning. In a statement ahead of its annual general meeting on Thursday, S4 said it is targetting an at least 100 basis point improvement in like-for-like operational Ebitda margin from 12.1% in 2025. Ebitda is earnings before interest, tax, depreciation and amortisation. S4 also confirmed its year-end net debt target of £60 million to £90 million versus £86.9 million in 2025. Average net debt in the first five months of 2026 fell to £106 million from £144 million a year earlier. S4 said it is continuing ‘our drive for margin improvement through greater efficiency, utilisation, billability and pricing.’ Headcount has been reduced by 11% to 6,200 since this time last year, and S4 said it maintains a ‘disciplined approach’ to managing costs. ‘We expect clients to remain cautious in the near term’ but ‘we continue to have confidence in our strategy’, Chair Sorell added. S4 plans to introduce a dividend policy of paying out 50% of adjusted basic earnings per share. It expects to pay total dividends of 2.2p per share for 2026. This would be double the 1.1p per share declared in 2025. S4 noted current analysts’ consensus range for 2026 adjusted basic EPS is 5.3p to 6.2p. The capital allocation policy remains ‘dividends first, debt repurchase second and share buybacks third,’ the company explained. Looking ahead, S4 said it is focused on three areas. ‘First, top line growth, where we are making some progress, but not sufficient. Second, on margin improvement, where we are progressing, but not where we ultimately want to be. Finally, improving liquidity, where we have made very significant progress. Effectively, we are half-way through our AI-driven turnaround, with the more significant half to come.’ Copyright 2026 Alliance News Ltd. All Rights Reserved.
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