Shares in marketing services group St Ives fell more than 35% this morning after it posted a gloomy forecast caused by the “current global economic uncertainty”.
The owner of Northern agencies Amaze, Branded3 and Tactical Solutions said it expects underlying pretax profit for its current financial year to be “materially below” expectations, and warned the following year would also be hit.
Trading in the eight months to April 1 had continued to be broadly in line with expectations, with group revenue running about 5% ahead of the same period last year.
“Trading across our Strategic Marketing segment has been strong to date, and significantly ahead of the equivalent period last year, with organic growth of 15% driven by a combination of international expansion and greater collaboration across our businesses, combined with acquisition-driven growth of 20%,” St Ives said in a statement.
“However, as noted within our half-year results, the current global economic uncertainty is leading to greater caution in the allocation of marketing budgets.
“Recently, and within the digital segment in particular, we have observed an increase in this level of uncertainty and caution within our client base which has led to the cancellation and deferral of a number of significant projects.
“We consider this to be a short term issue although it will impact trading for the remainder of the financial year and into the following year. We are implementing targeted cost saving measures where appropriate but will not do so if this results in long term damage to the business.”
Only four months ago, the company was talking in terms of growth through headcount and acquisitions.
It now says revenue in its Marketing Activation segment is running 11% down on last year.
It added: “Despite a strong performance overall in the year to date, the combination of factors outlined above lead the Board to conclude that the Group’s underlying profit before tax for the current financial year is likely to be materially below management’s current expectations.
“Whilst it is too early to judge with accuracy at this stage, it is expected that these factors will impact the outturn for the next financial year also.”
Shares in the company were down this morning down 36% at 143.37p.