Moody’s cuts S4 Capital

Moody's Investors Service said it downgraded to B1 from Ba3 S4 Capital plc’s€375 million backed senior secured term loan B issued by S4 Capital LUX Finance Sarl and £100 million backed senior secured revolving credit facility issued by S4 Capital 2 Ltd.

The agency also lowered S4 Capital plc’s corporate family rating to B1 from Ba3 and the probability of default rating to B1-PD from Ba3-PD. The outlook of all entities has been changed to stable from negative.

The downgrade and stable outlook follow two straight profit warnings in July and September, Moody’s said.

"We now expect S4 Capital's net revenue to decline year-on-year by 1%-2% whilst its reported EBITDA margin to fall to around 12%, in line with the company's recent guidance. This is substantially weaker than the company's original guidance in March 2023 of 6%-10% growth in net revenue (based on 2022 net revenue unadjusted for the lost client account of Mondelez in early 2023) with an EBITDA margin of 15%-16%. Recovery in revenue growth is likely in 2024 but we remain cautious in the backdrop of a weak macro-economic environment," said Gunjan Dixit, a Moody's vice president, senior credit officer and lead analyst for S4 Capital, in a statement.

The agency said it expects S4 will grow its revenues and EBITDA margins in line with its plan over the next 12-18 months.

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