LONDON, Sept 19 (Askume) – Shares in Martin Sorrell’s advertising group S4 Capital (SFOR.L) fell to a six-month low on Thursday after the company cut its revenue forecast due to weak demand from technology clients and reduced digital transformation spending.
S4, which gets about half its business from the technology industry, said in a May update that its year-on-year net income this year would fall more than expected.
Net income fell 13.5% to 376.1 million pounds ($499.4 million) in the six months to the end of June.
Sorrell, who founded S4 in 2018 after leaving rival WPP, said the exit of tech clients was not uniform but the sector was underperforming other industries.
“A technology services customer has reduced costs significantly,” he said.
However, he said operating income would remain roughly flat as S4 cuts its cost base to meet demand.
“We looked at the business geographically and behaviorally, and we also looked at the cost side,” he said.
Citi analysts said the results were “disappointing” and noted that the group’s technology services unit suffered a bigger loss than expected.
Technical Services is the smallest of S4’s three divisions, which also includes Content & Data and Digital Media.
The deployment of artificial intelligence in areas such as creating personalised advertising at scale and media planning and buying will underpin medium-term growth, Sorrell said.
General Motors is one of the customers changing its approach, he said.
“They have four strategic agencies, each dedicated to their respective major brands, Chevrolet, Buick, GMC and Cadillac, and we support them as the base agency for all four brands,” he said.
“As a result, creation, production and distribution are primarily digital, but also offline, which accelerates the personalization, visualization and copywriting process at scale.”
($1 = 0.7531 British pounds)
