Sorrell's S4 Capital hit by tougher revenue outlook
Adds CEO comments in paragraphs 5-7, 12-13, analyst reaction in paragraph 8
By Paul Sandle
LONDON, Sept 19 (Reuters) -Shares inMartin Sorrell's ad group S4 Capital SFOR.L fell to a six-month low on Thursday after it downgraded its revenue forecast on weakness in demand from its tech clients, with one in particular cutting spending on digital transformation.
S4, which derives almost half of its business from the tech sector, said like-for-like net revenue for the year would decline by more than expected when it updated in May.
Net revenue fell 13.5% to 376.1 million pounds ($499.4 million) in the six months to end-June, it said.
Sorrell, who founded S4 after leaving rival WPP in 2018, said the pull-back by tech clients was not uniform, but the sector was underperforming others.
"One Tech Services client reduced its spending significantly," he said.
However, he said S4 was cutting its cost base to meet demand, and as a result operational earnings would be broadly flat.
"We've taken a good look at the business across the board, both geographically and by practice, and we're focusing on the cost side as well," he said.
Analysts at Citi said the results were "underwhelming", noting that the group's Technology Services segment was suffering much more than anticipated.
Technology Services is the smallest of S4's three divisions, which also include Content and Data & Digital Media.
Sorrell said the deployment of AI in creating personalised ads at scale, and in areas such as media planning and buying, would underpin growth in the medium term.
He said General Motors was one client that had shifted its approach.
"They have four strategic agencies, each of them working on their key brands, Chevrolet, Buick, GMC and Cadillac, and we underpin that, working as the foundational agency across all four brands," he said.
"So creating, producing, distributing mainly digital but offline as well, which is personalisation at scale and speeding up the process of visualisation and copy writing."
($1 = 0.7531 pounds)
Reporting by Paul Sandle; Editing by Kate Holton and Sharon Singleton
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