:Martin Sorrell’s S4 Capital cut its forecasts for annual revenue growth and core profit margin on Monday as tech clients dialled back marketing spend, sending the advertising group’s shares down 20 per cent.
Scores of technology companies have cut costs through shedding staff and delaying investment decisions, reflecting pressures from higher interest rates, sticky inflation, slower economic growth and geopolitical uncertainty, despite a recent boom in the artificial intelligence (AI) sector.
The economic uncertainty has also prompted businesses to focus on short-term solutions to drive sales.
Analysts have also flagged that the rise of in-house AI tools provided by third-party vendors or digital platforms could prompt clients to abandon services from advertising agencies.
Last week, U.S.-based peers Interpublic and Omnicom also announced weak results that underscored the growing pressures on ad agencies.
S4, founded by Sorrell after he left WPP, the world’s largest ad group, said it now expects full-year like-for-like net revenue growth of between 2 per cent and 4 per cent, compared with an earlier forecast of 6 per cent-10 per cent.
It expects an operational core profit margin of between 14.5 per cent and 15.5 per cent, down from 15 per cent-16 per cent forecast previously.
In the first-half trading update, the company said revenue growth is expected to be about 5 per cent, adding that performance in its content business has been more difficult.
WPP shares were trading down 2.3 per cent.
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