Member Info for BrokeNSmoke

Genuinely didn’t think we would see 20p so soon after a good TU, though the ‘bad’ news on AI, tariffs, contract loss will likely be creating a ton of uncertainty, so hardly urprising I guess..

I find 20p surprisingly especially since we will finally likely see some optimism re the future in the YE accounts forward guidance, despite the Estee Lauder loss. Additionally the takeaways from WPPs strategy update are somewhat positive for us, since they are on the backfoot with AI.

I trimmed quite heavily at 28/29p (not prescient, just happy coincidence!) but recently took a nibble here again. I feel like the market is overreacting too much. My only concern is Seedance AI, it is very impressive and a potential threat.

@1pencil – Re your other post mate, totally agree on the AI as a tool. I think we both have said it makes sense as SaaS for a while now. This whole software replacement stuff is stupid in my view and have been investing in some of the beaten down ones.

Anyone who uses AI will know its good for sprints, its memory is far too limited to replace software. I work with a lot of devs mostly using GitHub AI and Claude in GitHub, and its great for assisting in writing code, but it’s a bigger picture contextual memory is incredibly poor. I think the same applies to software creation.

Not ideal, but far from being the end of the world.

1pencil - The indiscriminate sell-off was kick started by Seedance, more advanced AI with a tiny cost in $ cents. The dev team for the company I work for are really impressed by it vs the smattering of previous AI attempts. The only reservation appears that it is owned by Bytedance.

I think short to medium term CEOs will still look to agencies, especially given the track record of AI promises not manifesting and companies having to u-turn and rehire. Long term it throws up some serious questions though.

Wait this slide isn't on no news is it? I haven't been watching this board of late so not sure what has been discussed, but the slide is to do with the revealing of Seedance 2.0 (and Seed I guess) no? It is the catalyst that has driven AI down, given that it appears that China's AI is significantly more advanced that an any of the companies residing in the US with a cost to the end user orders of magnitude cheaper than US offerings.

Again haven't been tracking discussion, but, it would appear that if anyone can create high quality videos now, that don't look sloppy like previous visual generative AI, and at an absolute pittance, then it really puts the future of marketing business in a bit of an existential crisis.

Well gents, as a holder here I am happy to eat my words I posted the other day about recovery not being another year off at least. Happy days.

I doubt you will get such a post from the lse troll though ;)

'Would a taper of capex spend bring back opex on marketing initiatives, boosting S4 prospects immensly? That is what I'm interested in seeing how it plays out and isn't a far fetched investment thesis for S4's prospects to scale up dramatically in the near future from our tech client base.'

I can understand your reasoning, but, I think if they cycle spend back to opex it will be like admitting defeat on the AI business case and we could well see the bubble pop and economic downturn ensuing. In that instance recovery would be pushed back a year or more likely 2.

I think the mobile phone analogy doesn't quite stack up, and I am struggling to find a similar situation from memory. Yes people laughed at the idea, but there wasn't significant resistance against the use of a mobile phones, like there is with AI. Not talking from a workplace front, but, an end user/consumer front. The amount of people who have an aversion to consuming product that has AI in it is significant, be it services or entertainment. Take the game Clair Obscur Expedition 33, fantastic sales, cleaned up at the gaming awards, but then massive stink and pushback after the revelation. I think the only saving grace for us here is that, no one really wants to view advertising, it is more something we all put it up and thus care less if it is AI generated.

If the Garter Hype Cycle holds true, I think we are coming down from the peak of inflated expectations, and it will be a while before AI finds its proper use case and S4 properly releases its value (ignoring any kind of acquisition scenario).

And by this rate he will be buying another 1m at 12p....

Personally, there appears to be no optimism on the horizon. It looks like we are more or less writing off 2026 now and no chance of a sale with SMS ego and golden share. Another year of either falling or stagnating. Where is the incentive to buy?

Also averaging down from 800p, damn, sorry man.

On a green day for the market too , this will probably sink lower. For the 3rd year in a row it has been all results loaded into Q4, Q4 comes and we get profit warnings. Eternally jam tomorrow.

Like you all say this a few weeks after the last TU is impressively bad.

@Yesimabeliever yep, I called this out on Q3 TU that it was disappointing that the tech segmentation was still over 40%. They mentioned it taking longer to onboard clients which is probably the reason why.

I think it was inevitable that tech would continue to shrink. I mean why would you put hundreds of billions into AI advertising and then still pay external agencies for advertising.

I lost on this punt mostly because I though they would be able to transition out of being primarily tech focused faster than they have.

Still it's not easy to do this and there is a reason business in periods of business model/ client disruption can struggle and go under. Like I said the other day is the biggest issue is if we continue to bleed revenue.

Our best bet would be just to sell up, but no hope of that with the golden share. Personally, I would be fine if a competitor or a hedge fund was to pick this up on the 40-50p range.

Agree that 2026 looks bleak and we have no hope of a sale whilst the golden share exists.

I suppose its both. Capex spend though greater is at least should see future economic benefits while the tax hit being purely write off. I agree though - absolute madness! Cheers for the link.

Indeed, its the continued revenue loss that is my only concern re value trap. FCF and liquidity looks fine despite being in net debt, though continuing to hemorrhage on the revenue front things will become difficult. Also the whole succession plan, or lack thereof is still an issue and one has to wonder at the morale at S4 at the moment.

Don't have the time to post much at the moment so - GLA for the UK budget. Hopefully it is not all doom and gloom.

I haven't had time to look through Meta's earnings in detail, only skimmed, but a good chunk of the drop seemed to be due to the tax hit, no? Google and MS have continued with high capex spend but haven't seen the same kind of drop. That said, I welcome any kind of AI capex spend pessimism :)

We are in basement territory but it remains to be seen if this is actually a bargain.

Understand the pressure to give dividends but I'm with Nige on this one, reducing debt and improving business fundamentals. Reduce interest payments and improve future cashflow.

Given the 25-30m in restructuring costs the net debt increase isn't too bad given it sets us up for improved future cashflows.

The green shoots in the US is nice, but, I the outlook was slightly more conservative then I had hoped. I suppose this is for the best given our track record here.

Agree with you the-poster-formally-known-as-GoCPI.

Drab results, but hoping for a bit better forward guidance. It feels like momentum has been building with the client wins, but, I think the tangible impact of these will only have started to filter through to the results.

I do not however want to read another bloody 'macro economic headwinds' statement!

Lol common man, its not exactly war and peace you had to read through to find that out. It was literally 2 short paragraphs....

Anyways, I actually came here to GLA for tomorrow all. Hopefully a bit of good news before our government screws the pooch again with the budget later this month.

'Listen to the gravity of the situation here, just in the first opening minutes of the broadcast and how much damage this one report has done is immense.

The problem is Ai likes to 'please' and therefore hallucinates and makes stuff up, trouble is you just don't know which bits it has concocted..

https://www.youtube.com/watch?v=C17KWJ02Goo

Imagine the implications for legal teams and how much hot water a company could get themselves into unknowingly, all to save a few dollars.'

Indeed, I believe that when the AI gets negative feedback for hallucinations, it doesn't really affect anything and will just continue to make stuff up. A problem is with predictive text nature of LLMs. Bit of nightmare for a bulk of text when a professional still has to go through and double check said body of text. Looks like the professional side of things are entering the trough of disillusionment!

I think image generative AI has proven itself as a worthy tool though. Many hours of graphic design avoided and it only takes a fairly quick visual check to verify.

It was nice while it lasted I guess. Regardless of the deterioration in SP, I suspect the director buy has given holders renewed confidence to hold.

I suppose some of this will come down to the outcome of the Disney v Midjourney case. If Disney wins or Midjourney settles, then we will likely see a lot more legal battles on AI using copyrighted characters.

Good on GoCPI and Poker for being a voice of pragmatism during this rebound hype. I couldn't agree more. I think a rebate to 40-50p would be likely if we can get back to growth as you have already mentioned.

£2 would need us to return to being a growth golden child again, the economy to turn a corner, social politics to calm down a bit, geopolitical tensions to ease, the fear an economic/ debt crisis being just around the corner relax, interest rates to lower, fears of being vulnerable to more advanced AI to relax, an actual succession plan in place. Good luck with all that.

I would probably argue that a write-down on goodwill was already priced in after the last update.

Thanks for the reply Nige. For the longest time I had been of the same opinion but currently I feel that I could easily see this being snapped up in the 40-60p range if the golden share didn't exist. I personally would much prefer a quick rerate and the chance to reallocate the non-performing cash I have in this into other investments. I just don't see SMS getting a deal at a price he would be content with personally, plenty of other companies with struggling valuations at the moment for the venture capitalists to pick over.

Agree with everything else you said, I would 100% they focus on debt then share buybacks if the share price remains in the gutter. I feel like the dividend is being used a consolation prize for share holders, but, at least it gives a degree of comfort over company liquidity. As you say time will tell - GL mate