Member Info for GoCPI

ROFL...And so he has, Auson!!

I wish this would now break out higher and leave his pompous little backside behind!! PMSL...

Volumes are good and that's a positive - we'll take any positives.

Been adding over the past days including some this morning. I'm breaking my self-imposed portfolio size limits to get my holdings to where I have them now, and we'll just have to wait now. You'll think that the US value funds do see some value here, what with a 5% yield and a reduced cost base going into 2026.

@1Pencil/@Auson - My take on the net debt range at YE and the vague response from Martin, is rather mundane. A big variable factor is the number of job cuts in the UK/Europe which will need higher cash outlays than you would if these cuts were happening in the US. Until they've worked out how many roles they'd finally cut and the resulting one-off outflows, it's hard to pin down a tighter range for net debt. I'm OK with that.

Cut big now in the content team and set yourself for a robust 2026 - that's the management team's goal, IMO. And they're doubling down on the tech division capability.

"Also wondering why S4 is benchmarking 65% staff cost to revenue when it distinguishes itself from others as being more smarter and therefore has to be a lower percentage. lol."

I can't argue with that, but its better late than never. They probably held on for as long as they did in the hope that Ad spend in their core markets would come back, but not to be at the levels that they were forecasting - well, not for 2025 anyway. The best scenario for shareholders is if they rip the band-aid off and cut deep - IMO.

My takes on these points..

"The problem is .. if you let go talent and they then go elsewhere ... does it then become more difficult to re-source talent if/when you need it again ?"

It could well be that quite a few resources being let go are in the content creation side of business where it is now possible to do more with less (headcount). The job market is now probably saturated with such laid-off people, no doubt many are very talented, and finding resources in the future if the business does ramp higher, should be easier.

"Is the market predicting more asset book value write-downs at year end ..given that they are based on future cash flows predictions ??"

I won't be surprised if they do take another write down at YE. Goodwill and Intangibles were £650m in the H1 results from £700m at YE 2024. Could they write this down to £500m at this YE - this would probably result in a BV between £350m and £400m, but given that we're currently only values at £120m on this amazing exchange, our valuation to BV is still pathetically low. Bargain hunters don't exist on our magnificent stock market.

Kula - Good post. I think we'll end up with a 6 to 6.5% YOY revenue decline at the end of the year. That's still a mid single digits decline. I'm 'modelling' a 3% YOY revenue decline for Q3 and 4% YOY revenue increase for Q4 (a watershed moment as that's a first revenue increase since Q2 2023 (after circa 10 quarters). Net, I expect 2025 NET revenues of £709 million, a circa 6% decrease in 2025.

If the trajectory changes a bit to a sustained, small revenue growth for 2026, and couple that with a lowered cost base from the 2025 layoffs (more happening now), that could setup a profitable 2026. Financially speaking, 2025 is a write-off, but the market is 'valuing' us as a soon to be bankrupt company which is a head-scratcher. I'm eager to see what the guidance is for layoffs/cost reduction when Q3 results are released.

Could we get to a >15% adjusted EBITDA in Q4, after accounting for layoff payouts? THat's the million quid question.

GLA...

1Pencil - the guidance is always NET debt. The gross debt is the €375m notes to be repaid in August 2028. That bears a 4% markup over the EURIBOR rate and that's a total of 6% at the current ECB rate. They don't need to OR can repay the debt until the end of the term I suspect.

Https://digiday.com/marketing/when-cmos-pay-for-agents-not-agencies-s4-capitas-ai-gambit/

This one's an interesting read and the outcome is one that could shape where we land as we roll into 2026. The extent of the job cute will be interesting to note, but I suppose that it's the extent/final number of the job cuts and the resulting one-off costs that is still resulting in the wide range of the net debt forecast for the end of 2025.

@longfell - Auson and Believer summarised the one non-response when the Morgan Stanley analyst asked about potential licensing/SaaS demand for the Monks.flow platform. I'd agree with the others that its work in progress.

The growth story for me is for S4 to continue using their first mover advantage in Agentic AI and continue winning new business like they did with the unnamed FMCG customer. Plus revenue stability at large tech clients like Google, which was £63m this HY, down from £73m last HY. A question got asked about what clients are doing with savings from content creation through use of AI - Bruno replied that some were re-applying the savings to try to boost more revenue, whilst some were letting that fall the bottomline. Martin said that in light of lower margins because of tariffs, companies were looking at these cost savings to preserve margins. And there was a why£100 - £140m debt range question when we're 3.5 months out, it sounded like Martin sarcastically referred to it as 40m. Buybacks, larger dividend - that's the right way to go, IMO.

S4 is prepping for 2026 with a lot lowered cost base and then look to build up from there. It's a waiting game and unless a large buyer steps in now, we'll sadly see S4 drift lower from here, particularly if the global markets sell off a bit.

Sour grapes - probably was rebuffed by Martin in the past.

He keeps banging on about debt when this is a highly cash generating business having reduced net debt by more than £40m last year and likely to reduce it by £20 to £40m this year, after accounting for dividend payout + layoff costs in H2.

OK, we didn't do well on the only metric that matters on this low liquidity stock market, revenue growth, but even after today's revenue 'growth' downgrade from low single digit decline to mid single digit decline, we'll still have YoY growth in Q4. Q3 will also now be negative. We'll get an update on headcount cuts with the Q3 release in 7 weeks time and we'd expect to see them to throw the kitchen sink in from a cost viewpoint. But I'm resigned to the fact that the only thing that matters to this shiite market is revenue growth and them showing just Q4 revenue increase won't be enough. We'll need to follow-through in 2026 as well.

The SP wasn't a pretty read today however undeserved I felt it was - it doesn't matter what I think. I sold a few other shares I have added some today. A 5.5% yield is tempting enough for me as rates start to come down more. Bruno said on the call that Goog's spend with S4 is finally normalising and the downtrend there looks like letting up. We're pivoting to non-tech clients and that's another good thing. But a huge dent in your portfolio value today is disheartening and puts to rest any early retirement plans!! ROFL.

It wasn't a report that necessitated this sell-off but you live with what you get!!

My summary:

- Tech clients revenue contribution down to 42% and possibly drop more as the new FMCG client starts to generate revenues in H2 alomgside GM and other wins. A large tech client is still reducing spend - likely GOOG? That's a bummer not unexpected.

- Additional large scale layoffs in H2 - where will we end up at the end of 2025? POssibly closer to 6000 with more back-office roles going. The US and UK are likely to bear the brunt reflecting the biggest bang for the cost saving drive.

- Positioning for 2026 is how I'm seeing this with large scale cost reductions and a better revenue to cost profile. The biggest driver for the SP going into 2026 is whether revenue trajectory truly changes or not.

Still not fully out of the revenue decline arrest mode with a modest H2 improvement to be seen.

We're valued as a basket case and I don't see that meaningfully change this year. Maybe jam tomorrow, but that's where we are.

Higher FCF over 2024 even with a circa 10% revenue reduction and an increase in H2 over 2024 is confirmed. COsts will be chopped a lot more - and hence the headcount reductions. THey have realised that the headcount is no longer needed and I'd think that the brunt of reductions will be in Europe (UK inclusive) and the US. Note below.

The Company has reduced the number of Monks to circa 6,900, down 9% compared to circa 7,600 as at June 2024 and 4% lower

than the December 2024 number of circa 7,150.

We maintain a disciplined approach to managing our cost base and have commenced a further significant cost reduction plan

in the second half of 2025 to bring our staff cost to revenue ratio from 76% to be more in line with the industry average of 65%.

Crikey - nice. I'll read through and post my thoughts a bit later

AimLess is a trader that could get it right plenty of times, but could get it wrong plenty of times too - that peril comes with the territory.

Come on CPI - let's get on with the breakout!! ;-)

"Revenues: Their previous guide called for a low single digit revenue decline in H2. "

Apologies for the typo - I meant to write low single digit revenue decline in 2025. And this meant that revenues had to climb in H2 25 over H2 24. We can do more (content) with less (employees) with Agentic AI and how we drive this to higher revenues/margins will be question that Martin and team will need to address.

Good read this about Social AOR and how that's becoming a big play in the marketing space. As you may remember, we became Social AOR for T-mobile US in June 2025

https://archive.ph/RLcKl

Thanks, Wolf. Good listen this...

My take:

Revenues: weak for H1, likely 10 to 15% down over H1 2024. Not helped by GBP appreciation this year versus 2024. Even on a LFL/Constant currency basis, revenue could be down double-digits.

Costs --> EBITDA/FCF - Not a huge reduction over H2 24 I suspect. Net debt likely not much change, possibly a touch higher as dividends paid in June.

The key for me is the H2 outlook.

Revenues: Their previous guide called for a low single digit revenue decline in H2. That obviously means that SMS sees a return to growth in H2. The unknown for me is how the business is stacking up thus far in H2 - we're almost at the end of Q3 and the revenue runway should be very visible. The market thinks we're doomed and hence the current valuation. I wager not.

Costs: We've cut some headcount in h2 post June as the H/C at the end of August is 6800 and likely will drop more in September because of the expected cuts in the UKI (from the business insider article a couple of weeks ago). if they can do more with less and bring our cost base aligned with the industry giants, we must take action now. it's the new CFO's first analyst call on Monday and hopefully we'll see her fingerprints in the reduced cost base. A good guide on this front is helpful and should we return to even a small growth on a reduced cost base, we should move off this doomsday valuation situation.

Plenty of noise from Monks on LinkedIn on their leadership in data driven marketing - we'll see how that translates to revenue guide/pipeline build for the near future.

I'm at an all-time high positioning in S4 - I either go up or go down with Martin. :-)

Broke - I'm in-line with most of what you wrote. 2025 is a write-off with YOY negative growth baked in per the AGM update guidance. We've had a shiite load of negative news baked into the current SP, which is essentially priced for S4 to fail, IMO. I don't think this shallow market believes that we'd get a YOY growth in Q4 and that 2026 will be Meh at best. And hence my reference to us being priced to fail. And any sign that contradicts that narrative next Monday should be great for us. By no means is that a given, but remains a possibility.

What we do know is that we've had a 5% employee count haircut in 2025 (till the 22nd AUgust) and per the layoff news leak from Business Insider, more were meant to start in September 2025 in UK&I. US layoffs are way less expensive than UK/European ones as they don't have consultation period dramas over there, but reducing UK content staff is a good step toward righting the ship close to the 20% EBITDA margin levels. UK employment costs are higher, thanks to our very forward-looking labour government, and cutting here would make sense.

I'm optimistic that we'll finally return to growth in 2026 because the client mix gets a touch favourable, US rates are being cut, and you think that numpty trumpty will do more to boost US employment and growth in the coming months - his rabid isolation will only lead the US down a slippery slope of growth destruction - similar to what our leaders have achieved. There's more fiscal stimulus from the OBBB bill headed the US way next year and that'll help the macro more in the only country that really matters to us. ;-)

Https://www.mmm-online.com/news/martin-sorrell-defends-dentsus-potential-divesture-and-s4s-own-gameplan/

An insightful read. though it has the usual MS' hubris thrown in as well. ;-) However, stating that Client diversification and margin as 2 of the most most important bits he'd have done differently at S4 is a good admission of where he flopped. Of course he's still bullish on the S4 model, and why I'm invested here..waiting for the turn in business which the detractors say is never coming.

And that margin improvement is the only reason why they're cutting headcount now in high cost geographies like the UK.