Member Info for NigeCo

Nige Co...."Interesting comments about averaging down, again. I’m sure you will be aware of a fund manager Andy Brough who said don’t fall in love with a share as it won’t love you back."

Cardinal3,

Yes I know of Andy Brough, I used to watch him on Bloomberg tv 30-40 years ago. I'm not sure why you would think that I'm falling in love with any company? If I do decide to invest further funds into S4 Capital it will be based entirely on fundamentals of the company. Based on that I think that the investment risk has decreased significantly in the past 12 months, with debt being reduced at an impressive rate, that management deserve credit for. I'm also pleased that management acknowledge that more needs to be done. I find this reassuring to a degree. Bodes well for the future, only time will tell.

Nice find CM, thanks for posting.

"I've been waiting for some sort of recovery for longer than I care to think about and despite averaging down I am still down a lot. However if I don't see any sign of revenue growth by the end of the year I'll take it on the chin and move on as without that, the SP is IMO unlikely to re-rate above the 40p ish level."

RWD,

I share your frustrations, I'm also well down after averaging down, I'm considering averaging down further. Far be it from me to give you any advice on selling S4 at the end of this year, if things don't improve regarding revenue growth. But what I would say based on analysts future revenue forecasts, they have this year to drop to £639.2m (2025 £673m) 2027 £650.4m 2028 £666.5m. So we could be at the bottom, returning to some kind of small growth over the next two financial years. If the analysts are correct with their forecasts. Nothing set in stone. Just bare this in mind, I wouldn't want you or any shareholder to sell before a potential recovery of some kind.

I enclose below from an interview with SMS, dated Feb 2025. I enclose the link to the video interview below, well worth watching IMHO.

Sorrell... "its a good business, its a good agent, you've got very strong tech capabilities, very deep capabilities, tech capabilities that go well beyond anything I've seen elsewhere, including companies like Accenture, so very strong. We are in a very good position."

https://www.thedrum.com/tv/video/agencies-in-2025-fireside-chat-with-sir-martin-sorrell

If the above still holds true today, you have to ask the question, if we have better tech capabilities than the competition, then why hasn't it resulted in attracting far more new business wins than we've currently achieved? Why are we still losing revenue, but it also has to be said that revenue rate of losses is slowing and expected to return to growth in 2027. We lose a whopper, then gain one. S4 target of 20 whoppers looks a long way off at the moment. Currently we have 8, down from 10 a couple of years ago. Patience needed still.

Sir Martin has said previously that there is no reason why S4 can't get back to 20% EBITDA margin. I would be happy with 16%-17%, this should see a re rating of multiples of the current share price, 20% would be the sweet spot, but you don't always need to hit the sweet spot to achieve your objective. EBITDA expected to increase at least 1% @13.1% this year, we just need revenue to return to growth for the market to believe in S4 again IMHO.

"I hope S4 do not announce a profit warning. I just cannot get my head around the market fundamentals ie share price weak despite robust fundamentals."

Classhero, I would be shocked if there was to be a profit warning announced, bearing in mind that S4 announced the potential doubling of the dividend if targets meet expectations, at Q1 update after 4 months into the year, also at the AGM after 5 months. Also talk of future 50% of FCF going towards dividends. Plus talking of being net debt free next year. These are confident statements being made. I'm sure that lessons have been learned with past targets, so unlikely IMO.

Thanks for posting CharlesMunger.

Sorrell..... "We will succeed if we can implement AI at scale for clients, and fail if we can't. It's as simple as that."

https://www.youtube.com/watch?v=YAK3azKsmJQ

Https://www.adnews.com.au/news/s4-capital-cuts-11-of-workforce/type/yafNews

Https://www.koreatimes.co.kr/business/tech-science/20260609/forum-s4-capital-chairman-says-ai-forces-business-reset-calls-for-faster-execution

While I will take on board what brokers have to say, I wouldn't trust any of them, they all talk their own book. I will not be influenced, persuaded, or talked into changing my mind, opinion, or decision by others. I trust in SMS, that S4 Capital will be a worthwhile investment. I'm convinced that the worst is now behind S4. I could be wrong of course, but at the end of the day it's my money that's at risk, not the brokers. I'm a big believer in doing your own research, in that case you only have yourself to blame, if the worst happens. Happy to hold/add, hopefully reap the rewards within the next 2-5 years.

Https://uk.advfn.com/market-news/article/17250/s4-capital-slides-after-morgan-stanley-lowers-target-price-on-softer-growth-outlook-sfor

Https://www.proactiveinvestors.com/companies/news/1093436/s4-capital-backs-outlook-despite-increasingly-challenging-ad-market-1093436.html

"I suppose my point is even more fundamental and that is that the S4 SP should've never gone into the teens, ever. You're talking about circa 40% FCF yield at that level and that's outrageous."

Indeed RunS4, the LSE priced S4 Capital to fail @16p. You write off SMS at your peril.

Baron Investments

"Thrilled to see S4 Capital #SFOR stating we “expect to be close to net debt free next year, which will provide even more significant capital allocation opportunities”. That’s a major readjustment from recent years where net debt was c£.200m and more-so given the payouts received already and anticipated ahead"

https://x.com/baroninvestment

"There seems to be underlying support that won't let S4 get much above a 5.5% yield - i.e. not let it go down much!!"

Agreed RunS4, a smart move by management to let the market know well in advance regarding doubling of the dividend Sir Martin is limiting the share price downside IMO

"the likes of Glowacki from planet Glow, or no clue lse2000, or MildLaddie -- they look to get people panicky and try to get their trading profits."

You missed off GRaff with "Time to lock in those profits and get out." share price prediction of 18p. Lol. That ship has sailed.

Once Net Debt free by year end 2027, we can then look forward to large share buybacks.

Just waiting on revenue to return to growth, latest analyst forecasts for revenue growth is 2027, then we are off to the races.

"management expect to be debt free next year"

Just to correct what I said earlier above, what I meant to say was Net Debt free by next year, not debt free. S4 will probably not get down to debt free, they will target share buybacks, once net debt free.

Glowacki, I would have to disagree,

I find the update very reassuring indeed, management expect to be debt free next year, along with increasing the dividend. Management clearly have finances under control now, with confidence shown with a doubling of the dividend. From where we've been in the not too distant past, to today, it's night and day. Happy to hold/add, a re-rating is long over due, even though the share price has doubled this year. A further doubling of the share price would bring S4 up to what I would call fair value. IMHO.

I stand corrected, indeed it does look like the ex dividend date is 4 June. It's strange that the company goes ex dividend before they've actually approved the 1.1p dividend.

RWD,

I think that you may have got your ex dividend date wrong mate. The dividend of 1.1p has to be approved first at tomorrows 4 June AGM. Ex dividend date is 5 June, payment date 10 July.