Member Info for RunS4

Great read - Cheers Verney.

MildTiger will be back pumping this very soon. I'm reliably informed that he's currently tending to his bruises in the massage parlours of his brokerage firm - Shorter & Short. Once that's sorted, he'll be back with 'thank you sellers'.

What's investing without a bit of comedy?

That net debt range and its validity is something I don't disagree with and should be better communicated/forecast. It's a head scratcher as to why that's difficult.

The group treasurer hasn't changed as fas as I can tell from LinkedIn. I did see a few treasury roles being posted there, but beyond that Treasury Management needs to be clarified and we'll likely only know more once the results are released in March.

"RunS4, I would be cautious extrapolating for the current year as we don't really know how the reduction was achieved.

My guess is they had a cash injection of some sort facilitated in part by the 'Treasury Management' line, we had the sale of tvscientific to Pinterest during this period being a S4S Ventures portfolio company, did this contribute in some way ?"

Pencil - I'm not sure why I should be cautious extrapolating FCF achievements in 2025, to 2026. It's true we don't fully know how the cash increase was achieved, but they clearly telegraphed this was incoming in the November 24th 'secondary update' - they did say liquidity was improving ahead of expectations.

Highly unlikely that S4S' cash inflow from the TV Scientific sale can be brought into S4's balance sheet. A cash injection outside of an S4 asset sale OR an equity raise will NOT result in a net cash increase which is what we've seen in Q4. We just pulled up our socks, became a lot more lean, a bit of good working capital management to boot, and the revenue didn't pan as bad at they initially thought it would.

If that uptick continues into 2026 and we get even a small bump up in revenues, most of that would fall into the bottom line this year. And with an incoming massive fiscal stimulus in 2026, the pathways to growth for S4 this year should be more certain.

I wonder how Fitch and the other ratings agencies would react to this update?

https://www.fitchratings.com/research/corporate-finance/fitch-downgrades-s4-capital-to-b-outlook-remains-negative-10-10-2025#:~:text=The%20EUR375%20million%20term%20loan,constrain%20FCF%20given%20low%20leverage.

Some snipptes from Fitch below and my takes!!!

- Net and gross revenue to fall by 6.7% and 7.7% in 2025, respectively, before increasing in the low single digits each year to 2028; ---- Net Revenues fell more than 6.7% and YET EBITDA!!!

- Fitch-defined EBITDA margin at 9.3% in 2025, and gradually recovering towards 12.5% by 2028 ----- WE'RE at 12% already in 2025

- Change in working capital inflow at 2% of total revenue in 2025 and flat cash outflow at 0.5% of revenue in 2025 and beyond; ---- we can't yet say what impact that working capital management has had on cash at hand at YE 2025, but to pull this off 2 years in succession with that approach should confound the cynics.

Assuming FCF this year is circa £50m (again) based on net debt dropping to circa £95m from £140m and and £6m dividend, we're still trading at a greater 25% FCF yield -- for a non-distressed company (and after today's update there shouldn't be an iota of doubt about S4's going concern status) that's still basement bargain territory. This stupi*d market may want to see a bit of hard evidence before a higher rerate into the 40s, but I still stand by my assertion that we should've never got down to the levels we did in Q4 2025 (15 to 16p)...

"Share price currently up 43% on the day, Run S4, Run."

We're flying, Nige. We're flying, but I'm not changing my profile name again!! :-)

Lovely day for the holders + buyers in the teens.

"SMS has done a lot of interviews in India and with connections with Indian media.... I think he has real plans to make progress in that dynamic growth economy ..maybe more than Europe"

It's still not a large market sizewise from an Ad industry viewpoint that it would make a meaningful contribution to S4's topline in the near future, but maybe it's a good substitute for the China market. The bigger players like WPP/Omnicon are well entrenched there but worth keeping an eye out for.

I suppose the Indian ad industry idolises MS and what he says there goes for near gospel and he goes there often to preach to the converted, just because he can. ;-)

Nearly back to breakeven for me - a few more pence will do it. Any sneaky new wins/progress annoucements on LinkedIn should give some clues on 2026 progress. Good luck holders!!!

I wanted more and was hoping they could do 1.5p with that kind of liquidity improvements - but, that's a pragmatic approach should the world suddenly be different in a couple of months because orange baby has another fit!!

A couple of mre musings from me about today's update.

1. I didn't realise that the sellside had their consensus revenue at £664m for 2025. That would've meant a 12% YOY revenue decline and that would've been a pretty bad sign for S4's immediate revenue comeback prospects. At a circa 689m forecast revenue now for 2025, it's a 3% Q4 YOY decline and that's a lot more palatable number than it would've been otherwise.

2. Dave Meeker's note on LinkedIn in October about needing key resources at GOOG probably did mean that there was some ramp-up in revenue from them in Q4 - we need to see what the revenue decline was over 2024, but that's maybe a positive. And could the 2 new FMCG client also have started to ramp in Nov/Dec and that's another plus.

3. I thought that the Nov 24th update was pointless when it was made. There was Nov 6th update with a high single-digit decline forecast and I didn't see why the board needed to put that second update out after seeing October billings.

4. However you cut it, that lift in the last 2 months is very positive and even though it's difficult to extrapolate 2026's prospects from that bump-up, you'd think that corporate world in the US is looking at the incoming fiscal stimulus in 2026 and slowly but surely look to get their discretionary spend book out - Ad spend included, to boost revenues.

5. Net debt is now likely to be circa £90 to £95 million at 1.1x EBITDA - We could certainly get to be net debt-free by the end of 2027, maybe even sooner.

6. Increased EBITDA is near certainty for 2026, IMO. 15% is a near-certainty, IMO.

More later..

"Margin improvement from the cost cuts is yet to show up. We'll see this unfold in the coming quarters"

RWD - yes, correct. Plenty of cuts in Q4 would've been Europe where the redundancy payouts are bigger and will only be seen on the bottomline one or two quarters out. Me wagers that we could see a mid teens % EBITDA runrate in 2026 even with a low single digits revenue (2-4%) uplift this year.

"I do hope they indeed are making debt payments though ....they do seem to have cash they are not really using ...."

Not much a chance that they are OR even could make early repayments. It's EUR floating rate debt with a 400bps (or 450 bps) premium above Euribor rates, and to be repaid in August 2028. I don't believe these notes are callable, i.e, repayable early. What we'll now see is a big build in cash on the balance sheet at the end of FY 2025.

Poor Clueless 2000 - that aged very well! It's good to smack that update right back in his clueless face.

Was a fantastic update - With the net debt ratio levels that low, we're now at net debt under £100m, well below the low end of the range for the 2nd year in a row. Debt repayment only due at end of August 2028 - I genuinely don't see that as an issue anymore and S4 can initiate stock buybacks at these price levels with the SP well under the BV (however contentious that may be).

Headcount i at 6300 and thats a good 850 from end of last year - 12% reduction in HC numbers versus a 8.5% revenue reduction, and given plenty of headcount cut in the UK/Europe in Q4, wage bill for 2026 should be a lot lower than in 2025 - I wouldn't wager on a less than 15% cost reduction.

It looks like the US spend did remain perky post October in Q4, and of that trend does continue, we should see some revenue growth in 2026. Marry that up with lower costs, this could finally be the turnaround year, backed by fiscal stimulus, that we were waiting for..

The optimist in me wins out for a change, for a while yet anyway!!!

"Also, will we start to see ad spending rise with big tech again if they start scaling back AI infrastructure spend?"

That's the million dollar question as far as the AI capex spend moderating and whether some of these savings will be ploughed into marketing spend. Even without this scenario playing out, this could also be the year when more discretionary spend in the economy such as marketing spend, comes back and that the degree of this bouncing back and whether it comes back in areas that S4 focuses on - Tech and AI led marketing solutions, that could drive the direction of travel for our business and the SP.

Fingers crossed.

Switching the narrative from Next year Rodders to S4's real prospects for 2026. The markets are saying that more inflation is incoming...

1. Silver, Gold and other hard commodities are only signalling that. Silver above $100/Oz - anyone buy Silver? All those worthless £20 Royal mint coins from 2013 through 2015 are now worth something...LOL

2. Stocks at all-time highs, market breadth getting better, and with the incoming fiscal stimulus in the US, Another 20% in S&P this year isn't too far-fetched

3. However, the K shaped economy, the rich getting wealthier and inflation killing the less well off, will only get worse this year for the ones not invested in the markets

4. 2026 is the year that discretionary spend/sectors/stocks will bounce back and we sit in that sector and we'll eventually get back on the growth trajectory, IMO. :-)

That last point is contentious and will be met by multiple shaking heads no doubt :-), but hey ho my chips are firmly in S4's square.

Good weekend chaps, and keep the faith for just that longer!!!

"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"

Broke - it may not play out as a US economic downturn if the AI capex tapers off. 2025 GDP growth in the US has been plenty AI capex driven, but we only need to remember there's a shiite load of fiscal stimulus coming in from the OBBB in 2026. And that's at both a consumer level in terms of increasing tax refunds/deductions and at a business level for accelerated 100% depreciation for machinery/R&D spend and interest deduction changes from EBITDA to EBIT. Any slack from AI capex reduction will more than be picked up by this large incoming stimulus in 2026. There's that playing out now.

"How can you not make money when eventually the AI infrastructure is all there is ...around the world ?"

The question isn't whether they will make money or not, but not to forget that fundamental 'time value of money' as well as the scale of returns. If the hyperscalers are investing $500b annually and god knows what the ultimate capex spend will top out at, does the business case IRR stack up against the actual IRR when most industries aren't adopting this at scale. And one of the reasons why that business case could be stacking up is because of the 5 year depreciation wrte down that these companies are allowed to use - and you'd be hard-pressed to find that these chips' economic life lasts more than 3 years. Would the business case stack up with a 3 year depreciation cycle - I suspect not. This is what Michael Burry and a few other naysayers are betting on, however it yet may be a while before this spend now manifests in a downturn in future capex spend.

And if we bring back these empirical evidence based conversations to S4's prospects - after all this is why we're here - this massive Capex cycle is still disrupting opex spend at these tech 'nation states'. 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.

For a change, this interview isn't solely taking about AI democratising knowledge, but how it's slowly altering the marketing funnel, albeit slowly.

https://www.beet.tv/2026/01/agentic-ai-is-rewriting-business-models-for-ad-agencies-s4-capitals-sir-martin-sorrell.html

Of course he still has to sound positive on S4's business model and wouldn't it be nice if the tide finally turns in 2026? That thinking sort of explains why Martin isn't cutting billable headcount and cuts in Q4 were focused on operations people. Even a broken clock is right that 2 times a day and Martin hasn't been right for 3 years now - however in 2026?

"I wonder what SMS makes of this being at Davos, really sounds nuts."

SMS would say we're doing a lot with AI. 1. We're using Gen AI to make content creation a lot more of a doddle than it ever was and we can hyper personalisation at scale - something that wasn't possible previously. 2. We're using Agentic AI to get even more targeted messaging/campaigns to customers at speed of light, OK that was an exaggeration, but much more quickly than ever possible. We, as an industry, are miles ahead of where other industries are in terms of using AI.

That to me isn't the right characterisation of AI driven Capex spend. The right question for him and his hyperscaler peers should be - aren't we spending a shiite load of money building AI infrastructure and capability for which returns on our overblown spend is questionable? Just because you can depreciate your capex at 20% annually doesn't mean that you go and spend this kind of money and expect that the market will forever ignore these shenanigans when the return on this capex is suspect at best.

I'd now happily take a wager with anyone who wants to bet against me that 2026 will be the year of the revenue growth turnaround. Plenty of pieces of the economic puzzle are falling in place and even though 2025 was utterly disastrous, 2026 will be the real story of 'Next Year Rodders', for S4 anyway.

It looks like TACO numpty has pulled back from his Europe tariff threats over Greenland - does this mean that one of the key pillars of SMS' economic uncertainty thesis (Russia/Ukraine being another key one) has been removed and S4's business should start to boom now? Oh for that day!!!

Lol RWD - No arguments with you said there...Although all that brown nosing of MAGA nutters isn't getting S4 anywhere. And I won't go anywhere near the strains of running a £125m mkt cap behemoth.