S4 Capital - AI distractions and opportunities

S4 Capital's FY24 results are as it indicated in January, with net revenue down 11% like-for-like. The operational EBITDA margin of 11.6% was up from 10.7%, signalling tight cost control. FY25 guidance is for net revenue and operational EBITDA to be broadly flat, with further improvement in net debt. Management is signalling longer-term confidence by recommending a maiden 1p dividend, not anticipated by the market. S4 has taken a £280m non-cash write-down to reflect continuing difficult underlying trading conditions. Attention and budgets are being dominated by the current focus on AI. This shift in emphasis is part of a wider transition and S4 is itself using AI extensively. Clients are cautiously testing use cases that can be honed, with growing confidence in its use for copywriting and visualisation. S4's capabilities here are helping to bring in new business.

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