The Week Ahead 15-19 September: Interest rate decisions, NXT, SFOR

I am writing this from a very comfortable chair overlooking the North Sea as I try to give my legs as much of a break as possible between this morning’s 12km run and later this morning’s 30km run.

Running has evolved from a hobby of mine to a key part of my identity in the last few months and, if I am honest, it’s taking up more of my time than I expected. If I am not running, I am often too tired to be doing anything particularly productive. It’s not an ideal situation as I begin the countdown to my celebratory run around the coastline of Britain, but I will continue to work on it.

There’s a reason for this opening comment (aside from a shameless bit of self promotion). With time not on my side, my ability to follow the markets, or even my portfolio, is lower than it has been at any point since I started working as a financial journalist ten years ago.

But the impact of this shift in priorities has been reassuringly low. As a buy-and-hold investor, my aim is to keep any actual activity in the markets to a minimum. My research ahead of buying a stock is thorough and then I will aim to hold onto the stocks until the investment case changes. If it doesn’t change, I will just keep holding.

It means that in the last few weeks, I have been oblivious to any impact that political shenanigans have been having on global indices. Have the crumbling relations in government had any impact on domestic markets? Are ongoing tariff concerns stopping the relentless upward march of US stocks? Are international investors hunkering down as conditions in Eastern Europe deteriorate further?

It’s also reassuring, as I emerge temporarily from my running obsession, that in all cases, the answer is ‘no, not really’. Tetchiness from broader political, geopolitical or economic goings on remains on the minds of investors, but not to any greater degree than it was when I went into my running isolation.

And having preached for years that investment is something that more people should do and it really doesn’t take up as much time as some might fear, I am glad to have been proven right now that my work life doesn’t revolve around the stock market.

But next week there are a couple of stocks due to announce which will coax me out of my running mentality. And some economic updates which are worth paying attention to.

Economic Calendar

Companies Reporting

Next (LON:NXT)

The retail giant is one of the companies whose phenomenal first half performance has done so much to support British large cap indices in 2025 so far. The price leapt in March on the announcement of excellent 2024 financial results and last month, management confirmed an even better start to 2025. Full price sales were up 10.5% in H1, well ahead of guidance.

But, throughout the year, management has been very cautious about the outlook for H2. Next is a perpetual under-promiser (and over-deliverer), but even by their standards, the commentary about the second half has been very downbeat. Management’s (valid) concern is that rising national insurance contributions will have had a negative impact on employment opportunities in the UK, leading to a downturn in consumer spending. Now that the second half is underway, it will be interesting to see whether management is sticking with its predictions.

The last couple of months have seen brokers follow management’s lead and taper their enthusiasm for full year earnings.

Current forecasts are for normalised EPS of 706p, which is a slight decrease on last year. That seems a ridiculously conservative forecast given the massive sales outperformance in the first half and the company’s strong competitive advantage. But it will be interesting to see the impact that higher national insurance contributions has had on profits in next week’s first half results statement.

As is customary for Next, I would expect some indication that management has been under-promising again, which may lead to an uptick in broker expectations. But I also expect continued reservation about the remainder of the year and beyond.

S4 Capital (LON:SFOR)

In times of economic distress, marketing budgets tend to be the first to get slashed. Unfortunately for marketing firms like S4, the current period of economic distress has arrived at the same time that advancements in technology have made it far easier for companies to manage their own high quality marketing.

Indeed, in the company’s first quarter update, founder Martin Sorrell said that clients have been prioritising investment in capital expenditure on AI, rather than operating expenditure on marketing. The trouble is, that upfront capex could permanently reduce the need for ongoing marketing opex.

Investors certainly seem to be fearful of that. S4 shares have been a disaster, currently worth a little under 23p, down from their over-hyped pandemic peak of almost 850p.

To be clear, I wouldn’t touch this stock. I think the trends are firmly heading in the wrong direction and for all the company’s corporate chat about integrating technology, I think AI is more of a threat than it is an opportunity. It’s also leveraged up to its eyeballs, with net debt worth more than the current market capitalisation. According to Stockopedia, that’s putting it in bankruptcy risk territory.

But is there a value argument to be made?

Just last month, the media began making noise about a potential merger opportunity on the table, which suggests competitors might be seeing some value there. Shares are currently trading on just 4 times forecast earnings (although once you take the debt into account, that’s more like 8x).

There is the Martin Sorrell allure as well. S4 retains a number of big clients, especially in the technology space. From an investment perspective, that’s a problem because the company is over-reliant on just a handful of big spenders. But if those clients are loyal to Mr Sorrell (who, despite his advancing years, remains a force to be reckoned with in the advertising industry) potential buyers could be looking for access to those big clients at a very reasonable price.

I expect some heavy adjustments on some poor numbers next week, but some brutal honesty about the state of the market.