Next 15 Group plc (NFG) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for tracking out to this strange part of the world where normal businesses loath. We have quite a lot to get through this morning and here is the agenda, we've conveniently put page numbers if you want to jump back and forth, you're very welcome to do that. We're going to go through a little bit of a sort of like, okay, what's the environment in which we've delivered these results? What are the results so that you can actually hopefully fully understand that. A little bit more about the investment case because I think our business has continued to evolve and I think it's important that you understand why anybody should invest in Next 15 and also some updates on what we're doing from an operational and strategy perspective and then not surprisingly a bit on the outlook. The first slide here talks about the market. I think before I jump into that, it's important that you know that this is possibly the most challenging environment in which we run a company and I'm old and I've done this for a very long time. And then I've been through recessions and I've now been through a pandemic as you all have. We are dealing with the aftereffects of the pandemic. We are dealing with the end of free money, crazy high interest rates, challenges still with the supply chain for many businesses. We're still dealing with the hangover from a tech perspective of COVID where people bought way more technology than they were expecting to buy and now they don't need as much. And so we're dealing with that sort of like it's almost like the snake digesting the deer. It will eventually want to eat again but for a while, it doesn't need to. And we've done all of that and yet actually, we've managed to continue to grow. So from my perspective, the fact that we've accomplished that and the fact that we've managed to maintain the margins, the fact that we haven't sort of fallen into some kind of pit is, I think, huge testament to the way that we run the business, huge testament really to the businesses that we got. I don't think we can take a lot of credit for that. I think they can take a lot of credit for that. It's underpinned by some fairly simple things. We do a really good job for clients and they stay with us. If you look at our client retention, it is phenomenal. We've talked about the fact that the technology industry is challenging and has been challenging. And I actually think we're going to see a small improvement in the second half and I think next year could actually be another year of quite good growth in that area. But if you look at our technology customer base, they have stayed loyal even though there have clearly been areas where they wanted to cut spend. And in fact, if you look at our top 20 customers, many of whom we've had for a ridiculously long time, overall, their revenues have grown in the period. You've got a few odd exceptions, people like Google, whose revenues have gone backwards. I think Google was quite public about saying, we're going to just save everything we can save anywhere and invest in AI and unfortunately, that applied to us as well. We did see some areas where their spend increased but overall, it went down. So that's sort of the cornerstone of our organization, is very firmly placed and I think is something that I'm not sure the shareholders always fully understand. I think they sort of look at the complexity of our business and they sort of lose that data point in the process. I think there are other things that have been going on in the market, which are more subtle. The demise of the cookie has accelerated a bunch of things but really all it's been doing is accelerating the digital shift anyway. So almost every purchase now in some way, shape or form has a digital component to it. People look at something on Instagram, certainly if it's one of my kids, that's the way that the purchase process starts and then they eventually buy it, they may buy it online or they may buy it in store but there is a digital influence to that purchase. And there is a digital customer experience to that purchase. There just always is because there's some follow-up from the retailer or whatever it might be. And that applies now not just in the consumer world but very much in the B2B world. And so that whole shift is changing where money is spent. It's moving it from a world where people would spend a lot of money on brand building, there's sort of the long tail, if you like, of marketing and saying, right, we're going to concentrate a ridiculous amount of money into that short window where people are looking to buy something and they purchase it. And that is actually kind of a significant restructuring of the industry that's taking place. And again, I'm not sure that shareholders have seen quite what that means because I think people see structural shifts like, okay, TV advertising is on this significant decline and the rest of it. But it's why those things are happening. It's not just because people aren't watching TV in the way that they used to watch it, because actually the purchase decisions are occurring in a very different way and people are realizing that, that last minute on Amazon, when they're going to buy this but then just decided to buy this because the recommendation engine pushed me to something else. They're realizing that that's not just an Amazon thing. That's a online thing. And if they fail, this is where businesses are making or breaking their numbers, is because somebody clicked this versus clicking that. And so that whole issue of where the decision point is now becoming absolutely crucial and they're realizing that whereas before that decision could have been swayed by just doing a really good buildup in brand building, that loyalty just is not there anymore. Other things to note really are just the environment in which businesses like ours are actually operating in that. Last year, wage pressure was a thing, quiet quitting was a thing. There were a whole load of things on the whole staffing side of our organization that we were trying to navigate. A lot of those pressures have pretty much vanished to be perfectly honest. It seems that as people have returned more to in person if you sort of wander through the building after this, which, feel free to do, you might get kicked out by some people, certainly one part of the building, I'm not even allowed into. You'll see a lot of people in the office. And I think that has had something to do with it as well as people have sort of realized "Okay. I actually am attached to a company. My loyalty is now starting to reappear within those companies". And so people's sort of fluidity of job movement, which seem to be certainly there during COVID has very much dissipated. I think a lot of the reason that we've succeeded is because we are a collection of specialists. I think we get a lot of feedback out of investors, which is you're complicated, you're difficult to understand, you have all these businesses. Yes, we are and that is why we are good at what we do, just because we actually have businesses that are incredibly close to the problem that a customer has to solve. They can adapt very quickly. We don't have to go running around saying to them, you need to cut this cost or invest in this product area or whatever, they do what is right for their customer. And I would much rather -- we have the problem of trying to explain our business to you than we have the problem of having some monolithic business that our customers don't understand. They understand our business because they understand the problem that they're trying to solve and we have a very specialized part of our business that will go and solve that for them. And then when they don't need that, we can get out of the way. And that to them is a perfect supplier. And increasingly, with technology that model is very effective for them. It used to be that big organizations, in particular, unlike the laziness of saying, I'll have one company. If you can just do everything for me, that would be very helpful. And that was the proposition that the likes of WPP and even the large consulting firms tried to pitch. With technology, that's becoming less and less of a glue because the laziness doesn't matter anymore. It's much easier to manage a portfolio of specialist businesses than it was. And so therefore, if we're doing a really good job for somebody, somewhere, WPP is going to make a bid to procurement to say, well, you do this package thing that gives you this much benefit in. That part of the business will fight for us and say no. I don't need to change. I'm very happy with them. They're doing a really good job for me, saving 2% just isn't worth the hassle to change, the disruption to the business and all the rest of it. We are a very diversified group. And we'll get on to that a little bit as we go into some of the issues to do with mega trends of we are sort of building the business around in the sectors that we're building around. The agility of the business model, as I said, people are just very close to the problems they're trying to solve and that's super important. I think, again, that's part of the sort of investor case that gets lost is that people don't realize that actually being an agile business is so important these days. If we cannot literally change the product, change the service quickly, then customers will move. It's a bit like I was saying about people changing decisions on Amazon. It's like, if you cannot offer the right thing, then you're creating a point of weakness. And so our agility is hugely important to me. And lastly, this focus on organic growth and the disciplined approach to M&A, I think we got criticized for the Saatchi bid, which I think we've talked about being relatively opportunistic and really being focused on a few of our specialized businesses that we really liked. I don't think you will see us going off and doing anything like a Saatchi bid. I don't want to go through that nightmare again. And I know that we can do a lot of really interesting things without having to waste the time and the money that went behind that kind of thing. There are some other things that have been going on in the business behind the scenes that you may not have noticed. We continue to do small bolt-ons. We've added some into our Palladium business. We've added into our Brandwidth business and these are really just bolstering existing capabilities. We're typically paying 5 to 6x EBIT for those businesses so they're very easily accretive, don't use a lot of cash. They just continue to help us build real good quality specialized organizations. In the center, Peter's team has done a phenomenal job of just really driving the efficiencies, a lot of the efficiencies that we expected to come out of the Engine acquisition, moving into this building, getting all of our real estate really much more concentrated in London, for example, has yielded a big saving that will be a lasting saving for the organization. But it's also -- we had duplicate head office structures between the Engine business and ours. And there is a little bit more we can go on both of the real estate front and on some of the operational savings. But I'll get into how I want to spend some of that money a little bit later. On the other side of here on this slide, is the client wins. We do continue to win some really good clients. These clients add up to sort of roughly 5% of our revenue on an annualized basis. So we do continue to add some very good clients to the mix. And if you look at that, it's a pretty broad spread. Yes, you've got a pretty well-known technology brand in there but you've got Morrisons, the Department of Education. We had nothing in public sector until we did the Engine transaction. Now that is becoming quite a meaningful part to our business, as you will see later. Financial highlights. By this point, you've already read all of the numbers. So I'm not going to go through them in detail. I think, we had this distortion that we did flag this time last year, you've probably forgotten about it, which was we got this sort of additional revenue coming out of the large Mach49 contract win. If you were to strip out that GBP 5 million that sort of added to both revenue and profit, quite frankly, it literally was a complete flow through. EPS would -- is always going to be down this year to some extent because of the tax changes in the U.K. I'm particularly proud of the fact that we're managing our balance sheet well, we've gone from -- remember during COVID, people paid in 2 seconds. People have definitely returned to a more normal paying process. But I -- guys have done, I think, a pretty good job in managing that shift. The interim dividend is only up a modest 5%. We're never going to be a yield stock. I think we would have put it up more had we not announced the share buyback that we did today. And I think that's just down to competing uses of capital. At that point, I'm going to hand over to Peter and he can give you the -- wonderful color on the numbers.

[indiscernible] morning, everybody. Yes, Tim has covered off some of these but yes, revenue was up 5%, 1% decline in organic, which would have been sort of up a little bit if it wasn't for [indiscernible] situation. Again, operation profit down a little bit distorted by Mach49. And the thing that really sort of highlights or low lights, maybe is tax is now 27%, mostly because of the government going from 19% to 25% in U.K. but also a high portion of our profit is coming out of the U.S., which typically has slightly higher tax rates. We've increased the dividend a little bit. I'll talk a bit more about sort of capital allocation later. Revenue bridge, yes, sort of 1% decline. We had 4% growth from acquisitions. That was mostly Engine, which we acquired in March last year, so we had 6 months in the sort of half year this year versus 5 last time. So that's about sort of GBP 7 million, GBP 8 million of that. And then -- since then we have done a few bolt-ons, which will sort of continue to grow and a little sort of modest tailwind from acquisitions or -- sorry, from ForEx. On the segments, so we had pretty good growth from inside. Again, that's where bolt-ons tend to be concentrated. Savanta, we've grown from GBP 1 million revenue when we acquired it 8 years ago to roughly a run rate of sort of GBP 50 million, big organic growth but lots of bolt-ons. I think we'll continue to grow. Canada is a market, everybody wants to grow into. So hopefully, couple of bolt-ons in the area in the next sort of month or so. On margin, down a little bit. That was really from investments in planning, which is also data science business. They've developed a couple of products and we've had someone to really drive a sales function. So we think there's a lot of opportunity with particularly retailers to get some sort of products into that space. So I think that investment will continue for the next 6 months and really start paying off next year. So I think the margin will be slightly below 20% this year because of that investment but should get back up above 20% next year. Engaged, quite a broad [indiscernible] in here. MHP has done very well. I am going to say that because we're in the room that they've had a good strong period and both have done well. Some of our sort of Google revenues, Tim highlighted is off a little bit. They've gone from sort of brand building type work we typically do for them to AI. But overall, was very pleased that we retained margin at 20%. Again, I think that margin should be a little bit better in the second half. We tend to have a stronger second half for the group with September, October, November being our strongest months overall. Customer delivery, we've got 2 sort of standout businesses in this space. Activate continues to do very well. I mean they had a phenomenal period [indiscernible] where online lead generation grew like absolute weeds. We were slightly sort of nervous, would it be quite a sort of a down period for them but actually, they have maintained their revenue up against people like TechTarget, who've had very strong organic declines and Madison Logic. So that business feels a bit more optimistic. In fact, we had a sort of very optimistic e-mail from them couple of days ago. So again, I think we're beginning to see signs of growth back in that business. And SMG who had a phenomenal period since we acquired them 2, 3 years ago, they won Morrisons, which is an interesting from accounting perspective because the way that contract works is they get a monthly retainer which pretty much pays their costs. And then in the first year, we're going to account for all sort of commission revenue in lump sum because when we started the contract and started the financial year, we didn't quite know how they're going to do. As it turns out, actually, the business has done better than expected. We had a very positive Board meeting with them yesterday and I think there'll be a nice maybe sort of a couple of million sort of benefits in the second half just from that contract win. So I think, again, customer delivery, I can imagine will be second half weighted and hopefully the margin up a little bit in the second half. Business transformation, a sort of tale of 2 halves, really. We have 2 businesses in that space, Blueshirt Group and Palladium who have both suffered from a bit of market weakness. Blueshirt is very much focused on tech IPOs. There weren't a huge number of them last year. We expect on the back of Arm and a couple of other sort of U.S. tech IPOs, you should have seen, they've gone well, that market will open up but that won't really come into being until next year. So again, I think that part of the business will be [indiscernible] similar to Palladium, which does sort of DD for PE [indiscernible] firms. And again, that's been a bit quiet. On the other side, Transform, which again joined as part of Engine had a phenomenal first half very much on the back of Department of Education win and we're beginning to do good growth there. And also they've sorted the margin out. When we acquired it, it was roughly a 5% margin business, is now sort of 15%, really did some sort of fairly basics of housekeeping and getting sort of better systems in. So that part of the business is doing very well. And Mach49, obviously on the back of the contract win, has done exceptionally well, very high margin and I can see that continuing to grow and deliver well in the next couple of years. And finally, head office costs, as Tim mentioned, we've done a good job in terms of reducing them as a percentage of revenue. Cash flow, we've slightly sort of tweaked this because acquisitions in statutory accounting for acquisitions with earn-out payments have to go against the normal cash flow. So we think this is a better comparison in terms of how we've done. So we have a small working capital outflow, which is very much based around bonuses. We accrue bonuses at the end of January and pay them in sort of April, May and then it starts accruing as the year goes on. So that's probably the biggest impact here. We typically have a little bit of working capital out for normal trading in H1. And we're working very hard as Tim says, to kind of pull that back in the second half. So it will be less while the second half [indiscernible] and tax asset has gone up a little bit. CapEx, I think is fairly modest. And the acquisitions, because of the share price paying cash for earnouts rather than shares, that number is a little bit higher than we alluded to 6 months ago. And I think overall, with small bolt-ons, et cetera, [indiscernible] about GBP 70 million for the full year. But even with the buyback, which I think will probably about GBP 10 million beside of the financial year, we should be sort of positive net cash for the year-end.

Yes, as we understand the buyback piece, we'd like to do as much as we can but there are limits on how much you can buy given volumes and so on. So realistically, only about GBP 10 million will come out this year.

This is our sort of estimate of future earn-out payments. It's come down by [ GBP 12 million ] which is sort of 2 factors. One, we made our first big payment on Mach49, which was about $45 million. So that's sort of the impact on the reduction in FY '24 but also we're now assuming that all future payments are in cash which has increased the number by [ GBP 29 million ]. So those 2 impacts sort of offset each other.

And obviously, if our share price improves, we can decide to go back to paying the component in shares.

And finally, there's a lot of debate on the board in terms of our capital allocation policy. I think we're going to continue to prioritize internal investments and the obvious area is AI, which I'm sure Tim is going to talk about as we go on. And the policy here is we want to invest in both to realize efficiency savings but also to create new products. And we're looking to have the sort of capital markets event towards the end of October, where we're going to actually demonstrate some of the products and efficiency savings we're realizing from the businesses already. Still obviously early days. Still pretty allergic to debt. I think if there's any banks in the room that I think they will be pleased to hear that. So what did we do in terms of capital allocation, 1x EBIT is really so where Tim and I start twitching. In terms of bolt-ons, typically, yes, we can pay somewhere between sort of 5 and 6x EBIT. Also our model is that we typically pay 56% upfront. We like to use shares if we can because it gives a little bit of loyalty back to Next 15 but obviously, we'll have a sort of view on that. But I think we're pretty disciplined and focused around a few key businesses like Savanta, like Brandwidth, good operational teams, we've actually used to sort of taking these businesses on. We're still keen to look at strategic acquisitions. I agree, probably not the MSC scale, maybe slightly more SMG scale, which was a GBP 20 million revenue business but was clearly in the sort of retail media space, which is sort of high growth. I think we recognize it's sort of hard to do in the current markets but not to say we won't be scurrying the markets for something which slightly more needle moving. In the absence of that and particularly with our sort of current share price, we are looking at share buybacks and our hedge is that doing GBP 30 million over the next 12 months. As Tim said, there are constraints. We can only buy up to 25% of our historic liquidity, which at the moment is very modest because of the summer period. So I think we worked out something like sort of up to 30,000 shares a day. So GBP 30 million is going to take quite a while to get through there unless there's [indiscernible] improve. I think we're going to be flexible. I think in my head, we're going to do GBP 10 million this side of the financial year or maybe that moment to sort of reassess depending on where the share price is and where our prices are. And somebody will be looking at these earnouts and whether, again, it's the right thing to do to pay in cash as we do this year or to use shares.

Yes. I mean these are very much competing uses of capital and we are sort of balancing one against the other and I think the share buybacks is, if we can't find a good use for the cash in other ways, then yes, we will do that. When we did look at a couple of acquisitions earlier this year and the multiples were sort of like 12 and 13x, they were great businesses, et cetera, it would have been quite, some good things for us to own. But then you look at it versus saying that I could spend that money and buy a portion of a company, I already know, in fact I know it really well, I know how it's likely to do. I know I don't have to pay an earnout on it [indiscernible]. I mean you sort of arrive at the conclusion that it's very difficult to justify with the share price where it is, buying something at 12 times. Unless you think, yes, okay, this is a meteoric growth and transformative from a margin perspective. One of them wasn't -- one of them was only 15%, 16% margin, high growth but relatively modest margin. And that's why the things like the share buyback just makes sense at this point. But they may well time out. Peter and I and JP in fact all read [indiscernible] is over Christmas last year but that's how exciting we are. And I don't know if any of you read it but it's a great book and it's all about capital allocation. Again, it's how exciting we are that we read that over Christmas. And the very simple message, something that is, you use your share price when it's strong to go and invest and buy into things and when it's weak, buy your own shares. I mean it comes across loud and clear, they essentially follow 9 different businesses than all of whom were transformative. And within that capital allocation policy that was absolute rule that all of them applied. Warren Buffet is one of the cases that they follow in all of that and they just couldn't be clearer on it. Now stepping into the investment case, we think of ourselves as we do this sort of plastic thing that all business do, is what business are we in? And at a very simple level, we're in the business of maximizing potential for our people and our customers. We are helping them grow their sales. We're helping them grow their market share, their share price, you name it. That's what we're in the business is trying to do. And from our people, it's a case of trying to maximize their potential. From a skill base point of view, from a career point of view, from hopefully from a financial point of view. And what that really translates into is what we believe is a growth consultancy. And I think hopefully, that better describes that whole concept of what a growth consultancy is because I think some people have kind of said, we don't really know what that truly means. From our perspective, it does break down into 4 business areas. None of this is particularly news to you. There's the insight business, which is increasingly more about how we use data to solve problems for customers. Insight, in fact, is possibly starting to become less and less the right name for that because increasingly, customers are actually coming to us and just saying, "I need the data. Can you give me the data? " Yes, we may need you to do some insight work on top of that. But actually, the data is the thing that we really need and you are really good at finding that. And our market research jobs in that area, especially as we shift into AI uses of data are becoming of increasing value. If you want to find out who's going to win the next election, you don't go and interview 56 million people. The subset that is believable and the same is true for any form of data that you want to apply something, if you want to train and model on something, you don't need the entire universe of data, you need the right subset. In customer engagement, it's about optimizing brand assets but it's really about customer experience. That's really where that whole area of our business is being pushed. In delivery, this is -- there are 2 sides to that business for us, really, it's demand gen and it's connected commerce. But again, it's all underpinned by data. I mean that business area, there's literally nothing that a customer is buying for us that isn't deeply embedded in data. And then on business transformation, this is where we're typically competing with the very large consulting firms. We are brought in to solve a value problem. And in fact, if I sort of click on, the next slide is looking at business transformation. And really, you can think of it as -- these are all businesses that, in some way, shape or form are tasked with value creation at a very fundamental level. This is not sort of like can you help us move our share price a little bit. This is, no, we need you to fundamentally position us in the right way so that we are maximizing the value of the company that we are building or you need to help us build the right company. And we are literally competing with the likes of McKinsey and Bain on designing and building new companies and new products. And that's on the Mach49 and the transform side. On the Palladium and Blueshirt side, that is more, okay, let us find the assets of real value within your organization and make sure those are the things that are really seen and understood so that we can truly maximize the value from an external perspective of your company. In terms of megatrends, [indiscernible] something, we entirely sell from private equity. We realize that we are sort of a private equity firm in disguise. We had this fascinating conversation with Bridgepoint about this topic. And what we realized, actually, we do exactly what they do, which is we find things that we think are the things that are going to be really good long-term drivers of business growth and build businesses in those spaces. And these are then data-driven decision-making. That's our inside business or our data business. Customer experience, as I mentioned, is really our customer engagement business. Sales engagement is our delivery business and digital transformation is our business transformation area. Those are all areas that we know are going to continue to just naturally grow. Customers are going to buy more of all of those things over time. Our challenge is designing and building and executing well in each of those areas. And if we do, there is no reason why we're not successful. The other axis for that is where do we do business. We've historically been known as a business that is really rooted in technology and technology very much remains the heart of our company. And what's pleasing about this breakdown is it shows, yes, technology was a tough place for us in the first half of this year. But we made up for it by growth in financial services and public sector. That sort of again kind of speaks to the model that we operate and if we start to see technology rebound, as I suspect it will, certainly next year, then that should put us in a very good place. What you're not seeing is sort of aerospace, defense, other areas, transportation and so on. We want to stay very focused. Part of this whole specialist thing is staying in certain industry sectors and certainly very specialized product sectors. If we start to spread ourselves too thinly, then we start to lose value to the customer. One of the things they love about us is there is a 0 learning curve. We walk into a customer and we understand the problem they're trying to solve very quickly, we can add value very, very quickly. And unfortunately, that, these days, if you can't do that, you are not going to succeed. The only way you are going to succeed is by offering it at ridiculously low price, which we don't want to do. Moving to AI. We are in a position where we could and we could have actually in the first half of this year, we could have delivered better profits. We could actually push our margin up over the next few years by 2 or 3 percentage points quite easily. I am not going to do that. I want us to invest more into AI. Now that's not to say that, that is all that we're going to invest. We are basically redirecting almost any money we can find out of almost any pot into this. We've been working in AI, both from a customer perspective and from an investing in product perspective for quite a number of years now. Generative AI has essentially just accelerated a whole load of that across the business. It used to be in just very specific areas. Now it's literally everywhere within the organization. The spend is split into really 2 different areas. One is just efficiency, accelerating existing processes and making it easier for us to provide a product or service to a client so that they can do it more quickly, maybe on a more self-service basis. And then there is -- let's create completely new things, create new products, new services that create a completely different solution for customers than is currently available. To give you a few simple ideas of stuff that's been done, we have like a lot of services businesses challenges around how do we make sure that all of the content that we're producing for brands is on message is following the brand guidelines and all the other stuff. And if you're producing literally thousands of pieces of content a month, that's quite hard to do, especially when they're being created by relatively young people who are notoriously lazy and don't do everything that they should. What we've created is essentially a version of ChatGPT that it's a private instance around each individual brand for a customer and you can literally test and repeat the content against all of those guidelines and make sure that it meets the guidelines and it will tweak the language for you and put it into the right place. That's taken a problem and actually turned it into a benefit. Now the customers are saying, actually, can you run this additional content through that for us because actually, other content that we are not producing, can you make sure it's our message and the rest of it for us. It's a small but nice incremental piece of revenue that we're getting out of that. And we had a product called Prism, which is built by the Palladium guys, which was to create a self-service due diligence tool for private equity. So the private equity would essentially go and look at more companies and that would give us amazing visibility on the types of stuff that they were looking at. Did it also became something where they were like, we should look at 5 companies, not 2, because it was easier for them to do. Now we've embedded AI into all of that. So what it does -- do a whole bunch of different things, but the simplest thing that I can explain is now it's become a live tool. So it becomes a tracker effectively, somebody says, I was interested in this company, I can now see how that data is changing so that thing that looked quite an interesting investment 3 months ago and doesn't look quite so interesting now. That thing that didn't look so interesting 3 months ago, looks actually quite interesting because it's constantly refreshing and finding new due diligence on behalf of private equity firm. And so again, that's just a nice, easy thing to do with an Agent3, they view an awful lot of e-mail marketing as a part of ABM. And a lot of it is because it's B2B tech stuff, it's pretty heavy data. So you have to be pretty brave to click that e-mail and open it. And what they've done is essentially created a way by what it does. It takes all that data and put it into a video. You automate the creation of a video and the click-through rates on that have skyrocketed because it just creates a very short video that explains whatever it is, this complex topic, piece of technology, wherever it might be and people are much more inclined. It seems to do that. I wouldn't be, but then I'm not a B2B tech bias. That -- those are just some small simple examples of the types of stuff that's going on. I want to give you a sense of the ambition. In the last 5 years, we've more than doubled the company from a revenue perspective. I believe that we can do the same again. And the reason I think we can do the same again is because we're actually in 4 areas that I think are going to continue to grow, partly because of the mega trends that I talked about earlier, part of because of the customer focus as I talked about earlier. That give us a massive opportunity. Data is going to be a massive growth business. If I'm really honest, if it's not for us, it will be a huge missed opportunity. It is a completely new market in some ways because of AI. The transformation of that sector is going to go through is quite interesting. The market research businesses in that space, if they do not rethink of themselves as data businesses, then they are going to struggle, quite frankly, because AI is going to automate an awful lot of the market research, processes is going to drive a lot of value out of that. But the underlying data is going to get ironically more valuable. We're going to see a decline in value on one side and a massive increase in value on another. On customer engagement, I think there's more modest growth opportunity there, but it's getting more and more and more digital to this point about customer experience and the digital sort of interface that goes on there. So I still think there's some good growth there. Customer delivery, IBM used to take and still does actually. A ridiculous number of customers to the Masters Golf tournament in Augusta costs them an insane amount of money. We proved during COVID because we had the data to prove it. We generated more value out of the $8 million that they spent with us that year and generated more sales and all the rest of it, then they generated by the more than 10x just for that one event. Companies are realizing that, yes, that stuff has a role to play, but it is still much better to spend the money on proper data-driven customer engagement work. Interestingly, TechTarget had a really tough time in this last 6 months there. I think they had an organic decline of 25%, which I was kind of blunt away by. But in talking to both Agent3 and Activate, which are 2 of the businesses we have in that area, both of them came back and said, that's because their product, they've moved so aggressively to SaaS and the customers want tap us, which is technology and people are so they want that combination because it's -- they find actually the TechTarget product too difficult to use. It's producing sales leads and are not completely convinced those are the right sales leads, they're not completely convinced those sales, these are ready to be given to the sales team and the rest of it. They want a human layer on top of it. Now I suspect in the next 4 or 5 years, that human layer will get eroded. But in the short term, it's still the way to deliver it. But it is a massive, massive growth area. If I'm completely honest, I could have turned that number into 500 million, the market opportunity there is just huge. Business transformation, similarly so. I mean if we're competing with McKinsey and Bain and the rest of it, it's really just a function of us doing a good job, executing well. And if we do, we can easily deliver that kind of growth. In other words, I'm not sitting here going, yes, okay, market conditions aren't perhaps as rosy as they were last year. But long term, the potential for us is still huge. A quick update on strategy. We will remain specialized. We're not going to see us change the structure of the organization. There'll be some small areas of simplification, but nothing major. AI is going to be everything. If we can find a penny on the floor, it will get spent on it. We do keep pushing up within organizations. It's the thing that we could do better. But with relationships that are starting to develop through places like Mach49, that's getting easier and easier. M&A will still be focused on the mega trends I discussed earlier. AI data sets are going to be of massive importance. And I separated the 2 things out because actually, the investment in AI products is one thing. But if we don't have the underlying data, we definitely will not achieve what we need to achieve. And then obviously, we've kind of introduced this new element around capital allocation. In terms of outlook, we do continue to trade broadly. I think that was the word that everybody settled on in line with management expectations. Despite all of the headwinds, I think we will still grow this year, not perhaps what I would have liked us to do, but I think given the conditions. I think it's -- especially with what's going on in tech, I think that's still a pretty good outcome. We do still see good progress. One of the things about having a portfolio is you can really see where the money is. You can see which areas of business is doing well, where customers are directing money and where they're pulling money. It gets masked as soon as you start to push things together, it's harder to see what's going on. But we can really see it, and it's clear that there are still some really exciting areas of growth. And we just have some very good businesses. I mean SMG in itself is a phenomenal company, an absolute phenomenal company. It is going to continue to grow incredibly good rates and deliver very good margins. And that's just because they're a really good company in a really good space. If anything, the market is just coming to them. We do add new clients. I talked about that. We continue to run the balance sheet cleanly, as Peter said, he and I get very twitchy if we get even close to 1x EBITDA, and I don't think we'll ever get that close, and we're just going to spend every penny on AI. That's it. If I haven't said it enough times. That's what we have to do. We can still do good strong margins. I'm not saying that we're going to take a 20% margin and turn it into a 16% margin. I think we can stay at and maybe even still actually increase the margins over time. But I'd rather say let's continue to deliver a good strong margin. And if we have excess capital or excess profit effectively, then let's reinvest that into the organization in the right ways for the long-term growth of the business rather than sort of artificially raising the profit margin, which in the short term would be good, but in the long term would be, I think, a bad move.

We're done. Questions?

[ First one ]. I mean some of the things you were saying about the AI absolutely fascinating. How's [indiscernible] is the development and tick down thinking -- you talked about taking complex information [ COVID ] videos. Can that be used throughout the rest of the [indiscernible]?

So JP, who's sitting over there, Jonathan Peachey [indiscernible], who's our COO. So he's driving all of our initiatives across the group or sort of making sure that everything gets coordinated and is doing a lot of really good sort of -- we are doing -- we're sort of trying to do 2 things. We're sort of really pushing the companies themselves to do their own level of innovation. And then at the center, what we're trying to do is challenge them with ideas. So for example, we had a summer of code this last year where we hired a whole bunch of ridiculously smart but ridiculously young and almost none of them were from England people, [ which is really ] sad. There was one person from England, I think. Yes, 9 people from India and 1% from China or something that was kind of like, okay, where are the skills that are not in England, and we're extending that process. But that was a way for us in the center to just kind of like take ideas, throw them in, prototype them and see what could be done and then throw them into the businesses and say, right, you go play with this, see if there's something that could come out of it. And we'll just carry on doing that. But what we are doing, and we're getting really great reception on is, okay, you're all -- you guys are all building something that's kind of similar, let's put all of the code into GitHub so that you can all see what's been built and then you can actually -- rather than you having to build from scratch, you can basically take whatever it is that you need and create your version of AI, that product I mentioned about the brand guidelines and brand consistency and so on, that's a perfect example of that. It's I -- and then we might have asked to live within one of our businesses is not actually that hard to build in terms of like the basic code. What you do need to do is do all the work to ingest all of the brand content that's specific to that particular client. And within the constraints of something like ChatGPT where you've got a limit of 25,000. It sort of does create some complexities because you then have to try and figure out like which content do you ingest and some of those kinds of things. So that's where actually creating the code part of it is only one part of the challenge. So that's just like make that really simple, but just do it once and then use across the organization.

I do my other 2 [indiscernible]. On tech trends, you were saying you could see things getting better in the second half and into next year. Is that just lapping the performance? Or are you actually starting to see something. And then my third question is just about new business and [Technical Difficulty] situation, what is [indiscernible]?

Some of it is lapping for performance, if I'm being very honest with you. Some of it is also AI which is starting to really impact in a good way. Semi had a really good time during COVID, massive supply chain shortages and blah, blah, blah, so they just didn't have normally great market. And that is sort of -- in some areas, is completely hit a wall. But in other areas, obviously, through things like NVIDIA, it's just like very crazy time, but that is actually -- I think people see something like NVIDIA, but then there's a whole layer of other small semi companies that are also starting to really pick up and do well out of it because they're creating other specialized chipsets, other GPUs, whatever. So I think there's a portion of this is AI, there's also just a portion, which is the this ingestion problem is starting to run its course and companies are starting to reinvest in, okay, I know I have to update or whatever it is that I was going to update or we have grown or we bought a company and we now need to put everybody on a single platform is like we do. It's kind of annoying. We have to buy more economy, which everybody hates. But what we do, right? So there are just natural cycles that start to actually play into it, and that's really one of the reasons. I think also -- assuming the trends follow what we're seeing and hearing out of the venture capital world in California is that was a ridiculously quiet period in the last -- probably the last 12 months, really. And they're starting to wake up, they're definitely working up on AI. They're like all over it. But they're starting to wake up on lots of other areas as well. And they are sort of a bit like the first-time buyer in the housing market, to their spending and doing the whole thing starts to ripple through. So assuming that, that really does come back in the way that it seems like it's going to next year, that could be very, very good for us, not necessarily because we are massively exposed to the VC spending, but more because of the ripple effect. I'm sorry, what was your other?

It's on new business.

Actually, it's very healthy. I think the only thing on that is the time frames have definitely got drawn out. And clients start dates for things is where -- I mean, like we have a number of businesses with quite significant backlogs of revenue where the clients have said, yes, we're going to do this. But we're probably going to start this in Q4 or we may start this in the new fiscal year type of thing. And so we just can't budget for that at the moment. It's sort of like -- we're sort of -- we know we've won it, and we have the contracts and all the rest of it, we just don't really necessarily know the start date for it. But overall, it's actually quite healthy. In some areas of the business, the competition is more, you went from being 2 or 3 vendors who are pitching to 6 or 7, and -- but our win rate is still very good. So I'm not concerned about that as a driver.

Yes. Ciaran Donnelly from Berenberg. A few from myself. I guess just kicking off, in terms of the shift you've seen in terms of short-term engagement solutions, conversion tools. One, could you just talk about whether you see that as kind of a perpetual trend? Or is it transient? And is it linked to, I guess, business cycle, i.e., as we come down, people focus on the short-term tools and as we turn, they might go back to for engagement tools?

That's a very good question. I unfortunately think it's a permanent shift. I think, unfortunately, it's almost a bit like the political world is polarizing. Sort of you getting -- you inevitably have some brands like a Procter & Gamble, Unilever, Coca-Cola, American Express. So pretty much all of those are customers. And they are -- it's in their DNA. They just cannot think differently from that perspective to a degree. But even those organizations have kind of also got a side of the organization that's gone really short term, it's like almost what can we do this week? What can we do to sell more this week? How can we shift the needle? I mean it's interesting because we see it through our SMG business and we actually have all of their data through our SMG business. So we actually see all of the customer data that P&G and Unilever and all these guys have. So we can see also what promotions they're running and all the rest of it. And you can see the uptick where they are like, okay, we need to just drive more sales this week in this part of whatever country it is or whatever, and it's pretty fascinating. That money is coming from somewhere. It has to come -- it's not an infinite part of money. And I'm sure what is happening is they're just pulling some stuff that is less measurable and the rest of it. But I don't think you're ever going to go completely away from brand, but I think the short-term spend for brands if you go back 10, 15 years ago, it was a tiny portion of how they spend their money, for most. There were always some that were different, but for most people, whereas that has now -- so much of the money has shifted in that direction. It's just never going to go back because it's typically very measurable. You can kind of look at the ROI on it and you can kind of go, okay, you can literally see them move based on the data. It's like, okay, spent 10% more, spent 5% less, then 20% more or whatever. And so they shift money in and out. That makes it harder for us to forecast, but interestingly, thankfully, because we're starting to see underlying data, we can kind of see why they're making those decisions, and that helps us navigate from that perspective.

And then just on the goal of doubling the size of the business in 5 years. One clarification. I assume that's an organic goal there's no kind of inorganic baked in?

There'll be some inorganic baked into that. It's not going to be a huge component of it because we'll do bolt-ons. But it's -- I can't bake into that a major acquisition. Otherwise, I'm cheating. I said, look, yes, we doubled it, we can do that. EBay used to say about winning, it's like -- it's not winning. You'd say more than anybody. That's not really win. No, I think there'll be -- it's incremental acquisitions, not transformative.

And then I guess, just in terms of the organic element, giving us a sense of how we should think about underlying market growth contributing to it? And then, I guess, in terms of AI, what's the benefit from efficiency gains versus new products? How should we think about in terms of those [ 2 ]?

Doubling in that period, the efficiency gains to drive more the margin necessarily than they do the revenues. I mean, there'll be some small incremental revenue that you'll get from driving a more efficient product. It's like Prism, I can see customers are a little bit more addicted to the product than they were, and they're more inclined to use there because it's just -- I can look at it every day, and it produces a different answer, right? So you sort of create more usage out of some of those products, but it's not transformative in the way that it would be if it was a radically new product. And I think that's the part that's hard to predict at this stage. I mean it's sort of like -- I think if we are able to produce radically new products, then I think we could do even better growth than this, I think it's probably where my head would be. I think what I'm trying to sort of forecast with this is if we just execute well from an AI perspective, not brilliantly, but well, then we should be able to do this. AI will have some negative impacts on our business. There's no doubt about negative impacts on every big business. It has to. I mean, otherwise, why are you doing it? And if that's the challenge for us is finding more positives and negatives. I mean, I know it's obvious, but it creates lots of new ways to do things. And one of the things that we were talking about is we are this collection of specialist businesses, but that does make is, in some cases, a bit like an electrician, a plumber, a carpenter, a roofer or whatever. And if you've got an electrical problem, you want the electrician and so on. But there are some situations where you don't know what the problem is. And that's where we are sometimes a little weak, right, is because our electrician walks in, the customer goes, they got this problem and they go, well, that's an electrical problem there. And yes, they could solve it, but it really may not have been the right way to solve it in some situations. With AI, we can create some -- well, JP and I was talking about this earlier, the quite interesting new tools, which start to bring together those different capabilities so that you can actually create a diagnostic that is agnostic, if you like, it's not coming in an electrician or a plumber. It's actually coming in, in a way where you're saying, okay, I can now look at that problem for you. And then I can actually interpret that problems in really interesting ways. And then we can bring you in the people who are the right people to figure out and solve that problem. I think if we can start to do that kind of work, then actually we're in a brilliant place with customers because then we're still keeping the specialist capability. We're not turning people in generalists with making AI be the generalist on our behalf, if you want to call it that, and a wicked smart generalist because it can actually -- it can synthesize all of the really clever thinking and experience and knowledge of those individuals and put it into a bot. We were trying to come up with a name earlier with the bot. And if we do, then that to me is sort of -- that kind of thing is the genesis of us doing some things that are quite transformative.

It's just part of your [indiscernible]. Maybe one for Peter first. And if we look at Engage and you strip out Google, would that segment still be in kind of the first half? Or do you think it would be actually up?

Google was off about GBP 2 million. So year-on-year, which was very much a little bit [ under ], a little bit beyond. So I think it probably still down a little bit but less. I mean, interestingly, we had brands like Salesforce, Amazon, we're actually up. So it was quite a sort of mixed performance in -- will be our biggest client, that was one of the reasons why it was in decline.