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

Okay. So, good morning, and thank you for joining us on what is a beautiful day. It's very nice to meet you all again. My name is Sam Knights. I am the new CEO here at Next 15. My background comes from the world of Procter & Gamble, where I spent much of my early career working up through the business, and marketing program and a lot of my time spent running marketing through to that in Western Europe. For the past 12 years, my career has been spent building a business called SMG with its 2 founders from start-up to what is a global entity today. And along that journey, we were acquired by Next 15, and I've spent the last 4 years in my career working within the group. So I've seen it at its best, and I've also seen it challenge too. And it's with great pride that I take this role following on from Tim. And as this is our first interim results together, we want to set out how we've performed in the first half of fiscal year '26, specifically the decisive actions that we've taken already to start to reshape the group, and how we're positioning Next 15 for its next chapter. So we'll begin with an overview of our performance and the actions taken in the first 100 days. Mickey will then cover the financials in detail before I return to summarize. And I'm obviously joined today by Mickey Kalifa, our CFO. He will introduce himself in just a minute. But between us, we'll cover that strategic progress we've made, and the detailed financial performance for the first half. So let's start with a look at the group's overall performance, and the themes that define the first half. We'll dive into each of these headlines in more detail in the coming slides. But as a summary, here are the key headlines. Our first 100 days have been about decisive action. We've addressed legacy issues in the group. We've made clear progress on simplifying the portfolio, and we clarified the direction. Trading has been resilient with strong growth in consumer, government and digital transformation, offsetting some weaknesses that we've seen in technology clients. We've maintained strong margin discipline, and operating margins edged up despite slightly lower revenues. Our balance sheet remains strong. Net debt is down, and we'll maintain our dividend. Perhaps most importantly, we are sharpening our strategic clarity. We're focusing on the businesses that we believe have the greatest long-term opportunity. And whilst we will not go into that detail today, we will be announcing much more detail on that in the shareholder event in the coming months. So let's look at the details. This is the market context and performance. And I should say at this point, all the results in this presentation are adjusted to exclude Mach49 on the basis that it will be treated as a discontinued operation, and its results will be reported separately for the full year. Context of the market remains mixed. We've seen economic uncertainty, and tariffs that hit discretionary marketing spend. And also, we've seen technology clients continue to shift their investments away from marketing towards CapEx for things like AI development. As a result of that, we've actually seen technology revenues down for our group by just over GBP 12 million, GBP 12.1 million, around 15% year-on-year. But at the same time, our growth markets are performing strongly. So consumer and retail revenues grew 9% by GBP 6 million. And actually, for the first time, they now represent the largest spend in our group, 31% of group revenues. And we're actually seeing the marketing mix change. We're seeing more clients investing in channels that can be targeted through first-party data and that can be measured through closed-loop measurability. And we're also seeing an increase in the work that we're doing helping the U.K. government prepare for the advent of AI and digitization. In fact, Transform, which is our digital consultancy grew more than 50% through government work. Crucially, our simplification program is well underway with consolidation and disposals delivering efficiencies across the board, and I'll come to talk more about that in just a minute. So as a result of all of this, our net revenue was down slightly 3.6% to GBP 230.8 million, but our margin edged up through our disciplined cost control. And as a result, our PBT was broadly flat at GBP 30.9 million. So all in all, a robust performance despite some tricky market conditions that we're operating in. Mickey will come on to talk in more detail about many of the measures that are highlighted in the summary slide. However, the important takeaway that I want to give you is that we're in strong financial health with an improving EPS, a reduction in net debt down to GBP 45.3 million from GBP 74.8 million a year ago, and that's leverage at just 0.5x EBITDA, and working capital has materially improved, too. So we're able to maintain our dividend at 4.75p, which is supported by the strength of our balance sheet. So a business that is in strong financial health. So what have we been doing? Well, I say I'm the new CEO. I don't know whether I can still claim that. It's just over 100 days into the job. And what we've been doing in those 100 days. But it fits under 3 big headings: resolve, simplify and clarify. Let's break these down independently. So under resolve, we've taken decisive action on some of the legacy issues that we discovered, specifically Mach49, which is now being wound down and will be treated as discontinued operation by year-end. Mickey will talk to this in a little bit more detail later in the deck. Arbitration continues, but does not change our financial guidance. And we've also done a lot of work in enhancing our governance following an internal review. Under Simplify, we've divested Beyond and Palladium, the first 2 businesses, Next 15 has ever divested. We've integrated Savanta and Plinc. We've begun integrating House and Elvis, and we've brought together 4 B2B agencies under Project Goose. So in total, in the last 100 days, we've reduced the portfolio from 22 different businesses down to 12. We've also had a firm hand on cost control. We've reduced headcount by 8%. And we've also looked at our Board as well, and our new Board structure also reflects a simpler, more focused group. And then finally, under Clarify, we've had a really good look at our business. We're doing a full portfolio review, and we're shaping our business under what will become 3 pillars of data, technology and activation. This will help us to determine who Next 15 is today, but actually crucially what we want Next 15 to be in the future, and what makes the Next 15 business and what doesn't. This will be the framework for the next chapter. And whilst we're not going into this today, we'll be announcing much more detail about that in the coming months. So a lot of work has happened in the last 100 days, but the result is that we are moving towards a simpler, leaner, more focused Next 15 that's ready to grow into the next chapter. But actually, despite some of the challenges that it's faced, Next 15 is really strong at its core. It has strong strengths that we're building on. We're really data-rich for our size. We've got proprietary data sets like Brandvue and Plan-Apps, which track over 4,000 brands and over GBP 1 billion of media spent. We're agile at scale. We're large enough to compete globally, but we're also small enough to move quickly, as you can see in the last 100 days. Whilst others are talking about AI, we're actually helping our clients to deliver it through proprietary products like synthetic personas, product called Delve and Maistro, which are out there in market today, and helping our clients, as I'll come on to talk in the next slide. Crucially, we have exposure to high-growth markets like retail media, data and analytics and digital transformation. All of these markets are growing at a CAGR of over 10%, double digits. And finally, what struck me the most in the last 100 days is working throughout the group is that our culture, and our talent remain a defining strength. Our retention and engagement are ahead of industry norms. And all of these core assets give us confidence for the future, and the ability to shape the group into something that is going to be incredibly competitive. Perhaps, we haven't been -- perhaps we have been guilty of not sharing enough of the work that we're doing, and actually, when you look across the group, these strengths are already translating into real outcomes. So to bring this to life for you, for HMRC, the Transform team have automated parcel identification using AI under the Windsor framework to cover 120 million parcels a year with record accuracy over 80%. With Boots, SMG's Plan-Apps has activated first-party data from their Advantage card, lifting ROAS for clients by around 30% and improving supplier spend by 20% to 30% too. With NatWest, Savanta has developed a bespoke communication testing platform, tested over 300 high-risk communications, helping to avoid regulatory fines and saving over GBP 1 million in service costs. And with iManage, Project Goose, which is the 4 B2B marketing agencies that we're putting together have delivered an integrated campaign, doubling initial revenue and unlocking long-term growth. These are really clear examples of where we're really strong, and where our model is in action, which delivers impact and efficiency and compliance for our clients. And we've also, as a result of this type of work, increased our confidence in our pipeline, including some good strategic client wins, which because of the nature of what we do right now, I can't talk to them here as much as I'd like to, but it gives us great confidence for the future too. So in summary, before I hand over to Mickey, we've acted really decisively. We've resolved some legacy issues. We've simplified the portfolio. We've clarified our direction. Our trading has been resilient. Margins have held firm. Cash flow has improved. Balance sheet remains strong. Dividend is maintained. Most importantly, we're creating a simpler, more focused Next 15, which we'll be able to unveil to you in more detail at another event later this year. Now I'll hand over to Mickey.

Thanks, Sam. Thanks very much, and thanks for hosting us here this morning. I've known most of you for quite some time, and I met all of you. But I'm also very new. I'm as new as Sam. I've been in the role now over -- just over 3 months. But good news is that a lot of the things that we're doing, most of the things that we are doing are very, very familiar to me. I've been in the industry in a similar role for a considerable time. Prior to joining Next 15, I was CFO of a private equity-backed business called debt, roughly the same size as Next 15 and very, very similar. And then prior to that, I was also in a very similar role as CFO of M&C Saatchi. And so hence, a lot of the elements of this business are so very familiar to me. If we look at the results now, and the P&L, we think it's a good set of results for the first half of the year, and I'll take you through some of the highlights. First of all, at the revenue level, you can see that our revenue declined marginally by 3.6%. That decline was down to a number of factors, including a somewhat weaker U.S. dollar. There were clearly global economic challenges that have lingered, continued. There have been policy shifts in the U.S. We've seen tariff uncertainty in the U.S., and there has been a continued effect of reduced tech client spend. Now all of that has been somewhat partially offset by strong growth in a few of our businesses, including Transform, SMG and M Booth, and we'll talk about those in a bit more detail in a second. At the operating profit level, it was pretty much flat year-on-year, GBP 32.7 million versus 33.7 million. And then most notably perhaps here is the fact that our margins marginally -- very marginally improved in the period from 14.1% to 14.2%. And that is a function of the fact that we had some restructuring, cost restructuring last year that fed into this year, and we continue to focus on cost management this year. PBT was also flat, GBP 31 million versus GBP 31 million, and we -- our diluted EPS also improved. The primary driver for that was the reduction in our minorities as a result of the buyout of one of our companies, Agent3 last year. This slide looks at our revenue performance half year versus half year. The big thing to really focus on is the organic revenue, which declined on a constant currency basis by 5.3%. And the chart -- there's 2 charts here. The chart at the bottom really is maybe one to focus on because there were 2 components to it, up and down. We had several businesses that grew. We talked about Transform, SMG and M Booth. Transform in particular, grew significantly last year. We did, however, have some declines that was spread across a number of businesses, including Marker, including our B2B marketing businesses, and also our creative business, House 337. Here, we look at how our operating profit performed. First of all, it was flat, 33.7% last year, 32.7% this year. Margins pretty much flat, slightly, slightly up. And that margin improvement was due to restructuring from last year, and strong cost management carrying on this year. So we saw the full year -- we're beginning to see the full year benefits this year of FY '25 savings, and we're also seeing productivity improvements coming through this year. And that's kind of measured by the fact that our headcount this time last year, we had an average of just over 4,000 heads. This year, we've just got -- our average is just over 3,700. On to the segments, we will -- we continue to report the same 4 segments for H1 '26 as we've always done, but we will move to a new segmental reporting format when we come to year-end and the full year results. So this is probably almost certainly the last time we'll be referring to the business based on these 4 segments. But if we take each of these in turn and start with Business Transformation, this was the one that grew by 31%, and that was down to the growth in transform, that grew by 51%. That's our government and public sector transformation agency. And not only did it grow, but it also had stronger margins as well. Customer Insight declined by 6%. And the main reason for that was the decline in our Savanta business, but that business actually had improved operating margins so that you see margins improving in that business due to cost-cutting. Customer delivery declined by 8%. There are a number of factors here. We had relatively weak trading in Activate, which was down fairly sizably by 20%. That was partially offset by growth in our SMG business, which grew by 14%, but margins in this sector were down, that was due to 2 factors primarily. One, SMG incurred some investment spend this year. So despite growing in revenue, as growing -- as it was growing in revenue, it also spent. And then we saw some negative operational leverage effects taking place in Activate. Customer Engagement, our last segment declined by 10%, and that was down to weaker performance in Marker, Brandwidth and our creative business House 337, although that was partially offset by some very strong growth in M Booth. Finally, on this page, our head office costs, they came down this half, we reported GBP 7.5 million prior H1 '25, GBP 10 million. On to what our customer base looks like, this is a slightly different picture to one from previous halves. For the first time now, our Consumer and Retail segment is our largest segment. That now takes up 31% of total revenue versus 27% a year ago. And that's fueled by expansion in the Retail Media business that we've been talking about as well as influencer marketing. Technology, which was our largest segment, is now our second largest segment. That's now 30% of our total revenue. It was 34% a year ago. And it's well written. It's well documented across the board that tech clients have reduced their spend on the kind of products and services that we and our peers deliver. And then public sectors, worth noting is our fastest-growing vertical, and that's all through Transform focused on government public sector spend. And that's grown now to 13.5% of our total versus 9% a year ago. On cash flow, we think it's a pretty good picture on cash and net debt. There's 2 slides to come. Net inflows from trading were GBP 30 million. Now those were offset understandably by significant outflows for earn-out payments of GBP 26 million. Within our cash flow, it is important to recognize that we -- there's a lot of work that has been done over the last 12 months. It predates me, but it's continuing now, whereby our operating cash flow grew or strengthened by GBP 4.3 million of working capital inflows, and that compares to a GBP 32 million outflow this time last year, so that's a significant swing. On to leverage and liquidity. Our net debt is at GBP 45 million. It was GBP 38 million a year ago. Our net debt-EBITDA ratio is half of EBITDA. We have a covenant limit of 2.5x. So we're well, well within that. We really are focused on managing this as a priority item for us and will continue to be. And then even -- and we'll come on to talk about Mach49 in a minute and the Mach49 provision for earnout. Even if we include that in our calculation, even if we were to pay that out, our net debt-EBITDA ratio is still 1.5x EBITDA, well, well within the covenant limit. Talking of earn-outs, this just gives a picture of what our earn-out liabilities look like and have looked like, and how they've come down. A year ago, they were at GBP 37 million. 6 months ago, they were at GBP 44 million. They're now down to GBP 19 million, and of that GBP 19 million, we've already paid down about GBP 5-or-so million. So that's come down tremendously over the period. We do refer in this chart to the Mach49 liability, and we'll talk about that in a bit more detail on the coming slides. This looks at our adjusted PBT versus our statutory PBT. Our adjusted PBT is GBP 30.9 million, coming down to a statutory PBT of GBP 2.8. There's probably just 2 big areas to sort of talk about here. There's a number of items here, but the 2 that I'll focus on are number one, the goodwill impairment and the intangibles write-off, that's GBP 10 million. All of that related to goodwill and intangibles in Mach49. All of that have been written down to 0. We also have an item that is normal and appears regularly, which is the acquisition accounting-related costs. These relate to the -- of GBP 12 million. These relate to the amortization of acquired intangibles, the continued charges for employment-linked acquisition payments, and the movement in our -- the value of our earn-out liabilities. We are -- we have -- as you can see, we have a very, very solid balance sheet. We've got a good level of cash. We've got a minimal amount of debt. We feel we're in a very, very healthy position to be able to announce an interim dividend of 4.75p, which we're maintaining the same level from prior year, and this comes at a cost of GBP 4.75 million. On to Mach49. There's probably 3 points to mention on this. Number one, we've mentioned this once already, but we will be treating Mach49 as a discontinued operation by the end of this financial year. And so its results will be presented separately in the financial statements to our ordinary results. There are a number of costs associated with Mach49. We had an operating loss in the first half of the year of GBP 2.9 million, and we expect further losses in the second half of the year. We've also incurred legal fees and associated fees in the first half of the year, about GBP 4 million in the first half of the year, and we expect additional costs in the second half of the year. And as I mentioned, we've taken some write-downs in goodwill of GBP 9.1 million, and we've written off the intangible in Mach49, nearly GBP 1 million. And then also, we have an earn-out liability that we've retained our position on the balance sheet of GBP 60 million. Based on the evidence that we've received to date, we maintain our position regarding the nonpayment of that earn-out. However, for prudence, for this half year, at least, we're keeping that GBP 60 million on balance sheet. Finally for me, just the outlook for the rest of this year. The first half was in line with our projections. And the first couple of months of H2 are also performing just as we expected. The phasing of revenue and profit -- adjusted operating profit is consistent with previous years. So with all of that, we feel comfortable keeping our forecast as is, and we anticipate our results to be in line with market expectations. Back to you, Sam.

Thanks, Mickey. So in summary, these are the headlines that we touched on at the very start of the deck. Next 15 is a really strong core. We got good data for our size. We're agile at scale. We are early practitioners in AI. We have businesses that are really exciting in strong growth markets, leading those markets in some cases, and we have really strong culture of people. Mickey and myself and the team have worked incredibly hard to resolve some of the legacy issues quickly, and decisively in the first 100 days to simplify the group and to clarify our future. So now you can be confident that we're in control, we're executing with discipline, and we're positioning the group for sustainable growth into the future. Any questions? Should we go this way?

Very impressive performance in Transform. I just wondered if you can expand a little bit more on what you're doing there, but in particular, how penetrated are you, and what the pipeline sort of feels like on a forward-looking basis? And then second one, just kind of impressive working capital performance, particularly versus sort of where we were this time last year. Is that sustainable, that positive working capital? Or should we be mindful of a bit of seasonality in there, and how that looks for the full year?

I'll take the first one. So Transform is a really exciting business. The way that they talk about their business is solving naughty problems, and they're experts in digital transformation, early adopters of AI. And their way of working is to actually integrate teams within other businesses, which is what we're seeing as a trend, I think, in the future of kind of how agencies and partners work with clients. In my day, at P&G used to write a brief for a week, send it to a client, wait for 6 months, come back. And there was a very transactional relationship. That's not how it works now. And that's not how Transform work. They actually send teams in to work alongside senior members of the team to tackle really difficult problems that might involve structural problems, digital problems, how you unlock the spaghetti that exists in terms of some of the legacy systems in these businesses, and as a result, they're seeing major success, specifically in government work at the moment, but I think there's potential to go beyond that. And yes, in answer to the question on the pipeline, it looks strong. We're feeling really confident about the potential of that business. And interestingly, I think there's also a big role for that business internally for us in terms of knitting together some of the data, and the AI abilities that we have across the group to allow it to be more accessible to some of the other businesses that we have. On the question of working capital, yes, it's definitely been an impressive performance year-on-year, very impressive. And that's in large part down to the focus of working capital as an item, whereas perhaps historically, it hasn't been, but certainly over the last 12 months, and as I said, predating me, this is something that the team, the company is really, really focused on. We're not going to let go of it. So the gains that we've seen this half, we are going to focus on continuing to improve on. We won't -- naturally, we can't get these level of gains continuously, but we're not going to go back to where we were before. And it's also worth highlighting that within the portfolio of companies, there are a few businesses that are really working capital hungry, really intensive working capital, particularly the retail media business. That's just the nature of that business. But even there, we're taking a very close look at it with a view to even enhancing that working capital.

Three, firstly, on sort of the integration of Savanta and also House and Elvis. Just wondering if you could shed a little bit more -- share a little bit more detail on that, sort of what are the benefits? Is it primarily around go-to-market and driving cross-sell, I guess? Or also, is it more about sort of cost and taking further cost out of that? Secondly, in relation to that, with the restructuring program from last year, is there further cost to come out in H2 that could help support the margin? And then finally, just a little bit of progress on SNG and sort of its expansion into the U.S. What sort of actions have you taken, any sort of early positive indicators, that would be helpful?

So we'll start with Savanta and Plinc and House and Elvis, there's two different types, I think, of integration. So Savanta and Plinc is a really interesting one because I don't know how much you know about Plinc. They've got some very interesting technology that allows you to identify individual consumers and target communications based on a large data set. Obviously, Savanta has a large data set. And what side of business that we're seeing growing in Savanta is the data and technology side. And that's being dragged by the more kind of traditional legacy research side. And so by integrating Plinc and Savanta, we enhance those capabilities, and that allows us to go to market in a slightly different way. So we're really excited about the benefits there. On House and Elvis, that is more about scale. There are obviously 2 businesses that are working in similar areas, and we have a breadth of clients there, and those clients can benefit from the combined scale of those 2 groups. So that's why we've decided to do that. There are obvious benefits on top of that in terms of cost and simplification, and how we manage those businesses too. But they were more strategic choices than they were P&L choices. In terms of restructuring costs, do you want to take that, Mickey?

Yes, yes. Back to simplification, that program is continuous. It didn't stop in the first half of the year. It's something that will be ongoing for a while, which does mean in certain businesses, particularly those businesses where -- which are perhaps most challenged, we are going to continue to manage margin by taking costs out. So there are a few businesses within the group for which there is a continuous program of restructuring with the aim of, as your question points out, maintaining the margin into the second half.

And then I think the final question was on SMG's global expansion, which we're very pleased with the progress. They launched their first Retail Media network earlier this year. And we have a lot of interesting leads. It takes time. And I think when you expand globally, what I've learned in doing it the last 4 years is that you have to trade carefully, and make sure that you're spending your money wisely, which we're doing in SMG. But the early signs that we're seeing, we're very confident behind that business, and its ability to grow in other markets.

Just a couple from me. Just a follow-up on SMG. So reinvestment of growth and revenue growth into expanding its footprint in sort of over in North America has been a feature for a while. Are we seeing that as an ongoing process of reinvestment? Or is that a phase of reinvestment, which is now coming to an end now that new infrastructure has been put in place into that market, and now, the focus is around client wins and market penetration. So that's the first question. Second one, taking a step back, obviously, good to see the guidance sort of -- when you look at the sort of the revenue environment out there, do you see it as a continuation of the trends that we're seeing, so continued weakness likely from tech clients, but being offset -- largely offset by sort of gains and growth elsewhere in the portfolio? Or are you beginning to see any sense for the tech clients there are starting to stabilize and perhaps early signs of any recovery there? So I was wondering what sort of assumptions are sitting behind your growth outlook for the second half?

Yes. So starting with SMG. Interestingly, with SMG, it's got so much potential in so many areas. Global expansion is one of them, but also there's a big technology opportunity too. And so whilst we'll see initial investment in global development, which we've opportunity growing in North America, I'd imagine that we'll continue to invest in that business because we also see opportunities in growing our technology on some of the areas that retail media needs improvement, SMG is very much at the forefront of that. On tech, we are starting to see very early signs of recovery, but none that would give me a huge amount of confidence that the trend is going to reverse very quickly. And so I do see a continuation in some of the trends that we've seen in the short term. However, the very early signs that we're seeing out of our market businesses in the U.S. is that we have more confidence in the future forecast of those technology.

So I mean, there's been lots of debate about how with AI revenue models within the industry will change in the future. And I guess with the AI that's going on within simplification process, how do you see the revenue models of the group evolving for the future? And then the second one is just on -- you mentioned enhanced governance. So how are we thinking about, does that mean slightly higher central costs going in the near term? And the final one is, I know Mickey, you talked about kind of the program of, okay, costs will continue in the near term. But with kind of investing a bit more in AI and adding AI into your processes, does that mean it's not just the weaker agencies, which you could take out costs, but actually across the board, you can take out a bit more because of AI?

I'll take the first question.

Sure. I'll take the second one.

Can answer the first. So yes, AI is undoubtedly the major driver of what we're thinking about, and what we're seeing. I don't think anybody knows quite yet exactly how it's going to change revenue models, but I can give you some early indications of what we're seeing. So I think we're seeing that the kind of time, and retainer models becoming less important and actually clients investing based on outcome. And so where we can create tools, and technology that allow us to use the data that we have that provide client outcomes that then drives more data, allows us to reinvest in our technology, drive more client outcomes. You start to create this incredible flywheel that once you have AI at the core of it is incredibly scalable in every market in the world. And so we're starting to see some really early signs of that working brilliantly in some of our businesses, specifically in SMG. And as we talk later in the year, I'll be able to talk a little bit more about what we see the future of that being, but for us, it's incredibly exciting. Do you want to talk about central costs?

Yes. So, Jess, your question was whether with more governance, enhanced governance, we're going to have to spend more money at the central level. I don't think those 2 things are necessarily linked. We are not planning. We're not budgeting to spend more centrally to deal with that. It's just we have, as you know, a very -- historically a very, very decentralized model of operating. And what we would like to do, and what we are going to do is just make it a little bit less decentralized. We're not centralizing things. We're just making it rather less decentralized. And that requires a little bit more focus and effort than before, but that isn't necessarily going to result in any more count or any more sort of software-related costs.

Yes. I'd add to that. I think kind of phrase that we're using internally at the moment is unified, not uniform. So trying to bring in to the center things that are going to help each of our businesses to grow whilst allowing them still to be their businesses and to be entrepreneurial. So I'd agree with Mickey there. And that comes to your final point on AI. We think there's a big opportunity for Next 15 to become more of a platform in the middle of those core businesses that we see as the future, driven by AI. And that will, in turn, help us to reduce costs. Now obviously, that doesn't mean we get to keep all of those costs because clients will expect that, and we need to be on the front foot. We're already having conversations like that with a number of clients saying, well, I don't need all these people anymore. Sure you can do that in AI, but where we're finding real value is in helping them to deliver things more at scale, allowing us to reduce our costs and pass some of those savings back to them, which allows us to remain competitive. And certainly, that's been the case in a lot of the bigger contracts that share to the business.

There isn't much left to ask for business, but I have got some questions. Just first of all, in terms of the retail DX data and insights area, you talked about, how much of group revenue does that now represent bearing in mind the disposals? Just an idea on that. And then on Mach49, the losses there, sort of can't see quite where you're at in terms of people going all the rest of it. Can you just give us some idea of where that's at practically, if you shut the doors? Or is it ongoing? There's still going to be some losses going through there? And then just sort of picking up on some of your comments. Should we expect to sort of wider move into performance media as you go forward, just looking at the way the marketplace is going, trending clients wanting performance, pay on that basis, and just obviously, your success in SMG. I just wondered if that's the thing we should expect.

I'll do the first one, Sami, do you want to do the second

Yes, I can. So Retail DX and data represents just over half when you look at the businesses that play in those areas.

Mach49 wind-down process is very much underway. There are still -- it's very much still operational. We are -- we have an obligation to a number of clients, and we're fulfilling those obligations. So -- and we will close that business, wind down that business when all those obligations are satisfied. And we're on track to do that by the end of our financial year. So there are people there and been working very, very hard until that time.

And as a market here, I hate the word performance media because I think all media should be performing in some way. And this kind of -- we see at P&G is above the line, below the line, upper funnel, lower funnel. I've used the term quite a bit there to try. It's all changing. And actually, what we're seeing, I could talk about this for a while, but what we're seeing, we've seen in SMG is that, that old split between kind of brand media, and performance media is all becoming one thing now because the way that brands are targeting their media has changed to first-party data, and that means that they can measure everything. And so actually, I think businesses that will perform well in the future are those that can do all of media, whether that's upper funnel fame media, awareness medias, lower funnel to in a way that can be measurable. And I think will we see a move towards more performance media in that sense? Yes. But it's critical that you back that up with the right measurement, the right data. And that's kind of what's exciting about that side of our business, the comp side of the business is that we have an SMG that can do that, and we have a Savanta that can measure it. And so there's good opportunity there.

We have a couple of questions from the website. So the first one is from Roddy Davidson at Singer Capital Markets. Have you -- do you have a number in mind, the optimal number of operating businesses within the group in its current?

Yes.

Next question is from Steven Liechti from Deutsche Numis. Mach49, please, can you clarify how the arbitration process is working at the same time as founders having left the group post issues bound, and what are the financial authorities on that?

Yes, do you want to take that?

Yes, sure. I think everyone can understand that this is an ongoing case, and we are limited by what we can say. And effectively, we -- therefore, unfortunately, we've said everything we can say in our public announcements. That case is ongoing, and we would expect an outcome in the first half, latest first half of next year, but in terms of the details of that case, there's really nothing more that we can say.

Question is, can you give any more detail on AI products and services in terms of the end market revenue that's being generated now?

We can certainly follow up with that. I think I don't have the numbers to hand, but I think a lot of our revenue now in some form touches AI. So it would be quite difficult to split out, but certainly, that's something that we follow.

Next question from Steve is, how are you managing the need to invest in growth versus cost reductions?

Well, in that, Next 15 has a very good track record of delivering good margins relative to its competitors. And that's something that I will continue -- we'll continue to focus on. And as we talked about, there are a few high-growth businesses, long-term high-growth businesses. We will continue to invest in those. We'll continue to invest in all of those. But at the same time, even in those high-growth businesses, there are opportunities to manage costs as well. So it's a difficult balancing act, but business has a history of doing it that.

Those are questions from webcast.

Just a couple, going back to Transform, I know we touched on it earlier, so sorry to repeat, but I was wondering around the sustainability of that 50% growth. And if there was any disruptions in the comparative period last year to lead up to the general election, whether that made for an easier comp this year, and how you see that going forward? And then secondly, thinking about the growth trajectory and new business, could you give a bit more color in terms of the new business activity, and then how much of revenue comes from repeat and existing customers as well?

Yes. So on Transform, there is a good comparative. So we can't deny that. The sustainability of the work, though, I think, is very good. And the pipeline that we're seeing moving forward is probably stronger than we've seen at any point. And when we look at that business, I think there's also a ton of expansion opportunity, too, into different sectors, to different markets as well. So it's a business we're really excited about. We've got some great leaders in that business, too. They've done a brilliant job. So yes, I'd hope that we can really continue to grow that, whether it's at 50% every year, not sure, but we'd like to see strong growth. And on new business, on average, I'd say, we tend to see somewhere between kind of 10% to 15% of our revenue come from new business each year. I think that we're feeling really good in areas about the new business that's coming into the group. We've got some really exciting new clients. I'd love to tell you about today, but I would tell, I can't. And so yes, that's an area where we're really starting to see progress. But I think that comes back to focus. And I think a lot of what we need to do with the group is explain why a new client would come to Next 15, or come to one of those businesses in a way that attracts people in an easier way. And so that's what we're focusing on as an executive team. Thank you very much for your time.