Next 15 revenue, profit falls amid Mach49 dispute

(Sharecast News) - Next 15 Group reported lower annual revenue and profit after what it described as a year of decisive restructuring on Thursday, as the marketing and consultancy group simplified its portfolio and said early trading in the new financial year was encouraging.

The AIM-traded group said net revenue fell 6.3% to £448.8m in the year ended 31 January, while adjusted operating profit declined 8.6% to £67.6m.

Adjusted profit before tax fell 6.8% to £63.4m and adjusted diluted earnings per share decreased 6.5% to 44.4p.

Adjusted operating margin was broadly protected at 15.1%, compared with 15.4% a year earlier, reflecting cost discipline and early benefits from simplification.

On a statutory basis, Next 15 swung to a loss before tax of £13.4m from a profit of £34.1m, primarily due to costs and impairments linked to Mach49, which has been wound down and reported as a discontinued operation.

Chief executive Sam Knights said the year had been challenging, reflecting legacy issues and a difficult external environment, but said the group had acted decisively to simplify the business.

"We have reduced the portfolio from 22 businesses to 11, removed £11m of cost, strengthened working capital discipline and brought greater clarity to the group's direction," he said.

"The business is now simpler and more focused."

Next 15 said the portfolio reduction included disposals of non-core assets and integration of overlapping capabilities.

Headcount fell 16% to 3,350 from 3,992, while the integration of Savanta with Plinc, and House 337 with Elvis, was completed. It also launched Pretzl, a consolidated B2B marketing business.

The group said the restructuring had removed £11m of costs in the year, with total annualised savings of about £26m, and had reduced complexity while sharpening its focus on higher-quality, data and technology-led businesses.

Like-for-like net revenue declined 4.3%, reflecting weaker spending from technology clients and lower creative production revenue amid macroeconomic uncertainty.

However, the company said continued growth in digital transformation and retail media supported 4% revenue growth in its Track 1 portfolio.

Digital Transformation revenue grew 41.8%, while Retail Media revenue increased 8.2%.

Next 15 said that helped shift its client mix, with retail and FMCG becoming its largest industry sector, government its fastest-growing, and technology moving to second place.

Knights said the Track 1 portfolio, comprising SMG, Transform, Savanta, Pretzl, M Booth and M Booth Health, operated in structurally growing markets and delivered like-for-like revenue growth of 4% and profit growth of 7%.

"We are repositioning Next 15 as a more focused, data and AI-led growth platform, with increasing integration across our core businesses and early commercial applications already delivering client impact," he said.

Net cash generated from operations fell to £63.3m from £96.1m, but Next 15 said cash performance improved significantly through a £43.8m working capital inflow, compared with a £7.0m outflow the prior year.

Around half of the inflow reflected working capital management, with the remainder related to the Mach49 wind-down and litigation.

Net debt reduced 7.3% to £35.6m, and leverage remained low at 0.4 times adjusted EBITDA, against a covenant limit of 2.5 times.

The board recommended a final dividend of 10.6p per share, leaving the total dividend unchanged at 15.35p.

Next 15 said arbitration linked to Mach49 was ongoing.

The group said it had become aware in June 2025 of potential serious misconduct concerning the business, which had been reported to law enforcement agencies, and had stopped payments to Mach49's selling shareholder under the earnout agreement.

The company said it maintained its position on non-payment of the remaining earnout and had counterclaimed for previously paid earnout amounts.

The balance sheet included total contingent consideration of £68.9m.

Next 15 said that while it had sufficient liquidity to settle even in a reasonable worst-case trading scenario after mitigating actions, the outcome of the arbitration remained difficult to predict.

As a result, the directors concluded that the uncertainty around the arbitration created a material uncertainty that could cast significant doubt on the group's and company's ability to continue as a going concern.

The group said its financial position remained strong and that, in the event of a material adverse outcome, it had legal and commercial options available to protect its long-term financial position.

Looking ahead, Next 15 said early trading in the year ending January 2027 showed positive signs, with improving activity in digital transformation, including Transform's largest-ever client win.

The board said it expected to deliver like-for-like growth in revenue and operating profit and to meet market expectations for the full year. It said it had not so far experienced any material adverse impact from the Middle East conflict.

Knights said the group's priorities were resolving the Mach49 legacy issue, continuing simplification and returning Next 15 to organic growth.

"The next phase is delivery - converting a simpler, higher-quality business into sustained growth and improved returns," he said.

At 1351 BST, shares in Next 15 Group were up 2.25% at 249.5p.

Reporting by Josh White for Sharecast.com.

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