Next 15 Group Reports Profit Decline Amid Challenging Market Conditions
Why we think this is bad
The results paint a concerning picture for Next 15 Group. We're seeing a significant 11.3% drop in adjusted operating profit, coupled with a worrying 26.6% decline in statutory operating profit. The organic revenue decline of 4.0% is a clear sign of contraction, and the decrease in adjusted operating margin from 21.0% to 18.9% indicates growing pressure on profitability. The substantial increase in net debt from £1.4m to £38.4m is particularly alarming. While the maintained dividend offers a glimmer of stability, it's overshadowed by the challenging macro-environment, loss of a significant contract, and potential currency headwinds mentioned in the outlook. The £17.0m restructuring cost, while potentially beneficial in the long run, signals underlying challenges. These factors, combined with the use of terms like 'headwinds' and 'challenging market conditions', suggest a tough road ahead for the company.
Key Points
- Net revenue declined by 1.4% to £569.7m, with organic revenue decline of 4.0%
- Adjusted operating profit decreased by 11.3% to £107.4m
- Statutory operating profit down 26.6% to £56.6m
- Adjusted operating margin contracted to 18.9% from 21.0%
- Total dividend maintained at 15.35p per share
- Net debt increased to £38.4m from £1.4m
- Restructuring costs of £17.0m incurred, expected to yield £45m in annualized savings
- Loss of significant Mach49 contract to impact FY26 financial performance
- Challenging macro-environment and potential currency headwinds noted in outlook
- Berenberg Bank maintains 'Buy' recommendation with 885.00p target price
Summary
Next 15 Group's final results for the year ended 31 January 2025 reveal a challenging period for the tech and data-driven growth consultancy. Net revenue declined by 1.4% to £569.7m, with an organic revenue decline of 4.0%. The company saw a significant drop in profitability, with adjusted operating profit decreasing by 11.3% to £107.4m and statutory operating profit down 26.6% to £56.6m. The adjusted operating margin contracted to 18.9% from 21.0% in the previous year. Despite these challenges, the company maintained its total dividend at 15.35p per share. The outlook remains cautious, with the company citing a challenging macro-environment, the loss of a significant contract, and potential headwinds from currency fluctuations. Next 15 has undertaken significant restructuring, incurring costs of £17.0m, which is expected to result in annualized savings of £45m. The company's net debt position increased to £38.4m from £1.4m in the previous year. While broker Berenberg Bank maintains a 'Buy' recommendation with a target price of 885.00p, the current trading environment suggests caution.