Okay. I think we're good to go. First of all, welcome everybody. My name is Dame Heather Rabbatts, and I've recently become the Executive Chair of this fantastic group of businesses. Please make sure your mobile phones are switched off. I want to be like on the beginning of, "Hi, do come in." I know it's also quite warm in here today. Hooray, the sun is out, so please feel free to take jackets off as well. That clip that we've played was just a snapshot of some of the extraordinary work that we produce in this business. It spans sport, entertainment, music, and brands, and it really shows the creativity and the expertise we have here. It's all done by amazing people who work around the world. We, the Board, are truly appreciative of all of their hard work, endeavor, and creativity.
Before we begin, I'd just like to share with you that once again, we have been awarded this prestigious award for sport and entertainment. It's a testament to the fantastic work we do with our clients, including Coca-Cola, Heineken, and Barclays. They really set a pace in the industry. We will be talking more about sport and entertainment in the forthcoming months, and we've just heard we're shortlisted again for the Sport Industry Agency of the Year. Let me now turn to the focus of the first part of this meeting today, which is to present to you M&C Saatchi's full year 2025 results. Welcome to all of you here in the room and everybody who is listening online.
It goes without saying that 2025 results were impacted by a number of external factors, principally macro-driven weaknesses across many markets from Q2 onwards, particularly in Australia, while the unprecedented 43-day U.S. government shutdown in Q4 affected our high-margin Issues business. Our balance sheet, however, continues to improve, and we ended 2025 with a net cash balance of GBP 13.3 million, which is after two M&A transactions, the first transactions we've done in many years, as well as some put option payments. Simon is obviously going to take you through, in detail, these results shortly. We believe that our business is well-positioned for growth, supported by a broad range of expertise across industry, geography, connected specialisms, and creativity, as well as our strength across government and commercial sectors. Today you will hear more about our government work from Marcus. You will also hear more about Cultural Power from Karen shortly.
You will have seen from the video we talk about Cultural Power. It features significantly in our annual report last year and indeed this year, and we want to give real visibility about what that means to our clients and to markets. We have amazing selection of clients, as you've seen, who we love to work with them, and they love to work with us, and we have over a 94% client retention rate. I now want to just give a few, literally, couple of contextual strategic points before Simon goes into detail. As you all know, Zaid stepped down at the end of March, and I took over as Executive Chair in early April, so it's still very early days for me in this particular seat. I have the pleasure of leading an operating board who are incredibly talented executives.
It's through this operating Board, we will continue to ensure continuity, focus on the high potential businesses, and get the business back to growth, and you will see two of those leaders today. Secondly, the transformation that we've talked about previously. Phase Two is now virtually complete on top of other cost savings from restructuring, particularly those that took place in Australia. While there is still work to do, that we are closer to a simplified structure. Let me just add, I don't think any business, whether in this sector or any other sectors, talks about transformation being final. One has to be constantly agile, looking at being simpler, and ensuring that we always are responding to the challenges as we see them evolve. Finally, we are really clear on focus.
We are setting the foundation to unlock the intrinsic value of M&C Saatchi, which we believe is not currently realized. We have a resilient business, we have a unique market offer across government and commercial sectors, and we have deep market insights and consumer insights that empower us to deliver client solutions. We also have significant data stack and AI-enabled processes that we use to empower our growth engines, and we are going to shed some light on our growth engines later on after Simon has presented the results for last year. Thank you. Simon.
Well, thank you, Heather. Good morning, everyone. We appreciate you all joining us for our year-end update, whether in Golden Square or online. Heather, in her overview, has already outlined that 2025 was a year characterized by macro and geopolitical disruption, and that heavily impacted both us and also our industry, and especially across Q2 through to Q4. Against that backdrop, however, and this is important, the business demonstrated financial resilience, maintaining a net cash position, driving cost mitigation, and pushing ahead with opportunity areas like our fast-growing and margin accretive performance media division. So let me step you through some of the detail. Like-for-like net revenue for the year was GBP 204.7 million, down 7.3%. This, as Heather's already mentioned, was impacted by the macro context and the aftermath of global tariffs, including prolonged challenges in our consumer-weighted Australia business.
Within that overall result, once again, non-advertising specialisms outperformed the lower margin advertising area. Operating profit reduced by GBP 8.8 million to GBP 24.9 million, driven by a combination of that like-for-like group revenue decline of GBP 16 million and prior year half-two weighted investment annualization. Effects are also seen in our margin percentage and PBT. The EPS percentage reduction was slightly higher, principally driven by the non-deductibility for tax of some of our transformation and restructuring costs. Net cash was up at GBP 13.3 million, with operating working capital and inflow offset by outflows for the prior year bonus, M&A, which Heather's already mentioned, our first two pieces of M&A in seven years, and our final dividend. I'll give a little more on this later. Turning to revenue trends and starting with our non-advertising specialisms or capabilities.
Issues, which, as you know, is our public sector defense and security communications business, delivered 6.3% growth in the first half despite global tariff disruption. Though the Q4 U.S. shutdown did move us to a small full year decline. I'm pleased to say, however, the underlying momentum remains strong and we expect double-digit growth in 2026, particularly weighted to the second half. Consulting, which includes strategy and brand and Passions & PR, our Sports & Entertainment PR, activation and creative business, both saw client spend reductions driven by global uncertainty and also reflecting their higher project weighting. Media, focused on the performance and ad space particularly, delivered yet another strong year of growth, up 11.5% to GBP 25.2 million, which was an acceleration from 2024's growth, which was just over 8% like-for-like. Finally, Advertising, predominantly digital communications, was down 8.9% like-for-like, but was close to flat excluding Australia.
Advertising at GBP 68.5 million represents around 1/3 of group revenue compared to the 2/3, which is the higher margin non-advertising services that we provide. We also share revenue split by region, and that's another window on our GBP 205 million of Group like-for-like net revenue. The key call-out on this slide is Australia, which represents 2/3 of the APAC region, and alongside a subdued U.K. environment, drove the overall Group like-for-like decline. Conversely, the U.S., Europe, and the Middle East together, just over 30% of the business, were collectively flat despite a challenging global context. Let me give a couple more call-outs. Looking ahead, the U.K. will benefit from the expected step-up in our Issues segment that I've already noted.
Then, I should also just comment on the Middle Eastern business, which is our business principally based in the UAE, and that is being impacted by current geopolitical tensions, particularly affecting local events. It's around about, you can see from the slide, 6% of our revenue. On the next slide, I'd like to talk a little bit about our profit trajectory. This shows a bridge of like-for-like operating profit, and it reduced from GBP 33.7 million in 2024 to GBP 24.9 million in 2025. There were substantial cost programs, and that was able to mitigate around half of the revenue reduction. The most significant cost restructuring took place in Australia, where the business was right-sized and reshaped in half to 2025.
We are targeting. Heather's already mentioned this. We are targeting an increase in Group operating profit in 2026 and an increase in Group net revenue, and that's captured in the market expectations. That will be driven by that growth in revenue, particularly driven by some of our key specialisms like Issues and Media, alongside the annualization of some of those cost programs I've mentioned. Moving on to a little bit more detail on cash. Cash from trading reduced from GBP 35.1 million in 2024 to GBP 22.5 million in 2025, reflecting the lower profit profile and then those transformation and restructuring costs. Encouragingly, operational or trading working capital was an inflow of GBP 4.9 million, and that reflects increased cash management focus alongside senior incentive alignment around cash. The prior year bonus outflow in cash was GBP 9.1 million. You'll see it on the slide.
That is materially higher than what is forecast to pay out in 2026, which is around about 1/6 of that size, reflecting the prior year performance. Beyond this in cash, we saw normal flows for leases, tax, and interest, an inflow from a non-core disposal, just to remind you, that was SAATCHiNVEST, share purchases for the EBT, our Group share scheme, and then those two bolt-on acquisitions that I've already mentioned, DUNE | 23, a sports agency, and then the Women's Sports Group, a Rights and Sponsorship business. In 2026, we will not have a final dividend outflow, with those funds instead expected to boost our announced share buyback program. That links us through to our capital allocation framework. Organic investment remains key, particularly in those structurally growing high-margin divisions such as Issues and Media, and we will continue to invest behind that growth.
We're well underway with our announced 4.5 million share buyback program. It was launched on the 9th of March. We've already acquired and canceled just shy of 900,000 shares or about 0.7% of issued share capital, and that will drive earnings growth for shareholders. In conclusion, while 2025 was a challenging year, the focus for 2026 is to return to like-for-like revenue and profit growth in line with market expectations. Q1 trading, which was over a higher prior year base, is exactly in line with expectations and provides a platform for building growth momentum in Q2 and beyond. We will remain agile with our largely variable cost base, given that ongoing macro uncertainty, and yet also our particular focus, as Heather already mentioned, will be growth, focusing on the key drivers of intrinsic value, such as our Issues and Media divisions.
I'm now going to hand back to Heather to provide the context and introduce our remaining presenters to bring this to life. Thanks very much for listening, and we look forward to your questions later.
Thanks very much, Simon. Right. I hate clickers. They have a reaction to me. I'm not going to talk through all of this detail you'll be pleased to know, because the point of this part of our presentation is to really give insight to what is in our RNS, where we talk about laying the foundations of unlocking the intrinsic value. Crucially, we want to shine a light on the work that we are doing in terms of data insight and Cultural Power and the work we do across governments globally. We know increasingly much is said about AI and data in the market.
What we want to try and do here is to go from that generality to really getting underneath the skin of that and what we are doing here, which means that how we drive data insight and use AI to the benefit of our clients and to our brands, and that's what we're going to focus on next. We've got two speakers. I mentioned at the beginning the real strength and depth of the leadership across Saatchi. I'm going to introduce Karen Boswell, who's one of our most recent hires, who's going to talk about Cultural Power, and then Marcus Peffers will talk, who was first day one here, at when Saatchi was first launched. Let me hand over to Karen first, and she is going to talk us through the work we're doing on Cultural Power.
Thank you. I'll try not to have an aversion to clickers. I'm saying that.
Do you have the focus? I think we've lost it.
Yeah, it was working.
That's it.
There we go. For decades, the marketing industry has been obsessed with measuring what we make, impressions, reach, share of voice, return on ad spend. We've all been building extraordinarily sophisticated systems that count things that are very easy to count. We've been quietly ignoring the fact that the force really moving markets is culture. Not as a metaphor, not as a mood board, but as a mechanism. It became really clear to us through conversations with our clients, a lot of those that you saw in the reel up front, Disney, Nike, Pepsi, that culture isn't the context in which they, brands, are operating. It's actually become the operating system itself. They all expressed the same challenge to us. They can't define culture in a way that makes sense for them, nor can they work out how to measure the value of influencing it.
We have a very hardworking definition of Cultural Power. It's the force that shapes markets, earned through influence, expressed through behavior, and proven through impact. In a world increasingly fragmented, culture is moving faster than ever. Media spend alone no longer guarantees the growth that our clients need, and they are under pressure to prove return, not just activity. Cultural Power is our answer to that. It operates upstream of performance media and downstream of brand strategy, connecting the two in a way that the industry has yet to do. That's the gap that we are solving for. In very practical terms, it's how brands become more efficient at growth, how we lower the cost to acquire customers for them, and how we increase the ability to retain presence and influence in culture.
It's also how we operate and how we organize ourselves because as well as culture moving very fast and being fragmented, our industry is also very fragmented. Consultancies will tend to define a strategy. Agencies will tend to create campaigns. Media companies will tend to optimize spend. No one actually owns the end-to-end influence system. We do. Cultural Power is therefore our framework for how we integrate our four capabilities into one system. The signal step, the first step, is led by our Consulting division. This is where we seek to identify demand earlier ahead of the market, so that our clients can invest just before the price premium of buying media, rather than in it or behind it. We move into shaping what a clear positioning, a clear presence in culture looks like with and for our clients.
This is led by our Consulting and PR and Passions team working together. This means that marketing works harder and converts more efficiently in the moment, creating persistence within culture. We move into the shift phase, which is where our PR and Passions team work with our agency team, and looking to drive mass behavioral change at scale, something Marcus will touch on a little bit later as well. This means that the attention in culture is translating into action. Most agency groups would stop there, but because our performance media arm is built from conversion rate optimization upwards, that performance layer, it means that we're able to close the loop and optimize continuously, not just for the campaign moment, but driving to the bottom line as well.
That's critical because we're not just selling the outputs, we're building the systems that improve the value over time, that persistence to be in culture as culture moves. That is fundamentally a different economic model for our industry. I'll bring that to life with a client case. I'm sure many of you have probably seen and heard about GLP-1s. We've been working with a leading manufacturer of a GLP-1 product since 2020. The key here is that it was a very strong product in a fast-growing category, but the category in 2020 lacked meaning. Brands were competing on clinical data. Differentiation, therefore, was very narrow, and the risk was to become commoditized before we'd even put this product into market. In that scenario, therefore, growth becomes very expensive, it becomes less defensible, and increasingly reliant on media spend.
It's the antithesis of what we're trying to do within Cultural Power. The opportunity was not to outmarket the competition. It was to define how the category is understood and adopted. By building an emerging category, this company managed to shape meaning and capture that disproportionate value. It's where Cultural Power operates, not at the level of messaging, but at the level of market perception and behavior. Essentially, taking our Cultural Power model, the first thing we look to do is look at that signal, identify the real driver of demand. What we saw was that patients weren't buying a treatment, they were buying proof that change was possible. This helped us reframe the demand around the product and look to move from clinical outcome to personal transformation. This gave us meaning to create category in a new way.
That then meant that we could define the category narrative and position it around progress and momentum over medication. This gave us the emotional and rational alignment, which meant that we could expand appeal beyond just the early adopters. that gives us a system to scale the narrative. Every touch point, from the healthcare professional through to the consumer, reinforced the same meaning. Faster adoption, stronger retention, more efficient scaling. Everything from the small pieces of content to the large Super Bowl partnership and campaign that we did. Cultural Power is not about visibility, it's about shaping those conditions under which demand for our clients grows. in this case, we didn't just increase awareness, we changed how the category was understood, and therefore how it scaled. Growth did not come from outspending the competitors. It came from shaping demand before it scaled.
That is more efficient, it's defensible, and it's scalable. For our clients, Cultural Power allowed them to scale faster than the category, maintain their pricing integrity, become relevant as competition increased, and stay relevant and expand into new audiences and formats ahead of the competition. That delivered growth quality, not just growth volume. For us, this is where our model creates the disproportionate value. Because we're operating upstream of the performance media and downstream from that brand strategy, we're able to capture that conversion in the middle of it. More excitingly, for me at least, this is Cultural Power at its best, and because we've managed to organize ourselves around this operating principle, we're now connecting our specialisms. It means that we've also been able to connect incredibly rich, varied insights and data into a unique open loop model.
We've been interrogating that data over the last year or so, and we've developed a hypothesis that we could model the return of the value for a brand influencing culture in such a way. We took this hypothesis last summer to Oxford Saïd Business School, who through their Future of Marketing Initiative, expressed an interest in creating a first-of-its-kind data partnership to prove it with us. It's worth noting that many of our fellow friends, WPP, Omnicom, are also partners. However, Oxford saw something proprietary in our thinking, that signal before the noise. The exciting news is the first part of this program is now complete, and Oxford have validated that return on Cultural Power is the industry's first framework for measuring the commercial value a brand generates from its ability to shape and participate in culture. It's not brand tracking with some glitter on top. ROCP connects cultural influence.
The beliefs a brand can shift, the behaviors it can change, the communities it can galvanize, directly to measurable commercial outcomes. In the most precise sense, the missing link between culture and growth. While we've always known that culture moves markets, we can now prove it and price it. The model will be available this summer, backed by a pilot program which our clients have already signed up to and is underway, and we'll be looking to provide more information on that at that time. I've talked about our ability to draw on this incredibly rich, varied insight and data derived from our unique positioning to deliver Cultural Power and how this is central to developing our return model.
I'm now going to hand over to Marcus, who's going to talk more about our industry-leading expertise in the work that we do across commercial, government, and citizen spaces. Thank you.
Thank you, Karen. As Heather said earlier, at an overall level, we think of the business in relatively straightforward terms. Commercial activity, the private sector, and then citizen public sector focused activity where clients use our expertise to change the attitudes and change the behaviors of citizens for public good in line with their strategic and policy objectives. It's this citizen area that I'm going to focus on now, and specifically within that, our expertise in government, defense, and security. I think it's fair to say that it's an area that we've been leading the industry in now for over 30 years, using the latest in behavior change techniques to tackle complex societal challenges and take public policy to market at a local and at a regional and at a global level.
I think, as I said, I think it's fair to say that over this time and now in this area, there's no other agency has a comparable breadth of experience or depth of expertise. Building on that positioning, 15 years ago, we launched a standalone Issues specialism, World Services, focused on defense and security. It's a division that we promote discreetly to the right partners and to the right clients, but it is one that is now M&C Saatchi's largest global single practice. It has over 400 dedicated experts, and it is the leading communications capability of its kind anywhere in the world. Now, this means that at any moment in time, we are helping positively impact the lives of millions of citizens around the world. Who do we do this for?
Well, we do it for many of the world's largest and most successful public, private, and third sector organizations, national governments and their major departments. We've had significantly recently won contracts in the U.K., the U.S., and Australia, and expanded our work with the EU. Multilaterals like the United Nations and NATO, and in related global and social issue related areas, we work with many of the world's biggest foundations and NGOs. The Gates Foundation, Rockefeller, and Mercy Corps are all three big clients in this area. Then also in the private sector for large multinationals like JP Morgan, Meta, L'Oréal, General Motors, and so on, where we help them tackle the social forces and the social challenges that are impacting their customers and their communities, and ultimately their bottom line.
It's worth noting that although our work in this area is implemented globally, more than half of our income is generated in the U.S., and this is a key growth market for this part of the business, as it has been for the last 10 years. What do we do for this broad range of clients? Well, we work across all of our specialisms. We work with Consulting, Communications, including Advertising and Passions & PR, and Media. Sometimes the activity or the task is just focused on one of these areas, but most often it's across all of our specialist areas working together, connected end to end, and critically for this government and defense and security sectors, it's always with the latest in data and analytics and AI driving every aspect of the thinking and the process.
In terms of the challenges and issue sets we deal with, well, it can be very broad. If you take the U.K. government, for example, this is just a snapshot of the departments we currently work with and the policy challenges we work on in partnership with the U.K. government. In the U.K. we're delighted to have retained our place on the highly sought after GBP 1 billion+, four-year government communications roster, which was announced in January this year. Alternatively, it's less about breadth of issues. It's more about depth, building focused specialisms in sectors of high potential, like defense and security, fast-growing, high margin, and increasingly resilient. It's here that, as I said earlier, we spent the last 15 years building up a specialist issues practice.
We already work with the biggest defense and security clients across this area, and it's worth stating, and I think it's important to note that this dedicated practice is not just best in class. It is totally unique. There is no other marketing or strategic communications company has a capability that can compare. It's why our business in this area has performed so strongly over the last eight years, and we expect the growth to continue in the years to come. In part because we have such a significant competitive advantage. In other part, because it's a sector that is growing in value and becoming increasingly resilient as the world unfortunately becomes more volatile and threats to individual, corporate, and national security increase.
It's worth noting, this blip on the trajectory here, just here in 2024, it's because of the pause in funding flows caused by the U.S. shutdown, which is unprecedented, as Heather noted earlier. Our government related budgets got shuffled back a bit, but I'm glad to say normal service resumed straight after. In conclusion
Our expertise and our capabilities across government and defense and security, they are central to our business success, central right now and moving forward. I think it's for three reasons. Firstly, because we have a clear right to win in this area. Secondly, because we have deep specialisms in sectors that are high margin, high growth, and increasingly resilient. Thirdly, and finally, because it also, and this is really important, it gives us the right to win at the intersection of private sector and public sector, where commercial and citizen meet. Being uniquely strong in both these areas, it's mutually reinforcing and it's a huge differentiator for us. On one hand, government and public sector clients who want to understand cultural trends and consumer patterns and have access to the leading tools and technologies in use in the private sector.
On the other hand, commercial and private sector clients who want to understand population and lifestyle changes and access to world-leading behavior change expertise so that they can understand and tackle the emerging social challenges that are directly affecting their reputation, their customers, and their communities. This horizontality is why we have such a strong portfolio of major clients in that sweet spot of where commercial meets citizen or public meets private. It's an intersection that will continue to be a big focus for us as we look to target other sectors where there is a significant public-private crossover, like Sport & E ntertainment, travel and tourism, and health and wellbeing. Thank you.
It's your turn.
I avoid it. Okay. Thank you very much to both Marcus and Karen, and I hope that's given you all some more insight to actually the amazing work that we are doing here, and in particular, the work that we have with government and commercial sectors, but also how we're driving data and insight to drive growth with our clients. I think it also shows some of the two extraordinary leaders we have in this business, and I look forward to introduce some of the other leaders in due course to you all. It's now open to questions, so if you direct them first to me, and I will hand them over to whoever. If you could say who you are first, that would be great, and where you're from. Thank you.
Hi, morning. It's Jessica Pok from Peel Hunt. I've just got three questions, please. The first one, the Middle East and the conflict in the Middle East impacting your revenues for this year. Can you just give us an indication of approximately how much of that is related to maybe events which aren't coming back and how much is maybe just delayed?
Mm-hmm.
The second one is, maybe it's for Marcus at Issues. This year you'll be impacted by the reopening of the U.S. government work and a rebound of that. When we look at kind of Issues on an isolated basis, is it the case that you've got more opportunities this year in particular because of the volatilities in the global landscape? The last one is just on margin improvement for now, and I guess the next two years is, the margin's going to recover because Issues is going to recover this year. How do you think about that balanced by the investments that you're putting in? Because I think you're putting more in Issues and Media as well.
I'll just give a couple of sort of more strategic responses, and then Simon can respond in the detail. Just on the Middle East. Clearly this is a constantly unfolding situation. None of us know quite what is going to happen. Clearly, we've seen events being canceled or deferred. We're waiting to see when they will come back. But I think the important point will be for Simon just to say a bit about our Middle East exposure at the moment. Do you want to just respond to that first?
Yeah, no problems. Thanks for the questions, Jess. On the Middle Eastern conflict, I mean, our Sports & Entertainment business in the Middle East is about 25% of the revenue for that region, just to answer that question. The Middle East itself is about, as was shown on the slide, about 6% of our total Group revenue. It is somewhat contained, but certainly in terms of events, we have seen cancellations. We can't be sure whether things are going to be rebooked for later in the year at this stage, because it's quite a fluid situation. Yeah, what we're doing is, because we're a global network, we're able to look at how the resource in that region is used elsewhere in our Sports & Entertainment capabilities, for example, globally.
There's things we can do as a global network that can definitely make use of the talent we have in the region. It is quite an uncertain period that we'll be navigating through. The counterbalance to that is Issues that you mentioned as your second question. Marcus said it, I mean, it's a troubled world and Issues will tend to do better in a more troubled context. That's certainly what we have seen historically and it's what we expect going forwards. I mean, in terms of investing in that area, which is your third question, I mean, we're investing behind revenue, so we don't have to sort of lean forwards ahead of revenue coming in. As we identify new projects or new clients come on board, we will put in the capability behind that.
The thing to remember is we've got a core infrastructure that we're building from, and we've got that 400 people that Marcus mentioned in Issues. We've got core capabilities around Media, around creative, we've got AI. As we build out, we can do that very economically positively. I mean, we'll get operating leverage as we grow. I wouldn't want you to think we're having to dilute margin in order to push forward. That's not the case. Issues, and our performance media business should both be margin accretive as we grow them out.
Just to say, as you saw on one of the slides that Marcus put up in terms of our global Issues work, we work with a number of governments, as well as international organizations, and we can only see that work increasing.
Yeah. Thank you.
Okay. There's a gentleman here.
Good morning. It's Johnathan Barrett from Panmure. Thank you. I've got, well, really three questions, I guess. First one's just on Issues. You've talked about UN and NATO. I just wondered whether or not they're particularly material for that business. I'm just obviously thinking about the issues around the UN with support from the U.S. and NATO there. Just wondering what the context of the materiality is for your business. Secondly, just stepping back one big step. The size of the overall public sector now for the Group, obviously, it sort of continues to evolve. Just wondered if you could give us a steer on that. Lastly, really about the marketplace for your commercial clients. Obviously, they had a tough year last year. They had some very difficult conditions to deal with, hard to plan.
We've sort of entered with a similar theme this year. Are they a bit more resilient this year? Are they a bit better able to cope? Are they a bit more active? Could you just give us a bit of a flavor for that as well, please?
Okay. Marcus, do you want to just make some comments in response to the question specifically on Issues and the overall percentage of our government work across the Group?
Yes. Just take those in turn for UN and NATO. Revenue-wise, relatively small clients, actually growing. United Nations, we work with about six of the different agencies, so UNHCR, World Food Programme, World Health Organization, UNICEF. Actually it's pretty spread actually across all of the different agencies, some of which are under more financial pressure than others. With NATO, well, actually the reality what we actually see with NATO is that in communication terms, there's now a need more than ever to explain what NATO does to actually engage citizens, certainly in Europe, and certainly amongst NATO members in the role of NATO. Actually we're seeing the reverse actually, although it's a more sort of debatable topic at the moment in the U.S., with the current administration. We're actually seeing the need for communications go up. That's good.
In terms of our public sector work, well, in terms of the overall percentage of our revenue, Simon, you probably have a sort of perspective on that. It's certainly in the U.K., it's a significant part of the work we do within the U.K. group, working across all those different frameworks and all those different subject matters, which I outlined earlier. Then globally, I think it depends how you cut it, doesn't it?
Yeah. I mean, look, the thing to remind people, I think those who are familiar with the story will know this, but just to remind people. When we speak about Issues, we're talking specifically about our work in defense and security, and therefore there is other government work that sits within the rest of our business practices. We work, as Marcus described in his section, we work with the NHS or we do work on the census or, I mean, many other pieces of work that sit within our sort of other core practices. If you're to add that up, it's multi tens of millions more on top of the work that we already do in Issues. It's a substantial part of our business, and it is high expertise, very sticky, important about our accreditation.
It's a part of our business that is a very powerful driver of the future. Should I just mention on the marketplace, or do you want to say something first?
I just wanted to say that just in terms of that breadth of government work, whether it's security, defense, or some of the international organizations or the work we do with U.K. government, I think what I would want to stress that at a time of real volatility and overall market ambiguity, those sectors remain incredibly resilient. Governments continue to spend even where we see other clients softening because of uncertainty. For us, having that strength and depth across government, across citizen, is a really powerful pillar of our practices. Just before Simon comes in, you talked about the challenges last year in terms of clients and what indeed we saw with other colleagues across this sector.
One of the reasons why I particularly wanted Karen to come and talk today about our return on Cultural Power is that we believe that this is increasingly giving us real insight and capabilities in terms of our work with clients. Do you want to add?
Yeah. I mean, just in terms of the marketplace, clearly one of our biggest barometers for how the market is feeling is our pitching activity and our pipeline. Certainly, what we described as we exited last year was a strengthening pipeline into Q4, after what had been a much quieter sort of Q2 and Q3, really disrupted by the global environment. We have seen that continue into Q1. We have got a strong pipeline of opportunity. Clearly, it's important for us to convert that. Certainly, we can see that there has been something of a shift. It is still an uncertain environment. I wouldn't want to sort of ignore that. Certainly, we've seen improvement through the course of the back end of 2025 into 2026, and that's why we're confident in this year being a year of revenue growth and profit growth.
I mean, that's underpinned by data.
Thank you.
Thanks. Will Larwood from Berenberg. Three from me. Just firstly, obviously, you completed the Phase Two transformation plan. I guess, is there other further cost initiatives that you can do in 2026 as part of the focus on value creation? Secondly, one for Simon, just in terms of working capital, decent inflow underlying in FY 2025. Can we expect more of the same in FY 2026 or has that largely already come through? Then just in terms of, you spoke about a lot of return on Cultural Power. I guess, just interested to understand if it's influencing or impacting how you're thinking about pricing with that level of data.
Okay.
Okay.
In terms of Phase Two, as you rightly say, just to remind people, we had Phase One which was principally focused around our back office transformation. That was a GBP 10 million annualized saving. We had Phase Two, which was more around middle office, which was a GBP 5 million annualized saving. It's fair to say that we will always be focusing on efficiency. I think Heather said this a little earlier. Any company that says it's done its transformation in efficiency is not seeing how technology is evolving and the marketplace is evolving. We haven't called out a specific number as part of a Phase Three or anything like that, but you can absolutely work on the assumption that we will continue to look at how do we leverage our global network, how do we simplify the business. I mean, Heather's already mentioned that.
You might say, "Well, what does that look like?" Well, we've still got quite a complicated legal structure. There's still ways we can improve how we work across global functions, and connect things better. There's still opportunities to simplify our system stack. There's lots of things we can still do to make us simpler, and the benefit is that's better for colleagues, it's better for clients, and it's also better for pound notes terms. There is more we'll do, and that will be an ongoing thing. I mean, working capital, yeah, we were pleased to see a circa GBP 5 million inflow. The work is not done there and across cash the work is not done. We think there's more opportunity to drive better cash management and better focus on cash. When we were a very disaggregated business, it was much harder to achieve some of those goals.
Now we're a unified business where we can much more look at how we use cash around the Group. I think there is more opportunity. We're not done yet, and I would expect to see further cash inflows from working capital going forwards. Return on Cultural Power.
I think in terms of pricing, this is definitely an area which we are currently doing work on and will be saying more in the future. As Karen's presentation articulated, this gives us a very particular presence in the market. Also, as Marcus explained, we have incredible data insights across both government, what shifts behavior change in the commercial world. By bringing that data insight into this new system, we believe we can create more value for our clients and advantage to ourselves, and we'll be telling you more about that later on this year. Other questions? Oh, sorry, yes. Are you going to ask three as well? Everybody seems to have three. Is it the magic three?
I can ask for if you want.
Oh, no. Three is final. Two?
Yeah. Hi, Steve Liechti from Deutsche Numis. Yeah, I'll do three. Why not?
Go for it.
Simon, can I just tempt you to give us a harder figure for the first quarter like-for-like? I know you'll sort of talk about comps a bit there. The second part of that is, if you take the more discretionary elements of spend, do we assume that continues to be under pressure in the year? I'm thinking particularly about Passions and Consulting. Do they have to go into positive territory to get you to growth at Group level? That's the first question. A few questions there, I guess. Second question, Australia, can you give us an update there in terms of what you've done, what you're going to do in terms of strategic thoughts? Third, just on the Issues side, going back to the U.S., 50% of that business, obviously we had the shutdown, which hit it.
Is there any other risk there in terms of what the U.S. government is doing and changing the volatility and stuff like that to the business, or can we assume that you can sort of roll with the government actions there and there isn't a risk to that business? Thanks.
Okay. I'll come back to that final question.
Yeah
After you've responded to the others.
No problems.
Simon.
Look, we described for Q1 we're exactly in line with our expectations. For that, you can read that if we look at the Q2 last year into Q3, into Q4, and then into Q1, we have seen sequential improvement, as we've emerged from some of that uncertainty of tariffs. Q1 was a better performance, for example, than in the immediate aftermath. It is still slightly negative, but we expect that to turn around into Q2 and beyond. In terms of discretionary elements of spend, we'll still see more volatility among project type spend because that has more timing uncertainty. That's why it's so important as part of our portfolio that we've got a range of different work we do.
If you look at, for example, our Issues work or our Media work or some of the other work we do in Consulting, which is retained annual work, when we work with PepsiCo or we work with Toyota, I mean, that underpins and gives us some solidity to the platform, even though there will be some other things which are slightly more variable. Look, in terms of Australia, what have we done? We talked about in half two last year, we restructured the business. That was a real end-to-end review of how the business operates in the marketplace. It did involve moving offices. It did involve quite a big rethink around how we structured colleagues to do work. That's completed. I mean, that restructure was completed in the second half of last year.
Look, as you would expect, we continue to think about what is the most effective way to operate in all of our regions, including Australia. You know that for some regions we've decided that's a license. In other regions, we've decided that's an owned business. You could reasonably conclude we will do that. We'll continue to think about that for all of our network.
Just going to your final questions about U.S. and volatility. I mean, none of us have got a crystal ball. What I would say in terms of the work that we do in Issues, whether it's across U.S. or European governments, we believe there is significant resilience and indeed opportunity, sadly, because of the uncertainties that the world is currently experiencing in that world of defense and security. Any other questions? Nope. Can I thank you all for coming to a sunny Golden Square, and also for the colleagues who joined online, and I'll be seeing some of you later today. Thanks very much indeed, everybody, and I hope you found today illuminating. Thank you.