Good morning, everybody. I'm in Madrid. We're all spread all to the four winds. Radhika is in London, and Scott, I think, is in Singapore. Welcome to our Q1 update. Radhika's gonna take us through the trading update, and then Scott's gonna take us through a brief client analysis. Then I'll come back just to do a brief summary and outlook, and then we'll take questions. Radhika, over to you.
Thank you, Martin. Good morning. I will start with the financial headlines for the first quarter of 2026. Performance in the period has been impacted by the volatile global macroeconomic conditions and ongoing client caution. Despite these pressures, the annualized impact of its 2025 cost out actions and the continued strong focus on working capital management has resulted in the Q1 operational EBITDA meeting expectations. Revenue was GBP 164.8 million, down 7.5% reported and 3.7% like-for-like. Net revenue was GBP 149.2 million, down 8.9% reported and 5% like-for-like. Quarter end net debt was GBP 111.8 million, reduced GBP 33 million from GBP 144.8 million at 31st of March 2025 and GBP 45.6 million like-for-like.
Leverage has improved to 1.4x pro forma 12 month operational EBITDA compared to this time last year at 1.7x . The company repurchased its term loan B at a discount with a total of EUR 85.2 million repurchased to date. The outstanding loan now stands at EUR 289.9 million with a target reduction to EUR 250 million. Our full year guidance is reiterated. We expect like-for-like net revenue to be in line with current analyst consensus slightly below 2025. We target full year operational EBITDA to increase by at least 100 basis points. We target year-end net debt to be in the range of GBP 60 million-GBP 90 million.
The board will approve an interim dividend of GBP 0.011 and recommend a final dividend of GBP 0.011 subject to shareowner approval if performance and liquidity targets are met. Moving on to net revenue by practice and geography, where all my comments are on a like-for-like basis. Both our practices have been impacted by the ongoing client caution due to the Middle East conflict and lower activity from some of our larger technology clients. Marketing Services, our largest practice, delivered net revenue for the quarter of GBP 136.2 million, down 4.5%. Technology services generated GBP 13 million, down 10.3%. From a regional perspective, the Americas were above first quarter expectations, representing circa 80% of net revenue, down 0.5%.
EMEA declined 27.8%, predominantly due to scope reductions on BMW and the Middle East conflict. Asia Pacific declined 4.5%. Our capital allocation priorities are maintained from the year-end. We have established clear capital allocation priorities focused on delivering shareholder value through dividends. Dividends first, targeted debt repurchase second, and share buybacks third. The board will implement a 50% dividend payout policy out of adjusted basic earnings per share over the medium term, subject to financial targets being met. With that, I will hand over to Scott for the client update.
Thank you, Radhika, and good morning, everyone. Thanks for joining the call this morning. We continue to have a very compelling client list with some of the world's leading and most innovative companies. Eight of them are what we call Whoppers. That's clients that delivered revenues of GBP 20 million+ last year, and that's a differentiator for a company of our scale. Most of our direct competitors have a much more fragmented client list with smaller relationships. As you can see, we continue to be skewed towards the tech industry, and despite the ever-increasing amounts they're committing to CapEx spending and AI spending, we are starting to see budgets stabilize in this sector. We continue to see significant opportunities for new business, particularly driven by our own AI tools and capacity.
This is particularly so in the automotive sector, where we've recently won assignments from major manufacturers in Japan, South Korea, China, and India, and as the category establishes itself as an early adopter of AI at scale in reaction to the existential pressure from Chinese EVs and AVs. We see similar opportunities in financial services, where we've seen an uptick in pipeline and wins as financial institutions move beyond pilots and concerns around AI governance to full-scale adoption. Again, reflecting an existential threat, this time from new fintech platforms. In FMCG, we continue to build on the traction of winning real-time brand and orchestration partner engagements with two leading U.S.-based global clients at the end of 2025. One of these client relationships has since expanded internationally, and we're engaged in several scaled pitches in this category at the moment.
These are strong relationships that help us attract and retain talent to work on them. Declining spends overall have had a negative effect on the average revenue size of our top 10, 20, and 50 clients. This is primarily driven by reductions in spend and scope rather than lost business, and again, it is starting to stabilize. With that, I'll hand you over to Martin for the summary.
Thanks, Scott. Thanks, Radhika. Just a few observations on the overall picture. Firstly, and probably most importantly, we reiterate our full-year guidance. We saw a Q1 net revenue re-reported decrease of just under 9%, and 5% like-for-like, which was a sequential improvement over Q4 of last year and better than, I think, analyst expectations for the first quarter. The performance reflected heightened macroeconomic uncertainty caused by the conflict in the Middle East and indeed continued client caution, especially amongst the technology clients as they allocate even more spend building AI infrastructure. I think we're up now to something like GBP 700 billion for the top four hyperscalers alone for 2026.
Full-year like-for-like net revenue is expected to be in line with current analyst consensus, and that's slightly below 2025. Quarter end net debt was about GBP 112 million. Our leverage EBITDA, debt to EBITDA ratio is we're now down to 1.4x. That compares with GBP 145 million last year when the leverage ratio was 1.7x. On a like-for-like basis, it compares with GBP 157 million. You're seeing considerably improved liquidity as we saw at the end of last year and through last year. That continues into this year.
We reiterate our full-year target for EBITDA margin, which is targeted to increase by at least 100 basis points, primarily due to the annualized impact of the 2025 cost actions that we took. Number of months at the end of March 2026 is around 6,200, down 3% since December 2025, and 11% from the same point last year in March of 2025. We reiterate our 2026 target net debt range of GBP 60 million-GBP 90 million, with a medium-term leverage of under 1x operational EBITDA. I think it's reasonable to assume that over the next two years we'll be debt-free. The company's capital allocation policy is to prioritize dividends first, then further debt repurchases, and finally share repurchases as net debt falls further.
The board is also implementing a 50% dividend payout policy out of adjusted basic earnings per share over the medium term, subject to our financial targets being met. In that context or moving towards that objective, we will approve an interim dividend of GBP 0.011 for this year and recommend a final dividend of GBP 0.011, so making a total of GBP 0.022 for the year, subject to shareholder approval where necessary, which is on the final dividend. That will be if performance and liquidity continues as they are currently.
The company repurchased or has repurchased already just over EUR 85 million of its term loan B at a discount. That reduces the term loan B from EUR 375 million to EUR 290 million, just under EUR 290 million. We have a targeted reduction, further reduction to EUR 250 million, which will be the steady state. On the AI front, we're seeing significant opportunities for new business, particularly driven by those AI tools and capabilities. We continue, as Scott said, to win multiple exploratory assignments as clients experiment and explore AI applications and develop use cases. The AI capability is becoming more central to our agency's way of working and to our new business efforts.
A number of clients have called out the proprietary AI applications that we have and that we've implemented, as a result, we've won four major AI Industry Awards just in the last two years. As Scott outlined, we're seeing significant assignments in three verticals. One, autos, secondly, financial services, to a lesser degree, we're starting to see take up at scale in packaged goods. Overall, we remain confident in our talent, in our business model, in our strategy, and in our scaled client relationships, which we think position us very well to deliver sustainable long-term growth. With that, we'll go to questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We'll pause for a brief moment. Thank you. We'll now take our first question from Laura Metayer of Morgan Stanley. Your line is open. Please go ahead.
Good morning. Thanks for taking the questions. Two questions from me, please. The first one is on the Tech Services business. I'm curious, what do you think is the midterm outlook for this business? Obviously, the growth has been lagging the Marketing Services business. Do you see that business kind of closing the gap with Marketing Services over time? What do you think is the impact of AI on this business? The second question is on the Middle East, if you can help us understand what sort of business dynamics you're seeing there and the growth and how the situation is evolving, that'd be really helpful. Thank you.
Okay, thanks, Laura. On Tech Services, we are seeing stabilization and a little improvement. Budget for this year, we're budgeting sort of flat revenues for Tech Services. I think, when we looked at the budget for Tech Services, our people were a little bit more optimistic than that, but we were a bit more conservative in the forecast. There are some signs of improving overall environment there. It's not just within our Tech Services, Digital Transformation business, it's not purely Marketing there. There's Enterprise Tech Services as well or Enterprise Transformation. I think the prospects are a little bit better. Obviously, it's been a rough time for the practice over the last, really two years. That's background on that. On the Middle East, we did.
During the ceasefire, which was, you know, obviously subsequent to the starting of the, of the conflict there, we did see some stabilization. Hostilities recommenced briefly. We've now gone to another sort of ceasefire period. I mean, it's very volatile. I would say, I would characterize what's happening as we had the initial destabilization. We then had a period of the ceasefire where some commercial activities were continued. Whereas earlier on, we'd seen sort of a stasis in terms of budgets and budget discussion going into 2026. There was a continuation. There was then a sort of came to a shuddering halt very briefly a few days ago.
There are signs and signals that there may be some form of maybe longer ceasefire agreement whilst some negotiations continue. It's a very volatile situation. We have gone in Dubai just in the last 24, 48 hours. We've gone to virtual working again. I think the schools were closed again, kids were told to stay at home. It's very volatile, Laura, but I would say we saw the initial dislocation, some stabilization, and then the monitoring of the Straits of Hormuz for a very brief period of time brought things to a shuddering halt again.
Maybe we'll see some constructive action coming out of it now. Improvement on where it was, but we've just got a question mark hanging over things at the moment.
Thanks, Martin.
Okay.
Thank you. Once again, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We will now move on to our next question from Brad Barton of Barclays. Your line is open. Please go ahead.
Yeah, hi, everyone. Thanks for taking my question. Just on the Middle East again, obviously in EMEA, net revenue down 28%. If you were to try and quantify that, how much of that do you see coming from Middle East impact versus sort of the scope reduction you called out on BMW?
Yeah. Join in.
And then on the-
Yeah.
Yeah, sorry. Go ahead, please.
Yeah. Well, let's have it. Radhika, do you wanna respond to that?
Yeah. I would say 70% of it was BMW scope reduction, and the rest of it was the Middle East.
Okay. then versus underlying sort of business versus EMEA, do you see that roughly flat, or is it just those two factors?
Roughly flat for the year. Is that what you're saying?
Yeah, excluding those two factors.
Yes.
I mean, those were the key factors.
Yeah. Those were the key factors, yes.
Yeah.
Yeah.
Got it. That's brilliant. Then, just my second question. When you talk about your intended dividend policy-
Yeah.
You mention medium term, how should we think about the medium term here? Thank you.
Well, you It depends. I mean, What is the market consensus, Scott, for our EPS? Is it about 5.8, 5.9? You're on mute.
Correct. Yeah, correct for this year. Yeah.
If you know, 5.8, 5.9, you take 2.2 on the 5.8, 5.9 for this year. If you take 50%, you would be talking about just under GBP 0.03 a share. I think medium term, you can interpret as being this year and next year.
Thank you very much.
Thank you. With no further questions from the line, I will now hand it back to the management team for closing remarks.
Okay. Well, thank you for joining us, and thanks for the time, and we'll be back to you, I think in August.
Yes.
Radhika, for the first half?
Yeah. On the 11th. Yeah.
Yeah.
Yeah.
We'll be reporting on the first half in August, so we look forward to seeing you then. Thank you once again. Thank you.
Thank you.
Thank you.