Good morning, everybody. I'm joined here in London by Scott Spirit and Mary Basterfield, and then we have Wes ter Haar, and Chris Martin, and Brady Brim-DeForest to talk about our three practices. So, we're gonna cover the H1 results, we're gonna cover market momentum, analysis of clients, and then we're gonna go into a detailed, a more detailed review of content, data and digital media, and technology services. And then we'll wrap up before the summary and outlook with a section on artificial intelligence and the impact that's having on our business. Mostly positive. And then we'll do a summary and outlook, and take Q&A. So, a lengthy agenda, and we'll start off with Mary on the results.
Thank you, Martin. Good morning, and thank you for joining us today. I'd like to start with the financial highlights. We had a very mixed first half. Reported net revenue was up 19% to GBP 446 million, or 5% on a like-for-like basis in difficult market conditions. Growth slowed towards the end of the half, with like-for-like net revenue growth of 7% in Q1 and 4% in Q2, as clients grew more cautious due to macroeconomic uncertainty. This was especially evident in one or two from the technology sector, as well as regional and local clients. Given slower top-line growth, operational EBITDA was GBP 37 million, up 21% reported, but down 30% on a like-for-like basis and below expectation. We have experienced some people cost inflation, but we continued to exercise cost discipline, including headcount and discretionary costs.
The number of monks is down 5% on this time last year, at around 8,550. Operational EBITDA margin was 8%, versus 8% reported and 12% like-for-like in the first half last year. Adjusted operating profit was GBP 31 million, and adjusted earnings per share were 1.7 pence. Net debt at the end of June was GBP 109 million, and leverage was 0.9x . Moving to the income statement. Revenue grew 16% on a reported basis to GBP 517 million, with like-for-like growth at 3%. There was solid growth from the scaled client base, with revenue from the top 20 up 9% and top 50 up 11% on a like-for-like basis. Reported net revenue of GBP 446 million grew 19% or 5% like-for-like.
This highlights continued momentum in a challenging environment. Reported operating expenses of GBP 407 million grew 18% or 10% like-for-like. This includes some people and other cost inflation, partially offset by cost management actions. Operational EBITDA for the six months to June was GBP 37 million, up 21% on a reported basis and down 30% like-for-like. I have given you a breakdown of adjusting items in the table on the left-hand side. Acquisition, restructuring, and other expenses were GBP 6 million, down from GBP 70 million for the same period last year, due to lower M&A activity and reduced contingent considerations. Finally, the increase in net finance expense was driven by a higher Euribor rate on the term loan, which provides us with secure long-term financing, as well as some foreign exchange volatility.
Looking next at our three different practice areas: content, data and digital media, and technology services. My comments here are all on a like-for-like basis. Net revenue in content, our largest practice, declined by 3% to GBP 265 million. There was solid growth from the scaled client base, although some larger tech clients showed hesitancy and budget constraints. Some mid-tier clients were affected by market softness and internal restructurings. While overall, trading was tough with new business, local and regional clients underperforming.
Flashing.
Data and Digital Media net revenue grew 2% to GBP 107 million, again, highlighting tougher market conditions, particularly in the activation and performance business. Technology Services continued to deliver very strong growth. Net revenue was up 54% to GBP 74 million, with spend by key clients weighted to the first half. From a regional perspective, the Americas was our fastest-growing region, up 7%, and remains our biggest region at 79% of the mix. EMEA grew 2%, and our smallest region, Asia Pacific, was down 7%, with slower demand in China and some underperformance. Moving now to operational EBITDA by practice. Again, my comments are all on a like-for-like basis. Operational EBITDA in Content was GBP 7 million, impacted by lower-than-budget revenues, together with some people cost inflation and higher IT costs.
Headcount was lower at the period end due to controls on hiring and our work on efficiency. Combined with further cost actions, this will support the practice's EBITDA delivery in the second half. Data and Digital Media also experienced some people cost inflation, as well as increased travel costs after the lifting of COVID restrictions. Together with a tough trading environment, this has resulted in operational EBITDA of GBP 16 million. Technology Services was up 50% at GBP 27 million, reflecting an excellent top-line performance, supported by growth in the organization. This resulted in continued strong margin delivery with an operational EBITDA margin of 36%. Central costs grew as expected from GBP 10 million to GBP 13 million, reflecting a full six months of the investment in finance, legal, and assurance made in 2022.
Touching briefly on the balance sheet and facilities, we maintain a liquid balance sheet with long-dated maturities to support the business and its future growth. Moving to cash flow on the next slide. CapEx of GBP 5 million is mainly investment in IT infrastructure. This is halved from last year, which included fit-outs of key offices. Interest paid includes increased payments on the term loan, driven by the higher Euribor rate. We continue our focus on working capital and receivables. Net, this has resulted in a free cash outflow of GBP 2 million, broadly in line with last year. This takes net debt to GBP 109 million. The cash spend on combinations was minimal in the first half, and we expect the forecast combination payments to be made in the second half. Turning now to guidance for the full year.
Following slower-than-expected trading over the summer months, including August and current client activity levels, we have revised full-year expectations. We now expect net revenue to be down on the prior year and operational EBITDA margins in the range of 12%-13.5%. As in recent years, the full-year results will be heavily weighted to the second half, and in particular, the fourth quarter, reflecting seasonality and anticipated client activity. We continue to manage costs tightly, and given the market outlook, we are taking further action, especially in content, to support H2 profit delivery. We expect a net finance cash charge of about GBP 28 million and an effective tax rate between 24%-26%, which is slightly lower than previous guidance.
We are reducing our prior guidance for cash contingent consideration from GBP 102 million to GBP 95 million, which is all expected to be paid in the second half, and we maintain our net debt guidance of GBP 180 million-GBP 220 million for the year end. The board will consider a dividend of 1 pence per share when the final results for 2023 have been determined. In summary, after a challenging H1 in difficult market conditions, we are expecting an improved performance in the H2 , and longer term, we are working hard to improve the returns. And with that, I will hand over to Scott.
Thanks, Mary, and good morning, everybody. I'm going to cover the markets and, and then some client analysis. There's no doubt that 2023 has been a tougher year for our core addressable markets. Digital media spend is projected to grow at 8.9% this year, a decline on double-digit growth in 2022, and on the 30%+ growth that we saw in the COVID bounce back year of 2021. A bottom-up analysis of the major platforms shows that they're expected to grow just over 10% this year, rising to 14% next year. Growth at the platforms began to slow dramatically in H2 last year, so they are now lapping easier comps, unlike our business, which maintained strong growth throughout 2022 and slowed in Q1 based on the more conservative 2022 budgets of our enterprise clients.
Our other addressable market is digital transformation, and while there are plenty of broadly defined third-party reports out there to show a large and still relatively healthy market, when we look at the results and guidance of our direct competitors in this field, we can see that most of them are experiencing negative growth this year after many years of steady 20%+ top-line growth. That said, analysts expect a recovery to the mid-teens in 2024. With that backdrop, growth has been much harder to come by this year. That said, it's not all doom and gloom in the markets. There are still pockets of excitement and opportunity in our addressable markets. The first and obvious one is artificial intelligence.
We've been discussing this on our earnings calls all year and had a specific investor summit hosted by Wes at the end of June, which is available on our website for those that missed it. Wes will give us an update on where we are later in the presentation, but the early signs are certainly encouraging that this will be an opportunity for us to grow and continue to differentiate ourselves and disrupt the industry. Elsewhere, in digital media, there are areas such as retail media or influencer, which continue to outperform the overall market, and we've certainly seen in influencer and the wider social category as a bright spot in our growth. Finally, whilst overall revenues for the top 25 agencies were relatively flat in 2022, S4 expanded its market share last year 37% to a 1% share.
While this year has been challenging, we remain convinced we can scale our share over time based on our talent, our service offering, and our client relationships. As you can see, we still have significant exposure to the technology sector from a client standpoint, at 44% of H1 reported revenue. Obviously, there's been some concern about this sector this year, given many large tech companies are going through years of efficiency, and we have not been immune to these pressures. However, we still have several large tech companies growing their spend with us this year, and longer term, we are confident this is a sector which will continue to provide growth opportunities ahead of the overall market.
The main growth category for us has been financial services, with the full year impact of a portfolio of finance clients at TheoremOne.Monks, and some good wins and land-and-expand cases at Decoded.Monks. While growth overall has been harder to come by this year, our long-term strategy of building broad, scaled relationships with the world's leading enterprise clients continues to deliver. We have eight clients with revenues above GBP 10 million in the first half versus 5 last year, and a further nine in the GBP 5 million-GBP 10 million category versus 6 last year. As Mary pointed out, and as we put in the RNS, like-for-like revenue growth from our top 20 clients of 8.9% and our top 50 clients of 11.4% is ahead of the overall group. Our Whopper strategy continues to pay dividends.
The challenge this year has been further down the client list, with longer sales cycles and a tougher trading environment, meaning growth from new clients and project-based clients has been more difficult than last year. This is more marked at a local level when dealing with smaller and more localized client relationships. On the Whopper front, we had 10 last year, and obviously one of those was Mondelez, which will not be at that level in 2023. It's hard to predict exactly where we'll end up this year. We have clear line of sight on eight Whoppers, and as our largest clients are getting larger, we have several others that are projected to be at or close to the $20 million cutoff point. With that, I'll now pass over to Wes, who's gonna update you on the content practice.
Thank you, Scott, and hey, everyone. I will run us through the content practice update. Then after handing off to Chris and then Brady for the other practice updates, I'll be back with a deeper dive on AI specifically. You'll see us talk about AI practice, of course, but as it's such an important topic in our industry and beyond, a general update on our progress and positioning is relevant. First, if we go to the next slide, this echoes what we've heard from Mary, what we've heard from Scott. A year of economic slowdown. We're quite heavily weighted in tech, where we saw that play out, and we had some of our local markets struggle. This is a bit of an industry reframe.
General macro pressures in play, it's leading to conservatism in budgets, delays of H2 planning among some of our clients, and there's still some general concern about potential recession amongst our client base. It's slowing down sales cycles. If there is a positive note here, to echo what we just heard, is that we're still seeing growth across our bigger client relationships, the so-called scaled and selected portfolio ones, but it's currently not offsetting some of the other slowdown. What that means is we have more to do when it comes to matching costs to revenue. I'll come to that in a few slides, but if we go to the next slide to focus on revenue first. Few areas of strategic focus. So one is we need to double down on regions that have struggled, LATAM and APAC.
We're really focused on making sure we reignite those areas for growth. We're also doubling down, for instance, on the Middle East. I think a good example of an area where we're seeing good traction, and we believe there's a lot of growth available for us. We're also off to the races with our first wave of new logos and revenue related to our AI offering. I'll have some more details on that when we do the full AI update. For our bigger client relationships, we've opened up what we call our Plus One program. This really is just a more strategic way to up and cross-sell through our single P&L, some of our services and subject matter expertise. If we go to the next slide, I think this showcases the latest example. So we launched Experience.Monks to the world last week.
We internally rolled it out about 2, 2.5 months ago, and it's built around the merger of Jam3 in combination with our existing teams. This is truly best-in-class offering in the industry. The easy access to this expertise has already resulted in sizable new engagement with that existing client base. For CES for the Super Bowl, which is always a great place to turn up and for ComplexC on. To give a bit of detail on how this sort of expertise is rated in the industry, last week, Eventex released their top 100 event organizers and agencies of the year. Media.Monks came in at number 3, so we expect this offering to grow and grow, and really follow in the footsteps of what we saw happen when we launched Social.Monks.
Another one of these areas is subject matter expertise that is widely regarded as a leader within our industry. Talking about mergers, if we go to the next slide, we're a significant way through our merger model. That's good for a variety of reasons. One, it allows us to better align our offering to reflect what our clients need, make it easier to buy. Experience is a great example of that. It also drives cost efficiencies, so we should be seeing more of those in H2. But in general, the merger process means operational teams are integrated, there's better control on hiring costs, and of course, it's easier to eliminate duplication.
Important additional note here, as leadership, we don't necessarily believe you can cut your way to growth in this industry, so there's a flip side to this ongoing process, and that's why we've hired senior talent in key markets. Paris, London, Amsterdam, São Paulo, all have new managing directors. We have a few more exciting hires to come. We actually hope to announce one this month still. So we're balancing out both parts of that equation, which if we go to the next slide, is pretty key. Our ability to attract great talent has been a feature of our business for a while now. We're also seeing that reflected in partnerships. So some new updates here that I think are quite exciting. We're a partner to the Sphere in Vegas. Stunning new venue. If you haven't seen it, it's worth a Google.
We launched the first-ever advertising on that very unique canvas for YouTube and their NFL sponsorship. Much more to come. Our footprint on Roblox is growing. We're launching more and more work in that space and on that channel. The latest is for Scholastic, which I think is a really exciting example. And then I'll spend a bit more time talking in detail about our NVIDIA partnership during the AI update. But specifically, we'll lean into the product launch that we just did at IBC. IBC is still happening today in Amsterdam. We had a go-to-market launch with NVIDIA, AWS, and Adobe that I think is really exciting, but more on that during the AI update. And of course, great and ongoing relationship with Salesforce. We'll hear more about that from Chris in our Data and Digital Media section.
But we just co-authored Generative AI, a new report that's coming out this week, and we also have our Future of Loyalty report together with Salesforce, Reddit, and Polygon, which I think are great examples of thought leadership with our key partners. Which brings me to the last slide, and again, echoing the earlier comments, clearly not an easy year to manage. We will continue to use what is a tough year to implement changes, to make us leaner, lighter on our feet, give us more levers for growth. We spent this year optimizing internal teams and structure. That's a balancing act, and we've done that without negatively impacting levels of quality, levels of service, I think reflected back to us by our continued growth for our key clients.
We're optimistic about the progress we made, specifically what that means for our exit rate in both revenue and cost as we enter 2024. We've been historically backloaded. We're making sure that is not the case next year. Additional note on that balancing act, we've combined that with building out an industry-leading vision for what AI means for our industry, for our clients. We're bringing that to life across our practices. I'll give you the deeper dive that's a bit more holistic after this, but first, I'll hand over to Chris and Brady for the practice updates. Over to you, Chris.
Thanks, Wes. Let's dive right into our 2023 outlook for data and digital media. We're observing a cautious sentiment around media and large-scale marketing investments in the second half of the year, and this has led to lower commitment rate, particularly impacting our revenues derived from the % of media spend from our clients. That includes our media technology, activation, and performance business units. Clients are looking to consolidate, find efficiencies, and are pushing decisions until 2024. However, our business is somewhat insulated from this trend. Our clients are controlling staffing investments, and that's where our transformations and managed services business shine, offering staff augmentation for both seasonal support and downsized client teams. We're also experiencing slower decision-making cycles, pushing new investments to year-end or even 2024 in some cases.
We're using this time to launch some major updates to our media operating system and audience solutions in Q4 of this year. These updates will incorporate next-gen AI, optimization, and integration of media workflow with the creative side of the business. Through the remainder of the year, we're also making a final push to move work to lower-cost talent hubs and to install automation in those hubs, while controlling for costs by significantly reducing hiring and expenditures through the end of the year. Moving on to our wins for 2023, we have secured some high-profile clients like Deciem and Kimberly-Clark. Deciem, a leader in science-backed skincare, represents a new media win across four markets. Kimberly-Clark, on the other hand, has consolidated all of their DSP 360 or programmatic buying activities with Media.Monks globally, a significant win made possible through our close partnership with Google.
Our media agency of record offering, or AOR offering, is gaining momentum, and we've won contracts with Kraken, Netflix, and Trustpilot for 2023. And these wins validate our model for the future role of our services against legacy incumbent global media agencies. Our thought leadership in the AI and automation space has been strong, with key partnerships and stage presence. We've been named the launch partner for Salesforce's Web3 and AI announcement activities, and we're actively co-marketing and co-pitching with Salesforce, Amazon, and Google in the AI and automation space. And we're not just talking about it, we're delivering. We're ramping up our development of modularized enterprise-grade, cloud-based media, data, and analytics products. The biggest push we've had in Q4, or we expect to have in Q4, is the launch of our Media OS tool and our Inflection Planning Engine.
This approach to faster and automated media investment and decision-making, and the program is piloted with new clients and is primed for a public launch in 2024. Our significant investment and existing relationships in tech platform partnerships are accelerating our automation software adoption. We have multiple large-scale enterprise clients buying and installing our SaaS solutions, and we look forward to publishing the efficiency improvements that these automation tools are providing to our clients. We've also launched automation consulting services, with early successes showing a 60% decrease in process efficiencies, 50% decrease in our admin needs, and a 29% decrease in platform overheads, saving clients both time and money. Our focus on CRM and Data Cloud adoption is not just a buzzword; it's translating into accelerated deal velocity. Our AI pilot programs with Salesforce's Marketing GPT is already showing promise and traction.
These are calculated bets in AI, sorry, in AI, and these are setting us up well for 2024. We're optimistic but realistic coming in the back half of the year. We're anticipating broader economic headwinds as clients are also cautious about investments heading into Q4 in 2024. However, our client base in Data and Digital Media, while delaying investments, is robust and expected to rebound over time. Thank you for your time today. I'm now gonna hand you off to Brady Brim-DeForest in our Technology Services practice.
Thanks so much, Chris. Really appreciate it. Thanks, everyone, for your time this morning. Excited to share our progress and achievements in the Technology Services pillar. Over the course of H1 in 2023, we've had a very strong half year. Our primary focus has been on improving volume and momentum through the top of the funnel. We signed a number of new clients for the pillar, including Philips, Rise 8, BMW, Southwest, and Apex, among many others, and we're seeing continued success selling in collaboration across the pillars. I can jump to the next slide. Our strategy of connecting, landing, and expanding has proven successful, especially in tandem with Experience.Monks, Platform.Monks, and Data. Monks. We're winning together with our partners internally, and we're seeing significant upside in selling the end-to-end value proposition across the Media.Monks narrative. Next slide.
We're continuing to expand our services stack with meaningful new capabilities, like our global consulting services line, our new cloud services capabilities, and of course, AI. We've added dedicated leadership, like ex-Googler Anirudh Sarathy for cloud, and Kwasi Ankomah for AI. The AI pipeline is another bright spot, with significant wins across multiple sectors and verticals. Our new AI services offerings include AI readiness assessments, AI innovation studios, and rapid discovery for AI, all of which are seeing meaningful demand inside of both net new greenfield clients and existing portfolio clients. Our consulting services layer is continuing to expand globally, serving as the tip of spear for our land and expand strategy, delivering continuous value to our clients while developing long-term demand signals and unlocking new opportunities.
We see consulting as a critical part of our strategy to continue to accelerate momentum in our pipeline, as well as develop new relationships horizontally across the C-suite. Jumping now to a particularly exciting moment for the technology services pillar is our recent launch of our first commercial self-service AI product, DocRobot. You can try it out at www.docrobot.ai. DocRobot allows users to effortlessly aggregate, condense, and interpret business intelligence information while concealing sensitive confidential data. We're using it internally, extensively in a variety of applications, and we're looking forward to both deploying DocRobot on behalf of clients in our professional services engagements, but also deploying it as a licensed solution for those clients as well. Jumping now to the final slide.
From a continual and continuous focus on improvement across the org perspective, our priorities are fundamentally on growing our demand gen capability. Ben Lee and Patrick Ward form the core of our demand gen function and are working very hard with our scaled managing partners team to continue our land and expand strategy, leveraging demand signals and market, but also focusing on creating net new offerings that we can go direct to existing portfolio clients and greenfield clients with.
Finally, our partnership strategy is continuing to be a primary area of focus with our Oracle CloudWorld partnership, which is actually in action this week with private AI roundtables, our partnership accelerator, and expanded focus on technical certifications as well as the technology services focus on our broader MediaMonks NVIDIA partnership as well. Back to you for AI, Wes.
Thank you, Brady. Okay, we've talked about this a lot, and we've talked a lot about being fast and first. That commitment hasn't changed. If we go to the next slide, I will give a relatively fast update on our positioning and progress, and hopefully we can answer a few questions during Q&A as well. Let's look at what's happening since our last full update. If we go to the next slide. I've met with over 100 enterprise leaders, really understanding what do they need from us? What are they looking to buy? What's our role and responsibility in the moment? There's clearly some, some legal and ethical complexity that's washing out, but realistically, we've never seen this scale of interest at this level of the organization before. It's early in the revenue cycle, right?
Some of that legal and ethical complexity is a part of that. But if you look at the potential plus R, what I would call product market fit, I think it can be summarized by the quote on the following slide, which is, really after one of these in-depth sessions, and I think sort of shows the excitement in general that we're seeing at the C- level. Why is that excitement there? Because it's not about incremental change, right? AI and generative AI can unlock manifestly better value for our clients, which of course is driving that excitement at the C-l evel. If we go to the next slide, it comes down to three areas, and I'll show you some practical work we're doing across all three.
More efficient, this is to an extent, table stakes, replacing parts of manual labor and physical costs with cloud and compute. I think if you go to the next slide, in our industry, the ability to economically unlock more is important only if you can prove that more is better, right? So lots of focus on effectiveness. The interesting part of the AI value proposition here is the compound effect, right? AI can learn and learn, and those learnings compound over time. We're doing a lot of really meaningful work with our data and technology teams. And then if we go to the last slide, better end consumer experience, right? There will be a wave of industry-defining consumer experiences, made possible because of AI and generative AI, which means for our clients, there's opportunity to leapfrog competition.
So if we look at a few concrete examples of what we're doing, we can go to the next slide. We're building pipelines. I think it's really important to make clear that this isn't just about using AI tools. This is a combination of technology, workflow, and talent to replace traditional parts of marketing and advertising stack. Some examples are our photography pipeline, right? Where a mix of talent and machine is creating massive efficiencies for our clients when it comes to the output, scale, and speed of assets. Another example is in scaled copy, or what we call scaled copy. Again, combinations of technology, workflow, and talent to create efficiencies, more output at higher speed. But what's important is that these pipelines unlock the road to more effective marketing and advertising, right?
More personalized, more targeted, more contextual, which is really where the third pipeline and stack comes in to make sure we actually capture that value. Our data teams are helping clients set up their data pipelines to be ready to machine learn. There's a lot of magic to the moment when you look at AI, but it's driven by the right data structures and syntax. If we go to the next slide, this way of thinking, this, I would call it workflow-based way of thinking, is very aligned with NVIDIA, important new partner. I think our relationship is well captured by this quote from NVIDIA, "Our collaboration with the Monks will help us deliver a more engaging and personalized experience for brands and consumers." But we don't just have partnerships with NVIDIA in what I call the cloud and compute space.
We're across the spectrum, and that's exciting as it means we can go to market together in very disruptive ways. If we go to the next slide, this is what has happened over the last few days. In combination with NVIDIA, AWS, and Adobe, we launched software-defined production services for the broadcast industry at IBC. I think today is the last day at IBC, so it's still new, but massive potential impact for global broadcasters, and we have very high interest from broadcasters across the globe. So we'll keep you posted on this. Hopefully, we have some good news in our next session together. But if we go to the next slide, I think that's really an important sort of framing of the moment. This is a new game, right?
It's the cloud and compute revolution, and if you look at the last 10 years of our industry, that's really been about software eating the world. Now AI is digesting it. And I told Citi's AI Arms Race report that came out recently, had a really good view of the value stack in this space. We are playing across that value stack at every level, via our partnerships across silicon and infrastructure, our projects and products across software and applications. And as you will have noticed, all of our practices have services and pipelines to help our clients be fast and first in their specific industry. And while we're not building the foundational models, that's not our job, we are helping our clients train and tune them.
So the full stack offering, which we've gotten to, again, fast and first, means we have active AI engagement across a growing set of clients and sectors. If we go to next slide. This is early from a revenue perspective, but clearly an area where we'll see a lot of high growth. At this stage, we have work in the efficiency space, in the effectiveness space, in the experience space. Some of it sits in workshops, consultancy, pilots, which is that initial sort of revenue wave that we were expecting, but it compounds, right? As we prove the value of what's happening in this space and our value as a partner, the revenue, of course, will grow. And it's interesting, across all practices, to see that we have a very active and healthy pipeline when it comes to AI engagements.
So if we go to the next slide, just a bit of framing. Why have we been so excited about this for a while now? There's everything to play for. So to illustrate the size of the addressable market, even with all the influx of money into digital over the last decade, a fifth of the ritual firms doesn't even have a website yet. Only a quarter of enterprise workflows currently happens on cloud, and a large percent of what you would define as mature digital advertising clients still struggle with basics like dynamic creative optimization, let alone end-to-end solutions between data, content, and media. The big question then becomes: why? A big part of that reason is simple economics, right? And as we've said time and again, AI changes those economics. Don't take my word for it.
If we go to the next slide, take it from Louise, key operational leader who's focused on driving internal productivity gains. Go to the next slide. Take it from Michael, who's been creating completely new ways for our clients to interact and interface with their datasets. And if we go to the next slide, take it from Vincent, a personal favorite. "It allows us to create the consumer experiences we've always imagined," which I think is a very exciting opportunity for all of the teams involved. And with that, if we go to the last slide, make sure to download and read our Generative AI report. It's out this week together with Salesforce. Really strong work. And with that, I'm gonna hand it over to Sir Martin.
Thank you, Wes. Thanks, Chris, and Brady, and Mary, and Scott. So, no getting away from it. It was a very mixed first half. I mean, our practice net revenue growth was down 2.5% at Content, up a similar amount, 2.5%, at Data and Digital Media. And, last but not least, Technology Services was up over 50%, so very mixed. From a geographic point of view, Americas was up 7%, EMEA up 2%, and APAC down 7%, reflecting primarily the lack of response from a post-COVID China, at least as yet. So very mixed in the first half. But having said that, net revenue growth was 5% like-for-like, although it did reflect the challenging macroeconomic conditions and the client fear of recession.
We saw sort of three buckets: tech clients, FMCGs. Tech clients, mixed performance in terms of spend, although their digital advertising revenues were quite strong. Packaged goods clients, pricing up and fixing their ad budgets against net revenue, and therefore increasing their ad budgets and deploying more money into digital media, as we could see from the platform numbers. And last but not least, the smaller regional clients really being pushed and being very hesitant to commit, along with new business. Having said all that, there's been solid growth in relation to our core objective of deepening and building scaled relationships. Across our scaled base or Whopper client base, with our top 20 clients, and their like-for-like revenue growth was 9%, and for the top 50 clients, it was 11%.
So we've seen continued growth, and basically, we have a GBP 1 billion revenue business with 13 clients, accounting for about 50-55% of that revenue, and it's a very strong base on which to build. Acknowledging that most of our relationships are built around the tech or telecommunications space, is about half of the business. We've seen longer sales cycles, particularly evident in content, and especially, as I said, with tech and local and regional clients. Profitability reflected our slower top-line growth, but also some people and indirect cost inflation, and it was below our budget at GBP 37 million. So up on the GBP 30 million from last year in reported terms by around 20%.
We've been disciplined in our approach to cost management, and we're focusing on efficiency and integration, and that will have an impact on the second half and quarter four in particular, with it's acknowledged more to do. In relation to that, our headcount is down about 5% on a period-by-period basis, so comparing the end of the first half of last year to this year. Net debt has been better than expected at around GBP 109 million. It was up at GBP 135 million this time last year, and that's partly due to the timing of combination payments. Year-end guidance is around GBP 180 million-GBP 220 million, reflecting the outflow of approximately GBP 100 million in relation to those combination payments.
The board will look at, depending on the outturn for 2023, an inaugural dividend of at least one pence per share, which would reflect the board's confidence in our strategy and indeed, our outlook. We have continued focus on ESG. I mean, that has tended to, I think, lapse a little bit with our clients, given the fear of recession and the hesitancy. But we're focused on three areas: zero impact workspaces, on sustainable work, and diversity, equity, and inclusion through our women's program at Berkeley and the fellowship program. Initial traction, as you heard from AI conversations and initiatives, is encouraging and we certainly remain at the forefront of leading this change. We've revised our full-year net revenue target.
We expect likely down Like-for-Like on the prior year, with operational EBITDA margins now targeted at between 12%-13.5%. From an overall strategic point of view, we remain very confident in our talent, business model, and strategy, and focus on scaled and portfolio client relationships, the Whoppers and the Whopportunities. We think that positions us well for above industry average growth in the long term, with an emphasis on improving efficiency and margins, lastly, and probably most importantly, with an emphasis on dividends and share buybacks. We've moved our model to focus, as some of the tech companies have done, on efficiency this year and next year, and focusing on returning significant sums to share owners in the form of dividends and buybacks.
With that, we can open it up to Q&A, with the operator.
Sure. Ladies and gentlemen, if you would like to ask a question or make a contribution on today's call, please press star one now on your telephone keypad. To withdraw your question, please press star two. The first question comes from the line of Tom Sherlock, calling from Citi. Please go ahead.
Yeah. Good morning, it's Tom here from Citi. Can you, can you hear me?
Just fine, Tom.
Yes.
Yeah, it's fine.
Perfect. Perfect. Thank you. Thank you for the presentation. Three questions, if it's okay. First one, I mean, obviously, you've reset expectations in July, resetting them again now, and I. By definition, we don't know how negative it will be, but it seems you're implying at least minus 6 or so in the second half. I'm just questioning the question is about what you anticipate the phasing to be 3Q versus 4Q. I know you've talked about 4Q seasonality, but I presume that's the weight of revenue rather than the growth. Yeah, any line of sight on 3Q organic growth would be very much appreciated.
Second question, DDM, maybe I've got this wrong, but it looked like the actual organic growth rate got slightly better in the second quarter relative to the first quarter, or at least the first half appears to be faster growth than the first quarter. So I suppose the question is, for the outlook, should we expect a similar polarization between content and then everything else? And then the very final question is, on the margin side, I would have normally expected a company like yours to be able to adjust more at this stage of the year to lower revenue, but clearly, you're guiding to lower margins, which is fine. I suppose the question is: Are you wearing lower utilization but positioning yourself for recovery in the fourth quarter or the first half of next year?
Just your thoughts on where utilization has ended up and whether you'll, you could make further actions?
Yeah. Thank you.
On the cost side if you, if you need to.
Okay, thanks, Tom. I mean, Mary, do you want to talk about the third quarter and fourth quarter and growth?
Yeah, sure. So we've seen. As we said in the release, we've seen difficult trading in July and August. Now, obviously, we're partway through September, and we don't have the final numbers for the quarter yet, but I would expect Q3 will be down year-on-year. We've obviously adjusted expectations for the full year today, which reflects that. And as you pointed out, Tom, we do have a natural seasonality skew to Q4. But we are expecting the second half to be challenging, and we've got quite a lot to do from here to Christmas.
Yeah, on September, just, I think post-Labor Day, there was a feeling, and certainly in the markets, as you would know, Tom, from Citi, around deals like Smurfit and IPOs like Instacart and Arm. I don't think we've seen, you know, on our prep for this. I don't, in talking to analysts, I don't think we-- One of the questions we asked, whether we've seen a, you know, a sort of spring back in September. I think it's too early to call that. To date, I don't think we've seen that. On the second question about DDM. DDM actually did have a greater growth rate in Q2, and we're hopeful that that will continue into Q3 and Q4.
But I think the pecking order will remain the same. Tech services, you know, has grown extremely strongly in the first six months of the year, by far the strongest. That won't continue at that rate. It will slow down. But having said that, I think the pecking order will remain tech services, DDM, and content having the most to do. Do you want to comment on margin? That was the other question at the time.
Yeah, of course. So in terms of margin, obviously, we've delivered 8% in the first half. As we've said in the release, we have continued to drive efficiencies, and those have taken place gradually during the first half. So we will see some benefit in the second half based on the exit rate from June in terms of headcount. We continue to take further cost actions, and, you know, as Martin said, those will be particularly focused on content. And will continue through Q3 and into Q4, showing the benefit in terms of the margin delivery. I think the other thing I'd add is, obviously, from the natural seasonality, there is an impact on the margin delivery, which will naturally be better in the second half of the year.
Yeah, anything else you want to add, Wes or Chris or Brady, to the commentary on the three practices?
I can, I can add, because it was a specific sort of question from Ben. Utilization, that's definitely an area of focus. I mentioned the balancing act earlier. If you look at the content practice, it's driving most of our growth with the bigger clients. So we don't want to disrupt those relationships and that, that opportunity. Our struggles really are at the local market level, where it does need a bit of investment in talent as well. But utilization is definitely an area of focus. Lots of focus on our exit rate to match revenue and, and cost base when we head into 2024.
Anything, Chris, you want to add on DDM?
Only a mild comment. The media flow and our percent of media businesses, if they see a significant pullback in advertising budgets in the fourth quarter, that does have an inelastic impact to revenue. So the infrastructure and the people required to run less revenue is still there. You know, we will see if there is a broader macroeconomic pullback and CFOs get nervous towards the end of the year, we'll see that media flow decrease in our numbers, which is normally a seasonal number. And, you know, Q4 is our big quarter in the media parts of the business.
So I think that's where we are, a bit cautious, as we're not seeing those commitments come through at rates that we've seen previously, in other years. So that's the qualifier on the statements that I made earlier.
Yeah. Brady, anything you want to say on tech services?
I think, looking at the back half of the year, we're seeing actually more demand than we had anticipated, more specifically in the strategic staffing side of the house. I think a lot of clients and prospective clients are looking to shift FTEs to continued workforce strategies, and I think that's a bright spot for us heading into the back half of H2.
Okay. Okay, operator, any other questions?
Sure. The next question is from, Julien Roch, coming from Barclays. Please go ahead.
Yes, good morning, everybody. I have three questions, if I may. The first one is on organic. You said slower than expected trading over the summer months. Very challenging first half after in June, so four difficult months. Marie said she expected Q3 to be down, but can you give us the organic in May, June, and in July, August? I'd argue that just saying down is not good enough, but down is between -0.1 and infinity. That's my first question. The second one is when Wes went through content, he talked about, "We further integrated our teams, expanding our single P&L offering to clients." But I saw you had one single P&L and one single brand already. So where are you in terms of single P&L, really?
How many of your 30-plus agencies have the same HR, finance, ERP system, fully integrated? That's the second question. And then the last one, net debt of GBP 180-220, cash flow generation in 2024, maybe what kind of, free cash flow to EBITDA conversion are we talking about in 2024? And what net debt to EBITDA you're comfortable with? So with those two numbers, we can size the potential buyback in 2024. Thank you.
Yeah, and on organic, I mean, you try every time, Julian, to get us to give you a monthly, and we're gonna refrain yet again from doing that. But Mary, do you want to comment on just on trading in the summer months?
Yeah, sure. So hi, Julien. So as we've said, we saw trading slow towards the end of the half year, so May and June much slower than the Q1. And then we've seen difficult trading in July and August. Now, we do expect Q3 to be down. It's very hard to give specifics at this point. We're not through September yet, but we do expect Q3 to be down. And obviously, we'll update when we get to the Q3 trading update.
Yeah, on the single P&L, I think, you know, I think we've integrated most of what we've done, with the exception, I think, in America. In North America, I would say Decoded and Cashmere were the two... You may have seen the Jam3 Experience.Monks consolidation and integration that we did. You asked about, specifically about software, Julian. I mean, certainly on Workday and Slack and similar systems, you know, we've made a lot of progress, and they are used across the company. On ERP, that's gonna take longer. We have multiple ERP systems. We're starting with DDM on ERP. And Mary, do you wanna talk a little bit about what we're doing on ERP so that we're clear on that?
Yes. So from an ERP perspective, obviously, given the way the group grew up, through several combinations, there were, several different ERPs in place. We are consolidating around a small number at the moment, and the project for DDM is now underway, to roll out one ERP, for DDM, as an entity. That also happens to be an ERP, which is already in place in a few or several other areas of the group. So that will then give us an opportunity to push forward towards a more holistic solution for the group. But that's the focus at the moment.
Yeah, on cash flow, I mean, we've made significant progress from last year. We were at GBP 135 million of net debt last year on June 30th. It's now GBP 109 million. There haven't been significant payments. On the conversion of fixed FCF cash flow conversion, we have a specific objective across the company, actually, which will be published in the annual report, which is, what? 65%.
Yeah.
Mary, do you want to go into the detail on what we're doing on fixed cash flow?
Yeah. So we continue our work on cash management, cash generation, particular focus on receivables. And we have been gradually improving the position, but we do have more work to do. In terms of cash flow to EBITDA ratio, I'd probably say 65%-70% would be the expectation for next year.
And if I could follow up, so 65-70 on conversion. So what's the net debt to EBITDA you're comfortable with? So we can size the buyback. And then I'm sorry to come back on organic. I understand that July and August were down, and you can't tell us Q3 because it's too early. Yet you know that September... But July and August were down by how much? I mean, what's the closest number? Is it -1, -5, -10, -15?
You'll see when we do our Q3. You'll find out when we do our Q3. I mean, we've given you where we think we can... What we can say at this particular point in time in the year. So I think we have to leave it like that. We're not gonna go into month-by-month figures, Julian. So it's, I think it's the third time you've asked us, so, well, you can keep asking, and we'll keep answering.
And then on-
Okay.
... on the net debt to EBITDA ratio, Julian. So obviously, we have GBP 95 million of cash on contingent consideration to go out in the second half of this year. Which means that, especially given the change to the outlook that we've provided today, we would expect the net debt to be mid to top of range, as quoted, at the end of the year. But we have no further cash contingent consideration in 2024 or 2025. So once we get into 2024, the net debt to EBITDA ratio should come down quite nicely. And we've said from a long-term guidance perspective, we want to manage around 1.5.
I would just to add, Julian, you know, the premium will be on returning money to shareholders in those two forms, dividends and buybacks.
Thank you.
Thank you.
The next question comes from the line of Jonathan Barrett, calling from the Panmure Gordon. Please go ahead.
Good morning. I've got some-- I've only got three questions, but they're all quite short ones, after the earlier questions. First one is just on a simple question on FX strength for this year. Given the current rates, just what do you think that all, that now works out to be for the business? The second one is just on, this is on AI.... During your AI presentation, there were some hints around clients wanting to also get the benefit of AI systems that you put in place. And I think the conclusion was that the clients weren't necessarily willing to fund that, as it were. I wonder if you could just give us some thoughts on how you're going to approach that.
If clients just want the gains but don't want to support the investment. I wonder if you could get into that bit for us, and then focus on that.
I'm not sure where you got that from, but Wes can comment on it. I don't think we said that client
Uh
clients would be unwilling.
I think I'm extrapolating off of the comments around, you know, it being ending up being net neutral. And there are some other comments around the park, perhaps some other groups who are just talking about that subject matter as well, about not making any gains.
Are you asking about other groups, or are you asking about us?
Well, it's, it's the same subject matter for everybody, from what I can work out, and, you know, the fact that you weren't going to get any benefit from your investment, I think was something which was noted in your presentation. So just, yeah, wondered if you have any thoughts on that?
Again, we'll cover it, but I don't think that's right. But go on, what's the third one?
Okay. The third question is, obviously, you've talked about the content business, where you've got some initiatives going geographically. I just wonder if you could give us just a bit of information. I think you've mentioned it before, so that's an update on the size of the Middle East business, because you don't break that out in your report and LATAM as well, just so we obviously understand what the APAC number is, because you give that number. But just to understand how big the businesses are that you're trying to push those growth initiatives through on.
Yeah. Just on, I mean, on, on that directly, I mean, you can see that from the geographical breaks that we give. I mean, North America and South America now are really dominating the business. EMEA is 15%, of which the Middle East is not an insignificant part, and then you've got Asia at 5%. So really, you, you've got the Americas up at 80%, and that block is becoming more and more important in terms of growth. You can see that, the results elsewhere. Forex, do you want to comment on forex?
Yeah. So from a foreign exchange perspective, we have the most exposure to the dollar rate. And based on our expectations for 2023, one cent is sort of around GBP 5-6 million on the top line, so on net revenue, and around 1.5-2 on the bottom line for the full year.
I think we've been conservative in our forecasts on the forex rate. I think we've taken the average for the end of year 1.127?
Yes.
Yeah. And to date, it's been 123?
Year to date, August, is 124.5.
24.5. So, so I think we've been fairly conservative on that. On AI and funding, and Wes, do you want to comment on that? I don't, I don't quite understand where that came from.
Yeah, sorry. I don't think that is what we were saying. We see it as an area where there's definitely definite gains for us. Some of that is down to it being a very active area for potential conquesting. Some of it is down to internal productivity gains. Some of it is down to different commercial models that it opens up for us. So we see it as an area for big gains. If other groups are saying no gains, I think that in part might be probably where our opportunity sits because we're going after it in a way that's a bit more disruptive than I think some of the other maybe networks feel comfortable with. But for us, we see that as an area for clear gains.
Yeah, Chris, do you want to comment from your point of view on AI and Brady, too?
I don't know if I have too much more to add on that topic. I'll defer to Brady.
Okay, so
Thanks, Chris
just to clarify, you're expecting gains on margin from AI then? And just on the other question, I think you gave me a fairly good hint on the size of ME in EMEA. But what's the proportion of LATAM as part of the Americas, please?
Well, we don't break it down. It's difficult to break down because, you know, you're buying in reais, or you're buying in pesos, and you're selling in dollars. So we treat it as one, and you there's no real breakdown that's meaningful because the two things are interlinked heavily. Just going back to the AI question, do you want to add any more on that, Brady, or not, from your point of view?
Certainly, I think the. There are long-term margin improvement opportunities. I think right now it's really, most of the greenfield is in horizontal expansion from a technology services delivery perspective. AI is going to penetrate all the verticals inside the enterprise, and we think that we have a unique value proposition here across our capabilities when you add GDM content and technology services, and into a unified value proposition. We think we can more efficiently move from the CMO into the CTO and vice versa, as well as into other parts of the enterprise organization, including the CFO risk, and also core product and supply chain functions. So I think there's a lot of long-term upside. Most of it, I think, for us is greenfield net new opportunity.
Yeah, just to amplify that a little bit. You know, I think the five areas that we've and we've been through this before, the five areas where we think there is significant impact is first on visualization and copywriting, where there are productivity gains that will be shared with clients, but there's the opportunity to do more. Secondly, hyper-personalization at scale, so whereas clearly there's an opportunity to do more. So instead of producing a 1 million, 1.5 million assets, you can produce multiples of that for campaigns. The third area is media planning and buying. My own view is that digital media planning and buying, which is two-thirds of the market at the moment, probably going to 75% by 2025, and you've seen it in the first half of this year, has been considerably stronger than analog.
That media planning and buying will be reduced to an algorithmic analysis. We're already starting to see it with Alphabet and Meta and Amazon in the small business area, the SMBs and the medium-sized businesses. And that's a big advantage for us at 8,500 people versus 100, 130,000 people, or the 200,000 people that are employed in media planning and buying as planners and buyers. The fourth area is just general efficiency, like the one that we, that we've targeted with OBS, with AWS and Adobe and NVIDIA. And then finally, just spreading knowledge through the organization, which I think will simplify our organization and give people access to information to a degree that they've never had before. So if you take...
You look at all those, there'll be some challenges from on the productivity side and changing, and changing pricing. But overall, it's, it offers us a, a lot of opportunity. Any, any, any further-
Um-
Anything?
There are no further questions.
Yeah.
I will hand it back to Sir Martin to conclude today's conference.
Thanks, everybody. Any further questions, by all means, to Scott or Mary or myself, or indeed, Wes or Chris or Brady. Thank you for joining us, and we'll be back to you with the third quarter in due course.