- Profit warning as key contract not renewed
- Softer business in tech and public sector
- 12% hit to 2026 revenue
Companies are required to announce all price-sensitive information to the market as soon as possible.
Tech consultancy and marketing group Next 15 (NFG:AIM) dropped a bomb shell on Friday (6 Sep) after saying a key customer will not be renewing a three-year contract, resulting in a ‘material’ hit to profits.
The market dealt with the profit warning by brutally sending the shares down by 50% to a three-year low and wiping out more than £400 million of market value in the process.
The contract with the company’s venture subsidiary Mach49 was expected to contribute just over £80 million of revenue in the financial year to January 2026.
Next 15 said that while it anticipates the client will continue to use Mach49 in the future it believes it is ‘prudent to materially reduce forecasts for 2026’.
IT NEVER RAINS, BUT POURS
In addition, the company noted ongoing weakness in spending from its technology customers and reduced revenue from public sector clients, offsetting ‘stronger’ performances from its consumer-facing clients.
These factors alongside the lost contract which will impact the last month of the fiscal year to 31 January 2025 has led the board to believe 2025 revenue will now be lower than planned, with profits materially below expectations.
Next 15 acquired the Silicon Valley-based growth incubator Mach49 in 2021 and made the business a cornerstone of its ambitions to create a $100 million revenue innovation business to work alongside its data, technology and brand marketing businesses.
WHAT ARE THE EXPERTS SAYING?
Investment director Russ Mould at AJ Bell commented: ‘It is always dangerous if a business is reliant on a single client or contract for a big chunk of its revenue and shareholders in Next 15 have had a painful reminder of that fact this morning.
‘The digital communications and media firm’s loss of a major contract for its Mach49 consulting business is a significant blow. Rough calculations suggest it will result in a 12% hit to consensus forecast revenue for the January 2026 financial year.’
‘The group will need to find a way of giving the market some reassurance when it announces its first-half results later this month.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (Tom Sieber) own shares in AJ Bell.
