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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
So good morning, everybody. I'm joined in London with Mary, and Scott is in Singapore, and we're just going to review very briefly the Q1 results. So Mary will take you through them. And then Scott will just do a brief follow-up, and then we'll go to Q&A.
So Mary, over to you.
Thank you, Martin. So good morning, and thank you for joining us today for our Q1 trading update.
We've delivered strong top line growth in the first quarter, with revenue up 70% on a reported basis and 41% on a like-for-like basis at GBP 207 million. Gross profit net revenue was up 35% on a like-for-like basis to GBP 171 million. We maintain our full year guidance of 25% growth in gross profit and net revenue.
In the full year, we continue to target a steady improvement in EBITDA margin and from this year onwards, in line with our 3-year plan. Operational EBITDA for the year will be significantly weighted to the second half. Now the group is naturally weighted to the second half, with the average second half delivering around 2/3 of the full year EBITDA. This will be even more the case in 2022 due to investment in our growth, including our whoppers and our new pitch whopper as well as investment in our management infrastructure. In addition, we will be taking selective cost actions with an increased focus on operational efficiency given the current economic uncertainty.
Since the end of Q1, we have added 2 new whoppers, 1 through pitch and 1 through combination. Both will be fully effective in 2023 and will take our total to 8. The new pitch whopper will be operative from the second half of this year, with resources ramping in the first half.
Net debt at the end of March was GBP 48 million, and it is currently ranging between GBP 140 million and GBP 190 million on a monthly basis, reflecting significant combination payments, including TheoremOne and the growth of the business. We continue to maintain significant liquidity.
Moving to the next slide, and my comments here are all on a like-for-like basis. We've delivered strong gross profit/net revenue growth across all practices and regions. Content grew 33%, including strong growth from our whoppers and particularly BMW. Data & digital media was up 35%, with continued strong performance from the activation and performance business. And technology services was up 58%, with Zemoga now operating under the integrated brand of the Tech.Monks.
From a regional perspective, EMEA grew fastest, with gross profit/net revenue up 55%, and it accounted for 20% of the mix of gross profit/net revenue. The Americas, our largest region, grew 29%. And in APAC, we saw gross profit/net revenue for the quarter up 41%, with the region accounting for 8% of the business.
In the appendix, recognizing questions which have been asked following the full year results, we have included information on outstanding contingent consideration and invested capital. And we are happy to take any questions on these at your convenience.
And with that, I will pass to Scott for an update on our mergers.
Thanks, Mary. So welcome, everybody, to our Q1 results. As Mary said, I'm just going to quickly cover 2 deals. So one, 4 Mile Analytics, which was a transaction that took place in Q1, and a more recent one, TheoremOne, which took place after the end of the quarter.
So 4 Mile is a company that's joined our data & digital media practice. It's data and analytics and engineering company focused on data governance, software engineering, user experience and projects and product management. They actually have a real specialization in certain platforms -- technology platforms that clients use to analyze and visualize their data. So their experience particularly lies in Looker, which is a product or a company that Google bought a few years back, and then Snowflake, Fivetran and Google Cloud also areas that they focus on. 50-plus data engineers, primarily based in California, did around GBP 6.5 million of revenue or GP. It's same for them last year. So an excellent addition and, I think, an interesting company that brings great clients to us, great capabilities and also, obviously, accessing budgets outside of the traditional sort of digital media spend area.
The second one I want to cover is TheoremOne. So you're all familiar with this mega deal that we did towards the end of last year, and we now break out technology services separately, as a separate line item in terms of our gross profit. I think it's important to understand, firstly, what we mean by technology services. So for us, that's custom software development, which is essentially building digital products and services for our clients and also the systems integration around marketing technology. So these are engineer-heavy or engineer-led firms [ vastly ]. If you take Zemoga, for example, around 400 people, primarily in Colombia and all of them engineers.
So our thesis for expanding what we do in technology Services, it's really that we view increasingly technology and marketing are intersecting and that our clients need partners who they can trust to work with them seamlessly across both areas, just as they internally are increasingly seeing collaboration between CMO, CIO, CTO across their own digital transformation efforts.
So the merger with Zemoga was a real expansion for us last year. And actually, in the 6 months that since we've done that deal, we've seen really meaningful synergies already. They've converted several of our existing clients. And likewise, we've introduced our creative and data & digital media capabilities to several of their clients. And I think that holistic offer of technology services, creative and data & digital media is really proving a differentiator for us.
So Theorem, a deal that we completed relatively recently, very complementary capabilities with Zemoga from a business model and a client base perspective. So we're really excited to see how they can work together and drive forward our technology services practice. TheoremOne, similar size in terms of people but larger in revenue than Zemoga. Great client base. Actually slightly different business model in that a lot of their people are U.S.-based, and it's a sort of more a consultative approach, but that should mean that they marry very well with Zemoga's nearshore model and design and build model.
Last year, they did revenue/GP of around $58 million. And as Mary mentioned, I think Martin as well, they do bring one whopper to us in the financial services area and actually contribute. Several of their other large technology clients are also large technology clients, the [ best 4 ]. So again, very complementary there.
So that's it from me, and I think we head back to Martin and open up for Q&A.
Thanks, Mary. Thanks, Scott. So Cita, can we have any questions, please?
[Operator Instructions] And we will now take our first question from Julien Roch from Barclays.
My first question on the macro -- I mean the market is worrying about a slowdown, if not a recession. So from your statement, it doesn't seem that you're seeing everything in terms of client cutting. But can you give us what your clients are saying at the moment on macro worries? That's the first question.
The second question is if we were to go...
Let's deal with it one by one, shall we?
Okay. Yes, sure.
On macro, I think the one thing that we would say is clients are quite focused on measurement. Media mix modeling came up on our weekly call last Thursday. At our one of the meetings with the big tech platforms, it was clear that media mix modeling was becoming more and more important, that is, deciding how much of a budget goes online, not what the scale of the budget is so much as how much goes online and how much offline. And given the forecast that analysts generally are making for online activities, we are seeing significant growth. The forecast is that we focus on us saying digital will grow from about 60% to 70%, maybe even more of global media, for example, by 2024, 2025.
So what I think we've seen a really -- we've seen clients go down the funnel, so to speak, meaning they've become more activation and performance orientated. And I think that is the key change that's happened, not the people that are attacking the budgets as yet. I mean although to be fair, clients don't like to give us the bad news. They much prefer to avoid giving us bad news until the very last moment. But having said that, there's no sign of sort of slowdowns or cuts.
When you look at the GDP growth forecast for this year, which the IMF still have north of 3%. They were 4% to 5%. When you look at that and listening to our call last night, which said Q4 GDP might be as low as 1% up on the last year in the U.S. and elsewhere, it does signal tightening economic conditions. But I think we're fairly well placed given what we do and given our position in the funnel. Our pipeline is strong as we indicated. The statement was stronger this time last year, and the level of activity is progressing. We said on our weekly call we do see evidence of that.
Scott, do you want to add any more to that from what you see?
Yes. I think we've -- I'll just double down on that. We're really not seeing any negative effects from client spend right now. Obviously, there are the macro concerns. And a lot of those were already existent in Q1. So I think it's not that they happened afterwards. Our results reflect that. And I think it's true, as you said, that analysts are bringing down some of the digital media spend projections.
If you look back, we've consistently outgrown the digital media spend growth year-on-year-on-year. So if you take 2019, for example, we grew at night. So the spend grew at 19%, and we did 44%. If you take last year, spend rebounded to 30%. We did 44%. So I think we feel relatively comfortable we can always outgrow that market. And you should also remember that's really only one of our addressable markets, so there are plenty of others out there, such as the growth of cloud platforms, which is growing at 34%, 35%; growth of marketing technology software, which is growing at 32%, 33%; and digital transformation in general, which is trillions of dollars growing at 20%. So we tap into all those markets and more. And I think that gives us a lot of confidence.
Also, as Martin said, our clients, it continues to be dominated by technology companies, primarily big tech. So that's the likes of Alphabet, Meta, Amazon, PayPal, TikTok, Adobe, Salesforce, et cetera, all of which continue to do strong double-digit growth versus other sectors and companies.
And then I think, finally, the point is around our market share. So we're very proud and happy with what we've achieved in our short history. But I think if you look at the Ad Age top 25 agency groups, which includes the big holding companies, et cetera, Interactive, EPAM, Globant, et cetera, we came 25th. So we made the list. But we had a 0.4% market share. So I think from that perspective, there's plenty of share available for us as well.
The second question, I mean, slightly similar. But if we were to go into a global recession next year and holding agencies were the usual, going from plus 3, 5 to minus 5, minus 10, what would S4 go down to from the 25-plus you're growing?
Well, you've got a parallel to 2020. I mean we've moved on, obviously, since then. We're significantly larger than we are, I mean, not relatively but absolutely to 2020. But in 2020, when COVID hit in March and April, we did 19.4% on the top line, so almost 20%. And the whole goes, I think we're down on average about minus 10%. So there has been a significant basis point difference.
At the moment, the holding companies, I think Q1 did around 10%. We're at sort of 34%. The last year, we did -- we were significantly ahead. I think the average for the holding companies last year was around, what was it, 10% last year? Yes. And we're sort of doing about 3 or 4x that.
So I think there is reason to believe that given our market position, and I think mainly because of our focus on digital, which, again, just to underline that we -- the figures that we included in the release are figures that came out in the United States. So they refer to the U.S. market, principally. When they came out in the United States, I think it was late last week, I think it was on Friday last week, we adjusted the figures for growth. And that continues to see growth.
I mean just to reiterate, just in the global media market, digital share will go from around 60% this year to 70% by '24 or '25. And even in those -- the takedown of those forecasts, talking about digital increasing in the United States by 10% to 15%, and [ right ] before that, it was 15% to 20%. So they're taking it down quite significantly, but share increases. And I think there's reason to believe that -- and it goes beyond the advertising market.
Scott, do you want to just go into the other addressable markets where we are heavily represented in from a capabilities point of view by tech services?
Yes. I think in tech services, it's really around things that I mentioned previously, around marketing technology spend, digital transformation spend, cloud platform spend, all of which not only are growing at significantly higher than digital media spend, but if you look back historically, those kind of markets are more stable and more consistent in a recession. So they don't tend -- now I think the media spend tends to react quickly and hard, both on the down and the upside, whereas those kind of spends are a little less cyclical and a little more steady.
Okay. And the last question, I know Mary said that in the appendix of the presentation, there is more. But we haven't seen the appendix, and the presentation is not yet on the website. So on Page 155 of your annual report, you give the extra shares related to M&A for 2023. But could we get the extra shares related for M&A -- related to M&A for 2022?
And also the [ A ] shares incentive is 15% of the value creation if the invested capital grows compoundedly at 6%. But what's the starting point of the value creation? Is it a set date? Or is that less 1 month's average? So if we could get the starting point. So the shares in -- the extra shares in '22 and the starting point for the [ A ] shares incentive, please?
The starting point to the [ A ] shares is when we started at the very beginning. So that's the trigger for that. The invested capital in the appendix, it says GBP 1 billion is the approximately invested capital. Do you want to talk about the shares that have been issued, Mary?
Yes, of course. So when you see the appendix, Julien, you'll see that we've included both the deferred share issuance, which is based on initial considerations where the share issuance has been delayed. So for those, we have GBP 9 million in 2022, GBP 5 million in 2023 and GBP 19 million in 2024.
We also have expected contingent consideration shares, which we've calculated, assuming the current share price as of Friday. So 2022 -- sorry, 2022, GBP 22 million. And GBP 29 million in 2023.
If you have any questions when you've seen the numbers that's all written on the slide, just do give me a shout, and I'll be very happy to take you through them.
We will now take your next question from Tom Singlehurst from Citi.
It's Tom here from Citi. Yes, so the first question, I'll do them one at a time. I mean, obviously, heavy exposure to technology sort of focused clients. I'm just wondering whether you've got any sort of strong views whether that now is going to prove slightly more problematic if we're seeing pressure at the top of the funnel on funding and then obviously some of these tech companies sort of pushing to sort of safeguard cash flow and profitability and talking about using advertising maybe as a balancing item. Can you just give us a sense of how worried we should be about that in the context of such a significant exposure to the tech sector?
Well, clearly, you think the world has turned. I mean I must say I'd rather be focused on the tech clients and continue. I mean all these things are relative, Tom. And if I look at the growth, and I'm not talking about newer businesses or -- I mean there are 2 buckets, really: the tech companies that make money and the tech companies that don't. And I think your -- the implication behind your question would be correct in relation to the latter, the ones that don't make money or cash flow, but not about the former.
And we continue to see significant traction. For example, you take streaming, where there is pressure on various competitors within the streaming environment, that leads to not cutting the spend because maintaining a competitive position in an increasingly competitive streaming marketplace is critically important. That may result in reduced internal activity, in other words, more outsourcing. I mean we are seeing, I would say, on the media side of the equation, more in-housing being contemplated because in a 24/7 always-on environment, clients want to take back control of their functions. But in the areas that you're talking about, I mean, again on our call last week and in previous weeks, there are a number of tech companies of substantial scale that are consolidating their marketing activities or cutting their internal marketing expense and are, therefore, looking to outside providers even more significant than they used to before.
So I think the blunt answer to your question is no, that we would prefer to continue to have at least 50% of our business tech-driven. I mean, to some extent, everything is tech-driven, but I'm saying sort of fewer tech companies.
And in the note, I think, in the presentation, we say that of our 19 potential large accounts offers, as we call them, about 8 are tech. And I think having a strong tech base, a lot of this -- a lot of the commentary behind your question is sort of flashy contemporary commentary and, I think, really a focus on tech continues to be.
I mean the one other area, I think, which is really important, and we've seen that in the growth, as you well know, the -- of the holding companies has been health care, where we do have representation. But probably, we want to have more representation in health care. But having said that, I think the tech emphasis is strong because we are particularly strong with those highly profitable or strongly profitable tech clients, and I'd like that to continue to be the case.
I mean, Scott, do you want to comment any more on that?
I think just to stress again that it's all about relativity, right? So yes, the technology is definitely under more pressure right now than it was a year or 2 years ago. But which factor do you think is going to grow the next? And I would say technology. So if we're a growth company and want to be working with growth companies, then we want to maintain that exposure to technology clients [ for sure ].
Yes. I would also say, Tom, that -- I mean this is a sort of a difficult point in some respects. But the war in the Ukraine, with its emphasis on cyber, both defensively and offensively, is underlying the importance of a strong tech infrastructure for defense purposes and even offensive purposes. And I think the importance of tech has just been underlined. So you can say just like the importance of health care has been underlined by COVID and the rapid deployment of new vaccines, the war is underlying the importance of a strong tech ecosystem. And I think that bodes well for the tech sector in the long term. And as proportions of GDP increase and committed to defense, that just doesn't mean military personnel or missiles or tanks and beams, tech as well. So -- and then the other driver is digital transformation, which Scott has covered.
Got it. Very nice to be described as flashy contemporary, Martin. I'm excited about that.
The second question...
At last.
At last. Exactly. The second question, it's -- I mean, once again, it's a broad question, but given your experience, I mean we -- there's a lot of discussion about real growth coming under pressure. But of course, nominal growth is going up, obviously, courtesy of inflation. I just wonder whether you would describe your business as naturally nominal or real? I mean which is more important overall?
Well, I think, to be honest, it might -- things might temporarily be driven by nominal, but everything reverts to real in the end, and I mean everything.
So I mean I'm talking to one of our clients a couple of weeks ago, and they're saying that we heavily increased prices by as much as 30% during the last few years. I mean that cannot continue. And clients -- our clients are going to have to find ways of increasing volume rather than -- or getting growth through volume rather than price.
I think our business is -- we sometimes worry that we're too tactical and that we should be "more strategic." Our relationships tend to be, as we said before, have been, if you describe it, in the middle of the funnel or the lower end of the funnel. In times like these, to your question, I think we would probably argue that we've become more valuable whereas you see in the Snap numbers last week -- or not, the Snap reaction. The Snap reactions were snapped last week. You see it there, that Snap really is a brand awareness too, and it's not as heavily tactical as perhaps it would want to be or should be.
So I wouldn't concentrate on the nominal or the real. I concentrate on where we sort of figure in the system. And I think we figured the system in more and more in -- particularly the sales and marketing unites even more within companies. So I think that's where we are.
Scott, any other observations on that?
No, you're the expert on this -- on that.
I don't know any expert. I wish I was. Tom?
Perfect. And one very quick final one. Can you talk about the evolution of multiples for deals? I mean given the sell-off in public markets, are we seeing multiples come down in private markets as well?
Yes. Scott?
Yes, I think -- I mean, reality is, Tom, it always takes more time. So I don't think the significant sort of changes in the public markets haven't yet fed through to the private markets. But we're certainly starting to see that happen and see expectations a little bit more reasonable, I think, and also activity dropoff as well. So I think it's pretty much inevitable that, that will continue.
I mean talking to one head of a major PE company last week, he said they just raised, I think it was 22 billion in a new fund. And they felt there were going to be significant opportunities. I think there was a lot of capital raised last year, but the performance last year was so strong, at least when they marked to market at the end of the year.
But what's I think interesting, again, what we had last week, was the funding in the United States, for example. Some institutions are cutting back on their PE allocation because the rising valuation was so strong last year. We see 1 from that 45% last year. That -- the allocation of the PE was too high.
But interestingly, and it relates to the comments that I made about our geographical expansion, the Middle East is so flushed now that the incredible increase in wealth in the Middle East as a result of the oil price increasing, doubling or tripling really effectively. That funding is being -- funding trips are being switched to the Middle East. People were saying that anybody who's anybody in PE wasn't in Davos last week, they were in the Middle East raising money.
So I would say that there are 2 forces here. One what Scott mentioned, which is VC and PE will come under pressure from a valuation point of view. If they haven't already, they will do in Q2 or Q3. Most people think the impact will be in Q3, that we talked to, the real impact, that it will be quite strong.
But then on the other hand, if the PE funds can raise more, and there's another PE firm I can remember. They just raised 25 billion in new fund. There is considerable dry powder. So I think there might be some diminution in value. IPO valuations for the tech companies, option values for employees in the new tech companies will be less, which plays to our advantage because, in the labor markets, it will make things a little bit easier for us and take the pressure off. And I think we indicated in the statement we're already seeing that to some extent.
But it would be interesting to see how it shakes out. I think valuation would come down, but I don't think it's going to kind of come down that much because I think there's still ways of money from [ $1 of the planet ] or the other that will support a strong market. And the PE funds that have raised significant amounts of money last year or even into this year be more difficult but into this year will be there.
We will now take our next question from Steve Liechti from Numis.
First question, given your comments on tech, can you just remind us or give us any feel for your skew towards the big profitable players in tech as opposed to the sort of less or so and more early-stage guys? That's the first question.
Yes. I mean it's very much to the big end. I mean you know in our -- we give you our whoppers. Of the 8 whoppers, I mean you have -- the top 3 clients are all big and highly profitable. You then go to a packaged goods and car. You then go to a tech, which is strongly profitable, too. You then go to an FMCG. And then you then go into financial services. So of the top 8, 4 are highly profitable tech.
But we don't talk about much about our top 10. But if I take our next 2, that would most likely become 20 million-plus clients. They would either be tech. Well, they will both be -- well, 1 might be retail, 1 might be tech or 2 might be tech. So we would tend to have at least 5 of our top 10 -- make it 6 in the top 10 that are in the top 10 that are what I would call a highly profitable tech.
At the fringe, we benefit from the growth of newer tech companies but the core of our business and where we continue to reinforce it, it is with the big tech profitable bucket that I referred to before.
Great. Next question, just on like-for-like in net sales. Obviously, we've got the first quarter figures today. As we stand today, can you give us any sort of visibility on the second quarter, maybe April, just on the basis that I know the comps are so volatile and stuff like that? Any help you can give us there, please?
No. We -- you can find out about that when we report in September.
Okay, worth trying. And then last one. Just on debt, maybe for Mary. End of first quarter debt GBP 48 million, you're now running at GBP 140 to GBP 190 million. Can you give us any sort of slightly more detailed bridge to get from the GBP 48 to GBP 140 million, GBP 190 million? I know you mentioned combination payments and stuff. But just what are the key lumps within that? I'm thinking of TheoremOne and whatever.
Sure. Mary?
Yes, of course. So if we take the net debt at the end of Q1, it's obviously at GBP 48 million. Since then, obviously, we've had the initial cash outlay on TheoremOne. And then in addition, we've included within that range about GBP 40 million of cash contingent consideration, which makes up the bulk of the bridge.
Sorry. And is that GBP 40 million that you just mentioned, is that incremental to the number that you mentioned within the GBP 48 million? I think you mentioned GBP 16 million from memory on the release. I might be getting confused.
Yes, the GBP 40 million is incremental to the GBP 48 million. So GBP 48 million is the closing position for Q1. The GBP 40 million is GBP 40 million of the GBP 55 million full year cash contingent consideration. And then we also have the initial cash consideration for Theorem, which makes up the bridge.
We will now take your next question from Matthew Walker from Crédit Suisse.
The first one was on margin. So you said I think normally, it's like 2/3 weighted to second half, and it will be more this year. So could you give us a feel for how much that might be? Is it more like sort of 75% second half-weighted, 25% first half-weighted? That's the first question, if you want to tackle that.
Yes. Mary, do you want to deal with that?
Yes, of course. So yes, so obviously, as we've demonstrated in the numbers today, we are growing very strongly, and we've been investing in our growth, so both in our whoppers and our new pitch whopper but also in our infrastructure. And what this is driving is more of a shift in the weighting of the EBITDA delivery for the year to the second half.
Now obviously, we haven't finished the first half yet, so it's hard to give you precise numbers. We've tried to guide on more significant weighting of EBITDA margin to the second half. My expectation would be it will be more than 75% weighted to the second half.
We do, obviously, though, maintain our guidance, steady improvement in EBITDA margin for the year and 25% net revenue/gross profit growth.
Okay. And then the other question was on the shares that you gave us the number of shares. If I had all of those up that you gave us, that comes to about 84 million shares. I just want to see if that's right. And then does that mean that by 2024, barring any other acquisitions, the share count will basically be the 555 million at year-end '21 plus the 84 million, so it comes to about 639 million for 2024? And then given your invested capital number that you talked about in the share plan, the additional dilution, is that about 29 million shares as things stand at the moment?
Okay. So if I take the comment or the question on the share consideration that's already committed, yes, I think your maths is correct there. We've quoted all the numbers on the slide. So when you see it, Matthew, you'll be able to take a look. And then you'll be able to drive that sum to get to what you're saying is 639 million.
On the invested capital to date, I would say, dependent on the share price, you're in the right ballpark in terms of your estimation there.
Okay. And then the final question is a bit more sort of macro-related, which is you mentioned Snap and, obviously, that caused a big sell-off. Your perception of the Snap thing, is that genuinely related to macro? I guess the fact that the analysts are bringing down their digital advertising numbers for the whole of the U.S. market would suggest that it is quite macro-related rather than something very Snap-specific. I'm just sort of interested in your views on that.
Well, I think we tried to indicate that it was not specific. Scott, do you want to have a go on that?
Yes. I mean I think it's probably too early to say, right, because the Snap comments were made at a conference. It wasn't a full guidance on any of the earnings or anything like that or formal reporting until you see what Alphabet, Meta and Amazon and others do, which are obviously much bigger and contribute much more to digital spend. I think it's probably a little early to draw conclusions.
Obviously, the reaction has been very aggressive. And I think, as you say, any analyst that has brought down their projections for digital media spend are banking on that being a macro reaction.
I think as we said, we're not seeing any reductions in spend from our client base. And I think where that's -- we see what we see from our client base, but that's consistent with what I think some of our competitors have said as well. So that would indicate that it's probably less of a macro thing. But until we see everybody's Q2, Q3 results, we're really not going to know.
Yes, if you look...
I think you made another...
Go ahead. Go ahead. Go ahead, Matthew.
So I think you made another quite interesting comment though, which was on clients being quite shy about [ challenging ] agencies or you that they're about to cut. So based on your sort of historical experience, when do they kind of -- assuming that there is going to be some cuts and I don't know, but when do they tend to [indiscernible]. Basically, my question is when do they tend to set up and say, yes, we are cutting?
Well, you know when you know. I mean you -- that's -- the honest answer to it is when they finally make the decision.
Now a number of the sectors, I mentioned the streaming area for a minute. One of the reasons why some of the streamers have been under pressure is because of the highly competitive situation. You're not going to deal with that by going into the shell and not spending. You might decide to do less in-house and more out-house because you believe that, that will give you a better solution.
I mean when I -- and it's a bit related to Steve Liechti's question earlier. It was about tech -- or Tom's question about tech, which is -- or I think it was Steve's about big and small. And then Tom's about the importance of tech. When you look at the big tech companies that we -- that we work with, they are showing at the moment. I mean we touched based with a number of the last week. I would say of the biggest ones, they're all in reasonable shape. One of them, obviously, has been affected by IDFA, but I think is sort of rebasing estimates because the share price took such a hit that they're sort of rebasing their estimates from a lower level. And I think they are consistently undercalling it.
The other 2 continue to grow -- rather, 3 continue to grow at a very strong rate. And whilst it's true that they may have had -- while some of them don't have exposure to China, they actually do because the second biggest profit unit is outbound China. So this -- that is Chinese companies working internationally. They may have had some impact because of China. They may have had some impact because of the war. But what's interesting is that I think all of them, including the one that's under the most pressure, continues to see a very robust North American market. The American economy is extremely strong and running at profit at very high inflation levels. And Latin America, too.
So I think, overall, we feel pretty good about the way the tech companies are going. Obviously, nontech, which is the other half of the business, is a much more varied picture. I mentioned on cloud raising prices very heavily in the consumer area, that can't continue. In order to get organic growth, they're going to have to invest in continued, careful spending, which means measurement focused on sales, focused on sales effectiveness. So I think that, in a way, plays to our strength. And I think is -- I don't want to say it's helpful because it's a difficult overall environment, but it is helpful to ourselves.
We will now take our next question from [ Alex Apostolous ] from Barings.
I have questions mostly related to the accounting issues earlier this year that led to the delay in the '21 audited results. So my understanding is that, that was related to the longer-term contracts part of the business in the legacy side at least. So can you provide a bit more information on which contracts that actually related to? And underlying all of these issues, do you see issues with the profitability of those contracts that were impacted? And I have some follow-up questions after that.
I don't think we can name names. But do you want to talk, Mary, about -- with that one provisor about the longer-term projects?
Yes, of course. So one of the reasons that the issues arose was because the business in 2021 grew very significantly. And this included increasing the complexity of the way that we contract with clients and some longer-term contracts.
Now the issues we had with IFRS 15 weren't solely limited to those larger, longer-term contracts, but they were a focus of the work that we did during the audit. And what we saw is that the complexity meant that the judgments required under IFRS 15 were more complicated than previous years. And as we said, when we did the full year results presentation, the lack of experience in the team created issues that we then dealt with as part of the audit.
When I think about the work we've got going on at the moment and just to update you in terms of where we are with that, so since we did the full year results presentation, we've launched a very thorough process and control review around IFRS 15 and also training for the team. We've also done a full debrief with PwC. We spent an afternoon at their offices going through the issues that had arisen in some detail. I think it's a testament to the way we work collaboratively with them through the audit process that there wasn't any new news in that, but it did allow us to discuss in detail how we take things forward and to make sure we've captured all their suggestions.
Yes, that's clear. The second question also relates to this. So I think on the call about a month ago, you mentioned that you wouldn't see or you weren't expecting to see a massive headcount investment, I think, on the finance side. Just to get a sense, is that still the case? And these initiatives that you're talking about, all the trainings, going through IFRS 15 and all that, when will those measures come into effect? Or have they already come into effect?
Thank you. Yes, so when we talked about the investment necessary in terms of the finance infrastructure, so I was lucky enough to come in before we finish the budget. And so some of this was included in the budget. But in aggregate, we think it will be somewhere between GBP 4 million to GBP 5 million, of which GBP 2 million to GBP 3 million will be incremental over our budget for the year.
The processes and controls around IFRS 15 and the training for the team, I expect that to be complete before we close the half year. It's obviously very important to me that we don't encounter the same issues as we go through the half year review process as we had during the full year audit.
And one other thing that we've done in the last 3 weeks is we've selected our internal auditor. And we've agreed terms with 1 of the big 4. So that will begin imminently.
And then in terms of some of the hiring I mentioned. So as I said at the full year results, our new content CFO started in February. Our new group financial controller started in April. So they're already on stream, and particularly, the content CFO has their feet well under the table by now. We have the treasurer, the global compliance lead and the global head of finance transformation will all start in June. And then I would expect, over the summer, we will build out their teams as appropriate.
So I do expect we'll be in a much, much better place by the time we get to the half year results announcement in September.
Okay. And just lastly, so is PwC going to be your auditor, I guess, for fiscal year '22? And you've been going back and forth with PwC. I assume they think all the measures that you're taking, they view those as adequate right now, if you can confirm that.
And then just lastly, I still don't understand, though why you had to announce this delay the night before you were due to report. These issues sound pretty well telegraphed and flagged. So why wait until the last minute? That was all I had. I appreciate your time.
On the very last point, obviously, as I said, it was embarrassing and was unacceptable. But that's the way that it happened. I mean, obviously, whilst we were working closely with PwC right up until the last minute, they were not as comfortable as they should be in that said prerogative. They made the decision that they couldn't support it at that time.
I mean as the question about continuing with PwC, we will continue with them. We'll continue with the partner that is on the business at the minute. He has to rotate off in a year's time. So there will be a new partner coming on to the audit in due course.
But I agree with you that it was unfortunate, if I can put it that way, because we were working very closely together with them. But clearly, they didn't have -- I mean in their minds, they were not comfortable with letting us go ahead. And as I said before, that's their prerogative. Whether you think that was unhelpful or unsatisfactory or not, I mean that's what they felt. So they have rigorous internal review procedures. And that's the decision they came to. And we obviously were mortified by and very disappointed, but they felt that way. And -- or not felt that way, they made that decision, and we had to go along with it.
But the best thing for us, of course, as Mary said, is that we produce our half year results on time. We produce our annual results for 2022 on time and get a very clean bill of health in January, February and March of next year.
Clear. Sorry, I just missed one, a quick one. The 8 whoppers that you talked about, what percentage of your total revenue are they? That's all I have.
I haven't gotten the figure for the top 8, but whilst we're sitting here, I think we could say that the top 8, I would say about 1/4. We'll confirm the figures. But I would say it would rank at about 1/4 of our revenues in the top 8.
We will now take our next question from Joe Spooner from HSBC.
And just going back to the first quarter performance, if I can. Can you give a little bit of detail of what the like-for-like headcount was behind these like-for-like revenues that you've disclosed? And I guess as you look into the uncertainties of this year, how are you going to manage that headcount? Is it a case of continuing to recruit up until the end of the first half and then allowing that headcount to deliver the margin improvement in the second half? Any kind of details around that would be helpful.
Yes. I mean in raw numbers, we went from -- at about this time of last year, I think it was about 5,500 at this time last year to about 8,800 this year.
Mary, do you want to comment on headcount and how you see control?
Yes. Thank you. So as we look at the business, so obviously, over the last 3 or 4 years, the business has grown very, very fast. And naturally, as you might expect at this point, we have an opportunity to do a review in terms of how we're organized and the capacity and the headcount that we have across the business. And so as we move into the second half, particularly in the light of the economic uncertainty and the turbulence that we're seeing in the macroeconomic climate, we do very much have an opportune point for us to take a look at the efficiency of the group and make sure that we're optimized for efficiency and also to support further growth. So that's some of the work we'll be undertaking as we move into the second half, Joe.
And the comments in the statement...
Sorry, Joe, just quickly on that previous question. If you go back to -- about the scale of our client relationships, if you go back to our full year presentation, there's a slide in there that has a lot of client detail, and we break out the scale of our different client relationships. So our top 10 clients represented 41% of our revenue in '21. So hopefully, that's helpful. Apologies to [indiscernible].
No problem. Just a couple of comments in the statement you put out earlier around employee churn that, that was kind of running at high levels versus history, but you're starting to see that come down. I don't know if you can add any kind of color around those comments.
Sorry, just repeat that again, Joe. Joe, I didn't get it.
I think in the statement this morning, there were some comments around employee churn that those were at historically high levels, but you had started to see that come down in more recent weeks. So I just wondered if there's a bit more color that you could share around those comments.
Yes. I mean historically, our churn rates have been around 15% to 20%. And within the -- I think the ADCOs, when asked these questions, sort of talk about 25% to 30%. And I think what's happening, I think, on our management calls each week, people give a view on where they see the churn going. I think what we referred to before earlier in the conversation around the valuations of new tech companies and IPOs, that is we sort of reduced the pressure and also the reductions, the cuts that we're seeing in some of the tech companies in terms of staffing, that has reduced the pressure on digital salaries and expectations. And as a result, I think the pressure on churn is being reduced.
As there are no further questions in the queue at this time, I would like to turn the call back to your speakers for any additional or closing remarks.
Well, thank you very much. We have another call later today for the U.S. It's Memorial Day. So apologies to everybody for doing this on Memorial Day, but we'll be back for the U.S. call later on. Thank you very much.