REG - Ascential PLC - Half year results
22/09/2023 07:00
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RNS Number : 2893N Ascential PLC 22 September 2023
22 September 2023
Ascential plc
Half year results
Strong growth in all four segments
Performance in line with expectations
London: Ascential plc (LSE: ASCL.L), the specialist information, analytics,
events and eCommerce optimisation company, today announces results for the
six-month period to 30 June 2023.
Highlights
● Strong organic revenue growth in all segments, led by Events (up
25%).
● Organic revenue growth of 16% with Adjusted EBITDA growing 17% -
in line with expectations.
● Strategic actions to maximise shareholder value and position each
business within the portfolio for long-term success are well advanced.
Market update expected before the end of the year.
Operational highlights
● Events (comprising the Marketing and Retail & Financial
Services segments) revenue up 25%.
○ Marketing segment up 28%.
■ Lions' revenue up 30%.
■ Continued double-digit growth from WARC's subscription business up
12%.
○ Retail & Financial Services segment up 17%.
■ Money20/20 Europe continued to grow very strongly (up 19%).
● Digital Commerce segment revenue up 10%.
○ Strong revenue growth, outpacing a market impacted by the
continuing challenging retail environment, with continued key client wins in
the first half.
○ H1 investments in technology and marketing delivering and
enabling:
■ September launch of Flywheel Commerce Cloud, the integrated
go-to-market operating platform which brings together our best-in-class
solutions and products.
■ Implementation of integration synergies now underway in H2 to
drive stronger second half and full year margins.
■ October launch of unitary, single-brand, Digital Commerce
organisation structure.
● Product Design segment revenue up 8%.
○ Subscription billings up 7% with continued strong retention.
○ Non-fashion products driving growth (up 13%) and now account for
just under 50% of subscriptions.
○ Fashion product growth continues at 2%.
Financial highlights
● Group revenues of £307.4m (H122: £260.7m).
○ Reported revenue growth of £46.7m or 18% (organic: 16%, proforma:
16%).
● Adjusted EBITDA of £78.6m (H122: £67.2m). Margin of 25.6% (H122:
25.8%).
○ Reported growth of £11.4m or 17% (organic: 17%, proforma: 18%).
○ Events Adjusted EBITDA up 26% to £64.6m.
○ Digital Commerce Adjusted EBITDA at break-even for the half -
prior to the H2 reorganisation synergies enabled by the launch of Flywheel
Commerce Cloud under a single go-to-market brand.
○ Product Design Adjusted EBITDA up 8% to £27.4m.
● Reported Operating profit of £0.7m (H122: loss of £35.1m) stated
after charging Adjusting items of £63.5m (H122: £89.7m) reflecting:
○ Amortisation and impairment of acquired intangibles of £29.0m
(H122: £48.9m).
○ Non-trading items of £25.7m (H122: £33.2m).
○ Share-based payments of £8.8m (H122: £7.6m).
● Adjusted diluted EPS of 7.7p (H122: 8.0p) and total EPS loss of
3.8p (H122: EPS loss of 8.7p).
● The Group continues to deliver strong operational cash flows with
operating cash flow conversion of 99% (H1 2022: 128%) and free cash flow
conversion after tax and capex of 72% (H1 2022: 107%). Closing net debt at
£205.6m was a leverage ratio of 1.6x EBITDA (December 2022: £216.7m and 1.9x
EBITDA).
Duncan Painter, Chief Executive Officer, commented:
"Our businesses have continued to trade strongly in the first half of 2023. In
particular, both Cannes Lions and Money20/20 enjoyed extremely successful
editions in June and have progressed even further ahead of their pre-pandemic
benchmarks. Digital Commerce has once again outperformed the underlying retail
market it serves and action taken in the first half to create an integrated
enterprise customer product and organisation have set the Digital Commerce
business up to deliver sustainable margins and operating leverage going
forward. Product Design continues to drive growth by extending its world-class
trend forecasting expertise to a wider range of products and end markets.
The strategic actions to maximise shareholder value and position each business
within the portfolio for long-term success are well advanced and we will look
to update the market again by the end of the year.
After our seasonally stronger first half, we have had a solid start to the
second half. Despite continued macro uncertainty impacting the industries we
serve and currency headwinds, our businesses remain well set for the year,
supported by multiple growth levers. The structural long-term growth in our
end markets, and the success of our marquee events, underpins the Board's
confidence in the prospects of our businesses for the future."
Contacts
Ascential plc
Duncan Painter Chief Executive Officer +44 (0)20 7516 5000
Mandy Gradden Chief Financial Officer
Rory Elliott Investor Relations Director
Media enquiries
Matt Dixon FTI Consulting LLP +44 (0)20 3727 1000
Jamie Ricketts
Edward Bridges
Ascential will host a presentation for analysts and investors at 9.00 am on 22
September 2023, at the offices of Numis, 45 Gresham St, London, EC2V 7BF.
This presentation will be webcast on (http://www.ascential.com/)
www.ascential.com (http://www.ascential.com/) , and a recording will also be
available on-demand from our website in due course.
About Ascential
Ascential delivers specialist information, analytics, events, and eCommerce
optimisation to the world's leading consumer brands and their ecosystems. Our
world-class businesses improve performance and solve customer problems by
delivering immediately actionable information combined with visionary
longer-term thinking across Digital Commerce, Product Design, Marketing and
Retail & Financial Services.
With more than 3,500 employees across six continents, we combine local
expertise with a global footprint for clients in over 120 countries.
Ascential is listed on the London Stock Exchange.
Cautionary statement
Certain statements in this announcement constitute, or may be deemed to
constitute, forward-looking statements, projections and information (including
beliefs or opinions) with respect to the Company and its subsidiary
undertakings ("the Group"). An investor can identify these statements by the
fact that they do not relate strictly to historical or current facts. They
include, without limitation, statements regarding the Group's future
expectations, operations, financial performance, financial condition and
business. Such forward looking statements are based on current expectations
and are subject to a number of risks, uncertainties and assumptions that may
cause actual results to differ materially from any expected future results in
forward-looking statements. These risks, uncertainties include, among other
factors, changing economic, financial, business or other market conditions.
These and other factors could adversely affect the outcome and financial
effects of the plans and events described in this announcement.
Other than in accordance with its legal or regulatory obligations (including
under the Market Abuse Regulation, the UK Listing Rules, Disclosure and
Transparency Rules of the Financial Conduct Authority) no undertaking is given
by the Group to update any forward-looking statements contained in this
announcement, whether as a result of new information, future events or
otherwise. Accordingly, no assurance can be given that any particular
expectation will be met and investors are cautioned not to place undue
reliance on the forward-looking statements.
This announcement has been prepared for the Group as a whole and therefore
gives greater emphasis to those matters which are significant to the Group
when viewed as a whole.
Any forward-looking statements made by or on behalf of the Group speak only as
of the date they are made and are based upon the knowledge and information
available to the Directors on the date of this announcement.
Financial highlights - continuing operations
30 June Growth
2023 2022 Reported Organic(1) Proforma(1)
£'m £'m % % %
Revenue
Events:
Marketing 104.8 80.8 30% 28% 28%
Retail & Financial Services (2) 31.3 33.6 (7%) 17% 17%
Sub total 136.1 114.4 19% 25% 25%
Digital Commerce 114.1 95.1 20% 10% 11%
Product Design 57.2 51.2 12% 8% 8%
307.4 260.7 18% 16% 16%
Adjusted EBITDA(1)
Events:
Marketing 55.7 43.2 29% 28% 28%
Retail & Financial Services (2) 8.9 8.8 1% 15% 15%
Sub total 64.6 52.0 24% 26% 26%
Digital Commerce - 1.8 n.m. 0% 6%
Product Design 27.4 24.4 13% 8% 8%
Corporate Costs (13.4) (11.0) (22%) (29%) (29%)
78.6 67.2 17% 17% 18%
Adjusted EBITDA Margin(1) 25.6% 25.8%
Operating profit/(loss) 0.7 (35.1)
Adjusting items (63.5) (89.7)
Adjusted operating profit(1) 64.2 54.6
Loss before tax (11.8) (41.6)
Diluted loss per share (pence) (3.8p) (8.7p)
Adjusted diluted earnings per share (pence) (1) 7.7p 8.0p
Adjusted cash generated from operations(1) 77.8 85.7
Operating cash flow conversion(1) (%) 99% 128%
June 23 Dec 22
Net debt(1) 205.6 216.7
Leverage ratio(1) (x) 1.6x 1.9x
(1) Refer to the glossary of Alternative Performance Measures below.
(2) H122 included £5.6m of revenue and £0.8m of Adjusted EBITDA from the
disposed RWRC business.
OPERATING REVIEW
The first half of 2023 has seen continued strong performance from all four
business segments, following the record levels of revenue achieved in 2022.
Overall revenue grew by 16%, with EBITDA growing by 17%, (both on an organic
basis). After adjusting items, we recorded an operating profit of £0.7m (H122
£35.1m loss)
The Events business enjoyed an excellent half, with the two principal events
in the period, the Cannes Lions Festival and Money20/20 Europe, both growing
strongly. This was especially pleasing as the products had already exceeded
their pre-Covid levels of performance in the prior year. Overall, Events
revenue grew 25%, with EBITDA growing by 26%. Within Marketing, Lions grew by
30%, led by further record levels of strong sponsorship engagement, supported
by growth from awards, delegates and subscription revenue streams. For Retail
& Financial Services, Money20/20 delivered strongly, with revenue growth
of 19% and attendee numbers now reaching in excess of 8,500. Customer
engagement with the US show (in October 2023) remains good and preparations
for the launch of the Asian event in Bangkok (in April 2024) continue to
progress well.
The Digital Commerce segment delivered a strong revenue performance in the
first half of 2023 against a backdrop of continuing challenges in the global
retail sector due to sustained high inflation and the continuing volatility in
consumer activity that impacts our clients. Revenue grew by 10% on an organic
basis driven by the performance of our Enterprise customers. In the same
period, for example, the sales growth of Flywheel's customers outstripped that
of Amazon vendors overall by a factor of 5 highlighting the competitive edge
that our services deliver for brands trading on the major marketplaces. The
strong progress of the integration has enabled us to start to deliver material
cost synergies after the half year end that will drive higher margins in H2
and in 2024.
Product Design delivered a strong performance in the period. Revenue grew by
8%, while billings from subscription products grew at 7%, driven by continuing
high levels of retention. Growth continues to be driven by non-fashion
products, such as Insight, which collectively accounted for almost half of the
billings in the period, growing at 13%, while Fashion also grew 2% in-line
with expectations, driven in part by the 2022 launch of our advanced,
AI-driven, trend forecasting service, TrendCurve+.
Finally, as previously announced, we were pleased that our significant
minority investment in Hudson MX, was strengthened by fresh investment capital
from a new majority investor to help the Hudson business advance closer to
sustainable success. Hudson made good progress deploying its technology and
with key customers in the first half 2023.
Operating Responsibly
This year we have published a standalone Sustainability Report for the first
time, containing our key ESG information, enabling stakeholders to understand
our approach and commitments in this area.
Carbon Emissions data capture and reporting has been a core focus this half.
We are embedding emissions measurements across the business to be able to
report on scope 3 emissions in our value chain for 2023, along with the scope
1 and 2 emissions we already report. Measuring the emissions associated with
our events has also been a focus. We have appointed Isla, a non-profit
organisation founded by event professionals and industry leaders focusing on a
sustainable future for events, to measure the carbon footprint of our event
operations. From this baseline will work to set reduction targets and develop
a sustainability charter that sets the standard for sustainable event
operations across all of our events.
Internally, our focus remains to attract, retain, develop and engage a diverse
workforce. Our Employee Networks are key to that focus and this year have
organised education and engagement activities for colleagues globally around
International Women's Day, Pride and Juneteenth. Externally, the partnerships
our Brands continue to build are key to the impact we have in this area. These
include Lion's partnership with the Black Executive CMO Alliance, which
supported a group of young Black marketers to attend Cannes Lions in June, and
Flywheel Digital's partnership with Next One Up, a long-term mentoring
non-profit that transforms the lives of young men in Baltimore city.
Progress against our 2023 Priorities
We have made good progress on the priorities we set for 2023 - which can be
summarised as follows:
Engage with our shareholders on the proposals resulting from the strategic
review and, subject to their approval, implement them.
The preparations for the separation of the three businesses of Ascential have
progressed well and include branding, tax and legal structuring, preparation
of standalone cost bases and initial SEC filings. We have engaged with
shareholders throughout the period since our announcement in January 2023 and
have a good understanding of their feedback and priorities. As it implements
its plans, the Board remains agile and focused on its primary objective of
maximising shareholder value and positioning each business within the Group
for long-term success.
Digital Commerce: Creation of an integrated operating platform, bringing
together our digital products, aligning them with our customer base.
The Flywheel Commerce Cloud, our integrated operating platform, initially for
Enterprise customers has been developed and launched with key early-stage
customers already migrating. This is a key enabler to release the economic
and operational benefits of the integration of the Digital Commerce business.
Product Design: Continue to drive growth in non-fashion horizontal offerings,
underpin fashion's growth and accelerate our high value advisory services.
Non fashion products grew by 13% overall in the half, now accounting for just
under half of billings with Fashion products up 2% supported by the new
TrendCurve+ product. Our smaller and more economically sensitive Advisory
services declined marginally in the half.
Events: Double down on the successful return of live events including
preparations for Money20/20 Asia, growing digital revenues, with targeted
M&A delivering an enhanced offer for customers.
Both Lions and Money20/20 grew very strongly in the half and non-event
dependent revenues, including digital, were up by 16%. The post period
acquisition of Contagious brings expertise in creative trends insights to the
Marketing segment.
Outlook
After a strong first half for the Group, our second half operational focus is
to build upon this performance. In terms of Events, we look forward to
delivering a successful edition of Money20/20 USA and preparing for the launch
of Money20/20 Asia in 2024. In WGSN we will continue to drive growth through
our non-Fashion products and, in Digital Commerce, complete the launch and
roll out of Flywheel Commerce Cloud, accompanied by integration synergies to
drive margins. As our results in H1 have demonstrated, our business-facing
teams remain fully focused on delivering for customers.
After our seasonally stronger first half, we have had a solid start to the
second half. Despite continued macro uncertainty impacting the industries we
serve and currency headwinds, our businesses remain well set for the year,
supported by multiple growth levers. The structural long-term growth in our
end markets, and the success of our marquee events, underpins the Board's
confidence in the prospects of our businesses for the future."
SEGMENTAL REVIEW
Events
This division comprises the Marketing and Retail & Financial Services
segments and the combined performance for the half year was as follows:
Six months ended 30 June (£'m) Growth (%)
2023 2022 Reported Organic Proforma
Revenue 136.1 114.4 19% 25% 25%
Adjusted EBITDA 64.6 52.0 24% 26% 26%
Adjusted EBITDA Margin 47% 45%
In the six months ended 30 June 2023, the Events business held two of its three main annual events: the Cannes Lions Festival and Money20/20 Europe. Both of these events grew very strongly compared to their editions in 2022. This performance, combined with continued strong growth from WARC's subscription driven business, delivered overall organic revenue growth of 25% and improved margins compared to the six months ended June 2022 demonstrating the strength of these market-leading products and the important role they play for their customers.
Marketing
The Marketing segment comprises Lions and WARC. Lions, through its awards and festival, as well as its subscription and advisory products, is the global benchmark for creativity in the branded communications industry, while WARC is the global authority on marketing effectiveness for brands, agencies and media platforms. Shortly after the half year end, in August 2023, we acquired Contagious, a provider of creative trends insights to brands and agencies.
Six months ended 30 June (£'m) Growth (%)
2023 2022 Reported Organic Proforma
Revenue 104.8 80.8 30% 28% 28%
Adjusted EBITDA 55.7 43.2 29% 28% 28%
Adjusted EBITDA Margin 53% 54%
The Marketing segment performed very strongly in the first six months of 2023. Its year over year organic growth of 28% in both revenue and Adjusted EBITDA was especially pleasing considering that Lions had already returned to pre-COVID levels of revenue in the previous half year.
Lions provides opportunities to network, learn and do business at the Cannes Lions International Festival of Creativity. The festival celebrated its 70th edition in Cannes in June 2023, with Lions growing by 30% on the prior year (or by 40% on pre-COVID levels in 2019). The event enjoyed record levels of customer engagement, through physical sponsorship activations, while revenue from delegate participation was up 17% and award entries revenue also grew well, up 11%.
In terms of Events revenues, attendees at Cannes Lions also saw good growth, with a total of c.12,000 representing growth of 9% on the 2022 event. Attendees from Asia Pacific saw growth of over 30%, with delegates now able to travel outside their countries due to the lifting of pandemic restrictions. In addition, sponsorship revenue grew by 66%, as demand for onsite activations, particularly with major media and technology partners, grew strongly even compared to 2022's record levels.
In terms of the Lions benchmark awards, entry volumes of just under 27,000
were received, up 6% on prior year. This included an 18% increase in
submissions directly from brand customers, with strong engagement in
categories representing emerging channels such as B2B, Gaming, Commerce and
Businesses Transformation. This year saw the launch of the Entertainment Lion
for Gaming, where strong participation highlighted the increased collaboration
between brands and this growing industry. Lions' regional awards (Dubai Lynx
and Spikes) also saw growth in award entries, demonstrating the importance of
the Middle East and Asian markets within the industry.
Lions also provides year-round intelligence and consulting services through
its subscription and advisory products and this now accounts for 10% of the
last twelve months' revenues. Subscription revenues from Lions membership and
The Work, continued to grow well, up 8%, with annual renewal rates for The
Work remaining strong, at over 90%. Advisory, which provides insights using
Lions' awards intelligence and respected creative excellence training
programmes, more than doubled vs H122, with projects for major brands such as
Colgate, Pepsi and Heineken.
Further expanding Marketing's digital subscription base, WARC saw strong
revenue growth of 12%, with renewal rates continuing to exceed 95%, building
on the launch of the Marketing Effectiveness Platform last year. June also
saw the launch, at the Lions Festival, of the Lions & WARC Creative Impact
track, a joint content stream, examining what it takes to drive business
performance through commercial creativity in 2023.
Acquired in August, Contagious, a multi-format creative insights business,
brings to the Marketing segment deep expertise in the analysis of creative
trends. The business, which provides forward-looking creative inspiration and
trend analysis for agency and brand customers, is highly complementary to the
offerings of Lions and WARC and further strengthens our product set across the
industry.
Retail & Financial Services
Money20/20 is the world's leading platform where the global fintech
communities come together to do business. The Retail and Financial Services
segment also comprises Acuity Pricing, our Retail Price & Promotion data
provider.
Six months ended 30 June (£'m) Growth (%)
2023 2022* Reported Organic Proforma
Revenue 31.3 33.6 (7%) 17% 17%
Adjusted EBITDA 8.9 8.8 1% 15% 15%
Adjusted EBITDA Margin 28% 26%
*Prior year results include £5.6m of revenue and £0.8m of Adjusted EBITDA
from Retail Week World Retail Congress which was sold in December 2022.
The Retail & Financial Services segment performed very strongly in the
first six months of 2023. Its year over year organic growth of 17% in
revenue and 15% in Adjusted EBITDA was especially pleasing considering that
Money20/20 Europe had already returned to significantly higher than pre-COVID
levels of revenue in the previous half year.
Money20/20 is the leading platform for the global fintech community, driving
progress, growth and success for customers, by creating connections, enabling
deals and generating fresh insights. The brand's European event, held in
Amsterdam in June 2023, delivered growth of 19% compared to the 2022 edition
(and over 50% compared to 2019), driven by increases in both attendees (now
over 8,500), where revenue grew 11% and sponsorship business where revenue
grew 23%. The event saw attendees from over 2,300 companies attend,
representing over 100 countries, with over 18,000 customer meetings booked via
the Money20/20 app (an increase of over 20%). An increase in the Net Promoter
Score illustrates continued strong customer engagement.
Customer engagement ahead of the flagship US show, to be held in Las Vegas, in
October remains good. After delivering an exceptional result in the prior
year 2022 edition (where revenue was up 64% on pre-pandemic levels), and in
light of disruption to the funding environment for the early-stage financial
technology sector, in particular payments, we are expecting 2023 revenues to
be flat to slightly down on a constant currency basis (noting that we also
expect a 14% US Dollar currency headwind compared to 2022).
Preparations for the launch of the Asian show, in Bangkok in April 2024 are
progressing well, with strong early engagement from key regional players and
an excellent regional line up of content.
The Retail Price & Promotion business saw a slight decline in revenue,
although billings grew modestly, supported by product enhancements and renewed
marketing efforts including a re-brand in H1 to "Acuity Pricing".
The fintech end market and the broader payments ecosystem which Money20/20
serves remained robust throughout the pandemic underlining that it continues
to represent a long-term global growth sector. Despite recent significant
reductions in funding and valuations of companies in certain sub-segments of
the customer base from their 2021 highs, the long-term trend is expected to be
positive.
Digital Commerce
Our Digital Commerce segment operates a leading cloud-based platform enabling
brand manufacturer customers to optimise their sales, share, and profit across
the world's major digital commerce marketplaces.
Execution products (81% of revenue): Flywheel Digital, OneSpace, WhyteSpyder,
DZ, and Intrepid provide managed execution services to global enterprise
brands across the world's leading marketplaces. Perpetua and 4K Miles provide
self-service execution to challenger brands, while ASR provides content
optimisation services.
Measurement & Benchmarking products (19% of revenue): Edge and Yimian
primarily offer market share insight, with digital shelf optimisation, across
the key global marketplaces, while Intellibrand specialises in digital shelf
services in the Latam region.
Six months ended 30 June (£'m) Growth (%)
2023 2022 Reported Organic Proforma
Revenue 114.1 95.1 20% 10% 11%
Adjusted EBITDA - 1.8 n.m. 0% 6%
Adjusted EBITDA Margin - 2%
Digital Commerce delivered a strong performance in the first half of 2023
against a backdrop of continuing widespread economic challenges. In the six
months ended 30 June 2023, revenue grew by 10% on an organic basis (11% on a
proforma basis). We were pleased to see H1 growth ahead of that of the
leading marketplace.
This growth was led by expansion of the Enterprise customer offering, where
revenue grew by 11% on an organic basis (13% on a proforma basis) with our
Challenger customer division growing at 10% on an organic basis (6% on a
proforma basis). Growth in China was subdued at 2% as the region recovers
from the pandemic disruption in the first quarter of the year. Our
performance was once again led by the growth of our Execution products which
grew by 14% proforma while Measurement & Benchmarking products declined
slightly.
This robust underlying revenue performance continues to be driven by a mix of
gross new customer additions and net revenue retention*. We added over 1,150
new customers in H123 (over 150 Enterprise customers and over 1,000 Challenger
customers) and delivered net revenue retention for the last 6 months of over
100%.
Revenue continued to be weighted to the US with 62% of revenue from the US,
23% from Asia and 15% from Europe and other. Revenue from Digital
Subscriptions and Platforms continued to make up the vast majority of revenue
with approximately 50% paid on a fixed retainer or subscription and 50%
variable with customer sales or media spend.
As previously reported, we planned for our margins to be weighted towards the
second half of the year. Overall Adjusted EBITDA margin for the half was
breakeven (H122: 2%), including £3.3m of losses from businesses newly
acquired in 2022. We are now approaching the completion of our multi-year
investment programme to reorganise and integrate the business and products,
including the launch of Flywheel Commerce Cloud. This enables us to realise
synergies from H2 2023 as part of the benefits of this programme and we are
targeting a high single digit margin in 2023 and a mid-teens margin in 2024.
Flywheel Commerce Cloud was a critical focus for the business in the first
half, enabling us to move to a unitary business structure, with key clients
already commencing migration to the new integrated platform. This brings
together the capabilities of our Flywheel, OneSpace, WhyteSpyder and Edge
products into a single experience, all leveraging the same, aggregated,
cross-marketplace data. This integrated platform fully enables our
Enterprise clients to manage their end-to-end execution in real time across
the world's leading marketplaces utilising AI automation programmes as well as
new real-time retail optimisation utilities.
In addition to this critical launch of the first fully integrated platform for
Digital Commerce at this scale, we have also been aggressively rolling out new
capabilities with our marketplace partners to maximise our ability to optimise
our clients' eCommerce trading on a real time basis. We have successfully
launched products leveraging Amazon Market Cloud, Amazon Stream, Amazon DSP
services, Walmart Quality Content Programme as well as Target, Instacart, and
Uber.
The creation of Flywheel Commerce Cloud has also enabled us to create a
unitary organisation structure with all elements of the operation migrating to
a single brand "Flywheel" in October. As clients experience a fully
integrated global platform, they will also have a simplified engagement
experience with us under a single team.
* We calculate our net revenue retention rate on a constant currency basis as
of the end of a period by using (i) the revenue from our clients during the
twelve-month period ending one year prior to such period as the denominator;
and (ii) the revenue from those same clients during the twelve months ending
as of the end of such period as the numerator.
Product Design
WGSN, a leading global supplier of trend forecasts, market intelligence and
consumer insight, helps customers understand the future demands of
consumers. Information is delivered principally through digital
subscriptions to over 6,500 customers in more than 90 countries. The Product
Design segment also includes trend products for SMEs in the fashion market
(WGSN Start) and the innovative colour system Coloro.
Six months ended 30 June (£'m) Growth (%)
2023 2022 Reported Organic Proforma
Revenue 57.2 51.2 12% 8% 8%
Adjusted EBITDA 27.4 24.4 13% 8% 8%
Adjusted EBITDA Margin 48% 48%
The WGSN Group delivered a good performance in the first half of 2023. In the
six months ended 30 June 2023, revenue grew organically by 8% compared to the
six months ended 30 June 2022, while billings from subscription products grew
at 7%, driven by continuing strong levels of retention, which continues to be
at rates of over 95%. Growth continues to be driven by non-fashion products,
such as Insight, which collectively accounted for almost half of the billings
in the period and grew at 13%. Fashion grew at 2% with good take up of our
advanced, AI-driven, data-rich trend forecasting service, TrendCurve+,
launched in 2022. This product combines inputs from WGSN's unique proprietary
data sources, applying deep machine-learning algorithms to generate trend
projections across thousands of key items, silhouettes and colours, and is now
being utilised by leading brands and retailers across the globe to inform
their buying decisions.
In the smaller, non-subscriptions part of the business, the more economically
sensitive Mindset advisory revenue declined by 13% in H1, while there was an
offsetting strong performance from the Coloro business, which was up 60%
compared to H122.
Signature white papers released this year include Future Consumer 2025, which
has already been downloaded more than 13,000 times and presented at key events
such as Vidcon São Paulo, Outdoor Retailer and Cannes Lions. WGSN's strategic
use of AI to enhance its products continued, with the launch of
machine-translated versions of its Food & Drink platform into Spanish and
Japanese, with future releases due later in 2023 of WGSN Fashion in German and
French.
WGSN's ongoing roadmap of innovation and platform upgrades delivered an
important update this July, addressing a key customer need, with the WGSN
interface now serving up personalised forecast recommendations depending on a
user's job role, industry and brand. Finally, the business has also
continued to maintain outstanding levels of NPS in the last 2 years,
underlining the value of the information delivered to customers and the
strength of its brand.
FINANCIAL REVIEW
Overview
The results for the half are set out in the condensed consolidated statement
of profit or loss and show revenue of £307.4m (H122: £260.7m) and an
operating profit of £0.7m (H122: £35.1m loss). Adjusted EBITDA was £78.6m
(H122: £67.2m) with the improvement driven mainly by Lions and WGSN. The
£0.7m operating profit (H122: £35.1m loss) for the half includes adjusting
items such as amortisation and impairment of acquired intangibles, share-based
payments and non-trading items as set out in more detail below.
We delivered strong operating cash flow performance for the year with free
cash flow from operations after tax and capex of £56.9m (H122: £72.2m), an
operating cash flow conversion of 99% (H122: 128%) and a free cash flow
conversion of 72% (H122: 107%) with the reduction driven by a £12.0m unwind
in drawings under the Digital Commerce working capital financing and by higher
capital expenditure.
Alternative Performance Measures
A core KPI and strategic goal of the Company is Organic revenue growth rate.
We believe that this is the most efficient method of growth, measures the
underlying health of the business and is a key driver of shareholder value
creation. Organic revenue growth rate eliminates the impact of acquisitions
(counting them only once they have been owned for 12 months) and disposals and
that element of growth which is driven by changes in foreign exchange rates.
It also eliminates the impact on growth rates of changes, if any, in timing of
live events and of products that are being curtailed. Proforma growth rate is
measured in a similar way to Organic growth rate but assumes that the Group's
acquisitions were all made on 1 January 2022 and is therefore a measure of the
like-for-like rate of growth of the brands owned today.
Adjusted EBITDA is also an Alternative Performance Measure and is used in the
day-to-day management of the business to aid comparisons with peer companies,
manage banking covenants and provide a reference point for assessing our
operational cash generation. It eliminates items arising from portfolio
investment and divestment decisions, and from changes to capital structure.
Such items arise from non-trading activities, intermittent or non-recurring
events, and while they may generate substantial income statement amounts, do
not relate to the ongoing operational performance that underpins long-term
value generation.
Further details on Alternative Performance Measures are set out at the end of
this report.
Segmental results
The Group has four reportable segments. These are Marketing, Retail &
Financial Services, Digital Commerce and Product Design. Information regarding
the results of each is included below.
£'m Marketing Retail & Financial Services Product Corporate Total
Digital Design costs
Commerce
H123
Revenue 104.8 31.3 114.1 57.2 - 307.4
Organic growth 28% 17% 10% 8% - 16%
Proforma growth 28% 17% 11% 8% - 16%
Adjusted EBITDA 55.7 8.9 - 27.4 (13.4) 78.6
Organic growth 28% 15% 0% 8% (29%) 17%
Proforma growth 28% 15% 6% 8% (29%) 18%
Adjusted EBITDA margin 53% 28% - 48% - 26%
Depreciation and software amortisation (1.2) (0.2) (10.0) (1.5) (1.5) (14.4)
Adjusted operating profit / (loss) 54.5 8.7 (10.0) 25.9 (14.9) 64.2
H122
Revenue 80.8 33.6 95.1 51.2 - 260.7
Adjusted EBITDA 43.2 8.8 1.8 24.4 (11.0) 67.2
Depreciation and software amortisation (1.4) (0.2) (7.7) (2.2) (1.1) (12.6)
Adjusted operating profit / (loss) 41.8 8.6 (5.9) 22.2 (12.1) 54.6
Revenue
The Company benefits from diverse revenue streams across its segments ranging
from digital subscriptions to live events to advisory. Most of these revenue
streams are digital and have recurring or repeat characteristics benefiting
from our focus on customer retention.
Total revenue grew to £307.4m (H122: £260.7m), an increase of £46.7m or
18%. Adjusting for currency impacts, acquisitions, disposals and discontinued
products, revenue increased by 16% on both an Organic basis and Proforma
basis. This was driven by the strong growth across all our segments.
Adjusted EBITDA
Adjusted EBITDA grew to £78.6m (H122: £67.2m) an increase of £11.4m or
17%. This represented Organic growth of 17% slightly ahead of the growth in
revenue. Adjusted EBITDA margin was in line with the prior year at 25.6%
(H122: 25.8%). Adjusted EBITDA from operations is reconciled to statutory
operating profit/loss as shown in the table below
Reconciliation between Adjusted EBITDA and statutory operating profit/(loss)
£'m H123 H122
Adjusted EBITDA 78.6 67.2
Depreciation and software amortisation (14.4) (12.6)
Adjusted operating profit 64.2 54.6
Amortisation of acquired intangibles (17.3) (17.5)
Impairment of intangibles (11.7) (31.4)
Share-based payments (8.8) (7.6)
Non-trading items (25.7) (33.2)
Statutory operating profit/(loss) 0.7 (35.1)
Amortisation of acquired intangibles
The small reduction in amortisation of acquired intangibles from £17.5m in
H122 to £17.3m in H123 reflects the amortisation of intangibles on assets
acquired in 2022 (Sellics and Intrepid) less the impact of fully amortised
intangibles.
Impairment of acquired intangible assets
The Company undertakes a periodic review of the carrying value of its goodwill
and indefinite life intangible assets and, if there is an indicator of
impairment, its definite life intangible assets.
In H123 we have impaired acquired intangibles by £11.7m. This primarily
relates to acquired brand intangibles within Digital Commerce as result of the
decision to move to a single brand "Flywheel Digital" from the second half of
2023. An impairment was identified in the comparative period of H122 when,
as reported last year, the decision was made to change the focus of the Edge
Digital Shelf offering to our clients within the Digital Commerce segment.
As a result of this change, certain intangible assets associated with this
product no longer generated sufficient value to support the carrying value and
an impairment charge of £31.4m was recorded in the first half of 2022.
Non-Trading items
The Company has incurred significant Non-Trading items in H123 which have been
treated on a basis consistent with our policy and with previous years as set
out below and further explained in Note 5.
£'m H123 H122
Deferred contingent consideration - charge contingent on service 7.8 12.2
Deferred contingent consideration - revaluation credit (17.1) (4.6)
Deferred contingent consideration (credit) / charge (9.3) 7.6
Strategic review 23.0 8.5
ERP and Salesforce implementation costs 3.9 13.3
Transaction and integration costs 6.5 4.3
Property impairments and onerous contracts 1.4 (0.5)
Loss on disposal of businesses 0.2 -
Non-Trading items relating to Continuing operations 25.7 33.2
Discontinued operations - 0.4
Non-Trading items 25.7 33.6
The charge for deferred contingent consideration of £7.8m (H122: £12.2m)
reflects the earnout that is contingent on the continuing employment of the
founders on the acquisitions of Perpetua, WhyteSpyder, 4K Miles, and
Intrepid. The credit for deferred contingent consideration of £17.1m (H122:
£4.6m) reflects, primarily, the renegotiation of the Perpetua earnout to
facilitate integration with the Digital Commerce business.
The costs of implementing the strategic actions constitute a significant
non-trading item across both 2022 and 2023. These costs relate to resources
and professional fees for project management, tax and legal structuring, US
GAAP conversion and PCAOB audits for 2021 and 2022 and legal advice as well as
severance and retention incentives for key personnel impacted by the proposed
separation of the Group.
A 2021 IFRIC decision resulted in an amendment to the treatment of costs
incurred in respect of the Company's new ERP and, in prior years, Salesforce
systems, such that the majority of costs on implementation of SaaS software
are no longer capitalised but expensed as incurred. Costs relating to this
significant and non-recurring programme in the period totalled £3.9m (H122:
£13.3m).
Transaction and integration costs comprise professional fees for diligence and
legal costs for acquisitions and investments as well as the costs of
integrating acquisitions, chiefly those of Sellics and Intrepid and the
integration of our operating platform within Digital Commerce.
Net finance costs
The net finance cost for the period was £5.7m (H122: £5.2m) as set out in
the table below:
(£ million) H123 H122
Interest payable on external borrowings (9.9) (3.1)
Interest income 8.0 0.9
Fair value (loss) / gain on derivative financial instruments (2.0) 1.9
Amortisation of arrangement fees (0.4) (0.4)
Discount unwind on deferred consideration and lease liabilities (3.2) (4.6)
Foreign exchange (loss) / gain (0.5) 0.1
Adjusted net finance costs (8.0) (5.2)
Foreign exchange on deferred consideration 2.3 -
Net finance costs (5.7) (5.2)
The Group's adjusted net finance costs have increased from £5.2m in H122 to
£8.0m in H123 driven mainly by the significantly higher interest expense
payable since the second half of 2022 as interest rates have risen for both
our USD and Euro borrowings. The major items in interest income (£8.0m)
relate to interest receivable from Hudson MX of £5.3m (H122: £0.9m) together
with interest income on our interest rate caps amounting to £1.6m (H122:
nil). The unwind of the discount on deferred consideration and lease
liabilities is lower than the prior period, totalling £3.2m (H122: £4.6m)
due to the final settlement of older earnout agreements.
Profit before tax
Adjusted profit before tax of £49.8m increased compared to the prior period
(H122: £48.4m). This reflects the growth in adjusted EBITDA to £78.6m (H122:
£67.2m), partly offset by higher levels of depreciation and software
amortisation and of net finance costs (see above), together with an increase
in losses relating to the share of associates (to £6.4m, from £1.0m) as a
result of an increase in our ownership of Hudson which is currently loss
making (see below).
Total loss before tax for the half was £11.8m for the half down from a total
loss of £41.6m in the prior period. The reduction in losses is driven by a
£28.4m reduction in Adjusting items as set out above.
Taxation
A total tax charge of £5.0m (H122: £3.6m credit) was incurred on the
reported loss before tax of £11.8m (H122: £41.6m) with the lower levels of
tax deductibility of Adjusting items (with an effective tax rate of 16.6% or
17.5% in the prior period) driving this outcome.
A tax charge of £15.2m (H122: £12.2m) was incurred on Adjusted profit before
tax of £49.8m (H122: £48.4m) resulting in an Adjusted effective tax rate for
the period of 31% (H122: 25%) with the increase driven by the increased loss
on Associates for which no deferred tax asset has been recognised.
The composition of the tax charge is summarised in the table below.
Analysis of tax charge (£'m) H123 H122
Adjusted profit before tax 49.8 48.4
Tax charge on Adjusted profit before tax (15.2) (12.2)
Effective tax rate (%) 30.5% 25.3%
Adjusting items (61.6) (90.0)
Tax credit on Adjusting items 10.2 15.8
Effective tax rate on Adjusting items (%) 16.6% 17.5%
Reported loss before tax (11.8) (41.6)
Tax (charge)/credit on reported loss before tax (5.0) 3.6
Effective tax rate on reported loss before tax (%) n.m. 8.5%
The Group has a total recognised net deferred tax asset of £47.5m (H122:
£49.1m) comprising a £23.7m (H122: £35.5m) deferred tax liability on
non-deductible intangibles and an asset of £71.2m (H122: £84.6m) relating to
UK and US losses, accelerated capital allowances and US acquired intangibles.
The gross asset is expected to be realised in cash over the next ten years
with the majority recovered in the next four years. When considering the net
deferred tax balance by entity this is presented as a gross asset of £54.5m
offset by a deferred tax liability of £7.0m.
Foreign currency translation impact
The Group's reported performance is sensitive to movements in both the Euro
and US dollar against pounds sterling with significant acquisitions
denominated in US Dollars and events revenues in Euro and US Dollars. In
particular, the Dollar exchange rate has benefited our reported financial
performance in the first half as set out below.
Weighted average rate Period-end rate
Currency H123 H122 Change H123 H122 Change
Euro 1.17 1.17 0.3% 1.16 1.16 (0.1%)
US Dollar 1.23 1.32 6.5% 1.27 1.22 (4.3%)
When comparing H123 and H122, changes in currency exchange rates had a
favourable impact on revenue and adjusted EBITDA of £6.9m and £2.4m. On a
segmental basis, the impact of changes in foreign currency exchange rates was
as follows:
● Digital Commerce: £3.7m impact on revenue and £0.6m impact on
Adjusted EBITDA
● Product Design: £1.8m impact on revenue and £0.8m impact on
Adjusted EBITDA
● Marketing: £1.2m impact on revenue and £0.2m impact on Adjusted
EBITDA
● Retail & Financial Services: £0.2m impact on revenue and no
impact on Adjusted EBITDA.
The second half of 2022 benefited from a very weak Sterling exchange rate
relative to the US Dollar and we are expecting currency headwinds of 11% in
the second half of 2023 overall as a result.
For illustrative purposes, the table below provides details of the impact on
revenue and Adjusted EBITDA if the results were restated for Sterling
weakening by 1% against the Euro and US Dollar in isolation.
H123 H122
£'m Revenue Adjusted Revenue Adjusted
EBITDA EBITDA
Euro 1.3 1.0 1.1 0.9
US Dollar 1.2 0.3 1.0 0.3
Furthermore, each 1% movement in the Euro to pounds Sterling exchange rate has
a £0.8m (H122: £1.1m) impact on the carrying value of borrowings. Each 1%
movement in the US Dollar has a circa £2.2m (H122: £2.8m) impact on the
carrying value of borrowings.
Earnings per share
Adjusted diluted earnings per share were 7.7p per share (H122: 8.0p). Total
diluted loss per share was 3.8p (H122: loss of 8.7p) with the prior period
impacted by higher levels of Adjusting Items.
Investments
The Group holds minority investments in several companies including Shanghai
Coloro Technology, Tracksuit, Infosum, Hashtag Paid, Symbiosis and Hudson MX
("Hudson").
The largest investment, totalling £98.0m in equity and debt, is in Hudson, an
advertising software business providing media buying and media accounting
solutions through a cloud-based SaaS platform. Hudson completed a financing
round in February 2023 attracting fresh investment of $51.5m of which $30.0m
was provided by a new investor, MT II Holdings, LP ("MT II"), and $21.5m from
Ascential. As part of this refinancing Hudson's capital structure was
revised and MT II purchased part of Ascential's holding of preference shares
for £24.9m. Following the restructuring, MT II holds 51% of Hudson's common
stock, Ascential holds 36.5% and Hudson's management team and pre-existing
shareholders hold 12.5%.
Ascential continues to exert significant influence over Hudson and now holds a
£10.3m (December 2022: £73.8m) equity investment consisting of ordinary
shares measured using the equity method. In H123, we therefore recorded our
share of the losses of the Hudson businesses totalling £6.8m (H122:
£0.9m). Ascential also holds debt instruments in Hudson totalling £87.7m
(December 2022: £42.7m) including accrued interest. In H123, we recorded
interest receivable on these debt instruments totalling £5.3m (H122:
£1.0m).
In addition, as part of the restructuring in February 2023 Ascential has
agreed on arrangements that provide a potential path to a majority stake in
the future. These arrangements include granting a put option to MT II,
exercisable from 1 April 2024 to 31 December 2025 and subject to a maximum
consideration payable by Ascential of US$52m. If exercised, this put option
would result in Ascential holding a 79% common equity interest in Hudson with
Ascential then holding the right to call the remaining shares owned by MT II
in the two years following any exercise of their put option. Finally, and
looking further ahead, between February 2026 and December 2028, both the Group
and Hudson's management team, along with other existing investors, have agreed
options with a total consideration ceiling of US$40 million that would, if
executed, increase the Group's equity stake in Hudson to 49%.
Further details of the restructuring and the accounting for Hudson can be
found in Note 10.
Deferred contingent consideration
The Company's preferred structure for acquisitions is to enter into long-term
earnout arrangements with the founders of acquired companies and to link this
to the post-acquisition performance of the acquired company and for certain
elements make this contingent on the continuing employment of the founders.
Accounting for the earnout is complex and requires considerable judgements to
be made about the expected future performance of the acquired company at the
both the point of acquisition and at each reporting date. This is especially
difficult in the type of high growth, early stage, companies that Ascential
acquires.
The earnout is accounted for in three ways:
1. A liability for deferred contingent consideration is established on
the balance sheet at the point of acquisition based on that element of the
earnout which is not dependent on the continuing employment of the founders.
Any subsequent change in estimate is recorded as a Non-Trading item and in
H123 we recorded a revaluation credit of £17.1m (H122: £4.6m) primarily
attributable to the renegotiation of the earnout of Perpetua to facilitate
early integration of the business. During the period we made cash payments of
£14.3m (H122: £35.4m) in relation to this element of deferred contingent
consideration.
2. This liability is discounted to present value with the reversal of
this discount being recorded as a finance cost. This amounted to a finance
cost of £2.7m for the period (H122: £4.1m).
3. Finally, that element of the deferred contingent consideration that
is also contingent on the continuing employment of the founders is charged to
the consolidated statement of profit or loss as a Non-Trading item over the
service life of those founders (typically three years). This amounted to a
charge of £7.8m (H122: £12.2m). During the period we made cash payments of
£16.6m (H122: £18.0m) in relation to this element of deferred contingent
consideration.
The liability for deferred contingent consideration amounted to £65.0m at 30
June 2023 (H122: £80.6m).
In total, when combining this liability with the future income statement
charges for discount unwind and for deferred contingent consideration that is
contingent on continuing employment of the founders, the Company expects to
pay out deferred contingent consideration of up to £90m over the next three
years for acquisitions to date. £14m is due in the second half of 2023 with
the balance due in 2024, 2025 and 2026 contingent on the 2023, 2024 and 2025
performance of the relevant businesses.
Cash flow
The Company generated Adjusted operating cash flow of £77.8m (H122: £85.7m),
being a 99% (H122: 128%) operating cash flow conversion in the first half.
A feature of our cash flow is the working capital required in the Digital
Commerce segment for the purchasing of advertising media on behalf of
customers where the payment terms agreed with the customer can differ from
those agreed with the marketplace. At 30 June 2023 we had £182.5m of these
media reimbursables receivable from customers and £170.9m payable to the
marketplaces up from £122.6m and £116.4m respectively at 30 June 2022 with
the balances recorded in Other Debtors and Other Creditors respectively. In
order to reduce the impact of this working capital dynamic on the Group, we
have a facility with a bank to sell certain of the customer receivables for an
attractive rate of interest that is lower than our overall cost of
borrowing. Drawings under this facility amounted to £18.3m (H122: £29.0m)
at the period end representing a cash outflow of £12.0m in the half. The
resultant net working capital position relating to such media reimbursables of
a net receivable of £11.6m (H122: £6.2m) therefore does not have a
significant overall impact on the Group's balance sheet.
The Group's capital spend increased by £6.0m from the prior year to £19.9m
(H122: £13.9m) driven by increased product development in the Digital
Commerce business with the increase primarily related to the creation of the
single operating platform as part of our integration activities. Tax paid on
profits was £1.0m in the current period (H122: £0.4m refund). Tax
liabilities continue to be sheltered by prior period losses and tax-deductible
acquisition consideration particularly in the US.
As a result, the Company generated free cash flow of £56.9m (H122: £72.2m)
as shown in the table below:
£'m H123 H122
Adjusted EBITDA 78.6 67.2
Working capital movements (0.8) 18.5
Adjusted cash generated from operations 77.8 85.7
Operating cash flow conversion (%) 99% 128%
Capital expenditure (19.9) (13.9)
Tax (paid)/received (1.0) 0.4
Free cash flow from operations 56.9 72.2
Free cash flow conversion (%) 72% 107%
The cash flow statement and net debt position are summarised as follows.
£'m H123 H122
Free cash flow from operations 56.9 72.2
Acquisition of businesses net of cash acquired - (60.9)
Deferred contingent consideration including contingent employment cost (30.9) (53.4)
Disposal proceeds net of cash disposed and disposal costs 24.9 (0.4)
Acquisition of investments and loan to associate (13.3) (18.5)
Non-Trading costs paid (19.0) (24.9)
Cash flow before financing activities 18.6 (85.9)
Net proceeds from borrowings 9.1 91.8
Net interest paid (7.1) (2.5)
Lease liabilities paid (4.1) (3.0)
Shares purchased (2.6) -
Dividends paid to non-controlling interests - (1.2)
Net cash flow 13.9 (0.8)
Opening cash balance 80.0 84.1
FX movements (4.3) 5.1
Closing cash balance 89.6 88.4
Borrowings (299.6) (265.2)
Capitalised arrangement fees 1.2 2.0
Derivative financial instruments 3.2 2.1
Net debt (205.6) (172.7)
Returns to shareholders
Following the impact of Covid-19 on the business, no dividends were paid in
2020 or 2021 and in 2022 cash flow was prioritised for acquisitions. The Board
continues to prioritise capital for investment to support our growth strategy
and also, in the context of the ongoing strategic review, has decided not to
declare an interim 2023 dividend at this time.
Strong balance sheet and access to liquidity
Ascential manages its capital to ensure that entities in the Group will be
able to continue as going concerns while maximising the return to shareholders
through the optimisation of the debt-to-equity balance. The capital structure
of the Group consists of debt, cash and cash equivalents and equity
attributable to equity holders of the parent comprising capital, reserves and
retained earnings. The Group's policy is to borrow centrally to meet
anticipated funding requirements. These borrowings, together with cash
generated from the operations, are on-lent at market-based interest rates and
on commercial terms and conditions or contributed as equity to subsidiaries.
Going concern
The Board is required to assess going concern at each reporting period. These
assessments require judgement to determine the impact of future economic
conditions on the Group, including the impact of downward recessionary
pressures. After considering the current financial projections and the bank
facilities available and then applying a severe but plausible sensitivity, the
Directors of the Company are satisfied that the Group has sufficient resources
for its operational needs and will remain in compliance with the financial
covenants in its bank facilities for at least the next 12 months from the date
of approving these financial statements.
The process and key judgements the Directors have considered in reaching their
conclusions on going concern relate to liquidity, covenants and scenario
planning and are set out in Note 1.
Condensed Consolidated Statement of Profit and Loss
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
(Unaudited) (Unaudited) (Audited)
(£ million) Note Adjusted Results Adjusting Items Total Adjusted Results Adjusting Items Total Adjusted Results Adjusting Items Total
Continuing operations
Revenue 4 307.4 - 307.4 260.7 - 260.7 524.4 - 524.4
Cost of sales (103.8) - (103.8) (95.7) - (95.7) (212.0) - (212.0)
Sales, marketing and administrative expenses (137.9) (63.5) (201.4) (106.2) (89.7) (195.9) (210.4) (189.6) (400.0)
Impairment loss on trade receivables and contract assets (1.5) - (1.5) (4.2) - (4.2) (6.6) - (6.6)
Operating profit/(loss) 4 64.2 (63.5) 0.7 54.6 (89.7) (35.1) 95.4 (189.6) (94.2)
Adjusted EBITDA 4 78.6 - 78.6 67.2 - 67.2 121.1 - 121.1
Depreciation, amortisation and impairment (14.4) (29.0) (43.4) (12.6) (48.9) (61.5) (25.7) (91.6) (117.3)
Non-trading items 5 - (25.7) (25.7) - (33.2) (33.2) - (82.1) (82.1)
Share-based payments - (8.8) (8.8) - (7.6) (7.6) - (15.9) (15.9)
Operating profit/(loss) 64.2 (63.5) 0.7 54.6 (89.7) (35.1) 95.4 (189.6) (94.2)
Share of loss of associates 10 (6.4) (0.4) (6.8) (1.0) (0.3) (1.3) (2.6) (0.6) (3.2)
Finance costs 6 (16.0) - (16.0) (8.0) - (8.0) (21.8) (5.3) (27.1)
Finance income 6 8.0 2.3 10.3 2.8 - 2.8 8.4 - 8.4
Profit/(loss) before taxation 49.8 (61.6) (11.8) 48.4 (90.0) (41.6) 79.4 (195.5) (116.1)
Taxation 7 (15.2) 10.2 (5.0) (12.2) 15.8 3.6 (21.0) 32.3 11.3
Profit/(loss) from continuing operations 34.6 (51.4) (16.8) 36.2 (74.2) (38.0) 58.4 (163.2) (104.8)
Discontinued operations
Loss from discontinued operations, net of tax - - - - (0.4) (0.4) - (0.9) (0.9)
Profit/(loss) for the period 34.6 (51.4) (16.8) 36.2 (74.6) (38.4) 58.4 (164.1) (105.7)
Profit/(loss) attributable to:
Owners of the Company 33.9 (50.4) (16.5) 35.3 (73.5) (38.2) 56.6 (153.0) (96.4)
Non-controlling interests 0.7 (1.0) (0.3) 0.9 (1.1) (0.2) 1.8 (11.1) (9.3)
Earnings/(loss) per share (basic and diluted, pence)
Continuing operations 7.7 (11.5) (3.8) 8.0 (16.6) (8.6) 12.9 (34.6) (21.7)
Discontinued operations - - - - (0.1) (0.1) - (0.2) (0.2)
Total operations 8 7.7 (11.5) (3.8) 8.0 (16.7) (8.7) 12.9 (34.8) (21.9)
Condensed Consolidated Statement of Other Comprehensive Income
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
(Unaudited) (Unaudited) (Au
dit
ed)
(£ million) Adjusted Results Adjusting Items Total Adjusted Results Adjusting Items Total Adjusted Results Adjusting Items Total
Profit/(loss) for the period 34.6 (51.4) (16.8) 36.2 (74.6) (38.4) 58.4 (164.1) (105.7)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences:
- recognised in equity from continuing operations (28.4) - (28.4) 52.7 - 52.7 40.2 - 40.2
Other comprehensive income/(loss) net of tax (28.4) - (28.4) 52.7 - 52.7 40.2 - 40.2
Total comprehensive income/(loss) for the period 6.2 (51.4) (45.2) 88.9 (74.6) 14.3 98.6 (164.1) (65.5)
Total comprehensive income/(loss) attributable to:
Owners of the company 5.5 (50.4) (44.9) 85.4 (73.5) 11.9 96.8 (153.0) (56.2)
Non-controlling interest 0.7 (1.0) (0.3) 3.5 (1.1) 2.4 1.8 (11.1) (9.3)
Condensed Consolidated Statement of Financial Position
(£ million) Note 30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Assets
Non-current assets
Goodwill 9 681.9 682.4 711.1
Intangible assets 9 213.9 297.3 242.4
Property, plant and equipment 6.2 5.1 5.7
Right of use assets 16.6 22.9 20.7
Investments 10 24.9 92.8 88.5
Other receivables 11 87.7 - 42.7
Deferred tax assets 7 54.5 63.2 60.3
Derivatives - 2.1 -
1,085.7 1,165.8 1,171.4
Current assets
Inventories 4.1 3.5 3.3
Trade and other receivables 11 317.1 302.9 344.9
Derivatives 3.3 - 4.5
Cash and cash equivalents 14 89.6 88.4 80.0
414.1 394.8 432.7
Total assets 1,499.8 1,560.6 1,604.1
Liabilities
Current liabilities
Trade and other payables 12 269.9 218.9 277.6
Deferred income 114.8 121.0 116.3
Deferred and contingent consideration 13 42.3 43.5 43.2
Lease liabilities 6.8 6.6 7.3
Current tax liabilities 7.9 5.9 8.6
Provisions 1.5 1.6 2.0
443.2 397.5 455.0
Non-current liabilities
Deferred income 0.5 0.9 1.0
Deferred and contingent consideration 13 22.7 37.2 64.9
Lease liabilities 16.5 19.8 19.5
External borrowings 14 298.4 263.2 301.2
Deferred tax liabilities 7 7.0 14.1 8.6
Provisions 1.8 1.4 2.0
346.9 336.6 397.2
Total liabilities 790.1 734.1 852.2
Net assets 709.7 826.5 751.9
Equity
Share capital 4.4 4.4 4.4
Share premium 153.6 153.5 153.6
Other reserves 163.8 167.0 166.0
Translation reserve (8.7) 32.2 19.7
Retained earnings 376.9 440.8 386.5
Shareholders' equity 690.0 797.9 730.2
Non-controlling interests 19.7 28.6 21.7
Total equity 709.7 826.5 751.9
Total Liabilities and Equity 1,499.8 1,560.6 1,604.1
Condensed Consolidated Statement of Changes in Equity
Attributable to owners of the Company
(£ million) Share capital Share premium Translation reserve Other reserves Retained earnings Non-controlling interest Total
Balance at 31 December 2021 (Audited) 4.4 153.3 (20.5) 167.0 471.7 29.7 805.6
Loss for the period - - - - (38.2) (0.2) (38.4)
Other comprehensive income - - 52.7 - - - 52.7
Total comprehensive income - - 52.7 - (38.2) (0.2) 14.3
Issue of shares - 0.2 - - - 0.2
Share-based payments - - - - 8.2 - 8.2
Taxation on share-based payments - - - - (0.9) - (0.9)
Dividends paid - - - - - (0.9) (0.9)
Balance at 30 June 2022 (Unaudited) 4.4 153.5 32.2 167.0 440.8 28.6 826.5
Loss for the period - - - - (58.2) (9.1) (67.3)
Other comprehensive income - - (12.5) - - - (12.5)
Total comprehensive income - - (12.5) - (58.2) (9.1) (79.8)
Issue of shares - 0.1 - - - - 0.1
Share purchases - - - (3.7) - - (3.7)
Shares issued to employees - - - 2.7 (2.7) - -
Foreign exchange movements - - - - - 3.4 3.4
Share-based payments - - - - 8.5 - 8.5
Taxation on share-based payments - - - - (1.9) - (1.9)
Dividends paid - - - - - (1.2) (1.2)
Balance at 31 December 2022 (Audited) 4.4 153.6 19.7 166.0 386.5 21.7 751.9
Loss for the period - - - - (16.5) (0.3) (16.8)
Other comprehensive income - - (28.4) - - - (28.4)
Total comprehensive income - - (28.4) - (16.5) (0.3) (45.2)
Share purchases (2.6) - - (2.6)
Shares issued to employees - - - 0.4 (0.4) - -
Share-based payments - - - - 8.4 - 8.4
Foreign exchange movements - - - - (1.7) (1.7)
Taxation on share-based payments - - - - (1.1) - (1.1)
Balance at 30 June 2023 (Unaudited) 4.4 153.6 (8.7) 163.8 376.9 19.7 709.7
Condensed Consolidated Statement of Cash Flows
(£ million) Six months to 30 June 2023 Six months to 30 June 2022 (Unaudited) Year to 31 December 2022 (Audited)
(Unaudited)
Cash flow from operating activities Note
Loss before taxation on continuing operations (11.8) (41.6) (116.1)
Loss before taxation on discontinued operations - (0.4) (0.9)
Adjustments for:
Impairment of assets 2.0 31.4 59.9
Depreciation and amortisation 41.4 30.1 60.3
Deferred and contingent consideration: revaluation and contingent employment 5,13 (9.3) 7.6 31.5
costs
Loss/ (profit) on disposal of business 5 0.2 - (6.0)
Share-based payments 8.8 7.6 15.9
Share of loss on associates 6.8 1.3 3.2
Net finance costs 6 5.7 5.2 18.7
Cash generated from operations before changes in working capital, provisions 43.8 41.2 66.5
and deferred and contingent consideration
Cash outflows for acquisition-related contingent employment costs 13
(16.6) (18.0) (19.5)
Changes in:
Inventories (0.9) 0.4 (1.2)
Trade and other receivables 15.8 16.4 (50.7)
Trade and other payables 0.8 3.7 58.2
Provisions (0.7) (0.9) 0.1
Cash generated from operations 42.2 42.8 53.4
Adjusted cash generated from operations 77.8 85.7 126.1
Cash outflows for discontinued operations - - (0.9)
Cash outflows for acquisition-related contingent employment costs 13 (16.6) (18.0) (19.5)
Cash outflows for other non-trading items (19.0) (24.9) (52.3)
Cash generated from operations 42.2 42.8 53.4
Tax (paid)/received (1.0) 0.4 (0.2)
Net cash generated from operating activities 41.2 43.2 53.2
Cash flow from investing activities
Acquisition of businesses, net of cash acquired - (60.9) (60.8)
Deferred contingent consideration paid* 13 (14.3) (35.4) (37.9)
Acquisition of investments 10 (2.8) (2.9) (4.0)
Proceeds from sale of equity-accounted investments 10 24.9 - 5.3
Loan to associate (10.5) (15.6) (30.6)
Acquisition of software intangibles and property, plant and equipment (19.9) (13.9) (35.9)
Disposal of businesses, net of cash disposed - (0.4) 0.6
Net cash used by investing activities (22.6) (129.1) (163.3)
Cash flow from financing activities
Proceeds from external borrowings 14 57.1 115.6 176.8
Repayment of external borrowings 14 (48.0) (23.8) (53.8)
Proceeds from issue of shares - - 0.3
Share repurchase (2.6) - (3.7)
Net interest paid (7.1) (2.5) (9.0)
Net lease liabilities paid (4.1) (3.0) (7.3)
Dividend paid to non-controlling interest - (1.2) (2.8)
Net cash (used in)/generated from financing activities (4.7) 85.1 100.5
Net increase/(decrease) in cash and cash equivalents 13.9 (0.8) (9.6)
Cash and cash equivalents at the beginning of the period 80.0 84.1 84.1
Effect of exchange rate changes (4.3) 5.1 5.5
Cash and cash equivalents at the end of the period 89.6 88.4 80.0
* Includes payments for both deferred and contingent consideration recognised
on initial acquisition as well as any subsequent remeasurements. Payments
linked to ongoing employment as well as business performance are shown within
cash generated from operations
Notes to the Condensed Consolidated Interim Financial Statements
1. Basis of preparation
Ascential plc (the "Company") is a public limited company, which is listed on
the London Stock Exchange and incorporated and domiciled in the United
Kingdom. These unaudited condensed consolidated interim financial statements
as at and for the six months to 30 June 2023 comprise the results and
financial position of the Company and its subsidiaries and were approved by
the Board of Directors on 21 September 2023. The condensed consolidated
interim financial statements have been prepared in accordance with the
International Accounting Standard 34 "Interim Financial Reporting" (IAS 34) as
adopted for use in the UK.
As required by the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority, this condensed set of financial statements has been
prepared applying the accounting policies and presentation that were applied
in the preparation of the Company's published consolidated financial
statements for the year ended 31 December 2022 which were prepared in
accordance with applicable law and UK-adopted international accounting
standards. These condensed consolidated half-yearly financial statements do
not comprise statutory accounts within the meaning of Section 435 of the
Companies Act 2006 and should be read in conjunction with the Annual Report
and Accounts 2022. Those accounts were reported upon by the Group's auditors
and delivered to the Registrar of Companies. The report of the auditors was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report and did not
contain statements under Section 498 (2) or (3) of the Companies Act 2006. The
Annual Report and Accounts 2022 are available upon request from the Company's
registered office at 33 Kingsway, London, WC2B 6UF, United Kingdom or at
www.ascential.com (http://www.ascential.com) .
The condensed consolidated financial statements have been prepared on a going
concern basis (see further details below) and under the historical cost
convention, with the exception of items that are required by IFRS to be
measured at fair value. We have performed our assessment based on the Group as
it is currently constituted because, at the time of writing, the results of
our strategic review are not yet sufficiently certain. In any case, these
strategic actions would not be expected to have a detrimental impact on the
Group nor any impact on the assessment to prepare the consolidated financial
statements on a going concern basis.
Going concern
After considering the current financial projections and the bank facilities
available, and then applying a severe but plausible sensitivity, the Directors
of the Company are satisfied that the Group has sufficient resources for its
operational needs and will remain in compliance with the financial covenants
in its bank facilities for at least the next 12 months from the date of
approving these financial statements. The process and key judgements in coming
to this conclusion are set out below.
The Board is required to assess going concern at each reporting period. These
assessments require judgement to determine the impact of future economic
conditions on the Group, including the impact of any downward recessionary
pressures. The Directors have considered three main factors in reaching their
conclusions on going concern - liquidity, covenants and scenario planning - as
set out below.
Liquidity
In January 2020, the Group entered into a 5-year multi-currency revolving
credit facility ("RCF") of £450m. The facility expires in January 2025 and
the Group expects to negotiate either an extension of the existing facility or
a replacement facility on materially similar terms prior to that date. The RCF
can be drawn in tranches for each interest rate period. These tranches of debt
can be rolled over at the end of the interest period subject to covenant
compliance on the request date. The Group expects that it will be able to
continue to rollover its debt at the end of each interest period over the
remaining life of the facility. This reflects that even in downside stress
scenarios that it can take mitigating actions to maintain compliance with
these conditions. As the Group has the ability and the intent to roll-over the
drawn RCF when due, it has classified these borrowings as a non-current
liability.
This facility provides ample liquidity when judged against the net debt of the
Company of £205.6m at 30 June 2023.
Covenants
The more sensitive aspects of the Company's financing are the application of
certain covenant limits and the most sensitive covenant limit is Net Debt
Leverage (broadly, the ratio of Net Debt to Adjusted pre-IFRS 16 EBITDA). The
facility covenants are tested semi-annually and include (i) a maximum Net Debt
Leverage of 3.25x with the benefit of additional 0.5x leverage spikes for
relevant acquisitions and (ii) a minimum interest cover of 3.00x.
At 30 June 2023, our leverage ratio was 1.6x (or 1.7x on a covenant basis)
compared to the limit of 3.25x, and therefore well within our banking
covenants.
Scenario planning
In assessing going concern, the Directors considered the most severe but
plausible scenario that could impact the business to be the cancellation of a
major event at short notice. This scenario is not a forecast of the Company
and is designed to stress test liquidity and covenant compliance. The key
assumption is that Money 20/20 USA is cancelled in 2023 with minimal notice
due to an unforeseen event. This scenario results in a 0.7x increase and a
0.5x increase to our leverage ratio at the 31 December 2023 and 30 June 2024
testing points respectively.
In their review of the downside scenario, the Directors have also considered a
number of mitigations that would reduce the leverage ratio further and are at
their discretion, including, but not limited to, the use of equity to meet
deferred consideration obligations, and further restructuring and cost cutting
measures.
In this downside scenario there is sufficient headroom against all banking
covenant tests.
We have performed our assessment based on the Group as it is currently
constituted and do not consider that any plausible outcome from the Company's
ongoing strategic review would result in a more severe downside scenario.
Accordingly, the Directors continue to adopt the going concern basis for the
preparation of the financial statements.
2. Accounting policies, developments and changes
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are the same as those set out in the Group's
Annual Report and Accounts for the year ended 31 December 2022 and will be
applied for the year ended 31 December 2023.
The amended standards and interpretations to IFRS effective during the six
months to 30 June 2023 have not had a significant impact on the Group's
accounting policies or reporting.
3. Critical accounting judgements and estimates
The preparation of these financial statements requires management to exercise
judgement in applying the Group's accounting policies. It also requires the
use of estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses. The actual future outcomes may differ from
these estimates and give rise to material adjustments to the reported results
and financial position of the Group. Estimates and underlying assumptions are
reviewed on an ongoing basis, with revisions recognised in the year in which
the estimates are revised and in any future periods affected. The areas
involving a higher degree of judgement or complexity and assumptions or
estimation are set out below.
Critical accounting judgements
· Recognition of associates (note 10)
Key sources of estimation uncertainty
· Measurement of associates (note 10)
· Valuation of contingent consideration and
acquisition-related employment costs (note 13)
4. Operating segments
The Group has four reportable segments that are used to present information to
the Board (Chief Operating Decision Maker) on a monthly basis. End market
risks and opportunities vary and capital allocation decisions are made on the
basis of four reportable segments. The four reportable segments are Digital
Commerce, Product Design, Marketing, and Retail & Financial Services. The
reportable segments offer different products and services and are managed
separately as a result of different capabilities, technology, marketing
strategies and end market risks and opportunities. The following summary
describes the continuing operations in each of the Group's reportable
segments:
· Digital Commerce: measurement, optimisation and execution
for digital commerce growth
· Product Design: consumer product trend forecasting, data
and insight to create world-class products and experiences
· Marketing: services and tools to measure and optimise
marketing creativity, media and platform effectiveness and efficiency
· Retail & Financial Services: events, data and tools
to improve performance and drive innovation in retail and financial services
Information regarding the results of each reportable segment is included
below.
Reportable segment profits are measured at an Adjusted operating profit level,
representing reportable segment Adjusted EBITDA, less depreciation costs and
amortisation in respect of software intangibles, without allocation of
Corporate costs as reported in the internal management reports that are
reviewed by the Board. Reportable segment Adjusted EBITDA and reportable
segment Adjusted operating profit are used to measure performance as
management believes that such information is the most relevant in evaluating
the results of the reportable segments relative to other comparable entities.
Total assets and liabilities for each reportable segment are not disclosed
because they are not provided to the Board on a regular basis. Total assets
and liabilities are internally reviewed on a Group basis.
Six months to 30 June 2023 (Unaudited)
(£ million) Marketing Retail & Financial services Digital Commerce Product Design Corporate costs Continuing operations total Discontinued operations Total
Revenue 104.8 31.3 114.1 57.2 - 307.4 - 307.4
Adjusted EBITDA 55.7 8.9 - 27.4 (13.4) 78.6 - 78.6
Depreciation and software amortisation (1.2) (0.2) (10.0) (1.5) (1.5) (14.4) - (14.4)
Adjusted operating profit/(loss) 54.5 8.7 (10.0) 25.9 (14.9) 64.2 - 64.2
Amortisation and impairment of acquired intangible assets (29.0) - (29.0)
Non-trading items (25.7) - (25.7)
Share-based payments (8.8) - (8.8)
Operating profit/(loss) 0.7 - 0.7
Share of the loss of associates (6.8) - (6.8)
Finance costs (16.0) - (16.0)
Finance income 10.3 - 10.3
Loss before tax (11.8) - (11.8)
Six months to 30 June 2022 (Unaudited)
(£ million) Marketing Retail & Financial services Digital Commerce Product Design Corporate costs Continuing operations total Discontinued operations Total
Revenue 80.8 33.6 95.1 51.2 - 260.7 - 260.7
Adjusted EBITDA 43.2 8.8 1.8 24.4 (11.0) 67.2 - 67.2
Depreciation and software amortisation (1.4) (0.2) (7.7) (2.2) (1.1) (12.6) - (12.6)
Adjusted operating profit/(loss) 41.8 8.6 (5.9) 22.2 (12.1) 54.6 - 54.6
Amortisation and impairment of acquired intangible assets (48.9) - (48.9)
Non-trading items (33.2) - (33.2)
Disposal of business - (0.4) (0.4)
Share-based payments (7.6) - (7.6)
Operating loss (35.1) (0.4) (35.5)
Share of the loss of associates (1.3) - (1.3)
Finance costs (8.0) - (8.0)
Finance income 2.8 - 2.8
Loss before tax (41.6) (0.4) (42.0)
Year to 31 December 2022 (Audited)
(£ million) Marketing Retail & Financial services Digital Commerce Product Design Corporate costs Continuing operations total Discontinued operations Total
Revenue 99.2 92.0 226.1 107.1 - 524.4 - 524.4
Adjusted EBITDA 40.1 31.6 21.2 49.1 (20.9) 121.1 - 121.1
Depreciation and software amortisation (2.6) (0.9) (17.8) (3.3) (1.1) (25.7) - (25.7)
Adjusted operating profit/(loss) 37.5 30.7 3.4 45.8 (22.0) 95.4 - 95.4
Amortisation and impairment of acquired intangible assets (91.6) - (91.6)
Non-trading items (88.1) (0.9) (89.0)
Disposal of business 6.0 - 6.0
Share-based payments (15.9) - (15.9)
Operating loss (94.2) (0.9) (95.1)
Share of the loss of associates (3.2) - (3.2)
Finance costs (27.1) - (27.1)
Finance income 8.4 - 8.4
Loss before tax (116.1) (0.9) (117.0)
Non-trading items costs within continuing operations of £25.7m (31 December
2022: £88.1m; 30 June 2022: £33.2m) include Digital Commerce costs of £6.4m
(31 December 2022: £51.1m; 30 June 2022: £10.6m), Product Design costs of
£5.7m (31 December 2022: £nil; 30 June 2022: £nil), Marketing costs of
£0.7m (31 December 2022: £nil; 30 June 2022: £nil), Retail & Financial
Services costs of £0.2m (31 December 2022: £nil; 30 June 2022: £nil) and
Corporate costs of £12.7m (31 December 2022: £37.0m; 30 June 2022: £22.6m).
Finance costs, finance income, share of net profit in equity accounted
investees and share-based payments are not allocated to segments, as these
types of activity are driven by the Group corporate function.
Additional segmental information on revenue
The Group's main revenue streams are those described in the Annual Report for
the year ended 31 December 2022. The Group's revenue is derived from contracts
with customers.
Disaggregation of revenue
The following table shows revenue disaggregated by major service lines, and
the timing of revenue recognition:
(£ million) Timing of revenue recognition Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
(Unaudited) (Unaudited) (Audited)
Digital Subscriptions & Platforms Over time 12.6 11.1 23.9
Advisory Over time 4.4 1.9 5.2
Benchmarking Awards Point in time 28.9 25.7 27.8
Events Point in time 58.9 42.1 42.3
Marketing 104.8 80.8 99.2
Digital Subscriptions & Platforms Over time 2.4 4.5 6.3
Advisory Over time - 1.5 2.3
Events Point in time 28.9 27.6 83.4
Retail & Financial Services 31.3 33.6 92.0
Digital Subscriptions & Platforms Over time 107.2 89.6 213.9
Advisory Over time 6.9 5.5 12.2
Digital Commerce 114.1 95.1 226.1
Digital Subscriptions & Platforms Over time 51.3 45.4 95.9
Advisory Over time 5.9 5.8 11.2
Product Design 57.2 51.2 107.1
Revenue from continuing operations 307.4 260.7 524.4
Seasonality of operations
The Group's results are impacted by seasonality. The majority of Ascential's
revenues come from robust digital subscriptions and platforms and high repeat
advisory revenue streams which contain little material seasonal fluctuation.
However, the Company delivers a material amount of revenue from Benchmarking
Awards and Events which typically are more weighted to the first half of the
year.
5. Adjusting items
Adjusting items are those which are considered significant by virtue of their
nature, size or incidence and are presented separately in the consolidated
statement of profit and loss to enable a full understanding of the Group's
financial performance. Adjusting items are not a defined term under IFRS and
include the share-based payment charge, amortisation of intangibles acquired
through business combinations and non-trading items such as costs incurred for
acquisitions and disposals, integration, non-recurring business restructuring,
intangible impairment and capital restructuring. The tax effect of Adjusting
items is also included within Adjusting items.
Adjusting items included in profit/loss before tax are:
Six months to Six months to Year to
30 June 2023 30 June 2022 31 December 2022
(£ million)
(Unaudited) (Unaudited) (Audited)
Revaluation of contingent consideration 17.1 4.6 (1.0)
Acquisition-related employment costs accrued in the period (7.8) (12.2) (30.4)
Total deferred contingent consideration costs 9.3 (7.6) (31.4)
ERP and Salesforce implementation costs (3.9) (13.3) (21.6)
Strategic review costs (23.0) (8.5) (15.0)
Transaction and integration costs (6.5) (4.3) (16.2)
Profit/(loss) on disposal of businesses (0.2) - 6.0
Property provisions (1.4) 0.5 (3.9)
Non-Trading items (25.7) (33.2) (82.1)
Amortisation of acquired intangible assets (17.3) (17.5) (34.6)
Impairment of acquired intangibles (11.7) (31.4) (57.0)
Share-based payments (8.8) (7.6) (15.9)
Adjusting items included within operating profit/loss (63.5) (89.7) (189.6)
The revaluation of contingent consideration in the period includes a credit
relating to the renegotiation of the Perpetua earnout to facilitate
integration with Sellics, removing the link to future performance. The
remainder of the revaluation of deferred contingent consideration in the
period relates to updates to actual or expected performance for all
acquisitions with outstanding deferred consideration. Acquisition-related
employment costs incurred in the period relate primarily to that element of
the purchase consideration for the acquisitions of Perpetua, WhyteSpyder, 4K
Miles and Intrepid. The related net tax impact is a charge of £6.3m at June
2023.
The Group is concluding a multi-year programme to introduce a new ERP system
and a new instance of Salesforce, both of which are cloud-based and totalled
£3.9m (H122: £13.3m). These expenses are deductible for tax purposes and
generate a net tax credit of £1.0m. The programme is anticipated to be
completed this year. The cash impact of these costs is an outflow of £3.7m.
A significant non-trading item was the costs of the strategic review totalling
£23.0m (31 December 2022: £15.0m; 30 June 2022: £8.5m). The costs relate to
resources and professional fees for project management, tax and legal
structuring, US GAAP conversion and audit, and legal advice as well as
severance and retention incentives for key personnel impacted by the proposed
separation of the Group. The related net tax impact is a credit of £1.8m. The
cash impact of these costs is an outflow of £9.8m.
Transaction and integration costs totalling £6.5m (31 December 2022: £16.2m;
30 June 2022: £4.3m) comprise professional fees for diligence and legal
costs; as well as the DC integration costs which include the costs of
integrating acquisitions and £1.0m of costs relating to the creation of an
integrated Enterprise Product bringing together digital platforms. Transaction
costs are generally non-deductible for tax purposes, whilst integration costs
give rise to a tax credit of £1.8m. The cash impact of these costs is an
outflow of £5.4m.
The loss on disposal of businesses of £0.2m represents additional costs
relating to the 2022 sale of Retail Week World Retail Congress, ("RWRC").
Costs in relation to property impairments and provisions of £1.4m (31
December 2022: £3.9m; 30 June 2022: credit of £0.5) reflect impairments of
right of use assets and leasehold improvements and the creation of provisions
for operating expenses that were onerous following a reassessment of the
Group's property requirements. These costs are non-deductible for tax
accounting purposes and had no cash impact on the Group in 2023.
6. Finance costs and finance income
(£ million) Six months to Six months to Year to
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Interest on deposits, investments and debt securities 8.0 0.9 3.6
Fair value gain on derivative financial instruments - 1.9 4.3
Foreign exchange gain on cash and cash equivalents - 0.1 0.5
Adjusted finance income 8.0 2.9 8.4
Foreign exchange on deferred consideration 2.3 - -
Adjusting finance income 2.3 - -
Total finance income from continuing operations 10.3 2.9 8.4
Interest payable on external borrowings (9.9) (3.1) (9.6)
Amortisation of arrangement fees (0.4) (0.4) (0.8)
Fair value loss on derivative financial instruments (2.0) - -
Discount unwind on deferred and contingent consideration (2.7) (4.1) (10.3)
Discount unwind of lease liability (0.5) (0.5) (1.1)
Foreign exchange loss on cash and cash equivalents (0.5) - -
Adjusted finance costs (16.0) (8.1) (21.8)
Foreign exchange on deferred consideration - - (1.3)
Remeasurement of trade investments to fair value - - (4.0)
Adjusting finance costs - - (5.3)
Total finance costs from continuing operations (16.0) (8.1) (27.1)
Net finance costs from continuing operations (5.7) (5.2) (18.7)
7. Tax on profit on ordinary activities
The total tax charge for the period is £5.0m (30 June 2022: credit of £3.6m)
which comprises a tax charge of £15.2m on Adjusted profits and a tax credit
of £10.2m on Adjusting items.
The tax charge on Adjusted profits for the period has been calculated by
applying the expected full year rate of 30.5% (30 June 2022: 25.3%) to the
results for the six months ended 30 June 2023.
A tax credit of £10.2m is recorded in relation to Adjusting items for the six
months ended 30 June 2023 (30 June 2022: £15.8m; 31 December 2021: £32.3m).
A deferred tax charge of £1.1m (30 June 2022: £0.9m; 31 December 2022:
£2.8) is recognised in equity relating to share-based payments.
The total tax charge for the period comprises:
(£ million) Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
(Unaudited) (Unaudited) (Audited)
Current tax
UK tax (charge)/credit on income for the period (1.6) - 7.8
Overseas tax charge on income for the period - (1.2) (3.0)
Adjustments in respect of prior years - - (0.3)
Total current tax (charge)/credit (1.6) (1.2) 4.5
Deferred tax
Current period (charge)/credit (3.4) 5.0 5.9
Adjustments in respect of prior years - (0.2) 0.7
Impact of rate changes on opening balances - - 0.2
Total deferred tax (charge)/credit (3.4) 4.8 6.8
Total tax (charge)/credit (5.0) 3.6 11.3
Total effective tax rate nm* 8.5% 10.0%
*Tax charge on loss results in an effective tax rate that is not meaningful.
The deferred tax balances shown in the consolidated statement of financial
position are analysed as follows.
30 June 2023 30 June 2022 31 December 2022
(£ million) (Unaudited) (Unaudited) (Audited)
Deferred tax assets 54.5 63.2 60.3
Deferred tax liabilities (7.0) (14.1) (8.6)
Total 47.5 49.1 51.7
The £4.2m net movement in deferred tax from 31 December 2022 comprises;
· a charge of £9.9m arising on utilisation of tax assets related to US
acquisition intangibles and losses,
· a credit of £6.4m which relates largely to the unwinding of the
deferred tax liability on consolidated intangibles as a result of amortisation
in the period and share-based payments; and
· a charge arising on foreign exchange movements of £0.7m on deferred
tax assets, net of liabilities held in US dollar.
At 30 June 2023, within the £47.5m net deferred tax asset, the Group had
utilisable losses in the US and UK with a future tax impact of £26.2m (31
December 2022: £30.5m). The movement from the year end arises due to the
utilisation of tax losses in the UK. Our ability to utilise losses in future
years is primarily driven by the level of taxable profits arising in the US
and UK and we expect our deferred tax assets to convert into cash savings over
the next ten years with the majority being recovered over the next four years.
8. Earnings per share
The calculations of basic and diluted EPS are based on the profit attributable
to ordinary shareholders and a weighted average number of shares outstanding
during the related period.
The weighted average number of ordinary shares in issue during the period,
excluding those held by Employee Benefit Trusts, was 440.2million (30 June
2022: 439.0 million and 31 December 2022: 440.0 million). There is no dilutive
impact from potential ordinary shares as potential ordinary shares can only be
considered dilutive when their inclusion would decrease earnings or increase
loss per share.
Six months to 30 June 2023 Six months to 30 June 2022 Year to 31 December 2022
(Unaudited)
(Audited)
(Unaudited)
Adjusted Results Adjusting Items Total Adjusted Results Adjusting Items Total Adjusted Results Adjusting Items Total
Profit/(loss) attributable to owners of the Company (£ million)
Profit/(loss) for the year- continuing operations 33.9 (50.4) (16.5) 35.3 (73.1) (37.8) 56.6 (152.1) (95.5)
Profit/(loss) for the year - discontinued operations - - - - (0.4) (0.4) - (0.9) (0.9)
Profit/(loss) for the year 33.9 (50.4) (16.5) 35.3 (73.5) (38.2) 56.6 (153.0) (96.4)
Share number (million)
Basic and diluted weighted average number of shares 440.2 440.2 440.2 439.0 439.0 439.0 440.0 440.0 440.0
Earnings/(loss) per share (basic and diluted, pence)
Continuing operations 7.7 (11.5) (3.8) 8.0 (16.6) (8.6) 12.9 (34.6) (21.7)
Discontinued operations - - - - (0.1) (0.1) - (0.2) (0.2)
Total operations 7.7 (11.5) (3.8) 8.0 (16.7) (8.7) 12.9 (34.8) (21.9)
9. Goodwill and intangibles
At 30 June 2023, the Group had £849.2m of goodwill and acquired intangibles
and £46.6m of software (31 December 2022: £912.1m and £41.4m; 30 June 2022:
£937.2m and £42.5m). Movements in goodwill and acquired intangibles included
a decrease of £33.9m from unfavourable foreign exchange movements,
amortisation charge of £17.3m and impairment charge of £11.7m which was
primarily driven by the impairment of acquired brand intangible assets within
the Digital Commerce segment, following the decision to rebrand Digital
Commerce entities under the Flywheel brand.
The goodwill attributed to each of the Group's cash generating units (CGUs)
and group of CGUs are assessed for impairment at least annually. Regardless of
whether goodwill has been allocated to a CGU, CGUs may be assessed for
impairment more frequently than annually where there are indicators of
impairment. If such indicators exist, an estimate of the CGU's recoverable
amount is determined. The recoverable amount is the higher of value in use and
fair value less costs of disposal.
10. Investments in associates
(£ million) Total
At 1 January 2023 88.5
Acquisition of investments 2.8
Share of the loss of associates (6.8)
Disposal and conversion of investment in associates (58.1)
Movements in exchange rates (1.5)
At 30 June 2023 24.9
Investments as at 30 June 2023 were made up as follows:
(£ million) Total
Trade investments measured at fair value through profit or loss 11.6
Associates accounted for using the equity method 13.3
Investments as at 30 June 2023 24.9
Our investments in associates include investments in Hudson MX Holdings, Inc
('Hudson'), Shanghai Coloro Technology Co and several trade investments, with
Cognitive Logic Inc. ("Infosum") being the most significant among them.
Ascential has a £10.3m investment in Hudson in addition to preference shares
receivables of £87.7m included in note 11 (31 December 2022: £73.8m
investment in addition to £42.7m of secured and unsecured debt), an
advertising software business providing media buying and accounting solutions
through a cloud-based SaaS platform. This investment of £10.3m consists of
ordinary shares net of equity-accounted share of the profit or loss.
In February 2023 Hudson completed a new financing round and executed a capital
restructuring. It resulted in MT II Holdings, LP ("MT II") becoming the
majority shareholder in Hudson, holding 51.0% of the fully diluted common
equity and Ascential holding a 36.5% interest. The remaining 12.5% is held by
Hudson's management team and existing shareholders and does not carry voting
rights. As part of this, Ascential received £24.9m in cash from MT II for a
portion of its preference stock investment (which MT II then converted into
common stock) and converted the remaining £51.0m of the preference stock
investment into debt-like instruments, as disclosed in note 11 (£33.2m), and
into common stock (£17.8m). At the same time, the promissory notes that were
previously held were also converted into these debt-like preference shares.
The Group has agreed arrangements that provide a potential path to a majority
stake in the future. These arrangements include providing MT II with a put
option over 42.5% of their 51.0% stockholding, exercisable by MT II from 1
April 2024 to 31 December 2025 and, if executed, subject to a maximum
consideration payable by Ascential of US$52m and minimum consideration of
between US$38m and US$52m depending on the time period the option is held for.
The Group has assessed the value of this derivative liability to be not
significant at the transaction date and reporting date and will continue to
assess the value at each future reporting date until the option is exercised
or lapses. In making this assessment, the Directors evaluated various
potential plausible outcomes, including less favourable scenarios, and found
that this did not lead to a significant change in the value of the derivative
liability. If exercised, this put option would result in Ascential holding a
79% common equity interest in Hudson, at which point it is expected Ascential
would control Hudson and would then be required to consolidate its results. If
the put option is exercised then Ascential will be able to call the remaining
8.5% equity shares held by MT II at any time in the subsequent two years.
Separately, Ascential has established put and call options to acquire the
remaining management and external investors' shareholdings, totalling 12.5%,
which are exercisable between February 2026 and December 2028, subject to a
maximum consideration of US$40m. Full execution of these options would result
in the Group holding a 49% equity stake in Hudson. The Group has considered
the value of these options to be not significant at the transaction date and
reporting date and will continue to assess their values at each future
reporting date until the options are exercised or lapse.
Both MT II and the Group have committed to funds of up to an aggregate value
of US$51.5m into Hudson through non-voting preference stock, proportionate to
their common equity holdings. The Group's commitment in this respect is
£17.9m (equivalent of $21.5m) of which £8.0m had been drawn at the period
end. Subsequent to 30 June 2023 a further £9.9m has been provided.
Summarised financial information for the Hudson entity for the 6 months to 30
June 2023 is as follows. The balance sheet includes current assets of £6.8m,
non-current assets of £111.7m, current liabilities of £9.2m and non-current
financial liabilities of £113.1m. These figures include cash and cash
equivalents of £6.0m. The income statement includes a loss from operations of
£22.2m. Included in these amounts are depreciation and amortisation of £6.8m
and interest expense of £6.7m.
Critical accounting judgement: Recognition of associates
The assessment of whether the Group has control or significant influence over
Hudson is considered a critical accounting judgement which, following the
Hudson's refinancing in February 2023 has been reassessed. The assessment of
the position prior to February 2023 is described on page 161 of the Ascential
plc Annual Report 2022.
Assessment of Control
We have considered whether the nature of the relationship with Hudson, rights
under the terms of the common stock investments or any other factors would
indicate that Ascential has control over Hudson. We have considered the
requirements under IFRS 10 "Consolidated Financial Statements" to assess if
the Group exercises control over Hudson during the reporting period and at the
reporting date as follows:
· Power over the investee
We have assessed that Ascential cannot exercise power over Hudson due to the
lack of ability to direct the relevant activities of Hudson because its
entitlement to two board seats and 41.1% voting rights does not give it
majority power.
We have assessed that our customary protective veto rights over significant
changes to Hudson, including actions which could change the credit risk of the
business such as changes to capital structure, asset disposals, dividend
declaration and attraction of external funding, are protective in nature and
relate to fundamental changes to Hudson that only apply in exceptional
circumstances.
While Ascential may acquire control of Hudson in the future if a put option
held by MT II Holdings LLP is exercised, this is not within the control of
Ascential and therefore does not indicate control. Ascential has two call
options neither of which would result in it holding a majority of the voting
rights of Hudson and neither are considered to be substantive at the reporting
date.
In 2023 as part of Hudson's refinancing, we increased our funding to Hudson.
The funding was provided in a form of investment in preference shares on an
arm's length basis, without conversion or equity rights, repayable by maturity
date and at a market rate of interest. The increase in funding does not change
our determination of control under IFRS 10 as the terms are comparable to
those that Hudson would be able to obtain from an institutional lender given
the risk profile and life cycle of the business. Our continued funding in 2023
to Hudson has helped protect the underlying investment in the business.
· Exposure or rights to variable returns from its involvement with
the investee
We have assessed that the Group is exposed to variable returns, primarily
through the common stock equity instruments held during the reporting period.
· The ability to use its power over the investee to affect the
amount of the investor's returns
We have concluded that although the Group has exposure to the variable returns
from the investment, it does not have actual or potential rights to direct the
relevant activities of Hudson and therefore the Group does not have power over
the investment.
We have therefore concluded that Ascential's investment in Hudson does not
meet the definition of control as at 30 June 2023.
Assessment of Significant Influence
Following our consideration of control, we then considered the requirements of
IAS 28 "Investments in Associates and Joint Ventures" to determine whether
Hudson should be treated as an equity-accounted associate or as a trade
investment. This decision is determined by our assessment of ability (or
otherwise) to participate in the financial and operating policy decisions of
Hudson.
Following the restructuring of our investment in Hudson in February 2023,
Ascential holds 36.5% of the common stock and 41.1% of the voting rights in
Hudson, together with two of the five board positions. The Group has therefore
determined that it has significant influence over Hudson and accounts for its
investment using the equity method under IAS28.
Critical accounting estimate: Measurement of associates
Following its refinancing in February 2023 the Group's investment in Hudson
comprises common and preference stock.
The common stock we own is accounted for by applying equity accounting under
IAS 28 "Investments in Associates and Joint Ventures", including recording our
share of the results of Hudson in proportion to our common stockholding. The
equity investment amounts to £10.3m at the reporting date (31 December 2022:
£73.8m) after accounting for our share of Hudson's losses amounting to £6.8m
(30 June 2022: £0.9m).
We have determined that the preference stock we own is treated as a debt
instrument held at amortised cost under IFRS9 "Financial Instruments", rather
than an equity instrument. This is because the contractual terms give rise
to cash flows on specified dates that are solely payments of principal and
interest on the principal amount outstanding and that the cash flows are
consistent with normal lending arrangements for an early-stage investment. The
debt investment amounts to £87.7m at the reporting date (31 December 2022:
£42.7m of secured and unsecured debt) and is disclosed as a non-current other
receivable (see note 11).
The valuation of the investment in and options over Hudson shares is subject
to estimation and is informed by unobservable data points, including external
market evidence and Hudson's refinancing that took place in February 2023 on
an arm's length basis with a market participant. An assessment of the
sensitivity of the valuation of the investment indicated that a 5% increase /
decrease in the equity valuation of Hudson would not materially affect the
value of our investment on 30 June 2023.
11. Trade and other receivables
(£ million) 30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Other receivables 87.7 - 42.7
Total non-current other receivables 87.7 - 42.7
(£ million) 30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Trade receivables, net of the allowance for doubtful debts 78.6 94.9 112.1
Prepayments 18.9 24.0 9.6
Contract assets - accrued income 25.6 21.4 18.4
Other receivables 194.0 162.6 204.8
Total current trade and other receivables 317.1 302.9 344.9
Non-current receivables represent the investment in Hudson preference shares
(2022: secured and unsecured debt). Refer to note 10 for further detail.
Other receivables principally include amounts due from customers for
pass-through costs of £182.5m (31 December 2022: £194.6m) in relation to the
purchase of media on their behalf. These costs comprise amounts payable to
external suppliers which are charged directly to clients. The amounts due to
external suppliers in these relationships are recognised in other payables
(see note 12).
12. Trade and other payables
(£ million) 30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Trade payables 11.2 12.9 18.0
Other payables 182.8 134.3 203.5
Accruals 68.5 59.2 48.1
Interest accruals 0.8 0.6 0.9
Taxes and social security costs 6.6 11.9 7.1
Total trade and other payables 269.9 218.9 277.6
Other payables include amounts due to external suppliers in relation to
pass-through costs of £170.9m (31 December 2022: £193.7m). Pass-through
costs comprise amounts payable to external media suppliers which are charged
directly to clients. The amounts due from customers in these relationships are
recognised in other receivables (see note 11).
13. Deferred contingent consideration
The Group has liabilities in respect of deferred contingent consideration
payments under various business acquisition contracts as set out below.
(£ million) Note Total
At 31 December 2022 (Audited) 108.1
Acquisition-related employment costs accrued in the period 5 7.8
Revaluation of contingent deferred consideration recognised in the 5 (17.1)
consolidated statement of profit and loss
Discount unwind on contingent deferred consideration 6 2.7
Acquisition-related employment cost paid in the period (16.6)
Deferred consideration paid in the period (14.3)
Effect of movements in exchange rates (5.6)
At 30 June 2023 (Unaudited) 65.0
At 30 June 2023, £34.9m of deferred contingent consideration was categorised
as level 3 in the fair value hierarchy of financial instruments (31 December
2022: £66.8m). Uncertainty in the economic environment has increased the
level of uncertainty in the Group's projections with a consequent impact on
the potential range of these level 3 valuations. The balance is also impacted
by economic uncertainty in the markets we operate. It is therefore possible
that this uncertainty could result in the recognition of materially higher or
lower contingent consideration.
Both contingent consideration and acquisition-related employment costs are
based on the future performance of the acquired business to which they relate.
Performance is assessed using forecast revenues and the five-year plan which
is updated annually. Forecasts are inherently a source of management
estimation, resulting in a range of outcomes. During the period, the Perpetua
earnout, which is one of the largest payments, was renegotiated to remove the
link to future performance, which reduces the uncertainty considerably; a link
to employment for a portion of the earnout remains. The majority of the
remaining balance relates to the 4K Miles and WhyteSpyder earnouts. A 10%
increase in the results of these businesses in all remaining years would
result in an additional payment of around £8.9m over 2024 to 2025. A 10%
reduction in the revenue of these businesses in all remaining years would
result in a lower payment of around £7.9m over 2024 to 2025.
14. Borrowings
Details of the Company's borrowing facilities are set out in note 1.
Reconciliation of movement in net debt
(£ million) Cash Cash in transit Short-term deposits Interest rate caps External Borrowings Net debt*
At 31 December 2022 (Audited) 59.0 0.9 20.1 4.5 (301.2) (216.7)
Exchange differences (4.3) - - - 12.3 8.0
Repayment of external borrowings - - - - 48.0 48.0
Proceeds from external borrowings - - - - (57.1) (57.1)
Fair value movement - - - (2.0) - (2.0)
Net interest accrued - - - 1.6 - 1.6
Amortisation of debt arrangement fees - - - - (0.4) (0.4)
Net cash movement 0.4 (0.3) 13.8 (0.9) - 13.0
At 30 June 2023 (Unaudited) 55.1 0.6 33.9 3.2 (298.4) (205.6)
* Refer to the Glossary of Alternative Performance Measures for the definition
of Net Debt.
Borrowings are shown net of unamortised issue costs of £1.2m (31 December
2022: £1.6m). The carrying amounts of borrowings approximate their fair
value. The Group's borrowings at 30 June 2023 were $279.0m and €93.0m (31
December 2022: $233.0m and €124.5m).
15. Related parties
Other than as described elsewhere in these financial statements, there are no
material related party transactions requiring disclosure under IAS 24 "Related
Party Disclosures" other than compensation of key management personnel, which
will be disclosed in the Group's Annual Report for the year ended 31 December
2023.
16. Principal risks and uncertainties
The principal risks and uncertainties that affect the Group are described in
detail on pages 51 to 55 of the 2022 Annual Report and the Board considers
that these risks and uncertainties continue to be the most relevant risks and
uncertainties faced by the Company.
Economic and geopolitical risk continues to be assessed as high given
persistent inflationary pressure and risk of economic downturn or recession to
varying degrees depending on the geography where Ascential has clients and
conducts business. Recession modelling and scenario planning is a key part of
the Budget process and is kept under review as economic conditions change. The
impact of recession is distributed across Ascential brands with some brands'
propositions more attractive in a recessionary environment.
We also note the inevitable pressures on certain employees from uncertainty
arising from the January 2023 announcement about the Board's strategic review
process. We mitigate the impact of this on our people by limiting the number
of colleagues directly involved in the process and active awareness of
employee health and well-being. Details of the support we provide are included
in the "Our People" section of the 2022 Annual Report.
We consider that the Acquisitions and Disposals risk has increased since 31
December 2022 as we execute our strategic actions, in particular the disposal
of WGSN and separation of our Digital Commerce business. We are pleased with
progress to date and continue to actively manage the process to mitigate
execution risk with the support of our financial and legal advisors.
The Board and management are mindful that factors that increase and decrease
risk assessments and related mitigation may change quickly. We continue to
monitor the risk landscape and the Company's mitigation strategies. The
Company is aware that a number of risks and uncertainties could have a
material impact on the Group's performance over the remaining months of the
financial year and could cause actual results to differ from expected and
historical results.
17. Events after the reporting period
Investment in Contagious Communications
On 31 July 2023 the Group acquired Contagious Communications and its holding
company Steel River Media Limited. Contagious is a multi-format creative
insights business that provides forward-looking creative inspiration and trend
analysis for their agency and brand customers and will form part of the
Marketing segment.
The consideration for the acquisition was £8m net of cash acquired, subject
to adjustment based on the working capital to be determined upon the
finalisation of completion accounts for the acquired entities. Owing to the
acquisition's proximity to the issuance date of the interim condensed
consolidated financial statements, the Group has yet to conclude the purchase
price accounting pertaining to this acquisition.
ALTERNATIVE PERFORMANCE MEASURES
Ascential aims to maximise shareholder value by optimising the potential for
return on capital through strategic investment and divestment, by ensuring the
Company's capital structure is managed to support both strategic and
operational requirements, and by delivering returns through a focus on organic
growth and operational discipline. The Board considers it helpful to
provide, where practicable, additional performance measures that distinguish
between these different factors - these are also the measures that the Board
uses itself to assess the performance of the Company, on which the strategic
planning process is founded and on which management incentives are based.
Accordingly, this report presents the following non-GAAP measures alongside
standard accounting terms as prescribed by IFRS and the Companies Act, in
order to provide this useful and additional information.
Adjusted profit measures
The Group uses Adjusted profit measures to assist readers in understanding
underlying operational performance. These measures exclude income statement
items relating to items arising from portfolio investment and divestment
decisions, and from changes to capital structure. Such items arise from events
which are non-recurring or intermittent, and while they may generate
substantial income statement amounts, do not relate to the ongoing operational
performance that underpins long-term value generation. The income statement
items that are excluded from Adjusted profit measures are referred to as
Adjusting items. Both Adjusted profit measures and Adjusting items are
presented together with statutory measures on the face of the profit and loss
statement.
The Group presents a non-GAAP profit measure, Adjusted EBITDA, in order to
aid, where possible, comparisons with peer group companies and provide a
reference point for assessing the operational cash generation of the Group.
Adjusted EBITDA is defined as Adjusted Operating Profit before depreciation
and amortisation. The Group measures operational profit margins with reference
to Adjusted EBITDA. As Adjusted results include the benefits of portfolio
investment and divestment decisions but exclude significant costs (such as
amortisation of acquired intangibles and Non-Trading items), they should not
be regarded as a complete picture of the Group's financial performance, which
is presented in its Total results. The exclusion of other Adjusting items may
result in Adjusted results being materially higher or lower than Total
results.
Adjusting items are not a defined term under IFRS, so may not be comparable to
similar terminology used in other companies' financial statements and should
not be viewed in isolation but as supplementary information. Details of the
charges and credits presented as Adjusting items are set out in Note 5 to the
financial statements. The basis for treating these items as Adjusting is as
follows:
Non-Trading items
Non-Trading items are recorded in accordance with the Group's policy set out
in Note 5 to the financial statements. They arise from portfolio investment
and divestment decisions, from changes to the Group's capital structure, as
well as material events that are expected to be outside the course of ordinary
operating activities, (e.g. deferred consideration, integration costs and
professional fees on acquisitions). They do not reflect underlying operational
performance.
Amortisation of intangible assets acquired through business combinations
Charges for amortisation of acquired intangibles arise from the purchase
consideration of a number of separate acquisitions. These acquisitions are
portfolio investment decisions that took place at different times over many
years, so the associated amortisation does not reflect current performance.
Share-based payments
Ascential operates several employee share schemes. Income statement charges or
credits relating to such schemes are a significant non-cash charge or credit
and are driven by a valuation model which references the Ascential share price
and future performance expectations. The income statement charge or credit is
consequently subject to volatility and does not fully reflect current
operational performance.
Gains and losses on disposal
Gains and losses on disposal of businesses arise from divestment decisions
that are part of strategic portfolio management and do not reflect current
operational performance.
Finance costs
As part of the Group's early refinancing of its 2016 debt facility in 2020,
unamortised arrangement fees relating to the previous facility were written
off and fees for subsequent Covid-related covenant amendments were also
incurred. These one-off items do not reflect the current operational
performance of the Group. In addition, the foreign exchange gains and losses
on deferred consideration liabilities are treated as adjusting items in line
with other income statement items relating to revaluation of deferred
consideration.
Tax related to Adjusting items
The elements of the overall Group tax charge relating to the Adjusting items
are also, for consistency, treated as Adjusting. These elements of the tax
charge are calculated with reference to the specific tax treatment of each
Adjusting item, taking into account its tax deductibility, the tax
jurisdiction concerned, and any previously recognised tax assets or
liabilities.
Adjusted cash flow measures
The Group uses Adjusted cash flow measures for the same purpose as Adjusted
profit measures. The two measures used are Adjusted Cash Generated from
operations, and Free Cash Flow. The Group monitors its operational efficiency
with reference to operational cash conversion. These are reconciled to IFRS
measures as follows:
£'m H123 H122
Cash generated from operations 42.2 42.8
Add back: acquisition-related contingent consideration cash flow 16.6 18.0
Add back: other non-trading cash flow 19.0 24.9
Adjusted cash generated from operations 77.8 85.7
Adjusted EBITDA 78.6 67.2
Operating cash conversion 99% 128%
Net cash generated from operating activities 41.2 43.2
Less: capital expenditure (19.9) (13.9)
Add back: acquisition-related contingent consideration cash flow 16.6 18.0
Add back: other non-trading cash flow 19.0 24.9
Free cash flow 56.9 72.2
Adjusted EBITDA 78.6 67.2
Free cash flow conversion 72% 107%
Net Debt
Net Debt is calculated as follows:
£'m H123 2022 H122
Borrowings 299.6 302.8 265.2
Capitalised arrangement fees (1.2) (1.6) (2.0)
Derivative financial instruments (3.2) (4.5) (2.1)
Cash (89.6) (80.0) (88.4)
Net debt 205.6 216.7 172.7
Leverage
The ratio of net debt to EBITDA is calculated as follows:
£'m H123 2022 H122
Adjusted EBITDA 78.6 121.1 67.2
Less: Rent expense (3.4) (7.0) (3.5)
Adjusted EBITDA (pre-IFRS16) 75.2 114.1 63.7
Adjusted EBITDA (pre-IFRS16) H2 2022 / 2021 50.4 - 44.1
Adjusted EBITDA (pre-IFRS16) for last 12 months 125.6 114.1 107.8
Net debt 205.6 216.7 172.7
Leverage ratio 1.6x 1.9x 1.6x
The Group also monitors leverage using definitions included in the Group's
banking covenants which are subject to proforma adjustments for
acquisitions. Using these covenant definitions, the leverage ratio at the
end of June 2023 was 1.7x.
Organic growth measures
To assess whether the Company is achieving its strategic goal of driving
organic growth, it is helpful to compare like-for-like operational results
between periods. Income statement measures, both Adjusted and Reported, can be
significantly affected by the following factors which mask like-for-like
comparability:
● acquisitions and disposals of businesses lead to a lack of
comparability between periods due to consolidation of only part of a year's
results for these companies;
● discontinuation or curtailment of products or the move of event
products between different periods; and
● changes in exchange rates used to record the results of
non-sterling businesses result in a lack of comparability between periods as
equivalent local currency amounts are recorded at different sterling amounts
in different periods.
Ascential therefore defines Organic growth measures, which are calculated with
the following adjustments:
● results of acquired and disposed businesses are excluded where the
consolidated results include only part-year results in either current or prior
periods;
● results are normalised for events that move between H1 and H2, if
applicable;
● results of specific product lines are excluded if wholly or partly
discontinued; and
● prior year and current year consolidated results are restated at
constant currency for non-sterling businesses.
Organic growth is calculated as follows:
H123 Marketing Retail & Financial Services Digital Commerce Product Design Corporate Costs Total
£'m
Revenue
H123 - reported 104.8 31.3 114.1 57.2 - 307.4
Acquisitions - - (11.4) - - (11.4)
Other adjustments* - - (1.3) - - (1.3)
H123 - Organic basis 104.8 31.3 101.4 57.2 - 294.7
Organic revenue growth 28% 17% 10% 8% - 16%
H122 - reported 80.8 33.6 95.1 51.2 - 260.7
Disposals - (5.6) - - - (5.6)
Other adjustments* - - (7.7) - - (7.7)
Transfers** - (1.4) 1.4 - - -
Currency adjustment 1.2 0.2 3.7 1.8 6.9
H122 - Organic basis 82.0 26.8 92.5 53.0 - 254.3
Adjusted EBITDA
H123 - reported 55.7 8.9 - 27.4 (13.4) 78.6
Acquisitions - - 3.3 - - 3.3
Other adjustments* - - 4.0 - - 4.0
H123 - Organic basis 55.7 8.9 7.3 27.4 (13.4) 85.9
Organic EBITDA growth 28% 15% 0% 8% (29%) 17%
H122 - reported 43.2 8.8 1.8 24.4 (11.0) 67.2
Disposals - (0.8) - - - (0.8)
Other adjustments* - - 4.6 - - 4.6
Transfers** - (0.2) 0.2 0.2 (0.2) -
Currency adjustment 0.2 - 0.6 0.8 0.8 2.4
H122 - Organic basis 43.4 7.8 7.2 25.4 (10.4) 73.4
* Other adjustments relate to Edge Digital Shelf and Sellics
Non-Advertising discontinued products.
** Transfers relate to moving Retail Insight into Digital Commerce from RFS
and the transfer of lease property costs from Product Design to the Corporate
segment.
Proforma growth measures
Proforma growth is measured in a similar way to Organic growth but assumes
that the Company's acquisitions or disposals were all made on the first day of
the comparative accounting period and is a measure of the rate of growth of
the brands owned today. Proforma growth is calculated as follows:
H123 Marketing Retail & Financial Services Digital Commerce Product Design Corporate Costs Total
£'m
Revenue
H123 - reported 104.8 31.3 114.1 57.2 - 307.4
Other adjustments* - - (1.3) - - (1.3)
H123 - Proforma basis 104.8 31.3 112.8 57.2 - 306.1
Proforma revenue growth 28% 17% 11% 8% - 16%
H122 - reported 80.8 33.6 95.1 51.2 - 260.7
Acquisitions - - 8.8 - - 8.8
Disposals - (5.6) - - - (5.6)
Other adjustments* - - (7.8) - - (7.8)
Transfers** - (1.4) 1.4 - - -
Currency adjustment 1.2 0.2 4.4 1.8 - 7.6
H122 - Proforma basis 82.0 26.8 101.9 53.0 - 263.7
Adjusted EBITDA
H123 - reported 55.7 8.9 - 27.4 (13.4) 78.6
Other adjustments* - - 4.0 - - 4.0
H123 - Proforma basis 55.7 8.9 4.0 27.4 (13.4) 82.6
Proforma EBITDA growth 28% 15% 6% 8% (29%) 18%
H122 - reported 43.2 8.8 1.8 24.4 (11.0) 67.2
Acquisitions - - (3.5) - - (3.5)
Disposals - (0.8) - - - (0.8)
Other adjustments* - - 4.8 - - 4.8
Transfers** - (0.2) 0.2 0.2 (0.2) -
Currency adjustment 0.2 - 0.4 0.8 0.8 2.2
H122 - Proforma basis 43.4 7.8 3.7 25.4 (10.4) 69.9
* Other adjustments relate to Edge Digital Shelf and Sellics
Non-Advertising discontinued products.
** Transfers relate to moving Retail Insight into Digital Commerce from RFS
and the transfer of lease property costs from Product Design to the Corporate
segment.
Glossary of alternative performance measures
Term Description
Organic revenue growth Revenue growth on a like-for-like basis
Organic EBITDA growth Adjusted EBITDA growth on a like-for-like basis
Proforma revenue growth Revenue growth on a like-for-like basis assuming the Company's acquisitions or
disposals were all made on the first day of the comparative accounting period
Proforma EBITDA growth Adjusted EBITDA growth on a like-for-like basis assuming the Company's
acquisitions or disposals were all made on the first day of the comparative
accounting period
Non-Trading items Items within Operating profit / (loss) separately identified in accordance
with Group accounting policies
Adjusting items Non-trading items (e.g. deferred consideration, integration and restructuring
costs), Amortisation of intangible assets acquired through business
combinations, Share-based payments, Gains and losses on disposal, Write-off of
unamortised arrangement fees on refinancing, Covenant amendment fees and Tax
related thereto
Adjusted operating profit / (loss) Operating profit / (loss) excluding Adjusting items
Adjusted EBITDA Adjusted operating profit / (loss) excluding depreciation and amortisation
Adjusted EBITDA margin Adjusted EBITDA as a percentage of Revenue
Adjusted profit / (loss) before tax Profit / (loss) before tax excluding Adjusting items
Adjusted tax charge Tax charge excluding Adjusting items
Adjusted effective tax rate Adjusted tax charge expressed as a percentage of Adjusted profit before tax
Adjusted EPS EPS calculated with reference to Adjusted Profit / (loss) for the year
Adjusted cash generated from operations Cash generated from operations with cash generated from discontinued
operations acquisition related contingent consideration and other non-trading
cash flows excluded
Operating cash conversion Adjusted cash generated from operations expressed as a percentage of Adjusted
EBITDA
Free cash flow Net cash generated from operating activities including capital expenditure.
Net cash generated from discontinued operations, acquisition-related
contingent consideration and other non-trading cash flow are excluded
Leverage The ratio of Net debt to Adjusted EBITDA before, in both cases, accounting for
the impact of IFRS 16
Net debt Net debt comprises external borrowings net of arrangement fees, cash and cash
equivalents and derivative financial instruments. Net debt excludes lease
liabilities in line with how net debt is considered for the Group's banking
covenants
Responsibility statement
We confirm that to the best of our knowledge:
a. The Condensed set of Consolidated Financial Statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted
for use in the UK;
b. The interim management report includes the following information as
required by Disclosure Guidance and Transparency Rule ("DTR") 4.2.7R:
i. An indication of important events that have occurred during the first
six months of the financial year, and their impact on the Condensed set of
Consolidated Financial Statements; and
ii. A description of the principal risks and uncertainties for the
remaining six months of the year.
c. The interim management report includes the following information as
required by DTR 4.2.8R:
i. Related party transactions that have taken place in the first six
months of the current financial year and that have materially affected the
financial position or performance of the Group in that period; and
ii. Any changes in the related party transactions described in the 2022
Annual Report that could have material effect on the financial position or
performance of the Group in the current period.
By order of the Board
Duncan Painter Mandy Gradden
Chief Executive Officer Chief Financial Officer
22 September 2023
INDEPENDENT REVIEW REPORT TO ASCENTIAL PLC
Conclusion
We have been engaged by Ascential plc ("the Company") to review the condensed
set of financial statements in the half-yearly financial report for the six
months ended 30 June 2023 which comprises the Condensed Consolidated Statement
of Profit and Loss, Condensed Consolidated Statement of Other Comprehensive
Income, Condensed Consolidated Statement of Financial Position, Condensed
Consolidated Statement of Changes in Equity, Condensed Consolidated Statement
of Cash Flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting as
adopted for use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Christopher Hearn
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
22 September 2023
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