Ascential plc. Interim results for the six months ended 30 June Strong strategic progress and organic growth

Transcription

1 23 July 2018 Ascential plc Interim results for the six months ended 30 June 2018 Strong strategic progress and organic growth London: Ascential plc (LSE: ASCL.L), the specialist, global information company, today announces its interim results for the six-month period ended 30 June Strategic and operational highlights Traction for new operating model organised by customer needs Product design: growth from new products and segment expansion; excellent operating leverage. Marketing: a year of transition to drive long term growth. Sales: strong growth in the digital ecommerce subscription products and integration underway. Continued evolution of brands to enable customers to succeed in the digital economy Launch of Money20/20 Asia in Singapore; successful move of Money20/20 Europe to Amsterdam. Successful re-set of Cannes Lions; positive customer reaction and feedback for new model outweighing in-year impact on revenues and profits. Cannes Lions extends digital offering with the launch of The Work followed by the acquisition of WARC, the digital subscription product on marketing effectiveness, in July. Capital allocation decisions to support long term growth Conclusion of Exhibitions strategic review and sale to ITE shortly after the period end. Acquisition of WARC. Ungeared balance sheet supports further strategic development via organic growth and acquisitions. Financial highlights Results in line with Company expectations. Another period of good Organic, constant currency, revenue growth. Revenue from continuing operations of 188.9m (H117: 165.1m). Reported revenue growth of 14%; 7% on a constant currency Organic basis. Adjusted EBITDA up 2% on an Organic basis. As anticipated, margin reduces to 32.0% (H117: 36.8%) following the consolidation of Clavis, the launch of Money20/20 in Asia and China, and the Cannes Lions re-set. Adjusted EBITDA from continuing operations of 60.4m (H117: 60.8m). Reported operating profit from continuing operations 28.7m (H117: 32.2m). 1

2 Earnings per share Adjusted, diluted EPS on continuing operations of 9.4p up 6% (H117: 8.9p) and on total operations of 13.4p (H117: 13.4p). Reported, diluted earnings per share on total operations of 6.1p (H117: 7.1p). Good operational cash generation funded continued investment in the business and 49.0m of M&A with high operating cash flow conversion of 100% (H117: 103%). Closing net debt of 285.0m prior to receipt of proceeds from disposal of Exhibitions in July 2018 of approximately 284m after expected deductions, transaction expenses and separation-related costs (December 2017: 271.5m). Interim dividend of 1.9p per share (2017: 1.8p) up 6%. Duncan Painter, Chief Executive Officer, commented: In the last six months we have made considerable progress with our strategic vision: enabling our customers to succeed in the digital economy. It is particularly pleasing that we have delivered strong organic growth from our products in both their live and digital formats. This is supported by a number of important strategic decisions, such as the disposal of Ascential Exhibitions, the Cannes Lions re-set and realignment of Cannes Lions digital offering with the launch of The Work, the Digital Pass, and the acquisition of WARC. We were pleased with the initial steps taken to integrate our ecommerce analytics offerings, with One Click Retail traffic data now available on the Clavis platform, and the combined business delivering their first joint ecommerce Accelerator Summits in New York and London. The Money20/20 series also had a very successful first half with strong growth through the successful launch of Money20/20 into Asia combined with the smooth transfer of Money20/20 Europe into Amsterdam. The Group is trading in line with its expectations for the full year and the Board remains confident in our overall 2018 performance and our prospects for continued success through the execution of our strategy. Contacts Ascential plc Duncan Painter Chief Executive Officer +44 (0) Mandy Gradden Chief Financial Officer Media enquiries Edward Bridges FTI Consulting LLP +44 (0) Jamie Ricketts Adam Davidson Leah Dudley Ascential will host a presentation for analysts and investors at 9.00am on 23 July 2018 at the offices of Numis Securities at The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT. The presentation will also be webcast live at 9.00am from allowing the slides to be viewed. A recording of the webcast will also be available on-demand from our website in due course. References to non-gaap alternative performance measures are explained further below. 2

3 Financial Highlights Unaudited and restated 1 Six months ended 30 June m m Growth Reported % Organic 2 % Revenue from continuing operations Exhibitions & Festivals % 6.9% Information Services % 6.6% % 6.7% Adjusted EBITDA from continuing operations 3 Exhibitions & Festivals (4.5%) (4.8%) Margin 49.7% 55.5% Information Services % 12.7% Margin 25.1% 28.8% Central costs (8.0) (8.2) (0.6%) 2.1% Total Margin 32.0% 36.8% Adjusted operating profit from continuing operations Reported operating profit from continuing operations Adjusted diluted earnings per share (pence) -Continuing operations Total Reported diluted earnings per share (pence) -Continuing operations Total Free cash flow Free cash flow conversion 81% 91% June 18 December 17 Net debt Leverage 5 2.4x 2.3x results have been restated to treat the Exhibitions business as a discontinued operation. 2 Organic growth is calculated to provide a more meaningful analysis of underlying performance. The following adjustments are made: (a) constant currency (restating H117 at H118 exchange rates), (b) event timing differences between periods (if any) (c) excluding the part-year impact of acquisitions and disposals. 3 Adjusted EBITDA is IFRS operating profit before expensing (a) depreciation of tangible fixed assets and amortisation of software, (b) exceptional items, (c) amortisation of acquired intangible assets, (d) impairment of tangible fixed assets and software acquired intangibles (if any) and (e) share-based payments. 4 Free cash flow is cash generated from operations before exceptional items, less capital expenditure and tax paid. Free cash flow conversion is the measure of free cash flow divided by Adjusted EBITDA from both Continuing and Discontinued Operations. 5 Leverage is Net debt divided by last 12 months Adjusted EBITDA from both Continuing and Discontinued Operations. 3

4 Operating Review We are pleased to report a successful first half performance, growing both revenue and profit and making good progress towards the goals we set for the 2018 financial year. Continued record of organic growth and cash generation We delivered a strong operating performance in the first half with revenue from continuing operations growing 6.7% on an Organic basis (14.4% on a reported basis) and Adjusted EBITDA up 2.1% on an Organic basis (marginally lower on a reported basis). As anticipated, our EBITDA margin has reduced to 32.0% from 36.8% in 2017, following the integration of Clavis as well as the planned investment in the launch of Money20/20 Asia and China, the expansion of One Click Retail and the Cannes Lions re-set. This investment, along with acquisition payments of 49.0m, was primarily funded by strong operational cash generation with operating cash flow conversion of 100% (H117: 103%). Effective execution of growth strategy We have a clear strategic focus: becoming the leading specialist, global information company enabling customers in the consumer value chain to win in the digital economy by excelling at product design, marketing and sales. We have built strong operational momentum during the first half of 2018 and have made good progress against the goals we set for the year: The 2018 edition of Money20/20 Europe successfully moved to a larger venue in Amsterdam, with strong, positive customer feedback, a record Customer NPS score post event of +39 and increased levels of customers rebooking. Money20/20 Asia took place for the first time in March 2018 and performed significantly ahead of original expectations delivering revenues of 6.7m. Preparations continue for our inaugural event in China. We have taken the first steps to integrate our ecommerce analytics offerings, in support of our goal to create the leading enterprise insight platform for market planning, digital shelf, market share, promotion, content and trade research worldwide. One Click Retail SKU-level traffic data is now available on the Clavis platform, and the combined business delivered their first joint ecommerce Accelerator Summits in New York and London. In 2017, we announced several key changes to improve the Cannes Lions festival, to make it more relevant, affordable and accessible. The platform re-set for Cannes Lions in 2018 received positive customer feedback but these changes resulted in a one off 9% organic constant currency revenue decline. Our exit customer engagement survey received an overall NPS of +53, one of the highest approval ratings the event has achieved. Our goal is to continue the evolution of Cannes Lions to ensure the marketing industry has a consistent measure of creativity across all digital economies and media formats, whilst accelerating our own digital propositions to further establish the global Cannes Lions benchmark. In support of this goal, we launched The Work in May 2018, a new digital resource aimed at providing the global creative communications industry with the intelligence they need to do better business. We also acquired WARC, a digital subscription business that helps brands, agencies and media platforms assess marketing effectiveness across all channels. We plan to bring these two products together to form a digital product that spans both creative excellence and marketing effectiveness. 4

5 WGSN grew revenues by 7% on an Organic basis. Growth continues to be driven in part by takeup of recent new product launches (Instock, Insight, Barometer and Coloro). As well as providing new revenue opportunities, these new products broaden WGSN s customer base beyond its core apparel market, into the broader consumer goods sector. Retaining customers is at the centre of our growth model and we continue to focus relentlessly on listening to our customers so we can improve the quality and relevance of the information that we provide. In the first half we have assembled a research function independent of the brands to undertake all customer feedback and we continue to see retention rates of over 90% in WGSN, One Click Retail and Clavis. Continued focus underpinned by diversified revenue streams We believe that our success is driven by our ability to focus on providing information and capabilities to our customers that enable them to succeed in the digital economy. Over 90% of our H1 revenue was generated by brands who serve the consumer value chain through helping our customers excel at product design, marketing and sales. This focus is underpinned by diverse revenue streams including subscriptions, advisory, delegates, award entries and sponsorship as well as an increasingly global customer base. Following the disposal of the Exhibitions business, the Group generates 48% of its revenue from customers based in the Americas while revenues coming from customers based in the UK now stands at 22%. Outlook The last six months represent considerable progress in terms of the increased focus on our strategic vision, as well as organic growth from our products in both their live and digital formats. The Group is trading in line with its expectations for the full year and the Board remains confident in our overall 2018 performance and our prospects for continued success through the execution of our strategy. 5

6 Segmental review Exhibitions & Festivals Overall the Exhibitions & Festivals segment grew well in the first half of 2018 with Organic revenue growth of 6.9% to 85.4m (H117: 80.1m) with very strong growth in Money20/20 offsetting a decline in Cannes Lions. However, as expected adjusted EBITDA declined, by 4.5% to 42.5m (H117: 44.5m) reflecting investment in the launch of Money20/20 Asia in H1 and preparations for China in H2 as well as lower Cannes Lions revenues. Cannes Lions Cannes Lions, held each June, is the world s largest and most widely recognised international benchmark and festival for creativity in the branded communications industry. Following extensive discussions last year with key stakeholders, the 2018 Festival featured some important changes, most notably a new awards structure that included the retirement of three Lion awards and a reduction of over 120 sub-categories. Additionally, the Festival was focused into a five-day period (previously it was held over eight), a feature that makes participation more cost effective for our customers. This year, owing principally to the one-year withdrawal of Publicis and the refreshed awards structure, revenues declined by 9% on a constant currency Organic basis to 57.3m. The revenue mix also continued to move away from other major advertising holding companies. Cannes Lions has three main revenue streams: award entries, delegates, and partnerships and digital: Award entries account for 39% of the total revenue of Cannes Lions. As previously announced, volumes fell 21% this year driven by both the one-year Publicis withdrawal and the retirement of Lions awards and awards sub categories. Good levels of interest in the new Lions such as Social & Influencer and Brand Experience & Activation offset long established declines in Print and Outdoor Lions categories. Delegate passes also account for 39% of the total revenue of Cannes Lions. Delegate revenue declined in 2018 mainly as a result of reduced participation by agency holding companies including Publicis combined with the standardisation to a single five day pass. A new initiative this year was the Cannes Curated product for major brand groups. Partnerships and digital revenues were 21% of Cannes Lions total revenues. These revenues grew 35% compared to last year. The strong growth was driven by digital revenues and consultancy revenues from the Creative Leadership programmes that Cannes Lions is undertaking with three major brands. The launch of The Work and Lions Digital Pass were important steps to broaden engagement with the creative community beyond the physical environment of Cannes. This, together with the acquisition of WARC, further develops Cannes Lions year-round digital revenue streams. Overall, we are encouraged that these developments, together with the well-received format changes and the high level of stakeholder engagement evident during the Festival, position Cannes Lions well for long term growth. 6

7 Money20/20 Money20/20 is the leading congress in the payments and financial services innovation sector, focusing on the evolution of payment and financial services through mobile, retail, marketing services, data and technology. H1 revenues were 23.9m, an Organic growth of 90%. Money20/20 Asia was launched successfully and took place in Singapore for the first time in March The event delivered revenues of 6.7m, attracting over 3,500 attendees, significantly ahead of original expectations. Now in its third year, Money20/20 Europe relocated to its new home of Amsterdam in June The event delivered revenues of 17.2m, an Organic revenue growth of 33%. It attracted over 6,000 attendees, an increase of 21% and the enlarged exhibition space in Amsterdam enabled an increase in net square meterage sold of 41%. Preparations continue for the shows set to take place in the second half of the year - the original and largest edition is our October event in Las Vegas, while the inaugural edition of Money20/20 in China will be held in November in Hangzhou. m H118 H Asia (Singapore) Europe (2018 Amsterdam, 2017 Copenhagen) USA (Las Vegas) China (Hangzhou) Revenue Other Exhibitions & Festivals Revenues totalled 4.3m, down 2% on World Retail Congress, which brings together the leaders of the global retail industry, held its 2018 edition in Madrid, delivering double digit growth which was offset by a decline in one of the Lions Regionals. Information Services Information Services delivered good overall growth of 6.6% on an Organic basis to 103.5m (H117: 85.0m). Reported revenue growth of 21.8% benefited from a six-month contribution from MediaLink (compared to four months in the prior period) and Clavis (acquired in December 2017). Adjusted EBITDA of 25.9m for the half (H117: 24.5m) improved by 12.7% on an Organic basis, reflecting activities to drive operational leverage particularly in WGSN, Groundsure and Glenigan. As expected, margins reduced from 28.8% to 25.1% due mainly to the consolidation of Clavis, which is expected to break-even in 2018 but which was loss making in H1, as well as the impact of migrating MediaLink s revenue focus towards brand-led work. WGSN WGSN is the leading global supplier of trend forecasts, market intelligence and insight to the fashion industry and other businesses in design-orientated consumer markets. It is the Company s largest product. In the first half of 2018, WGSN grew revenues by 7% on an Organic basis to 37.8m, while retention rates remained strong, at 92%. WGSN continues to gain traction with products launched in recent years such as Instock (which is now being sold into financial services customers), the broader consumer trends product Insight, brand sentiment tool Barometer and new colour system Coloro which not only provide new revenue opportunities with existing customers but also broaden WGSN s customer base beyond apparel. 7

8 Digital retail strategy and analytics products Ascential has three products in digital retail strategy and analytics One Click Retail, Clavis and Planet Retail RNG and has taken the first steps in H1 to integrate these three products. One Click Retail is the leader in ecommerce data measurement for Amazon sales and share, sales analytics and product search optimisation for product manufacturers based primarily in North America and Europe. One Click Retail grew revenue by 53% driven by the signature of 21 new customers and the expansion of 15 existing customers into new geographies. One Click Retail secured five new customers in H1 as a result of synergies with its new sister brand Clavis. Clavis, which was acquired in December 2017, is also a leader in ecommerce analytics offering customers the ability to track and optimise the performance of their products across the digital shelf of hundreds of retailer websites. It offers a complementary product set to One Click Retail s sales and share expertise, as well as the potential to reach beyond the Amazon platform and further into the European and Asian markets, especially China. Clavis grew revenue 25% on the prior year, pre-acquisition period. Planet Retail RNG is our third retail analytics brand and grew revenues by 4% in H1. It provides information to consumer product companies, retailers and consultants on global retail trends through its digital subscription product, advisory services and executive education programmes. MediaLink MediaLink provides advisory and business services to brands, media platforms, technology companies and agencies seeking to drive growth through better marketing. It generates four main revenue streams retainers, projects, executive search and events (bespoke content and hosted meeting programme for its customers at events like Cannes Lions and the Consumer Electronics Show). MediaLink has been incrementally expanding its presence in UK/Europe over the past year. With a deliberate shift in product mix towards brands and reduced revenues from professional digital publishers and adtech companies, revenue in the first six months was 6% lower than the prior period. Other Information Services brands Our other brands within the Information Services segment include Groundsure, Glenigan and Retail Week. Revenues totalled 24.0m, a year-on-year growth of 9%. The largest of these brands is Groundsure, a market-leading provider of environmental risk data to solicitors, conveyancers, architects and other participants in the UK residential and commercial property market. Groundsure achieved strong growth during the period with revenues up 10% year on year to 9.5m in the first half of 2018 against the backdrop of broadly flat transactions in the UK housing market. Its new product, Avista, which was launched a year ago, has performed particularly strongly and now comprises over 15% of all residential reports sold. 8

9 Financial Review Introduction This Financial Review firstly addresses the key trends in continuing operations and then, as a separate section, discontinued operations comprising the Company s Exhibitions business disposed of in July 2018 and, in the prior period, the 13 Heritage brands which were all disposed of in The results of these discontinued operations, for both the current and the comparative period, are included as a single line item on the face of the consolidated profit and loss statement. CONTINUING OPERATIONS Segmental results The Company currently has two continuing reportable segments Exhibitions & Festivals and Information Services. A summary of the operational performance of the Company across its two continuing segments is given in the table below. m Exhibitions & Festivals Information Services Central costs Continuing operations H118 Revenue Adjusted EBITDA (8.0) 60.4 Depreciation (2.4) (2.0) (0.6) (5.0) Adjusted operating profit (8.6) 55.4 Amortisation (11.2) Exceptional items (12.7) Share-based payments (2.8) Operating profit 28.7 H117 Revenue Adjusted EBITDA (8.2) 60.8 Depreciation (1.6) (2.2) (0.7) (4.5) Adjusted operating profit (8.9) 56.3 Amortisation (8.7) Exceptional items (13.7) Share-based payments (1.7) Operating profit 32.2 Revenue Revenue from continuing operations in the first half grew to 188.9m (H117: 165.1m), an increase of 23.8m. However, direct comparability was affected by the acquisition of MediaLink in February 2017 and Clavis in December 2017 together with movements in exchange rates between the two years. Adjusting for these factors, Organic growth in revenue from continuing operations was 6.7%. Adjusted EBITDA Adjusted EBITDA from continuing operations was 60.4m (H117: 60.8m) a reduction of 0.4m on a reported basis and a reduction in Adjusted EBITDA margin of 4.8 percentage points to 32.0%. The reported growth in Adjusted EBITDA was impacted by the same factors described above. On an Organic basis Adjusted EBITDA grew by 2.1%, with Exhibitions & Festivals declining by 4.8% and Information Services increasing by 12.7% with strong operating leverage in established subscription businesses like WGSN funding investment in One Click Retail and the reshaping of the business model in MediaLink. 9

10 Foreign currency impact Following the Company s recent acquisitions together with the growth of Money20/20 and the disposal of the UK-based Exhibitions business and Heritage Brands, the Company s reported performance is increasingly sensitive to movements in both the euro and US dollar against pounds sterling. In the first half, sterling weakened considerably against the US dollar but was flat against the euro compared to H117 as shown in the table below: Sterling exchange rates Weighted average rate Closing rate H118 H117 Change H118 H117 Change Euro % % US dollar % % When comparing H118 and H117, changes in currency exchange rates had an adverse impact on revenue and Adjusted EBITDA of 3.1m and 0.5m respectively. Share-based payments The charge for share-based payments of 2.8m for Continuing operations (H117: 1.7m) has increased from the prior period as the charge builds up to a normalised level over a three-year grant cycle following the Company s IPO in early 2016 together with the increasing accrual for employment taxes on the gains driven by the Company s strong share price growth. Exceptional items The following table sets out the exceptional items incurred by the Company that have been excluded from Adjusted EBITDA. The Company considers that separately identifying such items improves comparability of the financial results. Exceptional items ( m) H118 H117 Earnouts: Acquisition-related contingent employment costs and revaluation Expenses related to acquisition activities Exceptional items relating to continuing operations The acquisition-related contingent employment costs relate to deferred consideration on the acquisition of One Click Retail, MediaLink and Clavis (and in 2017 Money20/20) which, absent the link to continued employment, would have been treated as consideration, as well as any subsequent revaluation of the earnout consideration. Net finance costs The Company s adjusted net finance expense for the period was 5.9m (H117: 5.5m) broadly in line with the prior year. Adjusted net finance expense ( m) H118 H117 Net interest payable (3.4) (3.0) Amortisation of loan arrangement fees (0.6) (0.7) Foreign exchange (loss) / gain (0.1) 0.3 Other finance charges (amortisation of discount on unwind of deferred (1.8) (2.1) consideration) (5.9) (5.5) 10

11 Taxation The Company s effective tax rate on continuing adjusted profits for the period was 23.6% (H117: 29.5%) which reflects the expected rate for the full year following the disposal of the UK-based Exhibitions business. Analysis of tax charge ( m) H118 H117* 2017* Adjusted PBT Tax charge on Adjusted PBT (11.8) (15.0) (18.7) Effective tax rate on Adjusted PBT 23.6% 29.5% 25.3% Adjusting items (26.7) (24.1) (54.1) Tax credit on Adjusting items Effective tax rate on Adjusting items 17.6% 25.4% 19.8% Reported PBT Tax charge on reported PBT (7.1) (8.9) (8.0) Effective tax rate on reported PBT 30.6% 33.2% 40.1% *restated for discontinued operation Cash tax paid in the first half was an outflow of 7.0m (H117: 3.6m) mainly attributable to the UK. The Company benefited by 4.4m in cash terms (H117: 4.2m) from the utilisation of historic tax losses in both the UK and the US. The Company has a total remaining deferred tax asset of 41.0m (December 2017: 47.1m) relating to UK and US tax losses, accelerated capital allowances and US acquired intangibles and deferred consideration. The majority is expected to convert into cash savings over the next 10 years. The Company s deferred tax liability at June 2018 amounted to 19.6m (December 2017: 31.3m) and related to acquired intangibles. DISCONTINUED OPERATIONS Ascential s Exhibitions business was previously part of the Exhibitions & Festivals segment and was identified as a separate cash generating unit following the announcement of the strategic review in February The Exhibitions business was sold after the balance sheet date on 17 July The prior period also includes the results of the 13 Heritage brands which were sold in A summary of the operational performance of the Company s discontinued operations is given in the table below. m H118 H117 Exhibitions Exhibitions Heritage Brands Total Discontinued Revenue Adjusted EBITDA Depreciation (0.3) (0.5) - (0.5) Adjusted Operating profit In H118, the Company also incurred 4.5m of exceptional costs for the Exhibitions disposal and separation costs and expects the total such costs for the year to be approximately 10m. 11

12 Acquisitions and disposals Ascential s strategy is founded on Organic growth driven first and foremost by a customer experience and retention mindset. Ascential frequently reviews any existing products that operate in more challenging end markets which might act as an anchor to the Company s overall growth rates. As part of its capital allocation process, Ascential also regularly assesses opportunities to acquire high-growth products with synergies with its existing products or operating in sectors with the potential for scale that may benefit from Ascential's know-how and infrastructure. Ascential completed no acquisitions or disposals in the first half, but shortly after the period end disposed of the Exhibitions business and acquired WARC. Exhibitions Following a strategic review where the Board concluded that a sale was in the best interests of all shareholders, on 15 May 2018 the Company announced that it had entered into a conditional agreement to sell its Exhibitions business to ITE Group plc for an aggregate cash consideration of 300 million on a cash and debt free basis and subject to a normalised working capital adjustment. This transaction was approved by shareholders on 25 June 2018 and the transaction was completed on 17 July 2018 with the Company receiving net cash proceeds of approximately 284 million (after deductions, transaction expenses and separation-related costs). As noted above, in H118, the Ascential Exhibitions business generated revenues of 54.5m and Adjusted EBITDA of 20.3m. In the financial year ended 31 December 2017, the Ascential Exhibitions business generated revenues of 82.9 million (or, adjusting for discontinued and sold events, 78.5 million) and Adjusted EBITDA of 23.3 million (or, adjusting for 1.5m of overheads stranded with the continuing business, 24.7m). WARC In July 2018, the Company acquired 100% of WARC for an initial cash consideration of 19.5m with deferred consideration of 4.5m payable in WARC is a global digital subscription business that helps brands, agencies and media platforms measure marketing effectiveness across all channels. In the year to 31 March 2018 WARC generated unaudited revenue of 10.8m (a growth of 10%) and EBITDA of 2.2m. The acquisition was funded from cash reserves and existing borrowing facilities and is expected to enhance Ascential s earnings per share in the 2018 financial year. Capital structure The Company has borrowing facilities comprising term loan facilities of 66m, 171m and $96m and a revolving credit facility of 95m which mature in February 2021, have a current rate of interest of % over LIBOR and are subject to a net leverage covenant measured at December and June each year. The covenant ratio limit is currently 4.0x and falls to 3.5x in June The Company s leverage ratio increased to 2.4x at 30 June 2018 from 2.3x at 31 December 2017 after paying out 49.0m in acquisition consideration in H1. Shortly after the period end the Company received the proceeds from the sale of the Exhibitions business which was deposited into AAA-rated money market funds. The Company has ambitious growth plans through continued investment in its higher growth brands and value accretive acquisitions. It is therefore intended that, in the short to medium term, the balance of net proceeds will be utilised to realise the strategic priorities of the Company, including the pursuit of further M&A opportunities. The management team and Board will continue to critically assess all investments against strategic criteria and the potential for increased shareholder returns over the medium term. 12

13 Cash flow (continuing and discontinued operations) The Company s cash flow statement and net debt position for the first half can be summarised as follows: m H118 H117 Adjusted EBITDA (including joint venture) Working capital movements Adjusted cash generated from operations % Operating cash flow conversion 100% 103% Capital expenditure (8.8) (6.4) Tax paid (7.0) (3.6) Free cash flow % Free cash flow conversion 81% 91% Exceptional costs paid (7.7) (4.9) Repayment of loan to joint venture Acquisition of investment (0.7) - Acquisition consideration paid (including earn outs) (49.0) (79.0) Disposal proceeds received Cash flow before financing activities Proceeds from issue of shares Net interest paid (3.2) (3.3) Dividends paid (15.2) (12.8) Net debt drawdown Net cash flow Opening cash balance FX movements (0.4) (0.6) Closing cash balance Borrowings (334.8) (290.1) Capitalised arrangement fees Derivative financial instruments Net Debt (285.0) (211.4) In the first half of 2018, the Company generated Adjusted operating cash flow of 81.5m being a conversion of 100% (H117: 84.5m, a conversion of 103%). After capex and tax, the Company generated free cash flow of 65.7m (H117: 74.5m) which, with an 11.3m draw down on the revolving credit facility, was used to fund dividends, interest payments, M&A and exceptional items. Earnings per share Total reported basic and diluted EPS for continuing and discontinued operations is 6.2p and 6.1p per share respectively (H117: 7.1p per share) with the reduction caused by an increase in the amortisation of acquired intangibles following the acquisition of Clavis and the increased share-based payments charge explained above. Adjusted diluted EPS for Continuing operations of 9.4p per share is 5.6% ahead of the 8.9p per share recorded for the first half of

14 Dividends The Board s dividend policy is to target an annual dividend of approximately 30% of net income payable one-third following interim results and two-thirds following final results. Accordingly, the Board has declared an interim dividend of 1.9p per share (2017: 1.8p per share interim, 3.8p per share final) which will be payable on 28 September 2018 to ordinary shareholders on the register as of the close of business on 31 August

15 Alternative Performance Measures The Company aims to maximise shareholder value by optimising 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, performance measures that distinguish between these different factors these are also the measures that the Board uses to assess the performance of the Company. Accordingly, the interim 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 additional information. Adjusted profit measures The Company uses Adjusted profit measures to assist readers in understanding underlying operational performance. These measures exclude income statement items arising from portfolio investment and divestment decisions, and from changes to capital structure. Such items arise from events which are nonrecurring 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. In addition, the Company presents a non-gaap profit measure, Adjusted EBITDA, in order to aid comparisons with peer group companies and provide a reference point for assessing the operational cash generation of the Company. Adjusted EBITDA is defined as Adjusted Operating Profit before depreciation. The Company measures operational profit margins with reference to Adjusted EBITDA. Adjusting items are not a defined term under IFRS, so may not be comparable to similar terminology used in other financial statements. Details of the charges and credits presented as Adjusting items are set out in note 5 to the interim financial statements. The basis for treating these items as Adjusting is as follows: Exceptional items Exceptional items are recorded in accordance with the Company s policy set out in note 2 to the interim financial statements. They arise from both portfolio investment and divestment decisions, and from changes to the Company s capital structure, and so do not reflect current 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 operational performance. Share based payments As a result of the IPO, a number of employee share schemes were introduced in As a result, there is a lack of comparability between periods in respect of share scheme costs particularly as the income statement charge builds up to a normalised level over a three-year period. As this arises from a change triggered by the IPO change in capital structure, these costs have been treated as Adjusting items. 15

16 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. Tax related to adjusting items The elements of the overall Company tax charge relating to the Adjusting items are also treated as Adjusting. These elements of the tax charge are calculated with reference to the specific tax treatment of each individual 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 Company uses Adjusted cash flow measures for the same purpose as Adjusted profit measures, in order to assist readers of the accounts in understanding the ongoing operational performance of the Company. The two measures used are Adjusted Cash Generated from Operations, and Free Cash Flow. These are reconciled to IFRS measures as follows: m H118 H117 Cash generated from operations Add back: acquisition-related contingent consideration cash flow Add back: other exceptional cash flow Adjusted cash generated from operations Net cash generated from operating activities Add back: acquisition-related contingent consideration cash flow Add back: other exceptional cash flow Less: capital expenditure (8.8) (6.4) Free cash flow The Company monitors its operational balance sheet efficiency with reference to operational cash conversion, defined as Free Cash Flow as a percentage of Adjusted EBITDA. Organic growth measures In order 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 statutory, 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 businesses. Changes in exchange rates used to record the results causes a lack of comparability between periods as equivalent local currency amounts are recorded at different sterling amounts in different periods. Event timing differences between periods. The Company has no biennial events, but if and when annual events are held at different times of year this can affect the comparability of half-year results. There were no such timing differences in the current or prior period. 16

17 The Company therefore defines Organic growth measures, which are calculated with the following adjustments as set out in the table below: Results of acquired and disposed businesses are excluded where the Company results include only part-period results in either current or prior periods. Prior year results are restated at current year exchange rates. Prior year results are adjusted such that comparative results of events that have been held at different times of year are included in the same period as the current year results. m Exhibitions & Festivals Information Services Central costs Continuing operations Revenue H118 reported Exclude acquisitions and disposals - (16.0) (16.0) H118 Organic basis Organic revenue growth 6.9% 6.6% 6.7% H117 reported Currency adjustment (0.2) (2.9) (3.1) H117 Organic basis Adjusted EBITDA H118 reported (8.0) 60.4 Exclude acquisitions and disposals H118 Organic basis (8.0) 61.4 Organic EBITDA growth (4.8%) 12.7% 2.1% H117 reported (8.2) 60.8 Currency adjustment 0.1 (0.6) (0.1) (0.6) H117 Organic basis (8.3)

18 Glossary of Alternative Performance Measures Term Organic revenue growth Organic EBITDA growth Exceptional items Adjusting Items Adjusted operating profit Adjusted EBITDA Adjusted EBITDA margin Adjusted profit before tax Adjusted tax charge Adjusted effective tax rate Adjusted EPS Operating cash conversion Free cash flow Free cash conversion Net debt leverage Description Revenue growth on a like-for-like basis Adjusted EBITDA growth on a like-for-like basis Items within Operating profit separately identified in accordance with Company accounting policies Exceptional items, Amortisation of intangible assets acquired through business combinations, Share based payments, Gains and losses on disposal and Tax related thereto Operating profit excluding Adjusting Items Adjusted operating profit excluding depreciation Adjusted EBITDA as a percentage of Revenue Profit before tax excluding Adjusting Items Tax charge excluding Adjusting Items Adjusted tax charge expressed as a percentage of Adjusted profit before tax EPS calculated with reference to Adjusted Profit for the period Operating cash flow expressed as a percentage of Adjusted EBITDA Cash flows before exceptionals, portfolio investments and divestments, and financing Free cash flow expressed as a percentage of Adjusted EBITDA The ratio of Net debt to Adjusted EBITDA 18

19 Principal Risks and Uncertainties The Directors consider that the nature of the principal risks and uncertainties which may have a material effect on the Company s performance remain unchanged from those identified in the 2017 Annual Report and Accounts available on our website Cautionary statement Certain statements in this interim management report constitute, or may be deemed to constitute, forwardlooking statements (including beliefs or opinions). Any statement in this interim management report that is not a statement of historical fact including, without limitation those regarding the Company s future expectations, operations, financial performance, financial condition and business, is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risk and 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 results announcement. As a result, you are cautioned not to place reliance on such forward-looking statements. Except as is required by the Listing Rules, Disclosure and Transparency Rules and applicable laws, no undertaking is given to update the forward-looking statements contained in this interim management report, whether as a result of new information, future events or otherwise. Nothing in this interim management report should be construed as a profit forecast. This interim management report has been prepared for the Company as a whole and therefore gives greater emphasis to those matters which are significant to Ascential plc and its subsidiary undertakings when viewed as whole. 19

20 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 by the European Union; b. The interim management report includes the following information as required by 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 Company in that period; and ii. Any changes in the related party transactions described in the 2017 Annual report that could have material effect on the financial position or performance of the Company in the current period. By order of the Board Duncan Painter Chief Executive Officer Mandy Gradden Chief Financial Officer 20 July

21 Independent Review Report to Ascential plc Conclusion We have been engaged by the company to review the condensed set of financial statements in the halfyearly financial report for the six months ended 30 June 2018 which comprises the Condensed Consolidated Profit and Loss, the Condensed Consolidated Statement of Other Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed 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 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ( the DTR ) of the UK s Financial Conduct Authority ( the UK FCA ). Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board 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. 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 International Financial Reporting Standards as adopted by the EU. 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 by the EU. 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. 21

22 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. Ian Griffiths for and on behalf of KPMG LLP Chartered Accountants London, United Kingdom 20 July

23 Condensed Consolidated Statement of Profit and Loss Restated* Six months to 30 June 2018 Six months to 30 June 2017 Year to 31 December 2017 Unaudited Unaudited Audited ( million) Note Adjusted Results Adjusting Items Note 5 Total Adjusted Results Adjusting Items Note 5 Total Adjusted Results Adjusting Items Note 5 Total Continuing operations Revenue 2, Cost of sales (67.6) - (67.6) (55.5) - (55.5) (93.9) - (93.9) Sales, marketing and administrative expenses (65.9) (26.7) (92.6) (53.3) (24.1) (77.4) (113.6) (54.1) (167.7) Operating profit 55.4 (26.7) (24.1) (54.1) 31.3 Adjusted EBITDA Depreciation and amortisation (5.0) (11.2) (16.2) (4.5) (8.7) (13.2) (9.3) (17.8) (27.1) Exceptional items - (12.7) (12.7) - (13.7) (13.7) - (32.5) (32.5) Share-based payments - (2.8) (2.8) - (1.7) (1.7) - (3.8) (3.8) Operating profit 55.4 (26.7) (24.1) (54.1) 31.3 Share of gain in equityaccounted investee, net of tax Finance costs 6 (5.9) - (5.9) (5.9) - (5.9) (12.2) - (12.2) Finance income Profit before taxation 49.8 (26.7) (24.1) (54.1) 19.9 Taxation 7 (11.8) 4.7 (7.1) (15.0) 6.1 (8.9) (18.7) 10.7 (8.0) Profit from continuing operations 38.0 (22.0) (18.0) (43.4) 11.9 Profit from discontinued operations net of tax (7.3) (7.3) (13.5) 6.1 Profit for the period 54.2 (29.3) (25.3) (56.9) 18.0 Earnings per share (pence) 11 Basic - Continuing operations 9.5 (5.5) (4.5) (10.8) Continuing and discontinued operations 13.5 (7.3) (6.4) (14.2) 4.5 Diluted - Continuing operations 9.4 (5.5) (4.5) (10.8) Continuing and discontinued operations 13.4 (7.3) (6.3) (14.2) 4.4 *Restated for discontinued operations (see note 8). 23