Ascential Regulatory News (ASCL)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATIONS

24 February 2020

Ascential plc

Audited results for the year ended 31 December 2019

Strong growth in revenue and adjusted profit

£120m share repurchase programme announced

London: Ascential plc (LSE: ASCL.L), the specialist information, data and analytics company, today announces results for the year ended 31 December 2019.

Operational highlights

·; Good delivery against our four key priorities for 2019:

·; Focus on execution: Exceptional performances in Flywheel Digital and WGSN.

·; Edge: Continuing progress on the integration of Edge due to complete in H1 2020, significant Coca-Cola contract win and encouraging trading in early 2020.

·; Marketing segment growth.

·; Ascential operating model rolled out.

·; Organic growth across all segments:

·; Product Design: Organic revenue growth of 8% and successful launch of WGSN Beauty.

·; Marketing: Organic revenue growth of 9%.

·; Sales: Organic revenue growth of 3% (Proforma 11%) with exceptional growth in Flywheel Digital ahead of plan and modest growth in Edge and Money20/20. Digital Commerce sub-segment revenues grew by 9% on an Organic basis and 21% on a Proforma basis.

·; Built Environment and Policy: 5% Organic revenue growth and expanded margins.

·; Acquisition of eCommerce analytics business Yimian in China.

Financial highlights

·; Revenue of £416.2m (2018: £348.5m).

·; Reported growth of 19.4%. Growth of 6.4% on an Organic basis, 9.0% on a Proforma basis.

·; Adjusted EBITDA of £128.5m (2018: £108.4m).

·; Reported growth of 18.5%. Growth of 6.2% on an Organic basis, 8.5% on a Proforma basis.

·; Margin of 30.9% (2018: 31.1%).

·; Adjusted operating profit of £105.8m (2018: £92.2m). Reported operating profit of £19.9m reduced versus the prior year (2018: £41.4m) due to a £36.9m charge for deferred consideration for Flywheel Digital following its exceptional performance in 2019.

·; Strong growth in earnings per share: Adjusted diluted EPS of 18.5p up 20.9% (2018: 15.3p).

·; Continued good cash generation: Operating cash flow conversion of 88% (2018: 106%), resulting in closing net debt leverage of 1.4x (December 2018: 1.1x) allowing headroom for continued investment in organic growth, select acquisitions and shareholder returns.

·; Recommended final dividend of 4.0p, making a total dividend of 5.8p for the year (2018: 5.8p) with the prior year benefiting from earnings from discontinued operations.

·; Successful refinancing executed shortly after the year end with expanded £450m revolving credit facility, replacing our term loans.

·; Share repurchase programme announced of up to £120m commencing shortly.

Duncan Painter, Chief Executive Officer, commented:

"2019 was a satisfying and successful year for Ascential. We advanced our operating model to ensure our products further align with our customers' needs in fast paced growth markets and this was reflected in organic growth across all of our segments. We were particularly pleased with the strength of growth of the Marketing Segment and exceptional performances from WGSN and Flywheel Digital.

Looking forward, we believe we are well positioned to continue to drive strong performance in our scaled and structurally growing markets. In 2020, we expect to deliver strong Organic growth with Group revenue in the range of £425m-£455m (using current exchange rates) and adjusted EBITDA margins of between 30% and 32%."

Contacts

Ascential will host a presentation for analysts and investors at 9.00am on Monday 24 February 2020 at The Theatre, 1st Floor, The London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.

The presentation will also be webcast live at 9.00am from www.ascential.com, allowing the slides to be viewed. A recording of the webcast will also be available on-demand from our website in due course.

About Ascential:

Ascential is a specialist information, data and analytics company that helps the world's most ambitious businesses win in the digital economy. Our information, insights, connections, data and digital tools solve customer problems in three principal disciplines:

·; Product Design via global trend forecasting service WGSN;

·; Marketing via global benchmarks for creative excellence and effectiveness, Cannes Lions and WARC, and strategic advisory firm MediaLink; and

·; Sales via eCommerce-driven data, insights and advisory firm Edge by Ascential, leading managed services provider for Amazon, Flywheel Digital, the world's premier payments and FinTech congress Money20/20, global retail industry summit World Retail Congress and Retail Week.

Ascential also powers political, construction and environmental intelligence product brands DeHavilland, Glenigan and Groundsure - together comprising the Built Environment and Policy Segment.

Cautionary statement

Certain statements in this announcement constitute, or may be deemed to constitute, forward-looking statements (including beliefs or opinions). Any statement in this announcement 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 risks 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 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 announcement, whether as a result of new information, future events or otherwise.

This announcement has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Ascential plc and its subsidiary undertakings when viewed as a whole.

Financial highlights - continuing operations

1 Restated for application of IFRS 16 (see Note 7).

2 Refer to the glossary of Alternative Performance Measures below.

Chief Executive's Statement

In 2019, we enjoyed a year of consolidation and progress. This follows a reshaping of our business in 2018 to support long-term growth, notably through the sale of the Exhibitions business, the acquisitions of WARC, BrandView and Flywheel Digital and the re-set of Cannes Lions and MediaLink's strategic re-alignment. We are pleased to report a successful performance in 2019, growing both revenue and profit and delivering well on the priorities we set out.

Strong organic growth and good cash generation

We delivered strong organic growth, with both revenue and Adjusted EBITDA up 6% and Adjusted diluted earnings per share up 21%. Our Adjusted EBITDA margin was in line with 2018, at 31%, with the planned investments made to position the Digital Commerce products in our Sales Segment as the number one platform in the market funded by strong operating leverage in our Product Design, Marketing and Built Environment and Policy Segments. This investment, along with acquisition payments and capex investment of £131.6m, was funded by good operational cash generation with operating cash flow conversion of 88% (2018: 106%).

Execution on key priorities for 2019

We have delivered well against the priorities we set for the year, in particular:

·; We are pleased with the levels of Execution demonstrated by our market-leading digital information products such as WGSN and Flywheel Digital and have built on the important initiatives that we have put in place to develop our cross-Ascential strategic client programme.

·; We have made progress with the integration of Edge, which commenced in the second half of 2018 and will run until the end of the first half of 2020. The major focus for the forthcoming year is to return the Edge business back to good billings growth in the second half.

·; Following the re-set for Cannes Lions and MediaLink's strategic re-alignment in 2018, Marketing Segment Growth was robust.

·; We have made progress in developing the Ascential operating model, with key changes implemented in our Finance, Marketing, Data Science and Product Development functions. These changes will drive efficiency and cross-sell and accelerate the development of our products.

Evolution of the operating model

In 2018, we adopted a new operating model, aligned to our strategy of serving customer needs in the functions of Product Design, Marketing and Sales. We have now further developed this model to highlight the particular specialisms within each of the segments in which we serve our customers.

After the year end, we have made some changes to the responsibilities of our key leaders to align our management structure more closely to our core segments of Product Design, Marketing and Sales, as well as Built Environment and Policy. Given the importance of returning the Edge business to strong growth, I shall be taking personal responsibility for leading the Digital Commerce sub-segment (within the Sales segment) in 2020.

Product Design

In another successful year for Product Design we achieved Organic growth of 8%, led by an exceptional performance from the advisory practice. This was supported by continuing solid growth from the core subscription business through a combination of high retention rates and successful product launches, with WGSN Beauty a recent example.

Marketing

Following re-sets for both Cannes Lions and MediaLink in 2018 the segment returned to strong Organic growth of 9% in 2019. For Cannes Lions, this was driven in part by the increasing participation of brands in the Festival, across all three revenue streams. For MediaLink the focus on brand-led business, both project-based and retainer, was successful in delivering a more sustainable business. The higher profile presence of MediaLink at the Cannes Lions festival also illustrated the benefit of collaboration and cross-selling initiatives that are an area of increased focus across Ascential. Continued growth of our digital revenue streams, such as The Work, together with that of WARC and the recent strategic investment in the media buying platform, Hudson MX, point to continuing diversification of the Marketing Segment's business model in favour of recurring and repeat revenues.

Sales

For the Sales Segment, following several key acquisitions and event launches in 2018, 2019 was a year of consolidation with growth of 3% on an Organic basis, or 11% Proforma including the contributions of Flywheel Digital and BrandView. The Digital Commerce brands within the Sales Segment (Edge, Flywheel Digital and Yimian) grew by 9% on an Organic basis, or 21% Proforma.

2019 was an important year for the integration of the four brands that comprise Edge. The initial phases of integration, covering organisational structure and CRM systems, were completed by June 2019. Progress has also been made on the underlying platform consolidation, with the phased roll-out of digital shelf catalogue systems to market share customers completed on schedule in December 2019 and the recent launch of the new market share platform. Reflecting our efforts to deepen our relationship with key customers it was pleasing that Edge was appointed as the preferred partner to Coca-Cola for its worldwide eCommerce operations.

In December, we also completed the acquisition of Chinese eCommerce analytics business Yimian that will provide a more holistic offering for Edge in China, with its sales and share expertise. Yimian's expertise in China provides an excellent fit with that of our Edge business across US and European marketplaces. Additionally, Yimian's capability in semantic analysis and record of innovation offers exciting opportunities for new product development.

Flywheel Digital had an outstanding year. Having joined the Group in 2018, it made significant strides, expanding its business into Europe, Australia and Japan, while also launching a service offering for Walmart in the US. Flywheel Digital enables us to not only report on the performance of our customers but also provide them with a real time trading platform to enable and drive actual sales growth.

Money20/20's modest performance reflected continuing strong growth from its European edition, offset by the competitive challenge in Singapore and a combination of adverse macro and local market factors that necessitated the deferral of the Chinese edition.

Built Environment & Policy

The Built Environment & Policy Segment continued to trade solidly, with Organic revenue growth of 5% and expansion of margin, despite testing conditions in its UK-based markets, a testament to the market leading products in this segment.

Jumpshot

In July 2019 we acquired a 35% stake in Avast's marketing analytics subsidiary Jumpshot. While Jumpshot's business model was attractive in its own right, we also benefitted from access to their high-quality information to refine and improve the product algorithms within the Edge business. This benefit persists, notwithstanding Avast's post year end decision to close Jumpshot, as it was no longer core to their mission. In January 2020, we sold our stake back to Avast recovering all of our investment and expenses.

Focused capital allocation and share repurchase programme

Consistently strong levels of cash flow conversion, combined with our disciplined capital allocation, has resulted in a net debt leverage ratio of 1.4x at the 2019 year-end. Furthermore, following the sale of the Jumpshot investment in January 2020, our proforma 31 December 2019 leverage ratio is 1.0x which is well below our historical norms.

While we have a pipeline of attractive bolt-on investment opportunities, we recognise that the delivery of shareholder value requires a return of cash to shareholders if M&A cash needs are not near-term and when our balance sheet is sufficiently strong to finance acquisitions should they arise earlier than expected. Having reviewed our capital allocation policy, the Board has decided to utilise part of its authority to make on-market purchases of our ordinary shares. We anticipate spending up to £120m in a share repurchase programme, which we will review on an ongoing basis based on the then competing opportunities for capital deployment.

Our dividend policy, which targets a 30% payout ratio of adjusted profit after tax, is unchanged.

Responsible business

This year, we launched our new Corporate Responsibility Framework, covering all elements of environmental, social and governance activities. This comprises solid foundations (such as health and safety), strategic issues (environmental sustainability and diversity and inclusion) and a signature focus on helping young people thrive in a digital world. This programme is designed to celebrate our existing activities, as well as provide inspiration for our people to launch new initiatives, and to enable Ascential to take a clear lead as a responsible business.

Coronavirus disease

The Board is actively monitoring the unfolding situation in respect of the Coronavirus outbreak. While China is an important, long-term, strategic growth market for Ascential, revenues from Chinese customers are today a relatively small part of the Group (less than 5% overall and with just 2% of attendees of Cannes Lions from China, for example) and we have not yet seen any material impact on trading from the situation. As a precaution, and to reflect travel difficulties in the region, we have previously communicated to participants that we have moved the date of Money20/20 Asia in Singapore from March to August 2020. We continue to monitor the potential impact of travel restrictions for Chinese delegates and sponsors to events in Europe (such as Retail Week Live in London in March). We are also mindful of the impact that Coronavirus might have on the business performance of our customer base in areas such as fashion but again have seen no significant impact to date. Our business continuity plans are enabling the majority of our approximately 200 staff in China to remain both safe and productive.

2020 priorities and outlook

As we enter 2020, we have four core objectives:

1. Increase the rate of Organic revenue growth in the Sales Segment by accelerating Money20/20 and by driving strong billings growth in Edge in the second half of 2020.

2. Focus on our service offering to further reduce customer churn.

3. Deliver product superiority across the Company allowing for further premium pricing for our highest quality products.

4. Deliver greater simplicity and efficiency throughout the business, including new systems and processes in our Finance, Marketing and Sales functions.

Over the coming year we will continue to utilise our unique insights and expertise to provide our customers with ever more relevant and critical information. With our product sets even more closely aligned to customer requirements, we believe we are well positioned to continue to drive strong performance in our scaled and structurally growing markets. In 2020, we expect to deliver strong Organic growth with Group revenue in the range of £425m-£455m (using current exchange rates) and adjusted EBITDA margins of between 30% and 32%.

Segmental Review

Product Design Segment

*Restated for initial application of IFRS 16 (see Note 7)

2019 was a successful year for our Product Design Segment, with Organic revenue growth accelerating to 8%, driven by advisory revenues, continued strong retention and the launch of WGSN Beauty. Revenue and Adjusted EBITDA both grew well in the period, with margin expanding despite product launch investment.

Through our WGSN product, we are a leading global supplier of trend forecasts, market intelligence and insight to design-led businesses, helping them understand the future demands of their consumers and the underlying influences that shape the preferences of different consumer communities. We have around 6,500 customers in over 90 countries. Information is delivered primarily through digital subscriptions (c.90% of our revenue) with growing specialist advisory and colour services, through Mindset and Coloro respectively.

The Product Design Segment has seen continued take-up of products launched in recent years such as Insight (the broad consumer trends product), Barometer (brand sentiment tool) and Coloro (the colour system). These not only offer new growth opportunities within the existing customer base but have driven an expansion of the addressable market beyond apparel and into newer product categories, as with the launch of Beauty in April 2019. This offering, specifically for the beauty industry, serves product developers with trend information based on four key elements: Ingredients, Texture & Fragrance, Colour, and Packaging. We now have over 200 customers signed up to Beauty achieving more than double our original year one targets. Instock, our digital shelf product for apparel companies, continues to gain traction with Financial Services companies interested in utilising alternative data to inform their investment decisions and we are focusing our efforts on this end market.

We will continue to explore opportunities to enter new market segments where our expertise in trend forecasting can be adapted, with a new product in the Food & Beverage market targeted for launch later in 2020. We will also continue to use data from other Ascential products to inform forecasts and analysis including empirical innovations such as the Trend Curve, launched in September 2019.

These initiatives position us well for continued mid to high single digit revenue growth in this segment.

Marketing Segment

*Restated for initial application of IFRS 16 (see Note 7)

One of our key objectives for 2019 was to re-establish the Marketing Segment as a pillar of sustainable growth after a re-set year in 2018 for its two largest businesses. We are therefore pleased to report 9% Organic revenue growth and 20% Organic Adjusted EBITDA growth for the year. Margin grew to 37% as a result.

Through Cannes Lions we are the globally recognised international benchmark for brand creativity, delivered via the festival platform in June and through year-round digital products and consultancy engagements. Following the changes implemented in 2018, including the new awards structure and re-focus into a shorter five-day period the festival returned to double-digit growth in 2019. Last year's changes to the festival's format continue to be extremely well received by participants, resulting in a 2019 NPS score of 69, the highest on record and positioning Lions well for future growth. All three Cannes Lions revenue streams grew in 2019:

·; Award entries accounted for 36% of Lions revenue. We were pleased with the launch year performance of the Entertainment Lion for Sport and the Creative Strategy Lion while the Creative Effectiveness category continued to expand. The new points-based award for Creative Brand of the Year, won in 2019 by Burger King, helped drive growth in entries from brands.

·; Delegate passes accounted for 33% of the festival's revenue. We saw a good increase in the volume of delegates, driven in part by growing popularity of the Cannes Curated product for major brand groups.

·; Partnerships and digital revenues accounted for 31% of Lions' revenues, with The Work and Lions Digital Pass broadening engagement with the creative community beyond the physical environment of the city of Cannes. These Lions Intelligence services have further developed the Marketing segment's year-round digital revenue streams helped by the growth of the Lions Advisory offering of training programmes and consultancy services for brands and media platforms.

Through the MediaLink offering Ascential develops partnerships and strategy for customers operating at the intersection of the media, marketing, advertising, technology and entertainment industries. Over previous years we have refined the business in favour of project work, particularly for brands, rather than structurally weaker sectors such as digital publishing.

The first half of 2019, in particular, benefitted from several major agency reviews and strong performance from the programme of targeted content, curated experiences and hosted meetings at The Consumer Electronics Show (CES) and Cannes Lions festival, with more than 1,800 hosted meetings taking place (a record for the business). In particular, the new location in Cannes (a dedicated facility at the heart of the festival), proved extremely popular with customers. The most high-profile engagement this year was the global media agency review for Disney, the largest of its kind in the market in three years. Lastly, we were delighted to see MediaLink's founder and CEO, Michael Kassan, inducted into the 2019 American Advertising Federation's Hall of Fame in recognition of his and the business' work in the industry.

Through WARC's digital subscription-based information we help brands, agencies and media platforms measure marketing effectiveness across all channels. Revenue grew strongly with a significant focus on product, content and marketing enhancements. A notable development was the launch of operations in China, supported by a Shanghai based team delivering localised content in this increasingly important market. Other highlights included the relaunch of the Gunn report as 'WARC Rankings', a benchmark for excellence in marketing based on performance in the world's most prestigious industry awards.

One of our aims within the Marketing Segment is to further diversify our revenue streams and build ever more recurring and repeat revenues. To further that aim we have made a strategic investment in Hudson MX, a New York based company building a software platform that empowers buyers, agencies, and their partners to reduce the operational costs inherent in the media buying process.

2019's growth rate in the Marketing Segment clearly benefitted from the foundations laid in 2018 as well as the return of a key customer to Cannes Lions after a one-year hiatus. These foundations position us well for mid-single digit revenue growth in this segment.

Sales Segment

*Restated for initial application of IFRS 16 (see Note 7)

Revenue in the Sales Segment grew by 3% on an Organic basis or, including the impact of 2018 acquisitions (principally Flywheel Digital) by 11%. The Organic and Proforma decline in EBITDA reflects high levels of investment in the Edge and Flywheel Digital products in the year as well as the expected decline in revenue from the smaller World Retail Congress and Retail Week.

Digital Commerce

The Digital Commerce element of the Sales Segment (comprising Edge by Ascential, Flywheel Digital and Yimian) grew revenues by 9% on an Organic basis and 21% on a Proforma basis.

Through Edge by Ascential we deliver eCommerce data, insights and advisory, comprising performance measurement, digital shelf optimisation, pricing & promotion and retail strategy expertise. As previously reported, following a period of rapid customer acquisition for each of its major products, in the second half of 2018 this business commenced an integration programme which will run until the first half of 2020. With a focus on unifying its go to market approach, Product Leadership, Innovation, Technology and Operations platforms, the programme will additionally scale the organisation, processes and systems required to manage significant numbers of global customers. With the initial phases, covering organisational structure and CRM systems, completed by June 2019, progress has also been made on the underlying platform consolidation, with the phased roll-out of digital shelf catalogue systems to market share customers completed on schedule in December 2019 and the launch of the new market share platform.

Edge acquired 89 new customers in 2019 (2018: 107), but, as previously reported, revenue growth rates reduced. This was due in part to the impact of our integration efforts, with cross-sell and upsell opportunities dependent partly on our phased transfer of customers to the new catalogue platform. However, we were encouraged by trading during the first month of 2020 which was ahead of plan which was especially notable as Edge renews 35% of its book of business in the month of January.

Through Flywheel Digital we provide managed retail and media services to brands on Amazon and more recently Walmart, Instacart and Kroger. Since acquisition in November 2018, we have established these services in Europe, Australia and Japan. The rate of revenue growth in 2019 has continued to be extremely strong against a backdrop of good US market conditions and Amazon's strong growth, including its best ever Black Friday in 2019 (online spend up by 16% over the Thanksgiving holiday weekend). All three revenue lines (retainer, retail commission and media commission) continued to grow strongly, benefiting from expanding markets and continued share gains, while 28 new customers were added in the year.

In 2019, we were also pleased to launch both our Spotlight operation in New York and our initial Walmart service offering, being selected among the first Walmart Advertising Partners. We invested heavily in scaling the overall business, while taking the lead in building Ascential's wider data science capabilities. Most recently, in February 2020, we have expanded into the active lifestyle category through the acquisition of Indigitous, an Amazon-focused managed service provider based in Seattle.

Finally, in this sub-segment, after an extensive search and considerable diligence, we were delighted to acquire the Chinese eCommerce analytics specialist Yimian. With around 100 staff based in Shenzhen and Shanghai, Yimian helps its customers, predominantly multi-national CPGs, optimise their sales on eCommerce platforms. Its principal offerings comprise insight on sales & share performance and pricing & promotion trends, together with analysis of ratings and reviews on both retail and social platforms.

Non-Digital Commerce

Through Money20/20 we are the leading hub worldwide for digital payments product strategy. Our congresses focus on the evolution of consumer payment and financial services through mobile, retail, marketing services, data and technology, and, despite a small decline for the Asia edition, achieved modest growth overall in the year, driven by the European event.

At the Asian event in Singapore over 3,000 attendees explored the future of money. After an outstanding launch edition in 2018 that was two years in the making, the 2019 event saw a small year over year revenue decline and we have spent significant time redesigning and relaunching the 2020 show.

Meanwhile, in its fourth year, the European congress in Amsterdam delivered strong growth, with increases in revenue and volumes for both delegates and sponsors, reflecting the quality of the product and location and the scale of the European market. The event attracted more than 6,000 attendees while the enlarged exhibition space in Amsterdam enabled an increase in net square meterage sold.

Now in its eighth year, the US event took place, in Las Vegas as usual, with good growth in both exhibitor and delegate volumes driven by a refreshed pricing strategy focusing on volume over yield. A revised venue layout offered delegates a more inclusive learning experience along with an improved networking experience via our App (delivering over 4,000 meetings) and we saw a strong improvement in NPS scores.

The planned second edition in China due to be held in December 2019, was deferred due to a hiatus for international companies in the Chinese FinTech market arising from a combination of macro-economic trends and changes in local market dynamics including significant changes in the Peer-to-Peer lending sector that had been an important revenue source in 2018. We intend to return the event to China in due course when market conditions improve.

The final and smallest element of the Sales Segment is delivered by the Retail Week and World Retail Congress products. These brands saw a revenue decline in the face of a highly challenged bricks and mortar retail environment particularly in the UK.

We are targeting high single digit growth in the Sales Segment going forward with that growth clearly skewed towards the Digital Commerce sub-segment.

Built Environment & Policy

*Restated for initial application of IFRS 16 (see Note 7)

The Built Environment and Policy Segment comprises the Groundsure, Glenigan and DeHavilland digital information products. Revenue for the year grew by 5% to £35.9m, with all three products contributing growth.

Through Groundsure we are a leading provider of environmental risk data to the UK residential property market. The product grew well against a UK residential property market that declined, as it continued to lead on product innovation, with new products in the period focusing on Coal Mining and Energy & Transportation, together with the refresh of the Groundsure Homebuyers report. Shortly after the year end, we reinforced our commitment to product innovation with the acquisition of a small specialist data provider and consultant based in Cornwall, Mining Searches UK, through which we will add non-coal to our mining searches portfolio.

Through Glenigan, we provide construction project sales leads, industry data, analysis, forecasting and company intelligence. The business grew in the year and maintained good retention rates, against a challenging market backdrop. The bespoke research element of the product achieved good traction in the market throughout the year reflecting our high standing with customers.

Finally, through DeHavilland, we are a leading provider of political intelligence and monitoring services in the UK and EU. The business achieved good growth in the year, improving its retention rates, helped by the launch of a new data feed API which allows clients to receive political contact data directly into their CRM solutions. While Brexit undoubtedly drove some increased customer need throughout 2019, we expect that this will continue as the UK moves into the next demanding phase of its exit from the European Union.

We are targeting the Built Environment & Policy Segment to continue to grow at similar levels to 2019.

Financial review

2019 was another year of good Organic growth in revenue and Adjusted EBITDA. Solid cash generation resulted in closing net debt leverage of 1.4x1, after continued investment in the business and M&A.

1 Please refer to Alternative Performance Measures for definition

Overview

The results for the year are set out in the consolidated statement of profit or loss and show, for continuing operations, revenue of £416.2m (2018: £348.5m), a growth of 19.4% (or 6.4% on an Organic basis, and 9.0% on a Proforma basis), and operating profit of £19.9m down 51.9% (2018: £41.4m). Adjusted EBITDA was £128.5m (2018: £108.4m) representing Organic growth of 6.2% or 8.5% growth on a Proforma basis. We also delivered solid cash flow in 2019 with free cash flow from continuing operations after tax and capex of £91.5m (2018: £84.8m), an operating cash flow conversion of 88% and a free cash flow conversion of 71%.

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 is an Alternative Performance Measure and is discussed in more detail below. 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 2018 and is therefore a measure of the 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 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.

Continuing operations

The results for the year ended 31 December 2019 are set out in the consolidated statement of profit or loss and summarised in the table below.

*Restated for initial application of IFRS 16 (see Note 7)

Segmental results

Following the sale of the Exhibitions Business in July 2018, the Group changed from two to four reportable segments to align the operating model to the needs of the end customers we serve. The four reportable segments are Product Design, Marketing, Sales and Built Environment & Policy. Information regarding the results of each reportable segment is included below.

*Restated for initial application of IFRS 16 (see Note 7)

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 have recurring or repeat characteristics and benefit from our focus on customer retention, with over 80% of all revenue coming from recurring revenue types or repeat business.

Revenues from continuing operations grew to £416.2m (2018: £348.5m), an increase of £67.7m or 19.4%. Adjusting for currency impacts and acquisitions, Organic growth was 6.4% driven by the Marketing Segment and the Product Design Segment. Proforma revenue growth, which is a measure of how well the current portfolio of brands is growing, was 9.0% and was driven by the Sales Segment.

Adjusted EBITDA

Adjusted EBITDA increased by 18.5% to £128.5m (2018: £108.4m) representing a 6.2% Organic growth rate, reflecting operational leverage and flow-through from revenue growth in the Marketing and Product Design segments in particular. Adjusted EBITDA margin remained in line with the prior year at 30.9% (2018: 31.1%), where declining margins in the Sales Segment as a result of investment in Edge and Flywheel Digital were offset by increases in all other segments' Adjusted EBITDA margins. We continue to see the evidence of the superior margin opportunities in scaled, mature, digital subscription businesses.

Reconciliation between Adjusted EBITDA and statutory operating profit

Adjusted EBITDA is reconciled to statutory operating profit as shown in the table below:

*Restated for initial application of IFRS 16 (see Note 7)

Amortisation of acquired intangible assets

The amortisation charge of £35.8m (2018: £30.6m) on acquired intangible assets increased mainly due to full year charges for the acquired intangibles of Flywheel Digital and WARC, offset by the impact of fully amortised assets. The Company undertakes a periodic review of the carrying value of its intangible assets of £760.7m (2018: £786.0m) which are supported by value in use calculations. No impairments were identified in the current or prior year.

Exceptional items

The charge for exceptional items in 2019 totalled £41.6m (2018: £14.0m relating to continuing operations) as set out in the table below and further explained in Note 4.

The charge for deferred contingent consideration relates to acquisition-related contingent employment costs on the acquisitions of Flywheel Digital, MediaLink, One Click Retail and Clavis which, absent the link to continued employment, would have been treated as consideration as well as the revaluation of initial estimates of deferred consideration. The substantial increase in charge in 2019 reflects the significant outperformance of Flywheel Digital in 2019 compared to our original expectations (a total charge of £36.9m).

Other acquisition and disposal expenses include £3.5m of costs relating to transaction costs (diligence and legal fees) with the remainder represented by integration costs offset by credits from the release of provisions in respect of historical disposals.

Share-based payments

The charge for share-based payments of £8.5m (2018: £6.2m) incorporates the Share Incentive Plan, the SAYE and the Performance Share Plan and the increase is driven partially by this being the first full three years since the IPO. As explained in the Alternative Performance Measures section, we treat share-based payments as an adjusting item because they are a significant non-cash charge driven by a valuation model that references Ascential's share price and so is subject to volatility rather than referencing operational activity.

Finance costs

The Adjusted net finance cost for the year was £10.3m (2018: £13.1m) as set out in the table below:

*Restated for initial application of IFRS 16 (see Note 7)

The net interest expense on the Company's net debt was £5.9m (2018: £6.5m) with the decrease driven by the higher cash holdings throughout the year and particularly in the first half with the reduction in interest margin driven by reduced leverage offset by higher LIBOR.

Amortisation of loan arrangement fees relates to the unwind of fees capitalised in respect of the borrowing facility taken out in 2016. In January 2020, the Group entered into a new 5-year multi-currency revolving credit facility ("RCF") of £450m (see Liquidity section below for further details). Upon completion of the new agreement, capitalised arrangement fees of £1.2m relating to the previous facility will be written off in 2020 as exceptional costs. We expect fees of £3.9m to be capitalised as part of the new arrangements and these will be amortised over the expected life of the facility.

Discount unwind on contingent and deferred consideration of £5.5m reflects the full year impact of the discount unwind on the future expected consideration of the acquisition of Flywheel Digital. Net foreign exchange gain or loss includes credits arising on the revaluation of monetary items (particularly cash) in the year. Finally, our 2019 net finance cost was also reduced by positive revaluations of £1.6m on our equity investments in Hudson MX, Shoptalk and the WGSN China joint venture.

Taxation

A tax charge of £20.6m (2018: £17.8m) was incurred on continuing Adjusted profit before tax of £96.4m (2018: £79.7m) resulting in an Adjusted effective tax rate for the year of 21.4% (2018: 22.3%) which compares to the effective tax rate of 20.6% on reported profits as can be seen in the table below.

Cash tax paid was £3.2m (2018: £12.2m) reflecting refunds of prior year overpayments. The Group benefited by £4.5m (2018: £3.1m) from the utilisation of historic tax losses in the UK and US, which are expected to continue to benefit the Group's cash flow over the medium term.

The Group has a total recognised deferred tax asset of £42.7m (2018: £43.1m) relating to UK and US losses, accelerated capital allowances, US acquired intangibles, and deferred and contingent consideration. The majority of this asset is expected to convert into cash savings over the next ten years with more than 75% being recovered over the next three years. Meanwhile, our deferred tax liability amounted to £22.9m (2018: £24.8m) and related to non-deductible acquired intangibles and is not expected to convert into cash.

Discontinued operations

There were no discontinued operations in 2019. Discontinued operations in 2018 relate to the trading of the Exhibitions business in the first six months of the year and its subsequent disposal. The overall result for discontinued operations was as follows:

Foreign currency translation impact 

Ascential reports its results in Pounds Sterling and following US acquisitions and the significance of Cannes Lions (primarily Euro) and Money20/20 (primarily US Dollar and Euro) reported performance is sensitive to movements in the Euro and US Dollar against Pounds Sterling. For most of 2019, Sterling was in line with the 2018 average Euro and US Dollar exchange rates but strengthened after the December UK general election as can be seen in the table below:

When comparing 2019 and 2018, changes in currency exchange rates had a net favourable impact of £6.1m on revenue and £1.8m on Adjusted EBITDA. On a segmental basis, the favourable impact of changes in foreign currency exchange rates was as follows:

·; Product Design: £1.0m impact on revenue and £nil impact on Adjusted EBITDA.

·; Marketing: £3.0m impact on revenue and £0.9m impact on Adjusted EBITDA.

·; Sales: £2.1m impact on revenue and £0.9m impact on Adjusted EBITDA.

·; Built Environment & Policy: £nil impact on revenue or Adjusted EBITDA.

For illustrative purposes, the table below provides details of the impact on revenue and Adjusted EBITDA if the actual reported results were restated for Sterling weakening by 1% against the USD and Euro rates in isolation.

Furthermore, each 1% movement in the Euro to pounds Sterling exchange rate has a £1.5m (2018: £1.5m) impact on the carrying value of borrowings. Each 1% movement in the US Dollar has a circa £0.7m impact on the carrying value of borrowings (2018: £0.8m).

Earnings per share

Continuing Adjusted diluted earnings per share of 18.5p per share is 20.9% ahead of the 15.3p per share recorded for 2018.

Continuing diluted earnings per share of 1.9p per share is below the prior year figure of 4.8p predominantly due to exceptional charges revaluing upwards the deferred consideration on Flywheel Digital following its better than expected performance. Total diluted earnings per share were 1.9p (2018: 51.4p), with the decline driven in large part by the gain on disposal of the Exhibitions business in 2018.

Acquisitions and disposals

We regularly assess opportunities to acquire high-growth products and capabilities to serve our key end markets of Product Design, Marketing and Sales, and in 2019 incurred initial cash consideration of £81.3m for bolt-on investment opportunities. The cash consideration comprises £64.5m on investments and £16.8m on acquisition of businesses net of cash acquired, of which £18.7m is in relation to Yimian.

Jumpshot

In August 2019, we completed the acquisition of a 35% investment in Jumpshot, Inc., an analytics business providing market leading insights on digital consumer engagement. Cash consideration including subsequent working capital contribution and acquisition expenses totalled £56.2m of which £54.5m was paid prior to 31 December 2019. On 30 January 2020, we agreed to sell our 35% ownership interest in Jumpshot back to the majority owner, Avast plc for cash consideration equivalent to our cost of investment including expenses.

Yimian

In December 2019, we completed the acquisition of Shenzhen Yimian Network Technology Co., Ltd ("Yimian") for initial consideration of £19.5m with a further £8-10m expected to be paid as part of earnout consideration relating to 2019 to 2022 revenue targets. Yimian provides services to help clients optimise their digital marketing and sales on China's e-commerce platforms.

Hudson

Hudson MX is an advertising software business providing media buying and media accounting solutions through a cloud-based SaaS platform. In 2019 we invested £8.0m for a minor equity interest and, subject to certain growth targets, agreed to increase our future holding for further cash consideration of £8.0m. A gain of £0.9m was recognised within net finance costs reflecting the upwards revaluation of our equity investment based on third party participation in the transactions.

Infosum

In addition, the Group made a minority equity investment of £2.0m in Infosum, a company that provides a decentralised environment to connect customer data, conduct analysis and drive more effective marketing campaigns, without any data exchange.

Deferred consideration

The Company's preferred structure for M&A is to enter into long-term earn out arrangements with the founders of acquired companies and to link the earnout to both the post-acquisition performance of the acquired company and 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 point of acquisition - 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 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. This amounted to £103.2m at December 2019 (2018: £96.7m). Any change in estimate is recorded as an exceptional item. This amounted to a charge of £13.0m in 2019 (2018: credit £5.2m) driven by the 2019 outperformance of Flywheel offset by the lower performance of One Click Retail.

2. This liability is discounted to present value with the reversal of this discount being recorded as Other finance costs within the interest charge. This amounted to a charge of £5.5m in 2019 (2018: £3.6m).

3. Finally, that element of the deferred consideration that is contingent on the continuing employment of the founders is charged to the income statement as an exceptional item over the service life of those founders (typically three years). This amounted to a charge of £20.1m in 2019 (2018: £13.3m), which was in addition to the charge for the revaluation of the earnout of £13.0m (2018: £5.2m credit).

In total, the Company expects to pay out deferred consideration of between £120m and £140m over the next three years for acquisitions to date. This is mainly contingent on the future performance of the acquired businesses which are estimated to grow their annual EBITDA by between approximately £23m and £33m between now and 2022.

Cash flow

Continuing operations

The Company generated Adjusted operating cash flow from continuing operations of £113.2m (2018: £114.4m), being an 88% operating cash flow conversion (2018: 106%). The reduction in operating cash flow conversion was driven mainly by the working capital impact of the very high growth of Flywheel business.

After continued investment in product development in our digital subscription products, internal productivity tools and property, capex remained consistent with the prior year at £18.5m (2018: £18.7m). Tax paid on profits from continuing operations decreased from £12.2m to £3.2m, driven by the shielding of current year charges by historic losses and refunds of overpayments in prior years. As a result, the Company generated free cash flow on continuing operations of £91.5m (2018: £84.8m) as shown in the table below.

*Restated for initial application of IFRS 16 (see Note 7)

Discontinued operations

There were no significant free cash flows from discontinued operations in 2019 while 2018 included discontinued free cash flows relating to the Exhibitions business.

Total operations

The cash flow statement and net debt position is summarised below and includes significant proceeds from the Company's business disposals in 2018 totalling £290.0m, as well as deferred and initial consideration paid on the Company's current and prior years' acquisitions totalling £48.6m (2018: £156.4m).

Restated for initial application of IFRS 16 (see Note 7)

Returns to shareholders

The Board targets a dividend payout ratio of 30% of Adjusted profit after tax. Consequently, the Board is recommending a final dividend of 4.0p per share payable on 11 June 2020 to shareholders on the register on 14 May 2020 which, together with the Company's interim dividend of 1.8p paid in September 2019, makes a total dividend for the 2019 financial year of 5.8p (2018: 5.8p) with the prior year benefiting from earnings from discontinued operations.

Consistently strong levels of cashflow conversion, combined with disciplined capital allocation, has resulted in a net debt leverage ratio of 1.4x at the 2019 year-end. Furthermore, following the sale of the Jumpshot investment in January 2020, our Proforma leverage is 1.0x which is well below historic levels. While we have a strong pipeline of attractive investment opportunities, we recognise that the delivery of shareholder value requires a balanced approach to investing in growth and returning excess capital to shareholders whilst maintaining a strong balance sheet. Having reviewed our capital allocation policy, the Board has decided to utilise part of its authority to make on market purchases of our ordinary shares. We anticipate spending up to £120m in a share repurchase programme, which we will review on an ongoing basis based on the competing opportunities for capital deployment.

Other financial matters

Accounting developments

IFRS 16, Leases, was effective from 1 January 2019 and we have taken the decision to apply this standard retrospectively. We have consequently adjusted our financial statements from the earliest point presented, 1 January 2018. The most significant impacts of the new accounting standard are the recognition of operating lease liabilities on the balance sheet and the reclassification of the lease charge from EBITDA to amortisation and interest. In relation to these leases we recognised £21.6m of right-of-use assets, £2.1m of investment property, and £26.8m lease liabilities as at 31 December 2019. We also recognised £7.3m (2018: £5.4m) of amortisation charges and £1.3m (2018: £1.2m) of interest costs from these leases instead of an operating lease expense.

Capital structure

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern 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 or contributed as equity to subsidiaries at market-based interest rates and on commercial terms and conditions.

The Company's sources of funding comprise operating cash flow and access to substantial committed bank facilities from a range of banks. The Company maintains a capital structure appropriate for current and prospective trading over the medium term that allows a healthy mix of dividends and cash for investment in bolt-on acquisitions.

Liquidity

In January 2020, the Group entered into a new 5-year multi-currency revolving credit facility ("RCF") of £450m with an accordion of up to a further £120m or 150% of EBITDA. The maturity of the facility may be extended at the option of the Group for up to two further one-year terms subject to individual lender approval. The facility covenants include a maximum net leverage of 3.25x with the benefit of an additional 0.5x leverage spikes for relevant acquisitions and a minimum interest cover of 3.00x and are tested semi-annually.

The previous facility, which operated through the 2019 financial year, comprised term loan facilities of £66m, €171m and US$96m as well as an RCF of £95m. All were due to mature in February 2021 and at December 2019 were subject to interest at 1.50% over LIBOR. There was a leverage covenant limit of 3.5x which was measured semi-annually. As at 31 December 2019 and 2018, all of the term facilities, totalling £283.8m (2018: £294.1m) had been drawn and none of the £95.0m of RCF had been drawn (2018: none).

Financial risk management

The Group is exposed to risks arising from the international nature of its operations and the financial instruments which fund them. These instruments include cash and borrowing and items such as trade receivables and trade payables which arise directly from operations. External borrowings are denominated 51% in Euros with the balance split between US Dollars (26%) and pounds Sterling (23%). The Company reviews and protects a proportion of its exposure to interest rate rises on the cost of borrowings through use of derivatives such as interest rate caps where appropriate. Principal risks (including strategic, operational, legal and other risks) are shown on in the full Annual Report.

Going concern

The Board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. Ascential's business activities, performance and position, together with the factors likely to affect its future development, are set out throughout this release and the full 2019 Annual Report. The financial risk management objectives, policies and processes in place for assessment, management and monitoring of risks, including the risks resulting from Brexit and the current outbreak of the Coronavirus, are also described more fully in the 2019 Annual Report.

The Directors believe that the Company is well placed to manage its business risks successfully and have assessed the Group's prospects and viability over a 3-year period. The long-term viability statement, which provides further detail of this assessment, can be found in the 2019 Annual Report. The Board's assessment of prospects and stress test scenarios, together with its review of principal risks and the effectiveness of risk management procedures, show that the Group has adequate resources to continue in operational existence for the foreseeable future, including the period exceeding 12 months from the date when the financial statements are approved. Accordingly, the Directors continue to adopt the going concern basis for the preparation of the financial statements.

ALTERNATIVE PERFORMANCE MEASURES

Ascential 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, 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 additional information. 

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 businesses;

·; 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; and

·; event timing differences between 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;

·; prior year consolidated results are restated at current year exchange rates for non-sterling businesses; and

·; prior year results are adjusted such that comparative results of events that have been held at different times of year (if any) are included in the same period as the current year results.

Organic growth for continuing operations is calculated as follows:

*Restated for initial application of IFRS 16 (see Note 7).

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:

*Restated for initial application of IFRS 16 (see Note 7).

Adjusted profit measures

Ascential 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 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 income 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 operational cash generation. Adjusted EBITDA is defined as Adjusted Operating Profit before depreciation and amortisation. The Company measures operational profit margins with reference to Adjusted EBITDA.

Adjusting items

Adjusting items are not a defined term under IFRS, so may not be comparable to similar terminology used in other financial statements. Adjusting items include exceptional items, amortisation of acquired intangibles and share-based payment charges. These items are defined and explained in more details as follows:

Exceptional items

Exceptional items are recorded in accordance with the policy set out in the annual report. They arise from both portfolio investment and divestment decisions and from changes to the Group's capital structure, and so do not reflect current operational performance. These items are presented within a separate column on the face of the income statement, but within their relevant income statement caption to assist in the understanding of the performance and financial position as these types of cost do not form part of the underlying business.

Amortisation of intangible assets acquired through business combinations and interests in associates

Charges for amortisation of acquired intangibles arise from the purchase consideration of a number of separate acquisitions and interests in associates. These acquisitions are portfolio investment decisions that took place at different times over several years, and so the associated amortisation does not reflect current operational performance.

Share-based payments

Ascential runs a number of employee share schemes. Income statement charges are a significant non-cash charge and are driven by a valuation model which references Ascential share price and so is subject to volatility rather than referencing operational activity.

Tax related to adjusting items

The elements of the overall Company tax charge relating to the above 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, namely to assist readers of the accounts in understanding the ongoing operational performance of the Group. The two measures used are Adjusted Cash Generated from Operations, and Free Cash Flow. These are reconciled to IFRS measures as follows:

*Restated for initial application of IFRS 16 (see Note 7).

*Restated for initial application of IFRS 16 (see Note 7).

*Restated for initial application of IFRS 16 (see Note 7).

*Restated for initial application of IFRS 16 (see Note 7).

The Company monitors its operational balance sheet efficiency with reference to Operating Cash Conversion and Free Cash Flow.

Glossary of alternative performance measures

Consolidated Statement of Profit or Loss

For the year ended 31 December 2019

*Restated for initial application of IFRS 16 (see Note 7).

Consolidated Statement of Other Comprehensive Income

For the year ended 31 December 2019

Consolidated Statement of Financial Position

As at 31 December 2019

*Restated for initial application of IFRS 16 (see Note 7).

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

*Restated for initial application of IFRS 16 (see Note 7).

Consolidated Statement of Cash Flows

For the year ended 31 December 2019