Ascential Regulatory News (ASCL)

27 July 2020

Ascential plc

Interim results for the six months ended 30 June 2020

Strategic advantage accelerated

London: Ascential plc (LSE: ASCL.L), the specialist information, data and analytics company, today announces results for the six-month period ended 30 June 2020.

Strategic and operational summary

● Resilient performance in challenging environment: strong growth from digital businesses but considerable headwinds for live events and the marketing sector.

● Consumer adoption of online channels driving higher demand for critical eCommerce insights, execution and expertise: Digital Commerce sub-segment now our largest product offering, growing revenue by 21%, doubling EBITDA year on year to £13.3m with margins of 25%.

● Digital subscriptions and platforms: over 80% of revenues in the half, growing 10% year on year.

● Positive momentum within Edge by Ascential: customer facing elements of the integration complete, with double-digit billings growth in Edge's Digital Shelf product ahead of plan and good cross-sell with Yimian.

● Continued investment in our digital platforms and products: expansion of Flywheel Digital onto the Walmart, Kroger and Instacart platforms, Yimian onto Lazada and Shopee and the launch of WGSN Food & Drink.

● Digital innovation and strong customer engagement: record levels of digital product uptake and the creation of complementary new platform extensions such as Lions Live.

● Live events: revenue down £96.8m in H1 due to COVID-19 related cancellations or deferrals. 2020 events outlook uncertain with operation of Money20/20 events in H2 remaining very challenging.

● Leadership group strengthened with new appointments to underpin our ambitious growth plans, particularly in Digital Commerce and China:

● Chip DiPaula and Patrick Miller, cofounders of Flywheel Digital, appointed to lead the Digital Commerce sub-segment (comprising Edge, Flywheel Digital and Yimian).

● Deren Baker, former CEO of Jumpshot, appointed to lead Edge.

● Charles Song, founder of Chinese technology business Linklogis, appointed as a Non-Executive Director, reflecting the strategic importance of China to our growth plans.

Financial summary

● Revenue of £144.3m (H119: £236.2m).

● Reported decline of 38.9%.

● Overall decline of 0.3% (Organic) or growth of 0.6% (Proforma) on an underlying basis adjusting for event deferrals and cancellations.

● £118.8m from digital subscriptions and platforms up 10%.

● Digital Commerce is our largest business at £53.6m, with strong growth of 21%.

● Steady underlying growth in Product Design up 3% driven by strength of subscription incomes.

● Marketing Segment declined £74.1m primarily due to the cancellation of the 2020 edition of Cannes Lions.

● Sales Segment impacted by the deferral of M2020 Europe to the second half.

● Adjusted EBITDA of £20.1m (H119: £76.7m).

● Reported decline of 73.8%.

● Approximately £40m of COVID-19 -related cost savings measures implemented in addition to direct event savings with c. £10m benefiting H1.

● Reported operating loss of £68.1m (H119: profit of £36.0m) after amortisation of acquired intangibles, share based payments and exceptional items primarily relating to the upwards revaluation of the Flywheel Digital deferred consideration following its extremely strong performance.

● Adjusted diluted EPS 0.4p (H119: 11.5p).

● Liquidity of £231m, £177m in cash and £54m available under revolving credit facility. Cash generation impacted by event cancellation and deferral, delayed customer payments and growth of Flywheel Digital. Operating cash flow conversion of 63% (H119: 102%), resulting in closing net debt of £216m. Considerable headroom against new £450m, five-year facility agreed in January 2020.

● Net debt leverage of 3.4x (December 2019: 1.4x). Covenant leverage of 1.8x well within covenant tests at June 2020. Leverage and interest cover covenants waived for the December 2020 testing period and leverage covenant relaxed to 3.75x for June 2021.

● The Board continues to assess the appropriate time to reinstate dividends after its decision to suspend them in March 2020 and will reconsider reinstatement alongside the full year results.

Duncan Painter, Chief Executive Officer, commented:

"I am proud that Ascential has responded with resilience and resourcefulness, evident in our day-to-day operations and underlying financial performance, during a period of significant global challenge. This reflects our agile and digitally-focused business model, which has enabled us to adapt to meet the financial challenges posed by the restrictions on our physical events and accelerate launches of innovative new products, like the Lions Live programme, for a large global audience. We increased the output and frequency of insights provided to both existing and potential customers, via podcasts, webinars and other original digital content, often achieving record levels of engagement with our audience. We have also strengthened our balance sheet and maintain significant liquidity to enable us to continue to invest in new opportunities.

Our Digital Commerce business was well positioned to respond quickly and comprehensively to the huge changes in consumer behaviour seen in recent months, supporting our brand manufacturer customers in a period of unparalleled demand. This underpinned our financial performance in the half. Our digital businesses, which represented the vast majority of our revenue in the period, provide a strong platform for long-term growth, while the key executive and director appointments announced today give us the bandwidth to deliver against these opportunities and to realise our global ambitions.

I would be remiss if I did not recognise the impressive performances of our 2,000 employees worldwide, especially over the past few months. We reiterate our commitment to continually develop the robustness of our diversity and inclusion programme to strengthen and support Ascential's welcoming and equitable working environment.

The fluid nature of the worldwide pandemic and its management makes it impossible to be precise about the short-term outlook for the Company, but we take significant comfort that we pivoted our strategy to become a global leader in digital commerce. We remain ready to run our market-leading events as and when restrictions on face-to-face gatherings are lifted and the economics of running events are positive. We are confident that Ascential is well positioned to execute its strategy based on the strength of our platform, organisation and balance sheet."

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.

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 Digital Commerce data, analytics and managed services brands Edge by Ascential, Yimian and 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 & Policy Segment.

Contacts

Financial summary

1 Refer to the glossary of Alternative Performance Measures.

Operating Review

Introduction

For almost all businesses and for our society in general, the last six months has been a period defined by the unprecedented challenges of COVID-19 and social unrest. I am pleased to say that not only has Ascential performed with resilience, but that our people have also faced these testing conditions with fortitude, dedication to our customers and unwavering respect for their colleagues. Additionally, we took swift action, such as management pay reductions and adoption of the UK furlough scheme (supplemented to ensure employees received no reduction in pay), to minimise the prospect of job losses and financial hardship for our people, while applying and funding the same standards for outsource partners, such as our London office cleaning staff. We also made a raft of content available free of charge to the business communities that we serve.

Our key priorities have been:

1. Supporting our people to ensure they come through this pandemic secure in their physical and mental health.

2. To position the Company to continue to execute against our strategy.

3. To protect the integrity and long-term value of our product brands. "Super-serving" our customers and contributing to our wider industry has been key to reinforcing the value of our long-term partnerships. Additionally, our people understand the importance of our services in helping these customers to survive and even thrive.

4. Agreeing a constructive path forward with our banking partners, while mindful of the value of the investment our shareholders have made in our Company.

5. Implementing the necessary steps to ensure we remain ready to grasp opportunities going forward, while being realistic about the post COVID-19 economics.

6. Adapting the formats, environments and structure of our live event products.

Financial Results

In terms of financial results, the impact of the pandemic-related lock down on both our events and the Marketing Segment generally has caused revenues to decline by 39% and profits to decline by 74% year on year. On an underlying basis that excludes the impact of deferred and cancelled events, our revenues were roughly flat year on year. Adjusted EBITDA grew by 26% on an underlying Organic basis, reflecting the growth in our Digital Commerce sub-segment and the decisive cost control measures we have implemented this year. The overall flat revenue performance in the period reflects, in the absence of events, over 80% contribution from digital subscriptions and platforms business, which grew 10%, on a proforma basis, offset by advisory business that declined by 24%.

Product Design delivered good growth of 3%, reflecting the high proportion of WGSN's revenues secured by subscription, despite a significant decline in its Mindset advisory revenue. The successful launch of Food & Drink in June, one month ahead of schedule, is testament to the focus of the brand in further expanding the reach of its offering.

The Marketing segment, excluding the Cannes Lions festival, declined by 21%, reflecting the condition of the segment's core customer base: the marketing and advertising community, unarguably one of the most challenged parts of the economy throughout the crisis. Pandemic-related restrictions resulted in the difficult decision to cancel the 2020 edition of Cannes Lions. Nevertheless, we continued to engage with our customers and the wider marketing community through the digital-only Lions Live week of content, attracting an audience of over 60,000, and plans are already underway to make the 2021 festival the most dynamic and engaging yet.

The Sales segment, excluding Money20/20 Asia and Europe (cancelled and deferred to September respectively), delivered strong proforma growth of 17%, or 21% focusing on the Digital Commerce brands alone. In the past months it is apparent that COVID-19 restrictions have driven accelerated consumer adoption of online channels, placing ever more reliance on our expertise and agility in responding to our customers' demands for insight and operational excellence. For example, online penetration of US retail advanced further in the first half of this year than it did between 2009 and 2019. It's now clearer than ever that these brands, particularly with the successful conclusion of Edge's integration programme in June, are strongly positioned to take advantage of this dynamic.

We should pause to highlight the innovation that our brands have displayed in the period, considerably increasing the output and frequency of insights provided to both existing and potential customers, via podcasts, webinars and other original digital content, often achieving record levels of engagement with their audience. We also believe the greater reliance on remote payment technology, observed in recent months, points to the continued vibrancy of Money20/20's customer base. Furthermore, the leading positions of both Money20/20 and Cannes Lions in their respective markets underpins their prospects as must-attend events, beyond the current physical restrictions imposed by the pandemic, and will continue to drive their evolution.

Management and Board

We have ambitious growth plans and we have a multitude of opportunities to further our strategic aims. As our Digital Commerce sub-segment becomes an ever-larger portion of our company and as the products within this sub-segment evolve, we are delighted that Chip DiPaula and Patrick Miller, co-founders of Flywheel Digital, have agreed to jointly lead the sub-segment going forward. They have made a huge contribution so far to Ascential, both leading in the high-growth Flywheel Digital brand but also contributing across the wider company and these are critical new leadership appointments. They will be joined by Deren Baker who will take over responsibility from me for Edge. Deren was the CEO of Jumpshot and is well known and respected within our company and the eCommerce industry.

Finally, to reflect the increasing importance we place on the development of our business in China, we are delighted to welcome Charles Song to the board as a new Non-Executive Director. Charles is the CEO and founder of the Chinese technology business LinkLogis. He brings over 25 years' experience in senior roles with firms such as JP Morgan Chase, HSBC and China Resources Bank. We are very pleased that Charles' appointment not only improves the mix of our board's skills but also underlines our commitment to adding the appropriate experience required to help us achieve our strategy that comes from Ascential's programme of diversity and inclusion.

Outlook and current trading

This crisis has created an opportunity for us to run harder at our strategic plans. Over the next 18 months we will focus on:

1. Accelerating investments to drive strong organic growth in our Digital Commerce businesses and continued bolt on investments.

2. Continuing to streamline our company, to both release capital to fund these investments and to further strengthen our balance sheet.

3. Making the necessary changes to ensure our marquee events of Cannes Lions and Money20/20 bounce back strongly, subject to the easing of local restrictions and stabilisation of end market conditions.

4. Continuing the new customer segment expansion for our WGSN business unit.

Clearly, the impact on our business in 2020 from COVID-19 has been significant. While we do not expect an immediate recovery in underlying trading conditions it is also apparent that a number of our brands remain well positioned, arguably more so than six months ago, to benefit from the accelerated shift towards eCommerce that we have witnessed, particularly clearly, in the past period. Despite entering the year in an already strong financial position we reinforced our balance sheet through the early suspension of the share buy-back programme and cancellation of the 2019 final dividend payment. These factors, combined with a refinancing in January 2020 that provides considerable liquidity headroom and the agreed relaxation of banking covenants over the next twelve months, leave us well placed to take advantage of the clear opportunities for growth both today and in the coming years.

Segmental Review

Product Design Segment

Through WGSN, a leading global supplier of trend forecasts, market intelligence and consumer insight, we help customers understand the future demands of consumers. Information is delivered principally through digital subscriptions (over 90% of revenue) to around 6,500 customers in over 90 countries. This segment had a solid six months overall, growing revenue organically by 3%, underpinned by its subscription base, which more than offset the decline in its Mindset advisory business.

For subscription revenues, which grew 6% on a proforma basis, the take-up of non-apparel focused subscriptions, such as Insight and Beauty continues to be the chief engine of growth. Subscription renewal rates, after starting the period at particularly strong levels, dipped during the height of COVID-19 restrictions, but showed signs of recovery towards the end of the half and we ended the half with c.90% renewal rates. New business, generally a smaller contributor to growth, saw similar patterns of performance across the period. WGSN also achieved a record Net Promoter Score from its subscribers in June 2020, reflecting the importance of the information we are providing to customers and the market position of our brand, boding well for both future growth and renewal rates.

In June, ahead of schedule, we successfully launched our new product addressing trends in the Food & Drink market, as part of our continuing focus to expand our offerings, utilising data from other Ascential products (such as Edge) and following the launches of Beauty and Trend Curve in 2019. Beauty has now exceeded 300 customers, growing billings to c.£3m, while our alternative data offering, serving the Financial Services community, also continues to expand.

Adjusted EBITDA grew well in the period, with the margin expanding despite investment in the Food & Drink product launch.

Marketing Segment

The Marketing segment was significantly impacted by the cancellation of the 2020 Cannes Lions festival, as a result of the widescale restrictions arising from the COVID-19 pandemic. The resulting economic conditions, particularly impacting the marketing community, have also had an adverse impact on MediaLink's advisory business. Excluding the Lions festival, the Marketing segment revenue declined by 21% overall and made a loss at the EBITDA level, notwithstanding the continuing strong performances of our digital subscription products WARC and The Work.

Cannes Lions is the global benchmark for creativity in the branded communications industry through both the main festival in June as well as digital products and consultancy. In the absence of the 2020 edition of the festival, Lions revenue in the period related chiefly to The Work, where its subscription-driven revenues continued to show good growth. In terms of the 2021 festival, plans are already underway, with a majority of both delegates and sponsors that booked for 2020 rolling forward their commitments to the 2021 edition such that we take forward over £13m of forward bookings to the 2021 event. In place of the festival, in June, Lions launched Lions Live: a week-long broadcast series of interviews with industry leaders, masterclasses and other original digital content that attracted an audience of over 60,000 from the marketing community. Lions Live attests to the brand's appeal as the focal point for the creative industry and gives us confidence that Cannes Lions will rebound strongly when economic and pandemic conditions, ideally including a healthcare solution, permit.

MediaLink, the strategic advisory firm serving the media and marketing ecosystem, experienced challenging trading conditions from the onset of the COVID-19 pandemic, with impacts on retainer levels, and reduced project and search activity, given the extraordinary pressures faced by its customers. Additionally, although events revenue is usually only around 10% of MediaLink's income, the absence of the Cannes Lions festival, a major platform for the industry, reduced the opportunity to sign new business. Towards the end of the period, the business saw signs of a recovery with several significant projects commissioned, suggesting the transformational pressures the pandemic has placed on the industry are beginning to drive demand for MediaLink's expertise. In addition, June saw the launch of the MediaLink Beach Online delivering tailored activation meetings to clients and a curated series of insights from senior figures engaging the wider industry.

WARC, which helps brands, agencies and media platforms benchmark marketing effectiveness, recorded strong, subscription driven, revenue growth underpinned by the performance of renewals throughout the period. In common with other brands WARC experienced record levels of engagement across its digital content with, for example, subscriber usage of WARC material growing by 29% in H1. WARC also expanded its collaboration with other Ascential brands in the period, particularly Lions Live, where it launched the Creative Effectiveness Ladder, a universal code to unlock successful marketing strategies, and supported several insight sessions delivered to Edge's customers, including the Digital Commerce Accelerator summit focusing on the development of eCommerce in China.

Sales Segment

The Sales Segment comprises the Digital Commerce sub-segment (comprising Edge by Ascential, Flywheel Digital and Yimian) and the non-Digital Commerce sub-segment (comprising Money20/20, WRC and Retail Week). Because of the impact of the pandemic on our ability to run live events, the revenue of the Sales Segment declined in total by 26% and the profits by 63%. The performance of the two sub-segments is set out below.

Digital Commerce

The Digital Commerce sub segment grew revenues by 19% on an Organic basis and 21% including Yimian and Indigitous on a Proforma basis. Profits were up strongly reflecting a balance of continuing investment in expansion offset by the flow through of the high levels of revenue growth in the period.

Through Edge we deliver eCommerce data, insights and advisory, comprising performance measurement, digital shelf optimisation, pricing & promotion and retail strategy expertise. Edge enjoyed solid trading, in terms of billings, across the period overall. We were pleased to see Digital Shelf, Edge's largest product, return to double digit billings growth. In terms of its integration programme, the business has now completed all major customer-facing elements of the programme, with the recent launches of both Market Share 2.0 and Digital Shelf 2.0 to customers in Q1 ahead of schedule. These new systems have been critical in handling massive increases in eCommerce data flows through the pandemic lockdown period and reacting quickly to rapidly evolving customer needs. With customer-facing systems now in place our focus now turns to business as usual, optimising the profitability of the products which has grown well in the period.

Overall, Edge acquired 32 new customers in the period with two significant global customer agreements with Coca-Cola and Adidas. It also generated new sales in partnership with Yimian in China, a market where we can now provide market share insight for our global brand customers. Yimian exhibited extremely strong growth in the period and added 10 new customers, including Unilever China and Reckitt Benckiser.

Through Flywheel Digital we provide managed retail and media services to brands on Amazon with a growing presence on the new and expanding Walmart, Instacart and Kroger platforms. In February 2020 we expanded coverage into the active lifestyle category, with the acquisition of Indigitous, an Amazon-focused managed service provider based in Seattle. Flywheel Digital recorded extremely strong growth in the first half, adding 33 new customers, continuing the roll-out of services to customers on Walmart, expansion in Europe, India and Japan and onboarding clients to the Instacart and Kroger platforms. An additional contributor of growth has been the underlying surge in consumers' eCommerce activity, which has reached record levels during the period of the COVID-19 pandemic, driven particularly by demand for personal health and household goods via online channels.

Non-Digital Commerce

Through Money20/20 we are the leading point of reference for digital payments product strategy worldwide. Our congresses, which focus on the evolution of consumer payment and financial services across multiple channels, have been significantly disrupted this year by the physical restrictions imposed by the COVID-19 pandemic. Neither the Asian nor European events were able to run in the first half, and we took the decision to cancel the 2020 Asia event, the smallest of three regional editions, in accordance with the advice of the local authorities in Singapore. For the two larger events, in consultation with each venue, size restrictions have been applied to delegate volumes to allow for appropriate physical distancing on site: reducing the Europe event, deferred to September, to a maximum of 4,000 attendees (having attracted over 6,000 last year) and the US event, in October to 6,000 (from around 10,000 last year). We are closely monitoring the developing local market conditions both in Europe and the US, conscious not only that large-scale events need to be permitted by the authorities but that our delegates and sponsors must have the appetite to travel and attend.

In the absence of physical events in the first half, customer engagement has focused on the brand's digital content, achieving record levels of audience reach. As an example, The Money Pot podcast, which addresses the current forces and ideas shaping the future of money, achieved downloads over five times the level seen at its launch in 2019. Looking forward into 2021 we are taking the opportunity to streamline Money20/20 and will focus our efforts on running the European and US editions. The scale of rebound in 2021 will depend on the global economy, scientific developments and customers' propensity to travel and attend large scale events and in this regard we are fortunate that Money20/20 is the most significant annual event in our industry and that payments technology continues to be an attractive end market.

The smallest element of the Sales Segment consists of Retail Week and World Retail Congress (WRC) serving the needs of UK and Global retailers and their ecosystem. WRC Rome has been cancelled for 2020 and will run in April 2021 and Retail Week Live has been deferred to October, while the subscription business of Retail Week continued to experience revenue declines driven by the weak underlying retail environment, which has been further impacted by the pandemic restrictions.

Built Environment & Policy

The Built Environment & Policy Segment comprises the Groundsure, Glenigan and DeHavilland digital information products. Revenue for the six months declined by 7% to £16.4m, due to the two-month hiatus for property transactions in the UK impacting Groundsure.

Groundsure is a leading provider of environmental risk data to the UK property market. In January, Groundsure acquired Mining Searches UK, a specialist provider of coal mining risk reports that complements their own expertise in non-coal reports, with a joint product launch scheduled for the second half. Groundsure grew strongly in Q1, supported by an active UK residential property market following the December 2019 general election. However, from late March housing transactions reduced sharply as the COVID-19 restrictions took hold, impacting Groundsure's revenue performance. The latter part of Q2 saw an improvement in residential transactions after the property market reopened in May, with volumes in recent weeks reaching historical highs.

Glenigan, a leading provider of construction project sales leads, industry data, analysis, forecasting and company intelligence grew steadily in the period. This was underpinned by solid subscription renewals, although new business, both subscriptions and bespoke, was impacted adversely by the extremely low activity levels in the UK construction industry during the pandemic lock-down period.

Lastly, DeHavilland, a leading provider of political intelligence and monitoring services in the UK and EU, also achieved steady growth. Like Glenigan this was supported by subscription renewals, with weaker new business reflecting the focus of government activity in the period on combating the pandemic as opposed to broader policy initiatives.

Financial Review

Overview

The majority of Ascential's revenues come from robust digital subscriptions and platforms and high repeat advisory revenue streams. However, the Company derives 25% of its revenue from live events, and 8% from its Cannes Lions awards benchmark product. As a result of the impact of COVID-19 restrictions, the Company cancelled the 2020 edition of the Cannes Lions festival and its associated regional events, which comprised just over half total revenues in the Marketing Segment in 2019. Additionally, we have cancelled Money20/20 Asia and RWC and rescheduled the Money20/20 Europe and Retail Week Live events from H1 to H2.

While our results for the first half have demonstrated the strength and resilience of our revenues from digital subscriptions and platforms, the impact of COVID-19 related restrictions has been significant on our events revenue lines and the profits of the Company as can be seen in the table below.

Segmental results

Revenue

The Company benefits from diverse revenue streams ranging from digital subscriptions to live events to advisory. Most of these revenue streams have recurring characteristics and benefit from our focus on customer retention.

The unprecedented events stemming from the COVID-19 pandemic have resulted in a substantial impact on revenue in the period which reduced to £144.3m (H119: £236.2m), a decrease of £91.9m or 38.9%, due largely to the cancellation of the Cannes Lions 2020 festival and the rescheduling of Money20/20 Europe to September. Adjusting for cancellations, deferrals, currency impacts and acquisitions, revenue reduced by 0.3% on an Organic basis, with good growth from the Product Design Segment and the Sales Segment offset by declines in the Marketing and Built Environment & Policy Segments. On a Proforma basis, revenue grew at 0.6%, reflecting the underlying growth of Yimian, which was acquired in December 2019.

The following table of revenue by type illustrates the resilience of revenue from Digital Subscriptions & Platforms in particular within the Digital Commerce sub-segment:

Adjusted EBITDA

Adjusted EBITDA reduced by 73.8% to £20.1m (H119: £76.7m), impacted heavily by the cancellation of Cannes Lions 2020 and the rescheduling of Money20/20 Europe, while the Adjusted EBITDA margin reduced to 13.9%. Adjusting for these cancellations and deferrals, Adjusted EBITDA grew by 26.3% on an Organic basis, or 34.0% on a Proforma basis, driven by the operational leverage within Flywheel Digital and WGSN combined with their revenue growth. We saw good margin growth not just in the Product Design Segment but also in Built Environment & Policy despite its revenue decline, although overall the EBITDA margin was impacted negatively by the cancellation of Cannes Lions 2020 and deferral of Money20/20 Europe.

In order to mitigate the impact of both event cancellations and deferrals as a result of COVID-19 restrictions, we suspended the share buy-back programme and the 2019 final dividend, made a temporary reduction of 25% in the Executive Directors' salaries and Non-Executive Director fees and cancelled the previously proposed 2020 annual salary increases across Ascential. We also agreed temporarily reduced salaries with our Executive Team and our most senior employees throughout the Group and utilised the UK Government's Coronavirus Job Retention Scheme to preserve the roles of approximately 200 colleagues working on events and in other impacted parts of our business. To ensure we are right-sized for the future economic headwinds we reluctantly took the decision to make just over 110 roles redundant in May.

In combination with reductions in variable compensation (bonuses and commissions) we have now made savings totalling £40m in addition to savings that flow naturally from cancelled events. Our objective continues to be to balance a near-term cost focus with the importance of preserving and nurturing Ascential's market leading positions and capabilities and its ability to deliver a strong rebound in 2021.

Reconciliation between Adjusted EBITDA and statutory operating (loss) / profit

Adjusted EBITDA is reconciled to statutory operating (loss) / profit as shown in the table below:

Exceptional items

The charge for exceptional items included in H120 totalled £61.2m (H119: £8.4m) as set out in the table below and further explained in note 5.

The charge for deferred contingent consideration of £55.8m (H119: £4.3m) reflects the expectation of further significant outperformance of Flywheel Digital in 2020 and 2021. Flywheel Digital accounts for £53.1m of the total charge of which £13.8m is attributable to continued employment of the founders and is therefore disclosed as employment costs in the period.

Restructuring costs represent the one-off expenses of the redundancy programme described above in order to right-size our future cost base for the economic headwinds we expect to arise from the COVID-19 related restrictions imposed around the world. Acquisition transaction and integration costs comprise integration costs for Yimian and Edge as well as diligence and legal fees for the acquisitions of Mining Searches UK and Indigitous early in 2020.

Share-based payments

The total credit for share-based payments in H120 of £1.6m (H119: charge £4.3m) reflects changed expectations on the vesting of PSP awards due to the expected performance of the Group versus the target performance conditions.

Finance costs

The Adjusted net finance costs for H120 were £8.2m (H119: £5.8m) as set out below.

The net interest payable on the Group's borrowings was £3.6m (H119: £3.2m) with the increase due to the higher levels of debt held in the period as a result of securing liquidity throughout the COVID-19 pandemic. The increase in the unwind of the discount on deferred and contingent consideration totalling £3.9m (H119: £2.6m) is driven by the revaluation adjustment made in 2019 in respect of Flywheel Digital.

In addition to the Adjusted net finance costs above, we have also included in Adjusting items a charge of £1.9m in respect of the write-off of unamortised arrangement fees upon early refinancing of our 2016 debt facilities in January 2020 and the subsequent covenant amendments agreed in April 2020.

Taxation

The Effective tax rate on Adjusted PBT has been impacted by a shift in profits; away from the UK (taxed at 19%) towards the higher tax jurisdiction of the US (taxed at 26%). Discrete items in the period, namely the impact of the UK rate change, have given rise to the net credit for the period.

Cash tax paid was £2.5m (H119: £3.1m) and the Group continued to benefit by £1.0m (H119: £4.6m) 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 £60.7m (December 2019: £42.7m) relating to UK and US losses, accelerated capital allowances and US acquired intangibles including the impact of deferred and contingent consideration. This asset is expected to convert into cash savings over the next ten years with the majority being recovered over the next three years. Meanwhile our deferred tax liability amounted to £23.5m (December 2019: £22.9m) and related to the amortisation of non-deductible acquired intangibles and is not expected to convert into cash.

Foreign currency impact

The Group's reported performance is sensitive to movements in both the Euro and US dollar against pounds sterling. In the first half, sterling weakened by 2.7% against the US dollar and 1.5% against the Euro compared to H119 as shown in the table below:

When comparing H120 and H119, changes in currency exchange rates had a favourable impact on revenue and Adjusted EBITDA of £0.6m and £0.3m respectively.

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.

Jumpshot

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

Mining Searches UK

On 2 January 2020, we acquired Mining Searches UK, the country's leading specialist in historical mining risk for £2.6m in order to build out our mining search product offerings for our customers. Mining Searches UK has been fully integrated into Groundsure in our Built Environment & Policy Segment.

Indigitous

In February 2020, we expanded into the active lifestyle category through the acquisition of Indigitous, an Amazon-focused managed service provider based in Seattle for £2.2m. Indigitous has been integrated into Flywheel in our Sales Segment.

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, of which £0.5m was invested as equity and £7.5m as a convertible loan in the first half, which we expect to convert into equity in due course.

Flywheel Digital

The expected significant outperformance of this 2018 acquisition versus our original expectations (see note 5) results in a significant increase in deferred consideration. We have agreed the option, utilisable at our discretion, to pay up to 75% of this future deferred consideration in Ascential shares.

Detailed information on acquisitions in the period can be found in note 12 on page 34.

Deferred and Contingent 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 earn out to both the post-acquisition performance of the acquired company and the continuing employment of the founders. Accounting for the earn out is complex and requires considerable judgements to be made about the expected future performance of the acquired company at the point of acquisition and at each subsequent balance sheet date - especially difficult in the type of high growth, early stage companies that Ascential typically acquires.

The earn out is accounted for in three ways:

1. A liability for Deferred and Contingent Consideration is established on the balance sheet at the point of acquisition based on that element of the earn out which is not dependent on the continuing employment of the founders. This amounted to £111.1m at 30 June 2020 (31 December 2019: £103.2m). Any change in estimate is recorded as an exceptional item and this amounted to a charge of £39.4m in H120 (H119: credit of £3.5m) as a result of the very strong performance of Flywheel Digital.

2. This liability is discounted to present value using the Company's cost of capital with the reversal of this discount being recorded within the interest charge. This amounted to a charge of £3.9m in H120 (H119: £2.6m).

3. Finally, that element of the deferred and contingent 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 £16.4m in H120 (H119: £7.8m).

Cash flow

The Company generated Adjusted operating cash flow of £12.6m in H120 (H119: £78.1m) being a 63% operating cash flow conversion (H119: 102%). The outflow from working capital versus the inflow in the prior year period was attributable to a combination of growth in Flywheel Digital and an increase in the time taken to collect receivables due to COVID-19 related lock downs.

Capex increased to £11.0m from £8.8m, while tax paid on profits reduced to £2.5m from £3.1m due principally to overpayment of tax in the prior period. As a result, the Company generated free cash outflow of £0.9m (H119: £66.2m inflow), a conversion of rate of negative 4% (H119: positive 86%).

The consolidated cash flow statement and net debt position is summarised below.

Earnings per share

Adjusted diluted earnings per share of 0.4p per share for H120 is below the 11.5p per share recorded for H119 driven primarily by the absence of Cannes Lions and Money20/20 Europe in the period. Total diluted loss per share of 15.1p per share is below the H119 earnings figure of 5.2p being further impacted by the exceptional item of £53.1m for the revaluation of the Flywheel Digital earnout.

Returns to shareholders

Dividends

The Board normally targets a dividend payout ratio of 30% of Adjusted profit after tax split one-third following interim results and two-thirds following final results. However, as a result of the COVID-19 pandemic, the ensuing cancellation of the Cannes Lions festival and consequent impact on profits and debt covenants, the Board decided not to declare the previously announced final dividend for 2019 and has not declared an interim dividend for the period (H119: 1.8p).

Share repurchase programme

At the start of the period after consistently strong levels of cash flow conversion, combined with disciplined capital allocation, and following the sale of the Jumpshot investment in January 2020, our leverage was well below historic levels. 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 and having reviewed our capital allocation policy, the Board decided to utilise part of its authority to make on market purchases of our ordinary shares. We originally anticipated spending up to £120m in a share repurchase programme but suspended this in March 2020, having repurchased shares worth £9.2m, as the impact of the COVID-19 pandemic on our 2020 financial performance became clear.

Strong balance sheet and access to liquidity

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.

In January 2020, we entered into a new 5-year multi-currency revolving credit facility ("RCF") of £450m with an accordion to raise further debt amounts up to the greater of £120m or 150% of EBITDA. The maturity of the facility may be extended for up to two further one-year terms subject to individual lender approval. At 30 June 2020, the borrowings were subject to interest at 1.60% over LIBOR. 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. At 30 June 2020, £396.3m of the new RCF had been drawn. The previous term loan facilities and £95m RCF held were fully repaid and cancelled in January 2020 (at 31 December 2019 £283.8m of term loan facilities were held and none of the £95m previous RCF had been drawn).

To address the uncertain business environment and ensure maximum flexibility in the medium term, across a broad range of business planning scenarios including a scenario in which no events take place in 2020, we agreed the following covenant amendments with our banking group in April 2020:

• At the December 2020 testing point - a full waiver of the leverage and interest cover covenants subject to a minimum liquidity of £100m at 31 December 2020.

• At the June 2021 testing point - the leverage covenant ratio limit has been relaxed from 3.25x to 3.75x to provide greater flexibility in a scenario in which no events take place in 2020.

Our covenant leverage at 30 June 2020 was 1.8x, which is well within our banking covenants. This was lower than the published leverage of 3.4x due to the application of pre-existing covenant adjustments for rescheduled events.

Going concern

There continues to be uncertainty surrounding the resolution of the COVID-19 outbreak and the impact to the wider global economy. The directors have considered a number of stressed scenarios and taken into account the strong condition of our balance sheet, our recent refinancing, the diversification of our business models and proactive steps taken already to provide covenant headroom and adjust our cost base as well as further potential mitigating actions. The directors therefore continue to believe that the preparation of these condensed consolidated interim financial statements should be on the basis of a going concern. Further details including of the various assumptions for the severe but plausible scenarios considered in coming to this conclusion are presented in note 1.

Condensed Consolidated Statement of Profit and Loss

Condensed Consolidated Statement of Other Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

* Restated for initial application of IFRS 16 - 2018 only.

Condensed Consolidated Statement of Cash Flows