TIDMASCL
RNS Number : 9329Q
Ascential PLC
25 February 2019
25 February 2019
Ascential plc
Audited results for the year ended 31 December 2018
Focus on digital economy driving strong growth
London: Ascential plc (LSE: ASCL.L), the global, specialist
information company, today announces results for the year ended 31
December 2018 in line with expectations.
A year of significant strategic progress
-- Business model now in place to enable customers to navigate the digital economy.
- Clear strategic focus on the consumer value chain and high
quality recurring revenue streams.
- Operating model reflects customer needs: Product Design,
Marketing and Sales.
- Sale of Exhibitions and allocation of capital towards
high-growth acquisitions.
-- Segments performing in line with expectations.
- Product Design: growth from recently launched products and
segment expansion.
- Marketing: a year of transition, with successful re-set of
Cannes Lions and MediaLink realigned to long term brand
relationships.
- Sales: continued strong performances from Money20/20, Edge and
Flywheel Digital.
-- Investment in brands to support long-term sustainable growth.
- Launches of Money20/20 Asia and China to establish leading
global fintech platform.
- Formation of Edge: specialist ecommerce analytics and advisory
offering.
Financial highlights
-- Strong revenue growth on continuing operations to GBP348.5m (2017: GBP292.9m).
- Reported growth of 19.0%.
- Growth of 6.3% on an Organic basis, 9.6% on a Proforma
basis.
- Key drivers of Proforma growth were the Sales segment (30%)
and Product Design segment (7%).
-- Solid Adjusted EBITDA growth to GBP101.8m (2017: GBP94.7m).
- Reported growth of 7.5%.
- Growth of 3.8% on an Organic basis, 12.5% on a Proforma
basis.
- Margin at 29.2% (2017: 32.3%) with impact of higher growth
acquired businesses in investment phase, partly offset by a net
positive impact from operational leverage.
-- Reported operating profit from continuing operations of GBP40.2m (2017: GBP31.3m) up 28.4%.
-- Further strong growth in earnings per share with Adjusted
diluted EPS on continuing operations of 15.3p up 12.5% (2017:
13.6p) and Reported diluted EPS on total operations of 51.4p (2017:
4.4p).
-- Continued focused capital allocation - disposal of
Exhibitions and strong cash generation resulting in closing net
debt leverage of 1.1x (2017: 2.3x) after continued investment in
the business and M&A. Strong operating cash flow conversion on
continuing operations of 105% (2017: 104%).
-- Recommended final dividend of 3.9p, making a total dividend
of 5.8p for the year (2017: 5.6p) up 3.6%.
Duncan Painter, Chief Executive Officer, commented:
"2018 was an important year for Ascential. We delivered another
year of strong growth, reflecting the value that customers place on
our critical information. We are now at an advanced stage of our
multi-year strategy to support global brands as they navigate
fast-paced change in the digital commerce economy. Our evolution in
2018 was supported by three high-growth acquisitions, partially
reallocating the proceeds of the Exhibitions business.
Our focus has now shifted to integrating and investing in our
unique information services to continue to give our global customer
base access to the critical information they need. We have taken
action to return our Marketing segment to growth in 2019, following
the successful re-set of Cannes Lions in 2018, and the realignment
of MediaLink to focus on large brand reviews and projects. We
remain well placed to enhance our market leadership in 2019 and to
pursue our medium-term target of double-digit growth."
Contacts
Ascential plc
Duncan Painter Chief Executive Officer +44 (0)20 7516 5000
Mandy Gradden Chief Financial Officer
Media enquiries
Edward Bridges FTI Consulting LLP +44 (0)20 3727 1000
Matt Dixon
Jamie Ricketts
Ascential will host a presentation for analysts and investors at
9.00am on Monday 25 February 2019 at the offices of Numis
Securities at The London Stock Exchange Building, 10 Paternoster
Square, London EC4M 7LT. The presentation will also be webcast live
at 9.00am from 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.
Financial highlights - continuing operations
31 December Growth
2018 2017 Reported Organic1 Proforma2
% % %
GBPm GBPm
Revenue
Product Design 77.8 73.6 6% 7% 7%
Marketing 116.3 110.6 5% (8%) (6%)
Sales 120.9 78.0 55% 25% 30%
Built Environment &
Policy 34.3 30.7 12% 12% 12%
Intercompany sales (0.8) -
------- ------- -------- -------- ---------
348.5 292.9 19.0% 6.3% 9.6%
------- ------- -------- -------- ---------
Adjusted EBITDA3
Product Design 28.1 22.5 25% 27% 27%
Marketing 38.9 48.1 (19%) (23%) (22%)
Sales 36.9 29.3 26% 19% 49%
Built Environment &
Policy 14.0 9.1 53% 53% 53%
Central costs (16.1) (14.3) (12%) (12%) (12%)
------- ------- -------- -------- ---------
101.8 94.7 7.5% 3.8% 12.5%
------- ------- -------- -------- ---------
Group Margin 29.2% 32.3%
Adjusted operating profit4 91.0 85.4 6.6%
Operating profit 40.2 31.3 28.4%
Profit before tax 28.9 19.9 41.7%
Adjusted diluted continuing
earnings per share 15.3p 13.6p 12.5%
Total dividend per share 5.8p 5.6p 3.6%
Operating cash flow5 107.2 98.1 9.3%
Operating cash flow
conversion 105% 104%
Net debt6 (109.8) (271.5)
Leverage 1.1x 2.3x
1 Organic growth is calculated to provide a more meaningful
analysis of underlying performance than Reported growth. The
following adjustments are made: (a) constant currency (restating
FY17 at FY18 exchange rates), (b) event timing differences between
periods (if any) (c) excluding the part-year impact of acquisitions
and disposals. There were no event timing differences in 2017 or
2018. See the reconciliation in the Alternative Performance
Measures section below.
2 Proforma growth is calculated in a similar way to Organic
growth but the calculation assumes that all acquisitions and
disposals in 2018 or 2017 took place on 1 January 2017. See the
reconciliation in the Alternative Performance Measures section
below.
3 Adjusted EBITDA is IFRS operating profit before expensing (a)
depreciation of tangible fixed assets and amortisation of software,
(b) exceptional items, (c) amortisation of acquired intangible
assets, (d) impairment of tangible and intangible assets and (e)
share-based payments.
4 Adjusted operating profit is IFRS operating profit before
expensing (a) exceptional items, (b) amortisation of acquired
intangible assets (c) impairment of and intangible assets and (d)
share-based payments.
5 Operating cash flow is cash generated from Continuing
operations before exceptional items. Operating cash flow conversion
is this measure of cash flow divided by Adjusted EBITDA from
Continuing Operations. See the reconciliation in the Alternative
Performance Measures section below.
6 Leverage is Net debt divided by Adjusted EBITDA from both
Continuing and Discontinued Operations.
Chief Executive's statement
Continued record of organic growth
Our strategy and focus on the digital economy has delivered
another year of strong growth in 2018, further amplified by recent
high growth acquisitions. Revenue from continuing operations was
GBP348.5m (2017: GBP292.9m), a reported growth of 19.0% and an
Organic growth of 6.3% or 9.6% on a Proforma basis. We have grown
EBITDA by 3.8% on an Organic basis and by 12.5% on a Proforma basis
and delivered an Adjusted EBITDA margin of 29.2% (2017: 32.3%),
allowing for the acquisition of higher growth, lower margin
businesses whilst continuing our planned investment to support our
market leadership in our core markets.
Operating model based on customer needs
Following the completion of the disposal of the Exhibitions
business in July 2018, we adopted a new operating model to align
with our strategy of serving the needs of customers in Product
Design, Marketing and Sales:
-- Product Design: global trend forecasting and insight (WGSN).
-- Marketing: global creative benchmark, effectiveness
measurement and strategic advisory (Cannes Lions, WARC,
MediaLink).
-- Sales: global ecommerce data, analytics and managed services,
Fintech consumer payments and retail intelligence (Edge, Flywheel
Digital, Money20/20, RWRC).
Ascential also powers political, construction and environment
intelligence brands DeHavilland, Glenigan and Groundsure, which
form a fourth operating segment, Built Environment &
Policy.
The shape of our business going into 2019 has directly benefited
from our transformation with a higher mix of subscription based
revenue streams with faster growth levels.
A year of developing our critical capabilities
Our strategic goal is to be the specialised information provider
that ensures our customers, who are primarily organisations who
create and distribute consumer products, are able to win and thrive
in the digital commerce economy.
We are confident that we now have the critical capabilities we
need in our business to achieve our strategic goals. We have built
a unique information set across the lifecycle of Product Design,
Marketing and Sales to enable our customers to win in the digital
commerce economy. We will continue to review how we build out our
capabilities to better serve our customers in China, and although
we believe we can develop our existing capabilities through organic
investment, we continue to review potential acquisition
opportunities to accelerate and provide further unique information
as part of this expansion.
In 2017, we set out the critical functionality we needed to
develop to position us as the most advanced and best positioned
company in this space and we have made good progress in executing
against this, particularly in the high growth Sales segment.
Customer Market leading products New product lines
capability
segment
Product
Design * WGSN trend forecasting - 16 categories * WGSN Insight - consumer trends
* WGSN Lifestyle & Interiors * WGSN Barometer - consumer insights
* WGSN Mindset * Coloro - colour system and tools
* WGSN Beauty - beauty trends
------------------------------------------------------------ ---------------------------------------------------------------
Marketing
* Cannes Lions - creativity benchmark * Cannes Lions - new segments (Sports and Creative
Strategy) launched
* The Work - digital platform on award winning creative
work * Cannes Lions Digital Pass - watch the Festival online
* WARC - digital platform for marketing effectiveness * WARC for Advertisers and Media Owners
* MediaLink - digital transformation and advisory for * CLX - next generation media marketing platform
media
------------------------------------------------------------ ---------------------------------------------------------------
Sales * Edge - total ecommerce
* Money20/20 - payments and fintech
* Edge - price & promotion
* Edge - retail insights
* Edge - market share
* Edge - digital shelf
* Flywheel Digital- managed retail services
* Flywheel Digital - Amazon Marketing Services
optimisation
------------------------------------------------------------ ---------------------------------------------------------------
Product Design
2018 was a successful year for our Product Design segment with
Organic revenue growth accelerating to 7%. Over the last few years,
we have launched a number of new products in our Product Design
sector and are now the clear market leader in trend forecasting in
all major product categories. This has provided us with a strong
foundation for our business and we have continued to maintain high
retention rates with our customers. Our newer products address
lifestyle and interiors, broader consumer trends, a colour system,
emerging market coverage and consumer insights. These, together
with our new WGSN Beauty trends product for 2019, put us in a
strong position for further growth in this segment.
Marketing
As previously announced, 2018 was a challenging year for our
Marketing segment, with an Organic revenue decline of 8%. Our focus
in the second half of the year has been to position our Cannes
Lions and MediaLink brands to be able to return to growth in the
full year of 2019. Since the acquisition of WARC and the launch of
Cannes Lions' The Work and the Digital Pass, digital products today
make up over 10% of this segment's revenues. We expect to see
continued strong growth in these new digital product lines in
2019.
The event reset activity we undertook for the 2018 Cannes Lions
festival saw a record Net Promoter Score and the major agency
holding companies have all reconfirmed their support for the 2019
festival. MediaLink has continued its planned transition away from
retainer contracts with small digital publishing and adtech
organisations towards brand orientated work. A cost restructure was
implemented in the second half of 2018 to align with this
focus.
CLX is a new two-day summit for industry VIPs launched for
Cannes Lions 2019. It is designed around immersive and interactive
experiences with some of the world's most exciting media and
entertainment creators. We see this joint development between
Cannes Lions and Medialink as an enabler of 2019 growth.
Sales
2018 was a seminal year for building out our capabilities in the
Sales segment and we now have market leadership in most of the key
areas we identified as important for this segment.
Our Fintech consumer payments capability has been expanded
through the launch of two new geographies for our market-leading
platform Money20/20 in Asia and China. The overall platform has
continued to perform strongly with Organic growth of 37% in
2018.
We now have a comprehensive set of capabilities to help our
customers win in today's ecommerce-driven environments. During 2018
we launched Edge by Ascential, which delivers industry-leading
ecommerce driven data, insights and advisory services for brands
and retailers. Formerly BrandView, Clavis Insight, One Click Retail
and Planet Retail RNG, Edge by Ascential delivers the industry's
most accurate and actionable sales-driving data to support our
customers through the cycle of market share assessment, digital
shelf management, price & promotion optimisation and retail
insights. With the recent acquisition of Flywheel Digital, we can
now also provide our customers with a platform-driven total product
management service for both retail management and marketing
services promotion on the Amazon platform.
Built Environment and Policy
Our Built Environment and Policy segment continues to trade well
with revenue growth of 12% and an expanded Adjusted EBITDA margin
of 41%. There are no plans to proactively review any strategic
decisions for this segment in the medium term.
Strong balance sheet and focussed capital allocation
We continued to apply a rigorous capital allocation framework to
our business. This was evidenced through the recycling of capital
from the disposal of the Exhibitions business which was completed
in July 2018 for a total cash consideration (adjusted for cash
disposed and working capital) of GBP296.4m into higher growth
business investments and M&A.
The disposal allowed us to further focus on our strategic
priority of enabling customers to win in the digital economy and
has increased our capacity to invest in our target disciplines of
Product Design, Marketing and Sales. We have allocated part of the
capital released from the disposal of the Exhibitions business to
the acquisitions of WARC, BrandView and Flywheel Digital. Apart
from the potential to accelerate growth in China, and an ongoing
interest in strengthening the depth and quality of the unique data
we own, we are now focusing our efforts on the integration and
engineering of our own new products and therefore expect M&A
activity to be a less pronounced feature of the next stage of our
development.
We ended 2018 with a robust balance sheet that provides
flexibility and underpins our confidence for our prospects in 2019
and beyond.
A culture aligned to our future
We have a unique set of company beliefs and behaviours that are
ingrained in our people and ways of working worldwide. We aim to
think big and see the bigger picture to help our customers
translate insight into advantage. We are thought-provoking and
persuasive, always searching for a better way to help our customers
win. We encourage our teams to be visionary and confident, so that
we continue to define the way forward in these exciting new
markets.
As part of the work to consistently embed these values and
leadership beliefs across the group, we have continued to develop a
"One Ascential" culture across all brands and geographies. For the
first time, this year we ran a single unified employee engagement
survey globally which both evidenced our progress in developing our
people strategy, and enabled us to develop a clear plan to further
improve across all engagement areas in 2019.
We continue to evolve our operating model to align more
effectively with our strategy and we have adapted our reward model
to reflect the structure of our income, incentivising our teams on
long term sustainable value creation. We expect to continue
evolving the operating model during 2019 to further streamline how
we work.
Summary
2018 has been a critical year for our business. We have executed
our priority divestments as well as ensuring that we have built up
the critical capabilities we need to be successful going forward.
We have developed a unique information set across the lifecycle of
Product Design, Marketing and Sales and as we continue to join up
our information, teams and capabilities, we identify more
opportunities to help our customers. We can see a clear path to
achieving double-digit growth as we continue to help our customers
grow their business in the accelerating digital economy.
Our focus over the next 12 months will be on returning the
Marketing segment to growth, consolidating and integrating the high
growth acquisitions we have made, and leveraging the wider
potential of the unique information we own across Product Design,
Marketing and Sales.
Outlook
We are now at an advanced stage of our multi-year strategy to
support global brands as they navigate fast-paced change in the
digital commerce economy. Our evolution in 2018 was supported by
three high-growth acquisitions, partially reallocating the proceeds
of the Exhibitions business.
Our focus has now shifted to integrating our unique information
services to continue to give our global customer base access to the
information they need. We have taken action to return our Marketing
segment to growth in 2019, following the successful re-set of
Cannes Lions in 2018, and the realignment of MediaLink to focus on
large brand reviews and projects. We remain well placed to enhance
our market leadership in 2019 and to pursue our medium-term target
of double-digit growth.
Duncan Painter
Chief Executive Officer
22 February 2019
Segmental Review
Product Design segment
Revenue grew organically by 7% to GBP77.8m (2017: GBP73.6m),
with Adjusted EBITDA growing to GBP28.1m (2017: GBP22.5m) and
margin improving to 36%, from 31% in 2017.
WGSN, the Company's largest brand, is the leading global
supplier of trend forecasts, market intelligence and insight to the
fashion industry and other businesses in design-orientated consumer
markets. In 2018, it grew revenue by 7% on an Organic basis to
GBP77.8m, while retention rates remained strong at 92%. WGSN
continues to gain traction with products launched in recent years
such as our digital shelf offering (now sold to financial services
customers), the broader consumer trends product Insight (growing
over 80% to GBP5m of billings), brand sentiment tool Barometer and
new colour system Coloro. These not only provide new revenue
opportunities with existing customers but also broaden WGSN's
customer base beyond apparel - and a new initiative for 2019 is the
launch of a specific trend product for the Beauty industry.
Marketing segment
Revenue of GBP116.3m (2017: GBP110.6m) represented an Organic
decline of 8% (down 6% on Proforma basis) driven by Cannes Lions
and MediaLink. As a result, the Adjusted EBITDA fell to GBP38.9m
(2017:GBP48.1m), with margin reducing from 43% in 2017 to 33%.
Cannes Lions, is the world's largest and most widely recognised
international benchmark and festival for creativity in the branded
communications industry. Following extensive discussions last year
with key stakeholders, the 2018 festival featured important
changes, most notably a new awards structure that included the
retirement of three Lion awards and a reduction of over 120
sub-categories. Additionally, the festival was focused into a
five-day period (previously it was held over eight), a feature that
makes participation more cost effective for our customers. In 2018,
owing principally to the one-year withdrawal of Publicis and the
refreshed awards structure, revenues declined by 8%. The overall
revenue mix continued to move away from advertising agency holding
companies, towards brands, media platforms and consultancies.
Cannes Lions has three main revenue streams: award entries,
delegates, and partnerships and digital:
-- Award entries accounted for 37% of revenue. Volumes fell 21%
driven both by the one-year Publicis withdrawal and the retirement
of Lions awards and awards sub categories. Good levels of interest
in the new Lions such as Social & Influencer and Brand
Experience & Activation offset long established declines in
Print and Outdoor Lions categories.
-- Delegate passes accounted for 38% of revenue. Delegate
revenue declined in 2018 mainly as a result of reduced
participation by agency holding companies, including Publicis,
combined with the standardisation to a single five-day pass. A new
initiative in 2018 was the "Cannes Curated" product for major brand
groups.
-- Partnerships and digital revenues were 24% of Cannes Lions
revenues and grew 27% compared to last year. The strong growth was
driven by digital revenues and consultancy fees from the Creative
Leadership programmes that Cannes Lions undertook with three major
brands. The launch of The Work and Lions Digital Pass were
important steps to broaden engagement with the creative community
beyond the physical environment of Cannes. This, together with the
acquisition of WARC, further develops Cannes Lions year-round
digital revenue streams.
Overall, the changes to the Festival's format were extremely
well received by participants, resulting in an NPS of score 53, the
highest on record. This, together with development of the digital
offering, the launch of two new awards categories in 2019 and the
high level of stakeholder engagement evident during the Festival,
position Cannes Lions well for growth.
MediaLink is a strategic advisory firm serving customers at the
intersection of media, marketing, advertising and entertainment.
There are four revenue streams - retainers, projects, executive
search and events (bespoke content and hosted meeting programmes at
events like Cannes Lions and The Consumer Electronics Show, CES).
Revenue in 2018 declined 7% on the prior year (on a Proforma
basis), driven by an ongoing strategic change to the business. The
mix of clients has changed following a deliberate shift in focus
towards more brand-led work, with a reduction in revenue from
digital publishers and AdTech businesses.
WARC, acquired in July 2018, is a global digital
subscription-based business that helps brands, agencies and media
platforms assess marketing effectiveness across all channels. In
the 2018 year (on a Proforma basis) it grew revenue by 8% while
maintaining a retention rate of over 90%. Growth was subdued by the
planned closure of certain print products and ongoing digital
subscriptions revenue grew by 13%.
The launch of CLX (a media and entertainment summit to be held
at Cannes Lions in 2019 in partnership with MediaLink) is expected
to be a driver of future growth for the Marketing Segment.
Sales segment
Revenue grew by 25% on an Organic basis (30% on a Proforma
basis) to GBP120.9m (2017: GBP78.0m), with Adjusted EBITDA growing
to GBP36.9m (2017: GBP29.3m) and margin declining to 31% (2017:
38%). The revenue growth was led by strong growth from Money20/20
Europe, along with the two launches, in Singapore and China. Edge
(18%) and Flywheel Digital (110%), on a Proforma basis, also
contributed strongly to the growth. In terms of EBITDA, the
acquisition of Clavis in December 2017 was the main factor in
reducing margin.
Money20/20 is the leading congress in the Fintech consumer
payments sector, focusing on the evolution of consumer payment and
financial services through mobile, retail, marketing services, data
and technology. 2018 revenues delivered an excellent Organic growth
rate of 37%.
In the first half, Money20/20 Asia was launched successfully
taking place in Singapore in March 2018. The event delivered
revenues of GBP6.8m. Now in its third year, Money20/20 Europe
relocated to its new home of Amsterdam in June 2018 and delivered
revenues of GBP17.3m, an Organic revenue growth of 33% partially
enabled by the enlarged exhibition space in Amsterdam.
In the second half, Money20/20 USA, the original and largest
edition now in its seventh year, was held in October 2018 in Las
Vegas. It reported revenue of GBP29.4m, an Organic growth of 4%.
The final event of the year was the inaugural edition of Money20/20
in China which was held in November 2018 in Hangzhou and delivered
revenues of GBP2.5m.
GBP'm 2018 2017
----------------------------------------- ---- ----
Asia (Singapore, March) 6.8 -
Europe (2018 Amsterdam, 2017 Copenhagen,
June) 17.3 12.3
USA (Las Vegas, October) 29.4 28.2
China (Hangzhou, November) 2.5 -
----------------------------------------- ---- ----
Total Revenue 56.0 40.5
----------------------------------------- ---- ----
Edge by Ascential, the recently integrated digital retail
strategy and analytics business, comprises the businesses formerly
known as One Click Retail, Clavis, BrandView and Planet Retail RNG.
To date integration has prioritised the alignment of customer
facing functions, while the consolidation of the underlying
product, technology and business systems platforms is ongoing.
Overall in 2018 Edge recorded (on a Proforma basis) revenue of
GBP55.7m, an Organic and Proforma growth of 18%.
-- Edge Market Share (formerly One Click Retail), a leading
provider of ecommerce sales and share measurement for product
manufacturers, grew revenue by 40% in 2018. This was driven by the
signing of 37 new customers and the expansion of 11 existing US
customers into new geographies.
-- Edge Digital Shelf (formerly Clavis, acquired in December
2017), the leader in optimising manufacturers' product performance
across hundreds of retailer websites, grew revenue (on a Proforma
basis) by 22% in 2018. This was driven by the signing of 26 new
customers and the expansion of several existing customers into new
geographies (primarily APAC).
-- Edge Price & Promotion (formerly BrandView, acquired in
September 2018) is a leading global information provider to
retailers and manufacturers, allowing them to measure and manage
pricing and promotion activity and drive sales across both off-line
and on-line market places. Edge Price & Promotion grew revenue
(on a Proforma basis) by 16%, driven by the signing of 40 new
customers and the expansion of several existing European customers
into the US.
-- Retail Insights (formerly Planet Retail RNG) a provider of
information to consumer product companies, retailers and
consultants on global retail trends saw revenues decline slightly
mainly driven by reduced advisory revenues. The launch of a new
platform, providing customers with more powerful data, analysis and
visualisation tools is designed to improve customer retention and
new business win rates in 2019.
Flywheel Digital, a provider of managed services to brands on
Amazon, was acquired in November 2018. In 2018 (on a Proforma
basis) it recorded revenue growth of 110% while it more than
doubled its customer numbers (to over 70).
RWRC recorded revenue growth of 2%. World Retail Congress, which
brings together the leaders of the Global retail industry, held its
2018 event in Madrid, which grew strongly. Retail Week an events
and information services business covering the retail industry,
refocused in 2018 to deliver fewer, but larger events. The
highlight was Tech 18, which doubled revenue in its second
year.
Built Environment & Policy segment
Revenue grew by 12% overall to GBP34.3m, with all three
businesses contributing double-digit growth in the year. As a
result, the EBITDA margin improved to 41%, from 30% in 2017.
Groundsure the market leading provider of environmental risk
data, had another strong year, outperforming a subdued UK
residential property market (down 2%), with revenue growth of 10%.
This success was achieved through further product innovation in
2019, rolling out the new technologies that underpin its flagship
Avista product across the full product range.
Glenigan, a provider of construction project sales leads,
industry data, analysis, forecasting and company intelligence
delivered a 15% revenue growth.
DeHavilland, a leading provider of political intelligence and
monitoring services in the UK and EU, grew revenues by 10%.
Financial Review
Overview
The results for the year are set out in the consolidated profit
and loss statement and summarised in the table below and show, for
continuing operations, revenue of GBP348.5m (2017: GBP292.9m), a
growth of 19.0% (or 6.3% on an Organic basis, and 9.6% on a
Proforma basis), and operating profit of GBP40.2m up 28.4% (2017:
GBP31.3m). Adjusted EBITDA was GBP101.8m (2017: GBP94.7m) an
Organic growth of 3.8% or 12.5% growth on a Proforma basis. We also
delivered strong cash flow in 2018 with free cash flow from
continuing operations after tax and capex of GBP77.1m (2017:
GBP80.1m) a free cash flow conversion of 76%. Operating cash flow
conversion was 105%.
A core KPI and strategic goal of the Company is Organic revenue
growth as 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 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 is measured in a similar way to Organic
growth but assumes that the Company's acquisitions were all made on
1 January 2017 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 group 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
Reported Organic Proforma
growth growth growth
GBP'm 2018 2017 rate rate rate
----------------- ------ ------ --------- -------- ---------
Revenue 348.5 292.9 19.0% 6.3% 9.6%
Adjusted EBITDA 101.8 94.7 7.5% 3.8% 12.5%
Adjusted EBITDA
margin 29.2% 32.3%
----------------- ------ ------ --------- -------- ---------
Segmental results
Following the sale of the Exhibitions Business in July 2018, the
Group changed from two to four reportable segments to align our
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 and restated for 2017
to enhance comparability.
Built
2018 Product Environment Corporate Continuing
GBP'm Design Marketing Sales & Policy Costs operations
Revenue 77.8 116.3 120.9 34.3 (0.8) 348.5
Organic revenue growth 7% (8%) 25% 12% 6.3%
Proforma growth 7% (6%) 30% 12% 9.6%
Adjusted EBITDA 28.1 38.9 36.9 14.0 (16.1) 101.8
Organic Adjusted EBITDA growth 27% (23%) 19% 53% 3.8%
Proforma growth 27% (22%) 49% 53% 12.5%
Adjusted EBITDA margin 36% 33% 31% 41% 29.2%
Depreciation and software
amortisation (1.8) (4.1) (2.1) (0.5) (2.3) (10.8)
------------------------------- ------- --------- ----- ------------ --------- -----------
Adjusted operating profit 26.3 34.8 34.8 13.5 (18.4) 91.0
------------------------------- ------- --------- ----- ------------ --------- -----------
2017 (restated)
GBP'm
Revenue 73.6 110.6 78.0 30.7 - 292.9
Adjusted EBITDA 22.5 48.1 29.3 9.1 (14.3) 94.7
Adjusted EBITDA margin 31% 43% 38% 30% - 32.3%
Depreciation and software
amortisation (2.3) (3.9) (1.0) (0.6) (1.5) (9.3)
------------------------------- ------- --------- ----- ------------ --------- -----------
Adjusted operating profit 20.2 44.2 28.3 8.5 (15.8) 85.4
------------------------------- ------- --------- ----- ------------ --------- -----------
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
characteristics and benefit from our focus on customer
retention.
Revenues from continuing operations in 2018 grew to GBP348.5m
(2017: GBP292.9m), an increase of GBP55.6m or 19.0%. Adjusting for
currency impacts and recent acquisitions Organic growth was 6.3%
driven by double digit growth of Money20/20 (37%), Edge Market
Share (formerly One Click Retail) (40%) as well as the Built,
Environment and Policy segment (12%) followed by the high single
digit growth of the Product Design segment (7%). This was offset by
an 8% decline in the Marketing Segment driven by Cannes Lions and
MediaLink. Proforma revenue growth, which is a measure of how well
the current portfolio of brands is growing, was 9.6%.
Adjusted EBITDA
Adjusted EBITDA increased by 7.5% to GBP101.8m (2017: GBP94.7m)
representing a 3.8% Organic growth rate. Adjusted EBITDA margin
reduced to 29.2% due to the acquisition of Clavis which was
slightly loss making in the year overall despite achieving
break-even in the final quarter, planned product investment in our
Sales segment including two new launches for Money20/20, the
acceleration of the Edge integration strategy and dilution of the
margin in the Marketing Segment as a result of revenue reduction.
We saw strong margin growth in the Product Design segment and in
the Built Environment and Policy segment demonstrating the superior
margin opportunities in scaled, mature, digital subscriptions
businesses.
Reconciliation between Adjusted EBITDA and statutory operating
profit
Adjusted EBITDA is reconciled to statutory operating profit as
shown in the table below:
GBP'm 2018 2017
---------------------------- ------- -------
Adjusted EBITDA 101.8 94.7
Depreciation and software
amortisation (10.8) (9.3)
------------------------------ ------- -------
Adjusted operating profit 91.0 85.4
Amortisation (30.6) (17.8)
Exceptional items (14.0) (32.5)
Share based payments (6.2) (3.8)
------------------------------ ------- -------
Statutory operating profit 40.2 31.3
------------------------------ ------- -------
Amortisation of acquired intangible assets
The amortisation charge of GBP30.6m (2017: GBP17.8m) on acquired
intangible assets increased mainly due to full year charges for the
acquired intangibles of MediaLink and Clavis as well as a
proportional charge for the 2018 acquisitions of WARC, BrandView
and Flywheel Digital offset by the impact of fully amortised
assets. The Company undertakes a periodic review of the carrying
value of its intangible assets of GBP786.0m (2017: GBP771.7m) which
are supported by the value in use calculations and no impairment
was identified in the current or prior year.
Exceptional items
The charge for exceptional items included in continuing
operations in 2018 totalled GBP14.0m (2017: GBP34.3m) as set out in
the table below and further explained in Note 5.
GBP'm 2018 2017
------------------------------------------ ----- -----
Deferred contingent consideration 8.1 27.7
Expenses related to acquisition 5.9 4.6
IPO expenditure and other - 0.2
Exceptional items relating to continuing
operations 14.0 32.5
------------------------------------------ ----- -----
The charge for deferred contingent consideration mainly relates
to acquisition-related contingent employment costs on the
acquisitions of One Click Retail, MediaLink, Clavis and Flywheel
Digital which, absent the link to continued employment, would have
been treated as consideration. The reduced charge in 2018 of
GBP13.3m (2017: GBP26.6m) is offset by a credit on revaluation of
GBP5.2m (2017: GBP1.1m charge) mainly due to MediaLink's lower
performance in the year.
Share-based payments
The charge for share-based payments of GBP6.2m (2017: GBP3.8m)
incorporates the Share Incentive Plan, the SAYE and the Performance
Share Plan.
-- The charge in 2016 represented 9 months' charge (of the
36-month service period) for the Company's inaugural grant of
awards.
-- 2017's charge includes both a 12-month charge for the 2016
award and a 10-month charge for the 2017 award.
-- The 2018 charge includes the full annual charge for the 2016
and 2017 awards as well as a 10-month charge for the March 2018
award.
The 2019 charge will include full annual charges for the 2017
and 2018 awards as well as a 10-month charge for the expected grant
in March 2019. The 2019 charge will also include the final 3-month
charge for the 2016 award. The 2019 charge is therefore expected to
be more representative of the share-based payment charge going
forward.
Finance costs
The adjusted net finance costs for the year were GBP11.9m (2017:
GBP11.7m) as set out in the table below.
Adjusted net finance costs (GBP'm) 2018 2017
---------------------------------------------- ------- -------
Interest payable on external debt (7.1) (5.8)
Interest receivable 0.6 0.2
Amortisation of loan arrangement fees (1.2) (1.3)
Discount unwind on contingent and deferred
consideration (3.6) (4.3)
Net loss on foreign exchange and derivatives (0.6) (0.5)
Adjusted net finance costs (11.9) (11.7)
---------------------------------------------- ------- -------
The interest expense on the Company's borrowings was GBP7.1m
(2017: GBP5.8m) with the increase driven by the drawdown of the
Revolving Credit Facility and slightly higher leverage during the
first half, partially offset by interest income on the disposal
proceeds which was deposited in money market funds. Other finance
charges represent the unwind of the discount on deferred
consideration and will increase in 2019 to include a full 12 months
relating to Flywheel Digital.
Taxation
A tax charge of GBP17.8m (2017: GBP18.7m) was incurred on
continuing adjusted profit before tax of GBP79.7m (2017: GBP74.0m)
resulting in an adjusted effective tax rate for the year of 22%
(2017: 25%). Adjusting items total GBP50.8m (2017: GBP54.1m) and a
tax credit of GBP8.9m arises on these adjusting items (2017:
GBP10.7m). This equates to a total tax charge of GBP8.9m (2017:
GBP10.7m) and an effective tax rate of 31% on the continuing profit
before tax of GBP28.9m.
The ongoing adjusted effective tax rate of the Group is expected
to be approximately 24-25% next year as a result of increasing
profits in the US which are taxed at 26% as compared to UK profits
which are taxed at 19%.
Cash tax paid was GBP12.2m (2017: GBP7.9m) and the Group
continued to benefit by GBP3.1m (2017: GBP6.7m) 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 GBP42.8m
(2017: GBP47.1m) relating to UK and US losses, accelerated capital
allowances and US acquired intangibles and deferred consideration.
The majority of this asset is expected to convert into cash savings
over the next ten years. Meanwhile our deferred tax liability
amounted to GBP24.8m (2017: GBP31.3m) and related to non-deductible
acquired intangibles and is not expected to convert into cash.
Discontinued operations
Discontinued operations relate to the Exhibitions business for
the first six months of the 2018 financial year and includes the 13
Heritage Brands which were sold at various dates in 2017 in the
comparator. The overall result for discontinued operations is
comprised as follows and was restated in 2017 to include the
Exhibitions business:
2017
Discontinued operations (GBP'm) 2018 Restated*
------------------------------------------- ------ -----------
Revenue 54.6 105.8
Adjusted EBITDA 19.8 25.9
Depreciation and amortisation (0.3) (1.8)
Amortisation of acquired intangibles (3.1) (7.7)
Exceptional items including gain / (loss)
on disposal 176.5 (3.0)
Share based payments (0.3) (0.6)
Profit before tax 192.6 12.8
Taxation (3.4) (6.7)
------------------------------------------- ------ -----------
Profit after tax 189.2 6.1
------------------------------------------- ------ -----------
*Revenue and cost of sales in 2017 have been restated for IFRS15
(see Note 1). There is no impact on opening balance sheet, net
profit or EPS. In addition, 2017 has been restated for the GBP1.8m
loss on disposal of the Heritage Brands which had been treated as
an exceptional item in continuing operations last year.
The exceptional item in discontinued operations includes the
gain on disposal of GBP180.6m with no tax impact as a result of the
application of the substantial shareholding exemption. This was
offset by GBP3.6m of separation expenses, GBP0.3m revaluation of
contingent consideration and GBP0.2m of items related to the
disposal of the Heritage Brands in 2017.
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 increasingly sensitive to movements in the Euro and
US Dollar against Pounds Sterling.
For most of 2018, Sterling was in line with the 2017 average
Euro exchange rates but weakened against the Euro at the year end.
Sterling weakened slightly against the US Dollar in 2018, as can be
seen in the table below:
Weighted average Year-end rate
--------------------- ---------------------
Currency 2018 2017 Change 2018 2017 Change
----------- ----- ----- ------- ----- ----- -------
Euro 1.14 1.14 0.1% 1.12 1.13 0.9%
US Dollar 1.32 1.30 (1.4%) 1.28 1.34 4.5%
----------- ----- ----- ------- ----- ----- -------
When comparing 2018 and 2017, changes in currency exchange rates
had a net adverse impact of GBP3.0m on revenue and GBP0.2m on
Adjusted EBITDA. On a segmental basis, the adverse impact of
changes in foreign currency exchange rates was as follows:
-- Product Design: GBP1.6m impact on revenue and GBP0.3m impact on Adjusted EBITDA.
-- Marketing: GBP1.1m impact on revenue and GBP0.1m impact on Adjusted EBITDA.
-- Sales: GBP0.3m impact on revenue and GBP0.2m favourable impact on Adjusted EBITDA.
-- Built Environment & Policy: no 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.
2018 2017
2018 Adjusted 2017 Adjusted
GBP'm Revenue EBITDA Revenue EBITDA
------------------------------------- --------- ---------- --------- ----------
Increase in revenue/Adjusted EBITDA
if:
- Sterling weakens by 1% against
USD in isolation 1.5 0.7 1.2 0.6
- Sterling weakens by 1% against
EUR in isolation 1.0 0.7 1.1 0.9
------------------------------------- --------- ---------- --------- ----------
Furthermore, each 1% movement in the Euro to pounds Sterling
exchange rate has a GBP1.5m (2017: GBP1.5m) impact on the carrying
value of borrowings. Each 1% movement in the US Dollar has a circa
GBP0.8m impact on the carrying value of borrowings (2017:
GBP1.0m).
Earnings per share
Continuing adjusted diluted earnings per share of 15.3p per
share is 12.5% ahead of the 13.6p per share recorded for 2017 and
continuing diluted earnings per share of 4.8p per share is 71%
ahead of the prior year figure of 2.8p.
Total diluted earnings per share were 51.4p (2017: 4.4p) driven
in large part by the gain on disposal of the Exhibitions
business.
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 2018, incurred initial cash
consideration of GBP97.7m for three bolt-on acquisitions.
WARC
In July 2018, we acquired WARC a global digital subscription
business helping brands, agencies and media platforms assess
marketing effectiveness across all channels. It is a global leader
in providing information and insight to understand and measure
multi-channel advertising effectiveness. The initial cash
consideration was GBP19.9m with deferred consideration of GBP4.5m
payable in 2019. WARC is growing well and delivered revenue of
GBP11.5m (up 8% on the prior year).
BrandView - Edge by Ascential
In August 2018, we acquired a leading global provider of Price
and Promotion analytics to retailers and manufactures for initial
consideration of GBP29.8m plus a deferred consideration, expected
to total GBP5.0m which is payable subject to the achievement of
targets for subscription billings in 2018 and the first half of
2019. BrandView was merged into the Edge by Ascential brand in
October. BrandView delivered GBP13.8m of revenue for the year (up
16% on the prior year).
Flywheel Digital
In October 2018, we acquired a leading US-based provider of
managed services to consumer product companies trading on the
Amazon platform for an initial consideration of $60m plus earn-out
payments payable over three years. Earn out consideration is
payable in cash based on revenue of the business for 2019, 2020 and
2021 and is expected to total between approximately US$47m and
US$196m. A portion of the earn-out is subject to the founders
remaining in employment with the company. The total potential
consideration, including both the initial consideration and
earn-out payments, is capped at US$400m. Flywheel Digital is
growing rapidly (with revenue in 2018 up 110% on 2017).
Exhibitions Business
In July 2018, we successfully disposed of our Exhibitions
Business for a total net cash consideration of GBP296.4m after
adjusting for working capital and cash disposed. After transaction
costs of GBP7.1m and the recycling of historic foreign exchange
differences, a gain on disposal of GBP180.6m was recognised.
Separation costs of GBP3.6m were recognised in exceptional
items.
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 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 - especially difficult in the type of high growth,
early stage companies that Ascential acquires.
The earn out 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 earn out which is not dependent on the continuing employment of
the founders. This amounted to GBP96.7m at December 2018 (2017:
GBP97.9m). Any change in estimate is recorded as an exceptional
item. This amounted to a credit of GBP4.9m in 2018 (2017: charge
GBP1.1m) driven by the 2018 performance of the MediaLink
business.
2. This liability is discounted to present value using the
Company's cost of capital with the reversal of this discount being
recorded as Other Finance Costs within the interest charge. This
amounted to a charge of GBP3.6m in 2018 (2017: GBP4.3m).
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 GBP13.3m in 2018 (2017: GBP26.6m) which was offset by a
credit for the revaluation of the earn out of GBP5.2m (2017:
GBP1.1m charge).
In total, the Company expects to payout Deferred Consideration
of between GBP120m and GBP140m 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 GBP23m and GBP33m
between now and 2021.
Cash flow
Continuing operations
The Company generated Adjusted operating cash flow from
continuing operations of GBP107.2m (2017: GBP98.1m) being a strong
105% operating cash flow conversion (2017: 104%). After increased
investment in product development in our digital subscription
products, internal productivity tools and the Company's datacentre,
capex increased to GBP18.7m or 5.3% of revenues up from GBP11.8m or
4.0% of revenues in 2017. Tax paid on profits from continuing
operations increased from GBP6.2m to GBP10.9m driven by an increase
in profits as well as a change to UK tax rules that extends the
period over which losses can be recovered. As a result, the Company
generated free cash flow on continuing operations of GBP77.1m
(2017: GBP80.1m), a decreased to 76% from 85%.
GBP'm 2018 2017
------------------------------------------- ------- -------
Adjusted EBITDA 101.8 94.7
Working capital movements 4.9 3.4
------------------------------------------- ------- -------
Adjusted cash generated from continuing
operations 106.7 98.1
% operating cash flow conversion 105% 104%
Capital expenditure (18.7) (11.8)
Tax paid (10.9) (6.2)
------------------------------------------- ------- -------
Free cash flow from continuing operations 77.1 80.1
------------------------------------------- ------- -------
% free cash flow conversion 76% 85%
Discontinued operations
The Company generated Adjusted operating cash flow from
discontinued operations of GBP3.4m (2017: GBP23.8m). The
significant decline arose from reduced profit as the Exhibitions
business was only owned for the first six months of the year and
the disposal occurring at a seasonally low point for deferred
income. Both the Exhibitions business and, in the prior year the
Heritage Brands, had minimal capital expenditure.
GBP'm 2018 2017
--------------------------------------------- ------- ------
Adjusted EBITDA 19.8 25.9
Working capital movements (16.4) (2.1)
--------------------------------------------- ------- ------
Adjusted cash generated from discontinued
operations 3.4 23.8
Capital expenditure - -
Tax paid (1.3) (1.7)
--------------------------------------------- ------- ------
Free cash flow from discontinued operations 2.1 22.1
--------------------------------------------- ------- ------
The consolidated cash flow statement (analysed between
continuing and discontinued operations) and net debt position is
summarised below and includes significant proceeds from the
Company's business disposals totalling GBP290.0m (2017: GBP48.7m)
as well as deferred and initial consideration paid on the Company's
current and prior year acquisitions totalling GBP164.7m (2017:
GBP164.7m).
GBP'm 2018 2017
--------------------------------------------- -------- --------
Free cash flow from continuing operations 77.1 80.1
Free cash flow from discontinued operations 2.1 22.1
Free cash flow from total operations 79.2 102.2
(Investment) / loan to joint venture (0.7) 0.2
Acquisition consideration paid (156.4) (156.5)
Exceptional costs paid
* Deferred consideration (8.3) (8.2)
* Other (4.1) (6.7)
Disposal proceeds received 290.0 48.7
--------------------------------------------- -------- --------
Cash flow before financing activities 199.7 (20.3)
Net interest paid (6.9) (5.9)
Dividends paid (22.8) (20.0)
Proceeds of issue of shares net of
expenses 0.4 0.1
Debt (repayment) / drawdown (33.6) 33.0
--------------------------------------------- -------- --------
Net cash flow 136.8 (13.1)
Opening cash balance 45.8 61.9
FX movements (0.6) (3.0)
--------------------------------------------- -------- --------
Closing cash balance 182.0 45.8
Borrowings (294.1) (320.7)
Capitalised arrangement fees 2.3 3.3
Derivative financial instruments - 0.1
--------------------------------------------- -------- --------
Net debt (109.8) (271.5)
--------------------------------------------- -------- --------
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 3.9p per share payable on 14 June 2019 to shareholders
on the register on 17 May 2019 which, together with the Company's
interim dividend of 1.9p paid in September 2018, makes a total
dividend for the 2018 financial year of 5.8p (2017: 5.6p).
Other financial matters
Accounting developments
2018 was the first year of implementation of IFRS15, Revenue
from Contracts with Customers and IFRS 9, Financial Instruments. As
explained in last year's annual report there is no material impact
on the Company from these new standards.
IFRS 16 is the new lease accounting standard and has been
implemented on 1 January 2019. 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 depreciation and interest. The Group
plans to adopt IFRS 16 using the full retrospective method. The
impact on the profit before tax in the consolidated financial
statements is insignificant. We estimate the increase in EBITDA to
be in the range of GBP7.0m to GBP8.0m with a combined increase in
depreciation and interest in a similar range. The impact of IFRS 16
for the year-ended 31 December 2018 will be finalised and presented
as a restatement along with the results for the half year ending 30
June 2019. The current level of operating leases held by the Group
is disclosed in Note 15.
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 and aims to
operate net debt of 1.5 to 2.0 times EBITDA to allow a healthy mix
of dividends and cash for investment in bolt-on acquisitions.
Following the disposal of the Exhibitions business in July 2018 and
the acquisitions of WARC, BrandView and Flywheel Digital in the
second half of the year, the consolidated leverage ratio as at 31
December 2018 is 1.1x (2017: 2.3x) allowing flexibility to fund
growth initiatives, future deferred consideration and bolt-on
acquisitions.
Liquidity
On 12 February 2016 the Company entered into new term loan
facilities of GBP66m, EUR171m and $96m as well as a revolving
credit facility (RCF) of GBP95m. All mature in February 2021 and
are currently subject to interest at 1.75% over LIBOR on the term
loans and LIBOR plus 1.5% on the RCF. There is a leverage covenant
limit of 4.0x (which drops to 3.5x in June 2019 until maturity)
which is measured semi-annually.
As at 31 December 2018 and 2017, all of the term facilities,
totalling GBP294.1m (2017: GBP288.9m) had been drawn. At 31
December 2018 none of the GBP95.0m of RCF had been drawn (2017:
GBP31.8m). As a result of the Exhibitions disposal, GBP125.4m of
cash is currently held in short-term deposits (2017: GBP18.4m). A
refinancing is planned to take place in early 2020 ahead of the
maturity of the facilities in February 2021.
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 52% in Euros with
the balance split between US Dollars (26%) and pounds Sterling
(22%). 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 set out in the 2018 Annual Report.
Going concern
Ascential's business activities, performance and position,
together with the factors likely to affect its future development,
are set out in the 2018 Annual Report. The Board is responsible for
determining the nature and extent of the principal risks it is
willing to take in achieving its strategic objectives. The
processes in place for assessment, management and monitoring of
risks, including the risks resulting from Brexit, are described in
the 2018 Annual Report where details of the financial risk
management objectives and policies are given.
The Directors believe that the Group is well placed to manage
its business risks successfully. 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. The Directors
have assessed the Group's prospects and viability over a three-year
period and the viability statement can be found in the 2018 Annual
Report. Accordingly, the Directors continue to adopt the going
concern basis for the preparation of the financial statements. In
forming their view, the Directors have considered the Group's
prospects for a period exceeding 12 months from the date when the
financial statements are approved.
Mandy Gradden
Chief Financial Officer
22 February 2019
ALTERNATIVE PERFORMANCE MEASURES
The Company aims to maximise shareholder value by optimising
potential for return on capital through strategic investment and
divestment, by ensuring the Company's capital structure is managed
to support both strategic and operational requirements, and by
delivering returns through a focus on organic growth and
operational discipline. The Board considers it helpful to provide,
where practicable, performance measures that distinguish between
these different factors - these are also the measures that the
Board uses to assess the performance of the Company, 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 results 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. The Group has no
biennial events, but when annual events are held at different times
of year this can affect the comparability of half-year results.
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 is calculated as follows:
2018 Built Environment Corporate Continuing
GBP'm Product Design Marketing Sales & Policy Costs operations
----------------------- -------------- --------- ------ ----------------- --------- -----------
Revenue
2018 - reported 77.8 116.3 120.9 34.3 (0.8) 348.5
Exclude acquisitions (0.7) (16.0) (24.0) - - (40.7)
----------------------- -------------- --------- ------ ----------------- --------- -----------
2018 - Organic basis 77.1 100.3 96.9 34.3 (0.8) 307.8
----------------------- -------------- --------- ------ ----------------- --------- -----------
Organic revenue growth 7% (8%) 25% 12% - 6.3%
2017 - reported 73.6 110.6 78.0 30.7 - 292.9
Exclude acquisitions - - (0.3) - - (0.3)
Currency adjustment (1.6) (1.1) (0.3) - - (3.0)
----------------------- -------------- --------- ------ ----------------- --------- -----------
2017 - Organic basis 72.0 109.5 77.4 30.7 - 289.6
----------------------- -------------- --------- ------ ----------------- --------- -----------
Adjusted EBITDA
2018 - reported 28.1 38.9 36.9 14.0 (16.1) 101.8
Exclude acquisitions 0.1 (2.1) (1.7) - - (3.7)
----------------------- -------------- --------- ------ ----------------- --------- -----------
2018 - Organic basis 28.2 36.8 35.2 14.0 (16.1) 98.1
----------------------- -------------- --------- ------ ----------------- --------- -----------
Organic EBITDA growth 27% (23%) 19% 53% (12%) 3.8%
2017 - reported 22.5 48.1 29.3 9.1 (14.3) 94.7
Exclude acquisitions - (0.1) 0.1 - - -
Currency adjustment (0.3) (0.1) 0.2 - - (0.2)
----------------------- -------------- --------- ------ ----------------- --------- -----------
2017 - Organic basis 22.2 47.9 29.6 9.1 (14.3) 94.5
----------------------- -------------- --------- ------ ----------------- --------- -----------
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
therefore a measure of the rate of growth of the brands owned
today. Proforma growth is calculated as follows:
2018 Built Environment Central Continuing
GBP'm Product Design Marketing Sales & Policy Costs operations
------------------------ -------------- --------- ----- ----------------- ------- -----------
Revenue
2018 - reported 77.8 116.3 120.9 34.3 (0.8) 348.5
Include acquisitions - 5.6 22.3 - - 27.9
------------------------ -------------- --------- ----- ----------------- ------- -----------
2018 - Proforma basis 77.8 121.9 143.2 34.3 (0.8) 376.4
------------------------ -------------- --------- ----- ----------------- ------- -----------
Proforma revenue growth 7% (6%) 30% 12% - 9.6%
2017 - reported 73.6 110.4 78.2 30.7 - 292.9
Include acquisitions 0.7 21.8 33.1 - - 55.6
Currency adjustment (1.6) (2.2) (1.2) - - (5.0)
------------------------ -------------- --------- ----- ----------------- ------- -----------
2017 - Proforma basis 72.7 130.2 109.9 30.7 - 343.5
------------------------ -------------- --------- ----- ----------------- ------- -----------
Adjusted EBITDA
2018 - reported 28.1 38.9 36.9 14.0 (16.1) 101.8
Include acquisitions - 0.8 5.9 - - 6.7
------------------------ -------------- --------- ----- ----------------- ------- -----------
2018 - Proforma basis 28.1 39.7 42.8 14.0 (16.1) 108.5
------------------------ -------------- --------- ----- ----------------- ------- -----------
Proforma EBITDA growth 27% (22%) 49% 53% (12%) 12.5%
2017 - reported 22.5 48.1 29.3 9.1 (14.3) 94.7
Include acquisitions - 3.1 (1.2) - - 1.9
Currency adjustment (0.3) (0.4) 0.6 - - (0.1)
------------------------ -------------- --------- ----- ----------------- ------- -----------
2017 - Proforma basis 22.2 50.8 28.7 9.1 (14.3) 96.5
------------------------ -------------- --------- ----- ----------------- ------- -----------
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 as these types of cost do not form part of the underlying
business.
Amortisation of intangible assets acquired through business
combinations
Charges for amortisation of acquired intangibles arise from the
purchase consideration of a number of separate acquisitions. These
acquisitions are portfolio investment decisions that took place at
different times over several years, and so the associated
amortisation does not reflect current operational performance.
Share-based payments
Following the IPO, a number of employee share schemes have been
introduced, resulting in a lack of comparability between periods in
respect of share scheme costs - particularly as the income
statement charge builds up to a normalised level over a three-year
period. As this arises from a change triggered by the IPO change in
capital structure, these costs have been treated as Adjusting
items.
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, 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:
GBP'm 2018 2017
------------------------------------------ ------ ------
Cash generated from operations 76.7 107.0
Add back: acquisition-related contingent
employment cash flow 21.0 8.2
Add back: other exceptional cash flow 12.4 6.7
------------------------------------------ ------ ------
Adjusted cash generated from operations 110.1 121.9
------------------------------------------ ------ ------
GBP'm 2018 2017
------------------------------------------ ------- -------
Net cash from operating activities 64.5 99.1
Add back: acquisition-related contingent
employment cash flow cash flow 21.0 8.2
Add back: other exceptional cash flow 12.4 6.7
Less: capital expenditure (18.7) (11.8)
------------------------------------------ ------- -------
Free cash flow 79.2 102.2
------------------------------------------ ------- -------
The Company monitors its operational balance sheet efficiency
with reference to operational cash conversion, defined as Free Cash
Flow as a percentage of Adjusted EBITDA.
Glossary of alternative performance measures
Term Description
Adjusted EBITDA Adjusted operating profit excluding depreciation
and software amortisation
--------------------------------------------------
Adjusted EBITDA margin Adjusted EBITDA as a percentage of Revenue
--------------------------------------------------
Adjusted effective Adjusted tax charge expressed as a percentage
tax rate of Adjusted profit before tax
--------------------------------------------------
Adjusted EPS EPS calculated with reference to Adjusted
Profit for the period
--------------------------------------------------
Adjusted operating Operating profit excluding Adjusting Items
profit
--------------------------------------------------
Adjusted profit before Profit before tax excluding Adjusting Items
tax
--------------------------------------------------
Adjusted tax charge Tax charge excluding Adjusting Items
--------------------------------------------------
Cash conversion Free cash flow expressed as a percentage
of Adjusted EBITDA
--------------------------------------------------
Effective tax rate Tax charge expressed as a percentage of Profit
before tax
--------------------------------------------------
Exceptional items Items within Operating profit separately
identified in accordance with Company accounting
policies
--------------------------------------------------
Free cash flow Cash flows before exceptionals, portfolio
investments and divestments, and financing
--------------------------------------------------
Net debt leverage The ratio of Net debt to Adjusted EBITDA
--------------------------------------------------
Organic revenue growth Revenue growth on a like-for-like basis
--------------------------------------------------
Organic EBITDA growth Adjusted EBITDA growth on a like-for-like
basis
--------------------------------------------------
Proforma revenue Revenue growth on a like-for-like basis assuming
growth the Company's acquisitions were all made
on 1 January 2017
--------------------------------------------------
Proforma EBITDA growth Adjusted EBITDA growth on a like-for-like
basis assuming the Company's acquisitions
were all made on 1 January 2017
--------------------------------------------------
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.
Nothing in this announcement should be construed as a profit
forecast. 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.
Consolidated Statement of Profit or Loss
For the year ended 31 December 2018
Restated*
-------------------------------
2018 2017
------------------------------------- ----- ------------------------------- -------------------------------
Adjusted Adjusting Adjusted Adjusting
(GBP million) Note results items Total results items Total
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Continuing operations
Revenue 3 348.5 - 348.5 292.9 - 292.9
Cost of sales (125.2) - (125.2) (93.9) - (93.9)
Sales, marketing and administrative
expenses (132.3) (50.8) (183.1) (113.6) (54.1) (167.7)
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Operating profit 3 91.0 (50.8) 40.2 85.4 (54.1) 31.3
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Adjusted EBITDA 3 101.8 - 101.8 94.7 - 94.7
Depreciation and amortisation 3 (10.8) (30.6) (41.4) (9.3) (17.8) (27.1)
Exceptional items 4 - (14.0) (14.0) - (32.5) (32.5)
Share-based payments - (6.2) (6.2) - (3.8) (3.8)
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Operating profit 3 91.0 (50.8) 40.2 85.4 (54.1) 31.3
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Share of the profit of joint
ventures accounted for using
the equity method 0.6 - 0.6 0.3 - 0.3
Finance costs 5 (12.5) - (12.5) (12.2) - (12.2)
Finance income 5 0.6 - 0.6 0.5 - 0.5
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Profit/(loss) before taxation 79.7 (50.8) 28.9 74.0 (54.1) 19.9
Taxation 6 (17.8) 8.9 (8.9) (18.7) 10.7 (8.0)
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Profit from continuing operations 61.9 (41.9) 20.0 55.3 (43.4) 11.9
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Discontinued operations
Profit/(loss) from discontinued
operations, net of tax 7 15.5 173.7 189.2 19.6 (13.5) 6.1
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Profit for the year 77.4 131.8 209.2 74.9 (56.9) 18.0
------------------------------------- ----- --------- ---------- -------- --------- ---------- --------
Earnings per share (pence)
Continuing operations
- Basic 8 15.5 (10.5) 5.0 13.7 (10.8) 2.9
- Diluted 8 15.3 (10.5) 4.8 13.6 (10.8) 2.8
Continuing and discontinued
operations
- Basic 8 19.3 32.9 52.2 18.7 (14.2) 4.5
- Diluted 8 19.1 32.3 51.4 18.6 (14.2) 4.4
*Restated for discontinued operations (see note 7).
Adjusting items are detailed in Note 4.
Consolidated Statement of Other Comprehensive Income
For the year ended 31 December 2018
2018 2017
---------------------------------------- ----- ----------------------------- --------------------------------
Adjusted Adjusting Adjusted Adjusting
(GBP million) Note results items Total results items Total
---------------------------------------- ----- --------- ---------- ------ --------- ---------- -------
Profit for the year 77.4 131.8 209.2 74.9 (56.9) 18.0
---------------------------------------- ----- --------- ---------- ------ --------- ---------- -------
Other comprehensive income/(expense)
Items that may be reclassified
subsequently to profit or
loss:
Foreign exchange translation
differences recognised in
equity 8.5 - 8.5 (22.9) - (22.9)
Cumulative currency translation
differences on disposals 10 - 2.4 2.4 - 2.4 2.4
---------------------------------------- ----- --------- ---------- ------ --------- ---------- -------
Total other comprehensive
income/(expense), net of tax 8.5 2.4 10.9 (22.9) 2.4 (20.5)
Total comprehensive income/(expense)
for the year 85.9 134.2 220.1 52.0 (54.5) (2.5)
---------------------------------------- ----- --------- ---------- ------ --------- ---------- -------
Consolidated Statement of Financial Position
As at 31 December 2018
(GBP million) Note 2018 2017
--------------------------------------- ----- -------- ------
Assets
Non-current assets
Goodwill 505.1 489.1
Intangible assets 280.9 282.6
Property, plant and equipment 9.2 11.3
Investments 6.1 5.1
Other receivables - 0.3
Deferred tax assets 11 42.8 47.1
844.1 835.5
Current assets
Inventories 3.9 17.8
Trade and other receivables 114.4 88.2
Financial assets - 0.1
Cash and cash equivalents 13 182.0 45.8
--------------------------------------- ----- -------- ------
300.3 151.9
Total assets 1,144.4 987.4
--------------------------------------- ----- -------- ------
Liabilities
Current liabilities
Trade and other payables 81.1 57.7
Deferred income 90.6 118.6
Deferred and contingent consideration 12 32.3 47.5
Current tax liabilities 6.0 12.1
Provisions 2.8 3.2
--------------------------------------- ----- -------- ------
212.8 239.1
Non-current liabilities
Deferred income 0.6 3.6
Deferred and contingent consideration 12 64.4 50.4
External borrowings 13 291.8 317.4
Deferred tax liabilities 11 24.8 31.3
Provisions 3.2 2.6
--------------------------------------- ----- -------- ------
384.8 405.3
--------------------------------------- ----- -------- ------
Total liabilities 597.6 644.4
--------------------------------------- ----- -------- ------
Net assets 546.8 343.0
--------------------------------------- ----- -------- ------
Equity
Share capital 4.0 4.0
Share premium 0.5 0.1
Reserves 542.3 338.9
--------------------------------------- ----- -------- ------
Total equity 546.8 343.0
--------------------------------------- ----- -------- ------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Reserves
--------------------------------------------------
Group Treasury
Share Share Merger restructure Translation share Retained Total
(GBP million) capital premium reserve reserve reserve reserve earnings equity
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
At 1 January 2017 4.0 - 9.2 157.9 (17.4) (0.1) 207.8 361.4
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
Profit for the year - - - - - - 18.0 18.0
Other comprehensive
expense - - - - (20.5) - - (20.5)
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
Total comprehensive
(expense)/ income - - - - (20.5) - 18.0 (2.5)
Issue of shares - 0.1 - - - - - 0.1
Share-based payments - - - - - - 3.6 3.6
Taxation on
share-based
payments - - - - - - 0.4 0.4
Dividends paid - - - - - - (20.0) (20.0)
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
At 31 December 2017 4.0 0.1 9.2 157.9 (37.9) (0.1) 209.8 343.0
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
Profit for the year - - - - - - 209.2 209.2
Other comprehensive
income - - - - 10.9 - - 10.9
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
Total comprehensive
income - - - - 10.9 - 209.2 220.1
Issue of shares - 0.4 - - - - - 0.4
Share-based payments - - - - - - 5.7 5.7
Taxation on
share-based
payments - - - - - - 0.4 0.4
Dividends paid - - - - - - (22.8) (22.8)
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
At 31 December 2018 4.0 0.5 9.2 157.9 (27.0) (0.1) 402.3 546.8
----------------------- --------- --------- --------- ------------- ------------ --------- ---------- --------
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
(GBP million) Note 2018 2017
------------------------------------------------------ ----- -------- --------
Cash flow from operating activities
Profit before taxation on continuing operations 28.9 19.9
Profit before taxation on discontinued operations 7 192.6 12.8
Adjustments for:
Amortisation of acquired intangible assets 33.7 25.5
Amortisation of software intangible assets 7.6 6.1
Depreciation of property, plant and equipment 3.5 5.0
(Gain)/ loss on disposal of business operations and
investments 10 (180.6) 0.9
Acquisition-related employment costs and revaluation
of contingent consideration 4 8.1 27.7
Share-based payments 6.5 4.4
Share of the profit of joint ventures accounted for
using the equity method (0.6) (0.3)
Net finance costs 5 11.9 11.7
------------------------------------------------------ ----- -------- --------
Cash generated from operations before changes in
working capital and provisions 111.6 113.7
------------------------------------------------------ ----- -------- --------
Changes in:
Inventories 2.6 (1.1)
Trade and other receivables (9.7) (15.1)
Trade and other payables, net of interest payable (26.7) 7.5
Provisions (1.1) 2.0
------------------------------------------------------ ----- -------- --------
Cash generated from operations 76.7 107.0
------------------------------------------------------ ----- -------- --------
Cash generated from operations before exceptional
operating items 110.1 121.9
Cash outflows for acquisition-related employment
costs 12 (21.0) (8.2)
Cash outflows for other exceptional operating items (12.4) (6.7)
------------------------------------------------------ ----- -------- --------
Cash generated from operations 76.7 107.0
------------------------------------------------------ ----- -------- --------
Tax paid (12.2) (7.9)
------------------------------------------------------ ----- -------- --------
Net cash generated from operating activities 64.5 99.1
------------------------------------------------------ ----- -------- --------
Cash flow from investing activities
Acquisition of businesses net of cash acquired 9 (97.7) (140.9)
Deferred and contingent consideration cash paid in
the year 12 (37.7) (15.6)
(Acquisition)/ reduction of investments (0.7) 0.2
Acquisition of software intangibles and property,
plant and equipment (18.7) (11.8)
Disposal of businesses net of cash disposed of 10 290.0 48.7
------------------------------------------------------ ----- -------- --------
Net cash used in investing activities 135.2 (119.4)
------------------------------------------------------ ----- -------- --------
Cash flow from financing activities
Proceeds from external borrowings 32.4 58.6
Repayment of external borrowings (66.0) (25.6)
Proceeds from issue of shares 0.4 0.1
Interest paid (6.9) (5.9)
Dividends paid to shareholders 14 (22.8) (20.0)
------------------------------------------------------ ----- -------- --------
Net cash used in financing activities (62.9) 7.2
------------------------------------------------------ ----- -------- --------
Net increase in cash and cash equivalents 136.8 (13.1)
Cash and cash equivalents at 1 January 45.8 61.9
Effect of exchange rate changes (0.6) (3.0)
------------------------------------------------------ ----- -------- --------
Cash and cash equivalents at 31 December 182.0 45.8
------------------------------------------------------ ----- -------- --------
Notes to the Financial Statements
For the year ended 31 December 2018
1. Basis of preparation and accounting policies
Basis of preparation
The full year announcement for the year ended 31 December 2018,
which is an abridged statement of the full Annual Report and
Accounts, has been prepared in accordance with International
Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board and interpretations issued
by the IFRS Interpretations Committee, as adopted by the EU, and
the Companies Act 2006 applicable to companies reporting under
IFRS.
Ascential plc (the "Company") is a public limited company, which
is listed on the London Stock Exchange and incorporated in the
United Kingdom. The registered office is located at The Prow, 1
Wilder Walk, London W1B 5AP.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2018.
Statutory accounts for 2017 have been delivered to the registrar of
companies, and those for 2018 will be delivered in due course. The
auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements are presented in pounds
sterling which is the Company's functional currency, and have been
rounded to the nearest one decimal place except where otherwise
indicated.
The Directors are confident that on the basis of current
financial projections and facilities available, and after
considering sensitivities, the Group has sufficient resources for
its operational needs and will remain in compliance with the
financial covenants in its bank facilities for the foreseeable
future.
The Consolidated financial statements have been prepared using
consistent accounting policies with those of the previous financial
year, with new standards applied in the year as set out below.
The consolidated financial statements have been prepared on a
going concern basis and under the historical cost convention, with
the exception of items that are required by IFRS to be measured at
fair value, principally certain financial instruments.
Accounting developments and changes
IFRS 15 and IFRS 9 have been applied from 1 January 2018. IFRS
16 has been issued and is effective from 1 January 2019. The impact
is described below.
IFRS 15 "Revenue from Contracts with Customers"
IFRS 15 is based on the principle that revenue is recognised
when control of goods or services is transferred to the customer
and provides a single, principle based, five-step model to be
applied to all sales contracts. It replaces the separate models for
goods, services and construction contracts under current IFRS. It
also provides further guidance on the measurement of sales on
contracts which have discounts and rebates.
The Group has adopted IFRS 15 using "the retrospective method
with practical expedients", meaning the cumulative effect of
initially applying the standard is recognised as a restatement at
the start of the earliest presented period, i.e. the opening
comparative balance sheet at 1 January 2017. The practical
expedient applied is that the new standard has only been applied to
those contracts that are not considered completed at 1 January
2017. IFRS 15 has had no material impact on continuing operations,
but an adjustment has been made to discontinued operations.
The result of our assessment on discontinued operations is a
less than 0.2% impact on revenue and a less than 0.1% impact on
retained earnings. For discontinued operations, the restatement
resulted in a reduction to revenue and cost of sales of GBP0.9m for
the year ended 31 December 2017, with no impact on profit before
tax in either period. The effect of this has been reflected in note
7.
IFRS 9 "Financial Instruments"
IFRS 9 applies a forward-looking impairment model that replaces
the current applicable incurred loss model. In contrast to the
complex and rules based approach of IAS 39, the new hedge
accounting requirements provide an improved link to risk management
and treasury operations and will be simpler to apply. The adoption
of IFRS 9 did not have a material impact on the Group's
consolidated results or financial position and does not require a
restatement of comparative figures.
The fair value of each category of the Group's financial
instruments approximates to their carrying value. Where financial
assets and liabilities are measured at fair values the measurement
hierarchy, valuation techniques and inputs used are consistent with
those used at 31 December 2017. There were no movements between
different levels of the fair value hierarchy in the year.
IFRS 16 "Leases"
IFRS 16 is effective from 1 January 2019 and has been adopted
from that date. It replaces all existing lease guidance and
introduces a single on-balance sheet model for lessee accounting
whereby a lessee recognises a right-of use of asset and a lease
liability for the obligation to make lease payments. The standard
excludes leases of low-value assets and short-term leases. Lessor
accounting remains similar to the current IAS 17 guidance.
These changes will be implemented in the financial statements
for 2019 with the actual impact of adopting the new standard at 1
January 2019 subject to change until the Group presents its first
financial statements that include the date of initial
application.
The Group has advanced its assessment of the potential impact on
the consolidated financial statements resulting from the
application of IFRS 16 and expects the impact not to be significant
on profit before tax. The impact of IFRS 16 for the year-ended 31
December 2018 will be finalised and presented as a restatement
along with the results for the half year ending 30 June 2019. The
current level of operating leases held by the Group is disclosed in
Note 15.
2. Critical accounting judgements and estimates
The preparation of these financial statements requires
management to exercise judgement in applying the Group's accounting
policies. It also requires the use of estimates and assumptions
that affect the reported amounts of assets, liabilities, income and
expenses. The actual future outcomes may differ from these
estimates and give rise to material adjustments to the reported
results and financial position of the Group.
Estimates and underlying assumptions are reviewed on an ongoing
basis, with revisions recognised in the year in which the estimates
are revised and in any future periods affected. The areas involving
a higher degree of judgement or complexity and assumptions or
estimation are set out below and in more detail in the related
notes.
Critical accounting judgements
Alternative Performance Measures (Note 4)
The Group uses alternative performance measures which are not
defined or specified under IFRS and removes adjusting items to
present an adjusted result. Adjusting items include amortisation
and impairment of acquired intangibles, share-based payments and
exceptional items. The classification of exceptional items requires
significant management judgement to determine the nature and
presentation of such transactions. Exceptional items are those
which are considered significant by virtue of their nature, size or
incidence. These items are presented as a separate column on the
face of the income statement but within their relevant income
statement caption. The Board view this as a relevant analysis to
assist the reader in their understanding of the underlying
performance and financial results of the Group. Note 4 provides an
analysis of exceptional items.
Key sources of estimation
Business combinations
Initial recognition of goodwill and intangible assets (Note
9)
Accounting for a business acquisition requires an assessment of
the existence, fair value and expected useful economic lives of
separable intangible assets such as brands, customer relationships
and technology assets at the date of acquisition. The fair value of
identifiable assets acquired and liabilities assumed on acquisition
is based on a number of estimates, including estimates of future
performance of related businesses, as is determining the expected
useful economic life of assets acquired. The value attributed to
these separable assets affects the amount of goodwill recognised
and the value, together with the assessment of useful economic
lives, determines future amortisation charges.
Acquired brands are valued using the relief-from-royalty method
which requires estimation of future revenues and estimation of a
royalty rate that an acquirer would pay in an arm's length
licencing arrangement to secure access to the same rights. The
theoretical royalty payments are discounted to obtain the cash
flows to determine the asset value, which also requires estimation
of an appropriate discount rate. A tax amortisation benefit is then
applied.
Acquired customer relationships are valued using the
multi-period excess earnings method ("MEEM approach") which starts
with the total expected income streams for a business or group of
assets as a whole and then deducts charges for all the other assets
used to generate income. Residual income streams are discounted and
a tax amortisation benefit is applied. The method requires
estimation of future forecasts of the business and an appropriate
discount rate.
Content and technology assets are valued using a depreciated
replacement cost method, which requires an estimate of all the
costs a typical market participant would incur to generate an exact
replica of the intangibles asset in the context of the acquired
business. The depreciated replacement cost method takes into
account factors including economic and technological
obsolescence.
In establishing the fair value and useful economic lives, the
Group considers, for each acquisition and each asset or liability,
the complexity of the calculations, the sources of estimation
uncertainty and the risk of such estimations resulting in a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year. Details of those
estimations that have a significant risk and the at-risk assets/
liabilities are disclosed as appropriate in note 9; the
significance of the risk will depend on the size of the
acquisition. Such sources of estimation uncertainty include
estimation of future cash flows, the determined weighted average
cost of capital and estimated useful lives.
Valuation of contingent consideration and acquisition-related
employment costs (Note 12)
Where a business combination agreement provides for an
adjustment to the consideration, contingent on future performance
over the contractual earn-out period, the Group accrues the fair
value, based of the estimated additional consideration payable as a
liability at acquisition date. To the extent that deferred
contingent consideration is payable as part of the acquisition cost
and is payable after one year from the acquisition date, the
deferred consideration is discounted at an appropriate discount
rate and carried at net present value in the consolidated balance
sheet. The liability is measured against the contractually agreed
performance targets at each subsequent reporting date with any
adjustments recognised in the consolidated income statement.
Acquisition-related employment costs are contingent on future
performance of the acquired business and linked to continued
employment of the founders over the contractual agreed period. They
are treated as an expense and recognised as such in the
consolidated income statement.
The estimation of the likely liability requires the Group to
make judgements concerning the future performance of related
business over both the deferred contingent consideration period and
the period of employment.
Taxation (Note 11)
Deferred tax assets are recognised to the extent that their
utilisation is probable. The utilisation of deferred tax assets
will depend on the judgement whether it is more likely than not
that the Group will generate sufficient and suitable taxable income
of the correct type and jurisdiction in the future, taking into
account any restrictions on the length of the loss-carry forward
period. Various factors are used to assess the probability of the
future utilisation of deferred tax assets, including past operating
results, operational plans and loss-carry forward periods. In
particular, utilisation of our US tax losses is subject to a
limitation triggered by change of control rules in the US and this
limitation is driven by the valuation of the US business at the
point of change in control. This is a key judgement area which
remains uncertain until it is agreed with the tax authorities.
3. Operating segments
Following the sale of the Exhibitions Business in July 2018, the
Group changed from two to four reportable segments as the
information presented to the Board (Chief Operating Decision Maker)
on a monthly basis changed. End market risk and opportunities vary
and capital allocation decisions are made on the basis of four
reportable segments. The four reportable segments are Product
Design, Marketing, Sales and Built Environment & Policy. The
reportable segments offer different products and services, and are
managed separately as a result of different capabilities,
technology, marketing strategies and end market risks and
opportunities. The following summary describes the operations in
each of the Group's reportable segments:
-- Product Design: global trend forecasting and insight (WGSN)
-- Marketing: global creative benchmark, effectiveness
measurement and strategic advisory (Cannes Lions, WARC,
MediaLink)
-- Sales: global ecommerce data, analytics and managed services,
Fintech and retail intelligence (Edge, Flywheel Digital,
Money20/20, RWRC)
-- Built Environment & Policy: Political, construction and
environment intelligence brands (Groundsure, Glenigan,
DeHavilland)
-- Discontinued operations:
o In 2018 (with 2017 profit or loss comparatives restated): the
Exhibitions business which was previously part of the Exhibitions
& Festivals segment and which was identified as a separate cash
generating unit following the announcement of its strategic review
in February 2018. The Exhibitions business was sold on 17 July 2018
(see note 7).
o In 2017: the 13 Heritage brands which were all sold in
2017.
Information regarding the results of each reportable segment is
included below and restated for prior periods to enhance
comparability. Reportable segment profits are measured at an
adjusted operating profit level, representing reportable segment
Adjusted EBITDA, less depreciation costs and amortisation in
respect of software intangibles, without allocation of Corporate
costs as reported in the internal management reports that are
reviewed by the Board. Reportable segment Adjusted EBITDA and
reportable segment Adjusted operating profit are used to measure
performance as management believes that such information is the
most relevant in evaluating the results of the reportable segments
relative to other comparable entities. Total assets and liabilities
for each reportable segment are not disclosed because they are not
provided to the Board on a regular basis. Total assets and
liabilities are internally reviewed on a Group basis.
Year ended 31 December 2018
Built Continuing
Product Environment Corporate operations Discontinued
(GBP million) Design Marketing Sales & Policy costs* total operations Total
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Revenue 77.8 116.3 120.9 34.3 (0.8) 348.5 54.6 403.1
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Adjusted EBITDA 28.1 38.9 36.9 14.0 (16.1) 101.8 19.8 121.6
Depreciation
and software
amortisation (1.8) (4.1) (2.1) (0.5) (2.3) (10.8) (0.3) (11.1)
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Adjusted operating
profit 26.3 34.8 34.8 13.5 (18.4) 91.0 19.5 110.5
Amortisation
of acquired
intangible assets (30.6) (3.1) (33.7)
Exceptional
items (14.0) 176.5 162.5
Share-based
payments (6.2) (0.3) (6.5)
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Operating profit 40.2 192.6 232.8
Share of net
loss in
equity-accounted
investee 0.6 - 0.6
Finance costs (12.5) (12.5)
Finance income 0.6 - 0.6
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Profit before
tax 28.9 192.6 221.5
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
*Corporate costs include a GBP0.8m elimination for intercompany
trading.
Year ended 31 December 2017, Restated*
Built Continuing
Product Environment Corporate operations Discontinued
(GBP million) Design Marketing Sales & Policy costs total operations Total
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Revenue 73.6 110.6 78.0 30.7 - 292.9 105.8 398.7
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Adjusted EBITDA 22.5 48.1 29.3 9.1 (14.3) 94.7 25.9 120.6
Depreciation
and software
amortisation (2.3) (3.9) (1.0) (0.6) (1.5) (9.3) (1.8) (11.1)
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Adjusted operating
profit 20.2 44.2 28.3 8.5 (15.8) 85.4 24.1 109.5
Amortisation
of acquired
intangible
assets (17.8) (7.7) (25.5)
Exceptional items (32.5) (3.0) (35.5)
Share-based payments (3.8) (0.6) (4.4)
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Operating profit 31.3 12.8 44.1
Share of net
loss in
equity-accounted
investee 0.3 - 0.3
Finance costs (12.2) - (12.2)
Finance income 0.5 - 0.5
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
Profit before
tax 19.9 12.8 32.7
----------------------- -------- ---------- ------ ------------- ---------- ------------ ------------- -------
*Restated for new operating segments, and Discontinued
operations (see note 7) and IFRS 15 (see note 1).
Exceptional items of GBP14.0 million (2017: GBP32.5 million)
include GBP0.3 million (2017: GBP0.3 million), GBP1.3 million
income (2017: GBP11.3 million), GBP14.7 million (2017: GBP20.3
million) and GBP0.3 million (2017: GBP0.6 million) which are
attributable to Product Design, Marketing, Sales and Corporate
costs respectively. Finance costs and finance income are not
allocated to segments, as these types of activity are driven by the
Group corporate function.
Revenue and non-current assets by location
Revenue from continuing operations is based on the location of
customers. Non-current assets analysis (excluding deferred tax and
financial instruments) is based on geographical location. The Group
does not have any customers from whom revenue exceeds 10% of total
revenue. Included in revenue is barter revenue arising from the
exchange of goods or services of GBP0.9 million for the year ended
31 December 2018 (2017: GBP0.5 million).
Non-current assets
(excluding deferred
Revenue tax and financial instruments)
(GBP million) 2018 2017 2018 2017
-------------------------- ------ ------ ---------------- ----------------
United Kingdom 81.0 62.4 377.2 436.9
Other Europe 56.1 49.3 103.5 113.7
United States and Canada 149.0 126.3 313.4 227.0
Asia Pacific 40.1 30.0 5.3 4.8
Middle East and Africa 8.4 10.7 - -
Latin America 13.9 14.2 1.9 6.0
-------------------------- ------ ------ ---------------- ----------------
Total 348.5 292.9 801.3 788.4
-------------------------- ------ ------ ---------------- ----------------
Additional segmental information on revenue
The Group's revenue is derived from contracts with customers,
and the nature and effect of initially applying IFRS 15 is
disclosed in Note 1.
The following table shows revenue disaggregated by major service
lines, and the timing of revenue recognition:
Timing of revenue
(GBP million) recognition 2018 2017
------------------- -------------------- ------- -------
Subscriptions Over time 72.9 69.6
Advisory Over time 4.6 3.7
Transactions Point in time 0.3 0.3
Product Design 77.8 73.6
----------------------------------------- ------- -------
Delegates Point in time 22.0 27.3
Stand Space Point in time 0.9 1.2
Sponsorship Point in time 9.0 8.2
Award entries Point in time 24.7 28.8
Subscriptions Over time 8.7 2.3
Advisory Over time 47.6 40.5
Other Point in time 3.4 2.3
------------------- -------------------- ------- -------
Marketing 116.3 110.6
----------------------------------------- ------- -------
Delegates Point in time 36.7 28.6
Stand Space Point in time 16.8 11.0
Sponsorship Point in time 11.3 9.0
Subscriptions Over time 44.6 23.6
Marketing Services Over time 2.7 2.7
Advisory Over time 4.3 2.7
Managed services Over time 4.1 -
Other Point in time 0.4 0.4
------------------- -------------------- ------- -------
Sales 120.9 78.0
----------------------------------------- ------- -------
Subscriptions Over time 14.3 12.9
Advisory Over time 1.0 0.3
Transactions Point in time 18.7 17.3
Other Point in time 0.3 0.2
------------------- -------------------- ------- -------
Built Environment and Policy 34.3 30.7
----------------------------------------- ------- -------
Intercompany sales (0.8) -
----------------------------------------- ------- -------
Revenue from continuing operations 348.5 292.9
----------------------------------------- ------- -------
Contract balances
The following table provides information about receivables,
contract assets and contract liabilities from contracts with
customers:
(GBP million) 2018 2017
------------------------------------------------------------------ ----- ------
Receivables, which are included in "Trade and other receivables" 64.2 67.6
Contract assets - accrued income 7.4 4.8
Contract liabilities - deferred income 91.5 122.2
------------------------------------------------------------------ ----- ------
4. Exceptional items
Exceptional items included in operating profit from continuing
operations
(GBP million) 2018 2017
------------------------------------------------------ ----- -----
Acquisition-related expenses 8.1 27.7
Acquisition transaction and integration costs 5.9 4.6
IPO expenditure and other - 0.2
------------------------------------------------------ ----- -----
Exceptional items included in profit from continuing
operations 14.0 32.5
------------------------------------------------------ ----- -----
Acquisition-related expenses include payments agreed as part of
the acquisition but linked to ongoing employment
of GBP13.3 million (2017: GBP26.6 million) offset by revaluation
of contingent consideration of GBP5.2 million (2017: GBP1.1 million
charge).
Acquisition-related employment costs relate primarily to the
acquisitions of One Click Retail, MediaLink, Clavis and Flywheel
Digital, which, absent the link to continued employment, would have
been treated as consideration. Under the sale and purchase
agreements between 25% and 50% of deferred payments are contingent
on both (i) the results of the business in the post-acquisition
period and (ii) the continued employment of the founders.
As part of the overall strategy of managing the Group's
portfolio, costs incurred as part of the acquisition and
integration of acquired businesses are considered to be material.
In 2018 integration costs relate mainly to Edge. Acquisitions
transaction costs include directly linked transaction costs as well
as stamp duty where applicable. Integration spend is in relation to
transferring acquired businesses onto the Group's IT and revenue
platforms., merging of products and rebranding.
5. Finance income and finance costs
(GBP million) 2018 2017
---------------------------------------------------------- ------- -------
Interest on bank deposits 0.6 0.2
Foreign exchange gain on borrowings - 0.3
Finance income 0.6 0.5
---------------------------------------------------------- ------- -------
Interest payable on external borrowings (7.1) (5.8)
Amortisation of loan arrangement fees (1.2) (1.3)
Foreign exchange loss on cash and cash equivalents (0.6) (0.8)
Discount unwind on contingent and deferred consideration (3.6) (4.3)
---------------------------------------------------------- ------- -------
Finance costs (12.5) (12.2)
---------------------------------------------------------- ------- -------
Net finance costs from continuing operations (11.9) (11.7)
---------------------------------------------------------- ------- -------
6. Taxation
The tax charge for the year comprises:
(GBP million) 2018 2017
--------------------------------------------------------- ------ -------
Current tax
UK current tax charge on income for the year at
19.0% (2017: 19.25%) 6.5 5.0
Overseas current tax charge on income for the year 2.2 2.9
Adjustments in respect of prior years (1.9) -
--------------------------------------------------------- ------ -------
Total current tax charge 6.8 7.9
--------------------------------------------------------- ------ -------
Deferred tax
Current year 1.2 (16.5)
Adjustments in respect of prior years 0.9 (0.3)
Impact of rate changes on opening deferred tax balances - 16.9
--------------------------------------------------------- ------ -------
Total deferred tax charge 2.1 0.1
--------------------------------------------------------- ------ -------
Total tax charge from continuing operations 8.9 8.0
--------------------------------------------------------- ------ -------
During 2018 a deferred tax credit of GBP0.4 million (2017:
GBP0.4 million) was recognised in equity relating to share-based
payments.
The difference between the tax as credited in the consolidated
income statement for the continuing operations and tax at the UK
standard rate is reconciled below:
2018 2017
----------------------------------------- -------------------------------------
Total
profit Total profit
Adjusted Loss on / tax Adjusted Loss on / tax from
profit/ Adjusting from continuing profit/ Adjusting continuing
(GBP million) tax items/tax operations* tax items/tax operations*
------------------------------- --------- ----------- ----------------- --------- ----------- -------------
Profit before tax 79.7 (50.8) 28.9 74.0 (54.1) 19.9
Expected tax charge/(credit)
at the UK standard rate
of 19.0% (2017: 19.25%) 15.1 (9.7) 5.4 14.2 (10.4) 3.8
------------------------------- --------- ----------- ----------------- --------- ----------- -------------
Principal differences
due to:
Impact of rate changes - - - 10.8 6.8 17.6
Impact of higher/(lower)
overseas tax rates 3.3 (1.6) 1.7 7.4 (8.3) (0.9)
Trading losses not recognised
for deferred tax purposes 1.1 - 1.1 - - -
Recognition of previously
unrecognised trading
losses (1.5) - (1.5) (12.7) - (12.7)
Recognition of previously
unrecognised capital
losses - - - - 0.1 0.1
Non-deductible legal,
professional and M&A
costs 0.8 1.4 2.2 - 0.6 0.6
Non-deductible share
based payments expense - 0.4 0.4 - 0.5 0.5
Other non-deductible
items 0.6 - 0.6 0.1 - 0.1
Non-taxable/deductible
exchange (gains)/losses - - - (0.4) - (0.4)
Non-taxable/deductible
disposal (gains)/losses - - - (0.4) - (0.4)
Adjustments in respect
of prior years (1.6) 0.6 (1.0) (0.3) - (0.3)
------------------------------- --------- ----------- ----------------- --------- ----------- -------------
Total tax charge/(credit)
for the year 17.8 (8.9) 8.9 18.7 (10.7) 8.0
------------------------------- --------- ----------- ----------------- --------- ----------- -------------
Effective tax rate 22% 18% 31% 25% 20% 40%
------------------------------- --------- ----------- ----------------- --------- ----------- -------------
* Tax on discontinued operations is set out in Note 7
The Group's effective tax rate is higher than the UK's statutory
tax rate mainly due to its mix of profits with increased profits
coming from the US.
The impact of rate changes in the prior year arose from the
enactment of US tax reform on 22 December 2017 and the continuing
reduction of the UK tax rate. The tax rate change included GBP17.2
million in respect of the US and GBP0.4 million for the UK.
The Group is subject to many different forms of taxation
including, but not limited to, income and corporation tax,
withholding tax and value added and sales taxes. The Group has
operations in 15 countries and multiple states in the US and sells
its products and services into more than 100 countries.
Furthermore, the Group renders and receives cross-border supplies
and services in respect of affiliated entities which exposes the
Group to tax risk due to transfer pricing rules that apply in many
jurisdictions.
Tax law and administration is complex and often requires
subjective determinations. In addition, tax audits by their nature,
can take a significant period of time to be agreed with the tax
authorities. Therefore, management is required to apply judgement
to determine the level of provisions required in respect of its tax
liabilities. The Directors' estimates of the level of risk arising
from tax audit may change in the next year as a result of changes
in legislation or tax authority practice or correspondence with tax
authorities during specific tax audits. It is not possible to
quantify the impact that such future developments may have on the
Group's tax positions. Actual outcomes and settlements may differ
from the estimates recorded in these consolidated financial
statements. The Group currently anticipates that the outcome of
these uncertainties will only be resolved after more than one year.
However even where uncertainties may not be resolved within one
year, material adjustments may arise as a result of a reappraisal
of the assets or liabilities within the next year.
7. Discontinued operations
Ascential's Exhibitions business was previously part of the
Exhibitions & Festivals segment and was classified as a
discontinued operation in accordance with IFRS 5 "Non-current
assets held for sale and discontinued operations" following the
announcement of the strategic review in February 2018. The
Exhibitions business was sold on 17 July 2018. The prior period
also includes the results of the 13 Heritage brands which were
discontinued and sold in 2017.
The results of the discontinued operations which have been
included in the consolidated statement of profit and loss are as
follows:
Restated*
2018 2017
------------------------------------- ----- ------------------------------ ------------------------------
Adjusted Adjusting Adjusted Adjusting
(GBP million) Note results items Total results items Total
------------------------------------- ----- --------- ---------- ------- --------- ---------- -------
Revenue 54.6 - 54.6 105.8 - 105.8
Cost of sales (21.4) - (21.4) (42.2) - (42.2)
Sales, marketing and administrative
expenses (13.7) 169.3 155.6 (39.5) (11.3) (50.8)
------------------------------------- ----- --------- ---------- -------
Operating profit/(loss) 19.5 169.3 188.8 24.1 (11.3) 12.8
------------------------------------- ----- --------- ---------- ------- --------- ---------- -------
Adjusted EBITDA 19.8 - 19.8 25.9 - 25.9
Depreciation and amortisation (0.3) (3.1) (3.4) (1.8) (7.7) (9.5)
Exceptional items - 176.5 176.5 - (3.0) (3.0)
Share-based payments - (0.3) (0.3) - (0.6) (0.6)
------------------------------------- ----- --------- ---------- ------- --------- ---------- -------
Operating profit/(loss) 19.5 173.1 192.6 24.1 (11.3) 12.8
------------------------------------- ----- --------- ---------- ------- --------- ---------- -------
Taxation (4.0) 0.6 (3.4) (4.5) (2.2) (6.7)
------------------------------------- ----- --------- ---------- -------
Profit/(loss) from discontinued
operations, net of tax 15.5 173.7 189.2 19.6 (13.5) 6.1
------------------------------------- ----- --------- ---------- ------- --------- ---------- -------
Earnings per share (pence)
* Basic 8 3.8 43.4 47.2 5.0 (3.4) 1.6
* Diluted 8 3.8 42.8 46.6 5.0 (3.4) 1.6
------------------------------------- ----- --------- ---------- ------- --------- ---------- -------
* Revenue and cost of sales have been restated for IFRS 15 (see
note 1). There is no impact on opening balance sheet, net profit,
or basic or diluted EPS.
Exceptional items in discontinued operations of GBP176.5 million
includes the gain on disposal of the Exhibitions business of
GBP180.6 million offset by GBP3.6 million of separation expenses
related the Exhibitions disposal, GBP0.3m revaluation of contingent
consideration on discontinued operations and GBP0.2 million of
other items related to the disposal of Heritage Brands in the prior
year. The prior year includes a restatement for the GBP1.8 million
loss on disposal, which was reported as continuing exceptional
items in the prior year.
During the year discontinued operations generated cash of GBP2.0
million (2017: GBP4.1 million) in respect of operating activities
and generated GBPnil (2017: GBPnil) in respect of investing
activities.
8. Earnings per share
Basic earnings per share is calculated by dividing the net
profit for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
year. Diluted earnings per share is calculated by dividing the net
profit for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the
year plus the weighted average number of ordinary shares that would
be issued on the conversion of all dilutive potential ordinary
shares into ordinary shares.
Earnings per share have been calculated with respect to the net
profit for the year for the Group, the continuing operations and
the discontinued operations (Note 7).
2018 2017
------------------------------------ ----------------------------- -----------------------------
Adjusted Adjusting Adjusted Adjusting
results items Total results items Total
------------------------------------ --------- ---------- ------ --------- ---------- ------
Profit attributable to equity
shareholders of the Company (GBP
million)
Profit for the year - continuing
operations 61.9 (41.9) 20.0 55.3 (43.4) 11.9
Profit for the year - discontinued
operations 15.5 173.7 189.2 19.6 (13.5) 6.1
------------------------------------ --------- ---------- ------ --------- ---------- ------
Profit for the year 77.4 131.8 209.2 74.9 (56.9) 18.0
------------------------------------ --------- ---------- ------ --------- ---------- ------
Share number (million)
Basic weighted average number
of shares 400.3 400.3 400.3 400.1 400.1 400.1
Dilutive potential ordinary shares 5.2 5.2 5.2 2.2 2.2 2.2
------------------------------------ --------- ---------- ------ --------- ---------- ------
Diluted weighted average number
of shares 405.5 405.5 405.5 402.3 402.3 402.3
------------------------------------ --------- ---------- ------ --------- ---------- ------
Earnings per share (pence)
Basic earnings per share 19.3 32.9 52.2 18.7 (14.2) 4.5
Diluted earnings per share 19.1 32.3 51.4 18.6 (14.2) 4.4
Continuing operations
Basic earnings per share 15.5 (10.5) 5.0 13.7 (10.8) 2.9
Diluted earnings per share 15.3 (10.5) 4.8 13.6 (10.8) 2.8
Discontinued operations
Basic earnings per share 3.8 43.4 47.2 5.0 (3.4) 1.6
Diluted earnings per share 3.8 42.8 46.6 5.0 (3.4) 1.6
------------------------------------ --------- ---------- ------ --------- ---------- ------
9. Business combinations
The Group acquired the following businesses during the years
ended 31 December 2018 and 2017:
Name Date of acquisition Country Shares/ % acquired Acquisition-related
of incorporation asset costs
deal (GBP'm)
---------------------------- --------------------- ------------------- --------- ----------- --------------------
Marketing
28 February
Media Link, LLC* 2017 USA Shares 100% 0.9
18 September
Siberia LLC* 2017 USA Shares 100% 0.1
WARC Limited ("WARC") 2 July 2018 UK Shares 100% 0.8
Product design
Sistema UseFashion Comercio 29 November
de Informacoes Ltda* 2017 Brazil Shares 100% 0.3
Sales
Clavis Technology Limited 22 December
("Clavis")* 2017 Ireland Shares 100% 2.3
ePossibilities Global
Holdings 31 August
Limited ("BrandView") 2018 UK Shares 100% 0.8
Peloton Holdings, LLC
("Flywheel 31 October
Digital") 2018 USA Shares 100% 1.0
---------------------------- --------------------- ------------------- --------- ----------- --------------------
*The details of the prior year acquisitions are set out in the
2017 annual report. In the current year a GBP0.9 million completion
statement receipt was received in relation to the prior year Clavis
acquisition, which resulted in a GBP0.9 million increase in
Goodwill in Edge.
2018 acquisitions
The following table sets out the key information relating to the
businesses acquired in 2018:
WARC BrandView Flywheel Digital
----------------------------- ----------------------- -------------------- ---------------------
Primary Activity Digital subscription Price and Promotion Managed services
business on marketing analytics to to consumer product
effectiveness. retailers and companies trading
manufacturers. on Amazon.
Segment Marketing Sales Sales
i) Deferred, contingent
consideration:
Contingent on results - 2019 2019-2021
in financial years:
Payable in: - 2019 2020-2022
Estimated undiscounted - GBP5.0 million GBP43.2/$55.3
amount million
Estimated discounted - GBP5.0 million GBP34.6/$44.2
amount* million
Deferred consideration 2019 - -
payable in:
Estimated undiscounted GBP4.5 million - -
amount
Estimated discounted GBP4.5 million - -
amount*
ii) Acquisition related
employment payments:
Contingent on results - - 2019-2021
in financial years:
Payable in: - - 2020-2022
Estimated undiscounted - - GBP14.3/$18.4
amount million
Exceptional cost related - - GBP1.5 million
to acquisition related
employment cost in 2018**
Maximum total consideration GBP29.5 million GBP38.0 million GBP310/$400 million
payable***
Anticipated total discounted GBP4.5 million GBP5.0 million GBP36.1 million
consideration (i and
ii)
*Consideration payable within one year is not discounted as
explained under note 1.
**The acquisition-related employment cost is accrued over the
period in which the related services are received, recorded as
exceptional costs.
***Includes i) Deferred, contingent consideration; ii)
Acquisition related employment payments; and iii) initial
consideration per the goodwill calculation table below
To determine the estimated contingent consideration and the
acquisition-related employment cost figures quoted above, the
Directors are required to make an estimate regarding the future
results. Any subsequent revaluations to contingent consideration as
a result of changes in such estimations are recognised in the
consolidated income statement and disclosed in Note 12.
From the date of acquisition, the businesses acquired in 2018
contributed GBP14.6m revenue and GBP4.3m EBITDA. If the
acquisitions had taken place at the beginning of 2018, the business
would have contributed GBP42.3m revenue and GBP11.0m EBITDA.
The fair values of the identifiable assets purchased and
liabilities assumed of the acquired companies as at the date of
acquisition were as follows:
Clavis
purchase
price
allocation Flywheel
GBP million WARC BrandView finalisation Digital* Total
--------------------------------------- ------- ---------- -------------- ---------- -------
Brands 1.8 0.2 - 6.2 8.2
Customer relationships 8.9 10.4 - 25.6 44.9
Content 9.4 - - 5.2 14.6
Technology 1.1 6.8 - 1.4 9.3
Property, plant and equipment 0.6 0.4 - 0.6 1.6
Trade and other receivables 2.8 2.9 (3.2) 30.0 32.5
Cash 5.1 0.6 - 2.2 7.9
Trade and other payables (1.1) (1.6) 0.5 (23.0) (25.2)
Provisions (0.3) (0.1) (0.5) - (0.9)
Deferred income (6.0) (3.4) 1.4 (0.9) (8.9)
Deferred tax liability (3.6) (3.0) - - (6.6)
---------------------------------------- ------- ---------- -------------- ---------- -------
Total identifiable net assets
at fair value 18.7 13.2 (1.8) 47.3 77.4
---------------------------------------- ------- ---------- -------------- ---------- -------
Initial cash consideration relating
to business combination 25.0 29.8 - 51.7 106.5
Completion statement cash receipt - - (0.9) - (0.9)
Working capital adjustment payable/
(receivable) in 2019 (0.2) - 1.2 1.0
Contingent consideration payable
in 2019 - 5.0 - - 5.0
Deferred consideration payable
in 2019 4.5 - - - 4.5
Deferred and contingent consideration
payable in 2020-2022 - - 33.8 33.8
Total consideration 29.3 34.8 (0.9) 86.7 149.9
---------------------------------------- ------- ---------- -------------- ---------- -------
Goodwill on acquisition 10.6 21.6 0.9 39.4 72.5
---------------------------------------- ------- ---------- -------------- ---------- -------
Cash flow
Acquisition of businesses (net
of cash acquired) 19.9 29.2 (0.9) 49.5 97.7
---------------------------------------- ------- ---------- -------------- ---------- -------
*The fair values provided for Flywheel Digital are provisional
figures, being the best estimates currently available due to the
proximity of the acquisition date to year-end. A review of the
closing balance sheet is currently being undertaken and adjustments
may be necessary.
The goodwill of GBP72.5 million arising on acquisitions is
attributable to workforce in place and the acquisition of new
customers, know-how within the business and with specific regard to
WARC the buyer specific synergies on accessing capabilities and
insight on the current marketing proposition by combining existing
creative excellence insights with deep expertise of measuring
marketing effectiveness. The combining of the creative insight and
the measuring of marketing effectiveness strengthens the already
available digital offering in the form of a combined subscription
product. With specific regard to Flywheel Digital, the know how
relates to the knowledge within the workforce on how to use the
technology and the content to good effect. In BrandView, the
goodwill is attributable to workforce in place and the acquisition
of new customers. Goodwill amounting to GBP39.4 million (207:
GBP62.1 million) is expected to be deductible for tax purposes.
10. Disposal of business operations
On 17(th) July 2018 the Group disposed of the Exhibitions
Business. The Group recognised a total gain on disposal of GBP180.6
million presented as an exceptional item within discontinued
operations.
Exceptional items in discontinued operations (note 7) of
GBP176.5 million includes the gain on disposal of the Exhibitions
business of GBP180.6 million offset by GBP3.6 million of separation
expenses related the Exhibitions disposal, GBP0.3m revaluation of
contingent consideration on discontinued operations and GBP0.2
million of other items related to the disposal of Heritage Brands
in the prior year.
2017 results have been restated to report the loss on disposal
of GBP1.8 million within discontinued operations (note 7).
(GBP million) 2018
----------------------------------------------- --------
Gross proceeds 297.8
Working capital adjustment 2.6
Cash and cash equivalents disposed of (4.0)
----------------------------------------------- --------
Total proceeds 296.4
----------------------------------------------- --------
Net assets disposed of (106.3)
Disposal costs (7.1)
Recycling of deferred foreign exchange gains (2.4)
Gain on disposal from discontinued operations 180.6
----------------------------------------------- --------
Assets and liabilities disposed of:
(GBP million) 2018
------------------------------------------------ -------
Goodwill* 67.3
Investments 0.2
Brands, customer relationships and databases 59.2
Tangible fixed assets including software 2.9
Deferred tax asset 0.8
Trade and other receivables 28.4
Trade and other payables (41.9)
Provisions (0.5)
Deferred tax liability on disposed intangibles (10.1)
------------------------------------------------ -------
Net assets and liabilities disposed 106.3
------------------------------------------------ -------
* As a result of the disposal of the Exhibitions Business, the
Exhibitions & Festivals segment was split up and required
historical goodwill to be allocated between Cannes Lions and
Exhibitions. In line with IAS 36, the Group determined that the
most appropriate allocation method was the relative valuation of
each business. For the Exhibitions Business this was the
consideration received of GBP297.8 million and for Cannes Lions the
most recent value-in-use calculation for the annual impairment
review was used and an external valuation specialist reviewed the
assumptions used in the value-in use calculation.
The net inflow/(outflow) of cash in respect of the disposal of
businesses is as follows:
(GBP million) 2018
----------------------------------------------------------- ------
Cash proceeds received for current year disposals (net of
cash disposed of) 296.4
Disposal costs paid (6.4)
Net cash inflow 290.0
----------------------------------------------------------- ------
11. Deferred tax assets and liabilities
The deferred tax balances shown in the consolidated balance
sheet are analysed as follows:
(GBP million) 2018 2017
-------------------------- ------- -------
Deferred tax assets 42.8 47.1
Deferred tax liabilities (24.8) (31.3)
Total 18.0 15.8
-------------------------- ------- -------
The major deferred tax assets and liabilities recognised by the
Group, and the movements in the period, are set out below:
Non-deductible US deductible Property,
intangible intangible Share-based plant
(GBP million) assets assets payments and equipment Tax losses Other Total
------------------------ --------------- -------------- ------------ --------------- ----------- ------ -------
At 1 January 2017 (30.3) 12.5 0.2 9.9 32.2 0.1 24.6
Credit/(charge) to the
consolidated income
statement for the year 2.9 9.7 0.3 (0.9) 2.6 - 14.6
Credit to equity - - 0.4 - - - 0.4
Adjustments in respect
of prior years - - - 0.1 0.3 - 0.4
Impact of rate changes 0.6 (7.4) - - (10.1) - (16.9)
Acquisitions (5.3) - - - - - (5.3)
Disposals 0.8 - - (0.1) - - 0.7
Foreign exchange
movements - (1.2) - - (1.5) - (2.7)
------------------------ --------------- -------------- ------------ --------------- ----------- ------ -------
At 31 December 2017 (31.3) 13.6 0.9 9.0 23.5 0.1 15.8
------------------------ --------------- -------------- ------------ --------------- ----------- ------ -------
Credit/(charge) to the
consolidated income
statement for the
year* 3.6 (2.8) 0.8 (0.9) (1.6) - (0.9)
Credit to equity - - 0.4 - - - 0.4
Adjustments in respect
of prior years (0.6) - 0.1 (0.2) (1.3) 1.0 (1.0)
Acquisitions (6.8) - - - - - (6.8)
Disposals 10.1 - (0.1) (0.7) - - 9.3
Foreign exchange
movements 0.2 0.2 - - 0.8 - 1.2
------------------------ --------------- -------------- ------------ --------------- ----------- ------ -------
At 31 December 2018 (24.8) 11.0 2.1 7.2 21.4 1.1 18.0
------------------------ --------------- -------------- ------------ --------------- ----------- ------ -------
* The above charge to the consolidated income statement for the
year includes a credit of GBP0.3 million in respect of discontinued
operations.
The above deferred tax balances are expected to reverse:
Non-deductible US deductible Property
intangible intangible Share-based plant
(GBP million) assets assets payments and equipment Tax losses Other Total
------------------ --------------- -------------- ------------ --------------- ----------- ------ ------
Within 12 months (3.1) 3.7 0.7 0.7 6.2 - 8.2
After 12 months (21.7) 7.3 1.4 6.5 15.2 1.1 9.8
------------------ --------------- -------------- ------------ --------------- ----------- ------ ------
Total (24.8) 11.0 2.1 7.2 21.4 1.1 18.0
------------------ --------------- -------------- ------------ --------------- ----------- ------ ------
In presenting its deferred tax balances, the Group does not
offset assets and liabilities as the Group has no legally
enforceable right to set off the arising current tax liabilities
and assets when those deferred tax balances reverse.
No deferred tax liability has been recognised in respect of
temporary differences associated with investments in subsidiaries
and joint ventures as the Group is in a position to control the
timing of their reversal and it is probable that such differences
will not reverse in the foreseeable future.
The prior year movement includes the impact of the US tax rate
change from 35% to 21% with effect for periods beginning after 31
December 2017. This resulted in a revaluation of US deferred tax
assets and liabilities and an overall reduction of GBP16.6m in the
prior year. For the current year, the US deferred tax assets and
liabilities remained valued using the Federal rate of 21% and where
applicable the effective State tax rate of 5%.
US deductible intangible assets represents the value of deferred
tax assets on US tax deductible intangibles and deferred
consideration. These deferred tax assets are recognised at a
blended US Federal and State tax rate of 26%.
Non-deductible intangibles represent the value of the deferred
tax liability which arises on the fair value of acquired
intangibles which are not deductible for tax purposes. The
liability is valued at the tax rate applicable to the jurisdiction
where the intangibles are located.
Deferred tax assets have been recognised on the basis that
sufficient taxable profits are forecast to be available in the
future to enable them to be utilised.
At 31 December 2018, the Group has the following tax losses:
Recognised Recognised Unrecognised Unrecognised Total Total
(GBP million) 2018 2017 2018 2017 2018 2017
---------------------------- ----------- ----------- ------------- ------------- ------ ------
US net operating losses 71.3 66.0 127.0 127.1 198.3 193.1
UK non-trading losses 36.3 54.1 - - 36.3 54.1
Irish trading losses - - 18.3 16.4 18.3 16.4
UK capital losses - - 114.9 115.1 114.9 115.1
Other Rest of World losses - - 3.9 - 3.9 -
---------------------------- ----------- ----------- ------------- ------------- ------ ------
Total 107.6 120.1 264.1 258.6 371.7 378.7
---------------------------- ----------- ----------- ------------- ------------- ------ ------
The above losses represent the following value at tax rates
applicable at the balance sheet date:
Recognised Recognised Unrecognised Unrecognised Total Total
(GBP million) 2018 2017 2018 2017 2018 2017
---------------------------- ----------- ----------- ------------- ------------- ------ ------
US net operating losses 15.0 13.8 26.7 26.7 41.7 40.5
UK non-trading losses 6.4 9.7 - - 6.4 9.7
Irish trading losses - - 2.3 2.1 2.3 2.1
UK capital losses - - 19.5 19.6 19.5 19.6
Other Rest of World losses - - 1.1 - 1.1 -
---------------------------- ----------- ----------- ------------- ------------- ------ ------
Total 21.4 23.5 49.6 48.4 71.0 71.9
---------------------------- ----------- ----------- ------------- ------------- ------ ------
The Group has tax losses in the US totalling GBP198.3 million
carried forward at 31 December 2018 (2017: GBP193.1 million). It
has been agreed with the US tax authorities that these losses are
available to offset against taxable profits subject to a
restriction following the change of ownership that was deemed to
have occurred upon the listing of Ascential plc in 2016. In line
with the US tax rules, the restriction of losses is, to a large
extent, based on the valuation of the US tax group at the change of
control date and this will be agreed with the US tax authorities in
due course. The valuation of the US tax group is therefore a source
of estimation and an external valuation was commissioned in 2017 to
support the Group's position. The recognised deferred tax asset is
sensitive to a change in this valuation. The Board expects the
deferred tax asset to be recovered over a number of years and
considers it to be unlikely that there will be a consequential
change in the estimates made that would lead to a material movement
in the asset in the next 12 months.
12. Deferred and contingent consideration
The Group has liabilities in respect of deferred and contingent
consideration payments under various business acquisition
contracts.
Product Level
(GBP million) Note Sales Marketing design Total 3
At 1 January 2017 66.8 - 4.0 70.8 51.0
----------------------------------------- ----- ------- ---------- -------- ------- -------
Additions 11.4 14.2 0.8 26.4 21.2
Acquisition-related employment costs
accrued in the year 4 17.2 9.4 - 26.6 -
Revaluation of contingent consideration
recognised in the consolidated income
statement 4 0.4 0.7 - 1.1 1.1
Discount unwind on contingent and
deferred consideration 5 3.3 1.0 - 4.3 4.3
Acquisition-related employment cash
paid in year (8.2) - - (8.2) -
Deferred and contingent consideration
cash paid in the year (12.1) - (3.5) (15.6) (13.1)
Effect of movements in exchange rates (5.7) (1.6) (0.2) (7.5) (5.1)
----------------------------------------- ----- ------- ---------- -------- ------- -------
At 31 December 2017 73.1 23.7 1.1 97.9 59.4
----------------------------------------- ----- ------- ---------- -------- ------- -------
Additions 38.8 4.5 0.1 43.4 33.8
Acquisition-related employment costs
accrued in the year 4 11.7 1.6 - 13.3 -
Revaluation of contingent consideration
recognised in the consolidated income
statement 4 (1.2) (4.0) 0.3 (4.9) (4.9)
Discount unwind on contingent and
deferred consideration 5 2.8 0.8 - 3.6 3.6
Acquisition-related employment cash
paid in year (16.4) (4.6) - (21.0) -
Deferred and contingent consideration
cash paid in the year (32.4) (4.6) (0.7) (37.7) (33.4)
Effect of movements in exchange rates 1.8 0.7 (0.2) 2.3 1.4
Disposal of business - - (0.2) (0.2) (0.2)
----------------------------------------- ----- ------- ---------- -------- ------- -------
At 31 December 2018 78.2 18.1 0.4 96.7 59.7
----------------------------------------- ----- ------- ---------- -------- ------- -------
(GBP million) 2018 2017
--------------- ----- -----
Current 32.3 47.5
Non-current 64.4 50.4
Total 96.7 97.9
--------------- ----- -----
The total deferred and contingent consideration balance of
GBP96.7 million (2017: GBP97.9 million) includes GBP59.7 million
(2017: GBP59.4 million) which is categorised as Level 3 in the fair
value hierarchy. The significant unobservable inputs used in the
fair value measurements are the determined weighted average cost of
capital and the forecast future profits, billings or revenue of the
acquired businesses. The Group three-year plan used to forecast
future profits is approved by the board and assessed against market
consensus on a regular basis. For details of deferred and
contingent consideration on current and comparative year
acquisitions refer to Note 9.
The Directors consider that the carrying amount of deferred and
contingent consideration of GBP96.7 million (2017: GBP97.9 million)
approximate their fair value.
13. Borrowings
The maturity profile of the Group's borrowings, all of which are
secured loans, was as follows:
(GBP million) 2018 2017
------------------- ------ ------
Non-current
Two to five years 291.8 317.4
Total borrowings 291.8 317.4
------------------- ------ ------
Borrowings are shown net of unamortised issue costs of GBP2.3
million (2017: GBP3.3 million). The carrying amounts of borrowings
approximate their fair value.
Reconciliation of movement in net debt
Interest
Cash Short-term rate
(GBP million) Cash in transit deposits cap Borrowings Net debt
------------------------- ------- ------------ ----------- --------- ----------- ---------
At 1 January 2017 39.1 4.4 18.4 0.4 (286.0) (223.7)
------------------------- ------- ------------ ----------- --------- ----------- ---------
Exchange differences (2.0) - (0.8) - 2.7 (0.1)
External debt drawdown - - - - (58.6) (58.6)
External debt repayment - - - - 25.6 25.6
Non-cash movements - - - (0.3) (1.1) (1.4)
Net cash movement (10.4) (2.0) (0.9) - - (13.3)
------------------------- ------- ------------ ----------- --------- ----------- ---------
At 31 December 2017 26.7 2.4 16.7 0.1 (317.4) (271.5)
------------------------- ------- ------------ ----------- --------- ----------- ---------
Exchange differences (0.4) - (0.2) - (6.9) (7.5)
External debt repayment - - - - 66.0 66.0
External debt drawdown - - - - (32.4) (32.4)
Non-cash movements - - - (0.1) (1.1) (1.2)
Net cash movement 23.1 4.8 108.9 - - 136.8
At 31 December 2018 49.4 7.2 125.4 - (291.8) (109.8)
------------------------- ------- ------------ ----------- --------- ----------- ---------
14. Dividends
Amounts recognised and paid as distributions to ordinary
shareholders in the year comprise:
2018 2017
------------------------ -------------------------
Pence per Pence
GBP million share GBP million per share
----------------------- ------------ ---------- ------------ -----------
2016 Final dividend - - 12.8 3.2
2017 Interim dividend - - 7.2 1.8
2017 Final dividend 15.2 3.8 - -
2018 Interim dividend 7.6 1.9
----------------------- ------------ ---------- ------------ -----------
Dividends paid 22.8 5.7 20.0 5.0
----------------------- ------------ ---------- ------------ -----------
After the reporting date, the Board proposed a final dividend of
3.9p per ordinary share from distributable reserves, resulting in a
total dividend of 5.8p per ordinary share for the year ended 31
December 2018. The final dividend is subject to approval by
shareholders at the Annual General Meeting and is therefore not
included in the consolidated balance sheet as a liability at 31
December 2018.
15. Operating leases
The Group had total future minimum lease payments under
non-cancellable operating leases as set out below:
2018 2017
-------------------------- --------------------------
Land and Land and
(GBP million) buildings Other assets buildings Other assets
---------------------------- ----------- ------------- ----------- -------------
Within one year 10.5 - 8.8 0.2
Two to five years 18.6 0.1 21.8 -
After more than five years 4.3 - 6.6 -
Total 33.4 0.1 37.2 0.2
---------------------------- ----------- ------------- ----------- -------------
The Group leases various offices under non-cancellable operating
lease agreements. The leases have various terms, escalation clauses
and renewal rights. The Group also leases other equipment under
non-cancellable operating lease agreements. The Group does not have
any finance leases. These non-cancellable operating leases will be
brought onto the balance sheet in 2019 when IFRS 16 Leases comes
into effect. See note 1 for the estimated impact of adopting the
new standard.
The Group sub-lets certain of its offices. The minimum lessee
receipts total GBP3.3 million (2017: GBP4.1 million), receivable
over the next four years.
16. Events after the reporting date
There were no reportable events since the year end of 31
December 2018.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BDGDDUBDBGCS
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