# Ascential plc Covenant amendments and Q1 trading update

- Link: https://www.directorstalkinterviews.com/ascential-plc-covenant-amendments-and-q1-trading-update/412816212
- Published: 2020-04-29T07:21:05+01:00
- Author: Giles Arbor

**Ascential plc** (LON:ASCL), the specialist information, data and analytics company,
today announced the successful conclusion of discussions with its lenders, an update
on Q1 trading, and additional mitigating actions taken to address the effects of
restrictions related to the COVID-19 pandemic.

**Covenant amendments**

As previously announced, Ascential successfully refinanced its debt facilities in
January 2020, and expects to operate well within its covenants at the next testing
date at 30 June 2020.  The new facilities comprise a £450m revolving credit facility(
RCF) maturing in January 2025 and provide considerable liquidity headroom when compared
to net debt of £154m at 31 March 2020 (31 December 2019: £171m).

To address the uncertain business environment and ensure maximum flexibility for
the Company in the medium term, across a broad range of business planning scenarios
including a scenario in which no events take place in 2020, Ascential is pleased
to have agreed the following covenant amendments with its banking group:

·    At the December 2020 testing point – a full waiver of the leverage and interest
cover covenants^(1)

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

^(1) Subject to maintaining a minimum of £100m in cash or undrawn facilities at 
31 December 2020.

**Impact of COVID-19 related restrictions and additional mitigating actions**

The majority of Ascential’s revenues come from robust digital subscriptions and 
platforms and high repeat advisory revenue streams. However, the Company does derive
25% of its revenue from live events and 8% from its Cannes Lions benchmark product.
As previously announced, as a result of the impact of COVID-19 restrictions, the
Company has cancelled the 2020 edition of the Cannes Lions Festival and its associated
regional events, which comprised just over half total revenues in the Marketing 
Segment in 2019.  Additionally, we have deferred the Money20/20 Asia and Money20/
20 Europe events from H1 to August 2020 and September 2020, respectively.  

In order to mitigate the impact of both cancellations and deferrals as a result 
of COVID-19 restrictions, we have previously announced the suspension of the share
buyback programme and the 2019 final dividend, a temporary reduction of 25% in the
Executive Directors’ salaries and Non-Executive Director fees, and a suspension 
of the previously proposed 2020 annual salary increases across Ascential.

In addition to these previously announced measures, Ascential has identified a further
£20-£40m of prudent cost saving measures in the current financial year, which can
be deployed as the year evolves.  Our objective will be to balance near-term cost
focus with the importance of preserving and nurturing Ascential’s market leading
positions and capabilities and its ability to deliver a strong rebound in 2021. 

**Trading update for the three months ended 31 March 2020**

With the deferral of events to the second half of the year, trading in the first
quarter comprised our Digital Subscription & Platforms and Advisory businesses. 
Revenue grew by 5.1% on an Organic basis or 5.7% on a Proforma basis with the growth
weighted to January and February before the full impacts of COVID-19 restrictions
were felt. 

Digital Subscription & Platforms (80% of revenue in the quarter) grew well with 
revenue up 19% on the prior year, with solid subscription renewals across all businesses
more than offsetting a general slowing of new business won towards the end of the
quarter.  The Advisory business (c.20% of revenue in the quarter) saw a greater 
impact from the poorer trading conditions associated with the COVID-19 restrictions,
declining 16% year on year in the quarter.

We ended the quarter with net debt of £154m (31 December 2019: £171m) after receipt
of proceeds from the sale of Jumpshot in January and the payment of £12m of deferred
consideration (with a further £56m paid or payable in the early part Q2).  In order
to maximise liquidity, the Company drew £201m of its RCF and at the quarter end 
holds cash amounting to £234m.

**Product Design Segment**

This segment which is 90% subscriptions, saw a good start to the year, driven by
the ongoing take-up of non-apparel focused subscriptions, such as Insight and Beauty.
Subscription renewal rates achieved particularly strong levels but this was partly
offset by a slow-down in new business towards the end of the quarter, combined with
tougher 2019 comparable results for the advisory product.  Work continues to expand
our product offering and we expect to launch our new product addressing the Food&
Drink end market in June ahead of schedule_._

**Marketing Segment**

Trading in the quarter was influenced by the far tougher conditions experienced 
in our advisory business lines particularly in comparison to the equivalent period
in 2019.  The digital subscription products have made good progress, thus growing
further the proportion of non-events driven revenue streams in this segment.  

**Sales Segment**

**Digital Commerce**

The Digital Commerce element of the Sales Segment (comprising Edge by Ascential,
Flywheel Digital and Yimian) grew very strongly in the first quarter.  Edge enjoyed
solid trading in a period that contains a high proportion of annual renewals. The
business has now completed the customer facing aspects of its integration programme
through the recent launches of both Market Share and Digital Shelf to customers 
in March, ahead of schedule.   Q2 will be used to decommission old systems and complete
the programme.  In addition to the global customer agreement recently signed with
Coca-Cola, Edge has also secured a global relationship with Adidas.

Yimian and Flywheel Digital both saw extremely strong growth in the period. In particular,
Flywheel added a number of significant new customers; delivered initial services
to customers on the Walmart platform; and are rapidly onboarding clients to the 
Instacart and Kroger platforms.  The integration of Indigitous into Flywheel is 
well under way and we are pleased to have added this new capability in Athleisure
to our product offering.

Common to the Digital Commerce businesses were the particularly high levels of traffic
seen on the world’s major platforms, as the underling momentum towards on-line commerce
accelerated, driven in part by the travel and movement restrictions associated with
COVID-19.

**Non-Digital Commerce**

With Money20/20 Asia deferred to August, the contribution in the period from the
remainder of the Non-Digital Commerce subsegment (RWRC) was not significant.

**Built Environment & Policy  **

The segment grew strongly in the quarter although, for the Groundsure product line,
the material slow-down in UK property transactions towards the end of the quarter
has had a direct impact on this momentum.

> **Duncan Painter, Ascential plc Chief Executive Officer, commented:**
> “Our businesses made a positive start to 2020 considering the circumstances. With
> the deferral of events to H2, trading in the first quarter has been exclusively
> from our Digital Subscription & Platforms and Advisory businesses. These comprise
> the majority of our revenue streams overall, with the Digital Commerce sub-segment,
> in particular, displaying very strong growth in the quarter which is expected 
> to continue through 2020.
> As expected, our subscription driven revenue streams have been resilient to the
> impact of the COVID-19 restrictions and the far weaker overall market conditions
> seen towards the end of the quarter, although a tapering of new business opportunities
> while these conditions persist is inevitable.  Again, as expected, our advisory
> revenue streams have been more directly impacted by these weaker conditions, particularly
> in comparison to their strong results in Q1 2019, and we would expect this impact
> to persist throughout the current period of economic stress.
> The covenant amendments we have announced today, combined with prudent cost measures,
> ensure that our business remains well set to weather the impact of COVID-19 and
> I would like to extend my thanks to our banking group for their strong support
> for the company.
> The majority of our employees have now been working remotely for over six weeks
> and, like countless others, adapting to a very different way of life. I would 
> like to thank them all for the extraordinary resilience they have displayed in
> these circumstances as well as their productivity and the dedication they have
> shown, both in working so effectively with each other and in continuing to provide
> world class services and products to our customers. This gives me confidence that
> Ascential will emerge even stronger the other side of the COVID-19 restrictions.”

**Cautionary statement**

Certain statements in this announcement constitute, or may be deemed to constitute,
forward-looking statements (including beliefs or opinions).  Any statement in this
announcement that is not a statement of historical fact including, without limitation
those regarding the Company’s future expectations, operations, financial performance,
financial condition and business is a forward-looking statement.  Such forward looking
statements are subject to risks and uncertainties that may cause actual results 
to differ materially.  These risks and uncertainties include, among other factors,
changing economic, financial, business or other market conditions.  These and other
factors could adversely affect the outcome and financial effects of the plans and
events described in this announcement.  As a result, you are cautioned not to place
reliance on such forward-looking statements.  Except as is required by the Listing
Rules, Disclosure and Transparency Rules and applicable laws, no undertaking is 
given to update the forward-looking statements contained in this announcement, whether
as a result of new information, future events or otherwise.

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

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