Duncan Painter, the 12-year CEO of Ascential Plc, could be forgiven for wondering just how he could have had a more successful seven years as boss of a listed B2B company. He has won plaudits for divesting profitable but low-growth legacy operations in magazines and exhibitions, for internationalising a once domestic group, and for an ambitious strategy to dominate the exploding world of eCommerce analytics. But the company, once known as EMAP Plc (and, briefly, as Top Right Group), has struggled to achieve 65% of the £2mn enterprise value of its IPO year in 2016.
Covid has had an impact, of course, on its international festivals in fintech and marketing. But, after 12 months of deliberation (and hoping for a share price re-rating to reward its continuing strategy), Ascential this month confirmed its breakup plan to:
- Sell-off its WGSN trend forecasting
- IPO its digital commerce in the US
- Retain its events in the UK listed company
Ascential executives may be disappointed by the fact that the sale of WGSN – the only part of the three-pronged breakup that seems certain to proceed exactly as planned – may achieve more than two-thirds of the parent company’s total valuation in the auction now underway.
Let me explain.
It’s not for ambitious CEOs to display any kind of reluctance to reduce the scale of the companies they manage, in the interests of shareholder value. But you could sense the disappointment as Painter recently summarised the rebound results of 2022, with revenue of £524mn (2021: £349mn) and £121mn EBITDA (£89mn) at the top end of investor expectations:
“Ascential has had an excellent end to the year, with each of our segments delivering double-digit revenue growth over 2022. These performances highlight the high-quality businesses within the group and provide clear evidence that each has an attractive, focused investment proposition to deliver significant value for shareholders and customers. Our plan of action will create the best structure for each distinct business to thrive. As the clear world-leader in product design trends and insights, WGSN is an outstanding and highly attractive business and well positioned for new, long-term owners to take it through its next chapter of growth. Potential sale proceeds are earmarked for both near-term returns to shareholders and fortifying stand-alone Events and Digital Commerce listed companies in the UK and US, respectively.”
The Ascential share price nodded appreciatively but continued its course – some 25% down in the past year. It’s all a reminder that there is sometimes no choice for listed companies but to reverse strategies once adopted with so much conviction. But the sagging share price, the covid setbacks, and the inevitably dilutive impact both of selling legacy assets and acquiring high-growth digital analytics will all be washed away by a lucrative breakup. And where better to start than WGSN?
The 25-year-old WGSN is a perfect illustration of how the one-time B2B publishing company has been able to expand a product that is very far from the traditions of magazines and trade shows. What had been known as the Worth Global Style Network was acquired by the former EMAP for £140m in 2005. Over the last five years, it has grown revenue by 37% and EBITDA by 75%.
But it’s even better than that.
Just eight years ago, it generated almost all its revenue from the core fashion market. Today, WGSN’s dependance on fashion has been reduced to 54% of subscriptions revenue by successful expansion into beauty, consumer tech, interiors and food & drink. It gets 90% of revenue from subscriptions and 10% from consulting. It has 450 employees, 7,000 customers in 90 countries, and claims a subscriber retention rate of 95%. That’s why some of the world’s major consulting, media-tech and private equity companies have long been watching WGSN and are now poring over the numbers and strategies.
The diversification – coupled with the acquisition of key competitor Stylesight – has been turbcharged by a canny media strategy. The once little-known “fashion forecasting platform” has become a global authority on changing attitudes and appetites, with more than 6,000 clients from startups to Fortune 500 companies, 8.7mn monthly page views, and 250 analysts and consultants who survey almost 18,000 consumers monthly and track 10,000 brands across 200 retailers. It publishes 150 monthly trend reports in six languages.
Its proprietary tech drives a business model which generates some £90mn from 50,000 data-obsessed subscribers. But the WGSN site is also great media, promoting its expertise including through “WGSN Live” digital broadcasts. Its predictions, forecasts and insights are everywhere. The emphasis on media content and its soaring Bloomberg-like reputation is down to WGSN CEO Carla Buzasi, longtime digital journalist and former launch editor of HuffPost UK.
The numbers tell the story of a business that has made the most of its digital parentage and journalistic ancestry:
| £mn WGSN | 2023** | 2022 | 2021 | 2020 | 2019 | 2018 |
| Revenue (growth) | 120 (12%) | 107 (18%) | 91 (3%) | 88 (2%) | 86 (10%) | 78 |
| EBITDA (growth) | 55 (12%) | 49 (20%) | 41 (8%) | 38 (-) | 38 (36%) | 28 |
| Margin | 46% | 46% | 45% | 43% | 44% | 36% |
| % of Ascential | ||||||
| Revenue | 21% | 22% | 26% | 33% | 23% | 22% |
| EBITDA | 39% | 43% | 100% | +100% | 29% | 26% |
It’s not difficult to understand why the Ascential CEO had been so keen to hold on WGSN as part of an admittedly loose grouping of retail-marketing information, advisory and analytics companies: it accounts for some 40% of the profits of the listed parent. Perhaps that’s why he is suggesting the WGSN auction – now underway – will achieve a price of “just” £800mn.
The reality is that this brilliant, market-leading global business – with fans and followers right across consulting, information, research and private equity companies – will almost certainly prompt bids of at least 20 x the (conservatively) estimated EBITDA of £55mn for 2023. On that basis, WGSN is worth at least £1.1bn – 80% of Ascential’s enterprise value. While the WGSN profit estimates (above) do not include a share of either Ascential’s central costs or its borrowings, the recent new business growth implies that EBITDA might actually exceed £60mn this year and £70mn next.
It means there’s plenty of scope for optimism among prospective new owners who might expect also to grow the scope of WGSN’s consulting services beyond 10% of revenue.
Global economic volatility, reduced brand loyalty, increased focus on sustainability and accountability, changing influences on consumer trends and shorter product life cycles have all contributed to WGSN’s accelerating growth and its future prospects.
The £1bn+ likely proceeds for WGSN next month will be welcome news for long-suffering Ascential shareholders who – in the board’s planned strategy – might expect to receive at least 50% as a special dividend. The rest (executives hope) will be invested in the listed companies planned for the UK and US.
But it might get messy.
The first concern may be Digital Commerce. Ascential describes it as “a sizeable and future-proof growth opportunity…best placed to partner with global consumer products companies…” At the heart of the division is the $400m acquisition Flywheel Digital which provides retail and media services to brands on Amazon with an expanding presence on the Walmart, Instacart, Kroger and other platforms. Digital Commerce accounts for some 40% of Ascential revenue.
At a time when a growing number of UK companies are seeking to exploit the richer stockmarket ratings and investor appetites on offer in New York, this US-centric division of Ascential is a stronger-than-average candidate to cross the Atlantic. But – with 2022 revenue of £226mn (+54% on 2021, but +10% organically) and £21mn EBITDA (-32%) and signs of post-covid slowdown in eCommerce – some advisors are wondering whether it will simply be too small to appetise major US investors. That’s before they question the relatively low growth rates and the £26mn impairment in 2022 for a digital acquisition made less than two years before. There may, of course, be appetising acquisition growth plans earmarked for the “excess” funds from the WGSN sale. We shall see.
Manwhile, the Events division (37% of total revenue in 2022) is set to become a listed pureplay events company. With Hyve Group being acquired by private equity and Tarsus by world leader Informa, pe companies may see this ‘new’ Ascential Plc – whose marquee brands are Money 20/20 and Cannes Lions – as having a potential valuation of more than £1bn (15x £70mn EBITDA). Providence (currently buying Hyve) is known to be interested, at least in Money 20/20, and so will many of the other pe firms whose longtime passion for trade shows is back to its best.
This year’s Events forecast of £80mn EBITDA, presumably, creates the possibilility of a £1.2bn valuation for a business which has bounced back strongly after the pandemic:
| Ascential Events £mn | 2023** | 2022 | 2021 | 2020 |
| Revenue | 200 | 191 | 111 | 73 |
| EBITDA | 80 | 72 | 37 | (15) |
| Margin | 40% | 38% | 33% | — |
WGSN and the Events portfolio may, therefore, together be worth at least £2.2bn i.e. almost 2x the Ascential enterprise value.
For Duncan Painter, the calculation is another headache and simply reinforces the basic investor question: If this is the time to sell WGSN in a private equity-lubricated auction, why not sell the Events portfolio too? Will these rich asset valuations (coming after years of share price depression) spell the end of Ascential?
Whatever the US end-game for Digital Commerce, the demise of the UK listed company would be a sad finale for the CEO whose 2011 appointment had been a far-sighted recruitment of a tech executive to a traditional B2B media company, albeit with some strong information services (including WGSN). He had previously joined a database start-up which, in 1999, became ClarityBlue. The MBO was sold seven years later to Experian, the UK-based credit services group. Painter became an executive of Experian which morphed into a joint venture with Sky TV. He became managing director of the customer intelligence unit Sky IQ, which powered the growth of the pay TV’s 10m+ subscribers.
The tech and subscriptions CV made the chippy Painter the perfect outsider to reinvent the former EMAP. He promptly sold the B2B magazines to Metropolis, Wilmington, and GlobalData, the trade shows to Hyve Group, and (later) the Built Environment & Policy business to private equity and others. The £600m proceeds funded digital commerce acquisitions, especially in the US.
The share price history shows investors may not be ready to cheer Ascential. But we can now see that – for all the wobbles in the bold Digital Commerce strategy – the CEO has likely turned a £1bn company into a £3bn+ collection of prized media-tech assets in just seven, pandemic-punctuated years since IPO.
Congratulations, Duncan.
