Ascential agrees covenant amendments to shore up finances
Ascential
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16:40 19/04/24
Ascential announced a further shoring up of its finances in the face of the Covid-19 crisis on Wednesday, agreeing amendments to its lending covenants with its banks to see it through the possibility of an event-free year.
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The firm had successfully refinanced its debt facilities in January, and said it expected to operate well within its covenants at the next testing date on 30 June.
It said the new facilities comprised a £450m revolving credit facility maturing in January 2025, providing “considerable” liquidity headroom when compared to net debt of £154m as at 31 March.
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 said the covenant amendments with its banking group included a full waiver of the leverage and interest cover covenants at the December 2020 testing point.
At the June 2021 testing point, it said that the leverage covenant ratio limit had been relaxed to 3.75x from 3.25x, to provide greater flexibility in a scenario in which no events take place in 2020.
The FTSE 250 company did note that the majority of its revenues came from “robust” digital subscriptions and platforms, and high repeat advisory revenue streams.
However, it does derive 25% of its revenue from live events and 8% from its Cannes Lions benchmark product.
Ascential had previously indicated that, as a result of the Covid-19 restrictions, it has cancelled the 2020 edition of the Cannes Lions Festival and its associated regional events, which comprised just over half total revenues in its marketing segment in 2019.
Additionally, it has deferred the Money20/20 Asia and Money20/20 Europe events from the first half, to August 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 director salaries and non-executive director fees, and a suspension of the previously-proposed 2020 annual salary increases across Ascential,” the board noted in its statement.
In addition to those measures, Ascential said on Wednesday that it has identified a further £20m to £40m of cost saving measures in the current financial year, which could be deployed as the year evolves.
It said its objective would 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.
Looking at its current trading, Ascential noted that with the deferral of events to the second half of the year, trading in the first quarter comprised its digital subscription and platforms, and advisory businesses.
Revenue grew 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 and platforms, which made up 80% of revenue in the quarter, saw revenue grow 19% on the prior year, with “solid” subscription renewals across all businesses more than offsetting what the firm described as a general slowing of new business won towards the end of the quarter.
The advisory business, making up the other 20% of revenue in the quarter, saw a greater impact from the poorer trading conditions associated with Covid-19, declining 16% year-on-year in the quarter.
Ascential ended the quarter with net debt of £154m, narrowing from £171m at the end of December, 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 of the second quarter.
In order to maximise liquidity, the company drew £201m of its revolving credit facility, and at the quarter end held cash amounting to £234m.
“Our businesses made a positive start to 2020 considering the circumstances,” said chief executive officer Duncan Painter.
“With the deferral of events to H2, trading in the first quarter has been exclusively from our digital subscription and 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, Painter said the company’s subscription-driven revenue streams had 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 those conditions persist would be “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 the first quarter of 2019, and we would expect this impact to persist throughout the current period of economic stress.”
Painter said the new covenant amendments, combined with cost measures, would ensure that the business remained “well set” to weather the impact of the pandemic.
At 0923 BST, shares in Ascential were up 10.29% at 255p.