Fresh blow to UK’s tech ambitions
26th January 2023
Government ambitions to transform the UK into a hub for technology suffered another blow yesterday as Ascential, the FTSE 250 information and events group, announced plans to spin off its digital arm into a standalone company listed in New York.
The break-up will see the events business remain in London but free up its digital commerce division to “attract and retain talent, have its own currency for M&A, and ultimately open up incremental pools of capital” in the US.
Investors welcomed the decision, which is subject to shareholder agreement, and the company’s share price was up 26 per cent at the close.
Ascential’s digital commerce business, which helps brands sell more online, made up 42 per cent of the group’s revenue last year. The company said the split would be a strategic move as most of its ecommerce income derives from the US, where the majority of its staff are based. Scott Forbes, the current Ascential chairman, and Duncan Painter, its long-standing chief executive, will run the newly independent business, the company said, and are expected to relocate.
In last year’s autumn statement, Jeremy Hunt, the chancellor, outlined ambitions to transform the UK into “the next Silicon Valley” — but it is not proving easy. While the UK has a thriving early-stage tech scene, there is a pattern of British companies further up the food chain turning to Wall Street when they want to grow, because US investors are perceived to have deeper pockets and a better understanding of the industry. There are only two companies officially classified as technology firms in the FTSE 100: Sage, the accountancy software business, and Autotrader, the online car marketplace.
Last year the blue-chip index lost Aveva, the industrial software giant, which was bought by France’s Schneider, and Avast, the cybersecurity business, bought by NortonLifeLock.
One City source remarked that Ascential’s relatively small size meant the company could find itself experiencing the worst of both worlds: “It will be a tiny and irrelevant company on the US index that will struggle to get coverage and capital.”
Johnathan Barrett from Panmure Gordon said that while the break-up made sense strategically, moving to the US was unnecessary: “When we look at valuations between the US and the UK we see stocks that are typically differentiated on growth prospects, not the market they are listed on.”
Other high quality and growth- oriented media companies such as Rightmove, GlobalData and Relx are listed in the UK, he added.
The events division of Ascential, which runs the Cannes Lions advertising festival and the Money 20/20 conference, and makes up about a third of the group’s revenue, will remain on the UK stock market under the Ascential brand, led by Philip Thomas.
Ascential plans to sell another part of the business, WGSN, a subscription service that provides insights into consumer trends in fashion and food, with a large amount of the proceeds returned to shareholders. Analysts at HSBC estimate it is worth £914 million.
Ascential grew out of the ashes of the Emap empire after it sold international businesses and offloaded its radio, TV and consumer media assets to Germany’s Bauer. It was rebranded in 2015 and concentrates on events and data.
The announcement came alongside a trading update that said revenue for 2022 should exceed expectations to be at least £530 million, up from £349 million in 2021. It highlighted the strength of its digital commerce business, which is expected to show revenue growth of 15 per cent and a record profit margin.
Painter said: “Our plan of action will create the best structure for each distinct business to thrive.” The London Stock Exchange would not comment.
Shares in Ascential closed up 54p, or 26 per cent, at 262p yesterday, valuing the company at £1.2 billion.
Behind the story
‘We’ve come a long way since 1887” reads the banner on Ascential’s website. It is no exaggeration — and its history is also the story of the changing media landscape over more than a century.
What started as a small group of newspapers has been through many hands and called many names, now unrecognisable in the sprawling data and events company being split up today. It all began with Sir Richard Winfrey, the British Liberal politician, who bought the Spalding Guardian and later the North Cambs Echo and the Peterborough Advertiser, papers that he used to promote his views and campaign for agricultural rights.
This empire grew, as it was handed down through his family, to become the East Midland Allied Press, better known as Emap.
Its successful magazine division started by accident, as a way to do something useful when the company’s printing presses lay dormant between issues of the local papers. In those early days they included such august publications as the 1953 Angling Times and Motor Cycle News and eventually included Drapers, Retail Week and Smash Hits.
In 1996 a pivot to data followed when the group sold its 65 newspaper titles to Johnston Press for £111 million and bought Glenigan, which provided information for the construction industry.
In 2004 it bought the Cannes Lions International Advertising Festival, a cornerstone of its events business.
In 2007 Apax, the private equity firm, and Guardian Media Group, under chief executive Carolyn McCall, paid more than £1 billion for the company, by now a business-to-business magazine and events group. It was hoped that the latter would be a new revenue stream to offset losses at its newspapers but instead cash had to pumped cash into the debt-laden group.
With its radio and TV arm sold to Bauer in 2008 it was renamed Top Right Group and set about selling off divisions and closing product lines. Duncan Painter, who remains chief executive, joined in 2011.
Ascential, as it is now known, came into being with another rebrand in 2015 that paved the way for an £800 million float in 2016, netting the Guardian and Apax £80 million. Since the listing its shares have risen about 13 per cent, reflecting the ups and downs of the business from successful asset sales to Covid restrictions.
Original article here: https://www.thetimes.co.uk/article/4cce0034-9d01-11ed-8201-2ed91f44d1e8?shareToken=d3968cc18ddeb80957d50a8a3ae35cc6
Author: Katie Prescott, Technology Business Editor, The Times
Director, Research Analyst, Media & Digital