Shares in specialist information and analytics company Ascential (ASCL) rose 4.4% following the announcement management was considering a demerger and US listing for its digital operations.
Such businesses tend to be given a higher value by US equity markets so moving to a New York listing could trigger a considerable re-rating for Ascential’s digital business.
FOCUS ON SHAREHOLDER VALUE
The potential demerger and US listing of the digital assets is in line with management’s philosophy of maximizing shareholder value.
It would leave the Marketing (Cannes Lions and WARC) and Retail and Financial Services (Money 20/20, Retail Week, World Retail Congress) operations listed in the UK.
Management has been extremely active in making both acquisitions and disposals.
The group completed seven acquisitions in 2021, together with the disposal of its Built Environment and Policy unit and more recently its MediaLink business.
Last year's acquisitions have significantly strengthened the e-commerce and analytics business, which is the fastest growing and the most valuable segment of the group.
Together, the Digital Commerce and Product Design businesses will account for 70% of group revenue this year.
Recent full year results announced on March 16 outlined a strong performance with revenue ahead by 52%, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) jumped from £27.1 million to £88.9 million.
LESS ATTRACTIVE
On the flip side, Ascential without the digital business would be a significantly less attractive proposition for investors who are unable to hold US-listed assets.
The attraction of a deal for them would very much depend on the exit multiple secured for the higher-growth digital assets.
Roddy Davidson at Shore Capital described Ascential as ‘a well-managed company with an increasingly compelling digital commerce offering and the potential for its marketing division to bounce back strongly'.
'As things stand, we estimate three-year aggregate earnings per share growth of 96%, a sharp rebound in dividend per share starting this year and strong underlying cash generation which we do not believe is adequately reflected in its stock valuation’, added Davidson.
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