Ascential well placed to grow despite Cannes concerns

Economic uncertainties and digital disruption have piled pressure on advertising agencies and marketing budgets, which has cast a shadow over Cannes Lions in 2017. This has been exacerbated by news that major marketing company Publicis will not be exhibiting at next year's event.

The bulk of the revenue from Cannes Lions - which contributed 19 per cent to Ascential's top line in 2016 - is generated by companies submitting themselves for awards (40 per cent of revenue) and exhibition stands (48 per cent). In the most recent event - which finished last week - the amount of these sales generated from marketing agencies fell to 65 per cent, from 80 per cent a few years ago, while the number of award applications dropped from 43,101 in 2016 to 41,170.

But growth prospects for Cannes aren't all doom and gloom. Ascential has succeeded in offsetting the decline in demand for traditional advertising with an increased exposure to the digital advertising world. There are also a number of new awards in fast-growing areas of marketing and Ascential has realigned the festival's structure to benefit from the fragmentation of the industry.

Ascential has also recently made a strategic acquisition in its information services division (40 per cent of group revenue in 2016 and 30 per cent of profit), which is well aligned with Cannes Lions. MediaLink - bought in February for $69m (£54m) - provides media platforms and brands with information services to help drive growth through better marketing. During Cannes, the business reportedly created more than 850 meetings with 60 clients. MediaLink's focus on digital advertising could also help Ascential plug any holes from agencies dropping out of Cannes.

Strategic acquisitions and portfolio trimming have been a major part of Ascential's history. Founded in the 1800s, the group spent its early years specialising in print publishing before moving on to radio and then media and events. The group's current chief executive, Duncan Painter, joined in 2011 and has spent the past six years trimming the portfolio to specialise in events and information. Today, Ascential's top five brands - which includes Cannes Lions and MediaLink - contribute nearly 70 per cent of overall revenue and over 80 per cent of cash profit (its top 10 brands contribute 87 per cent and 93 per cent, respectively). At the start of the month, management also managed to sell the remaining 11 non-core businesses, netting £23.5m to pay down debt.

The streamlined portfolio is now well placed for organic growth with some events, such as Money 20/20, set to be launched in new geographies. Broker Numis expects revenue at the events business to rise by 15 per cent in the year to December 2017, with 8 per cent of this driven by organic growth. The information services business is expected to benefit from MediaLink and the first full-year contribution of One Click Retail, a fast-growing data analytics provider to the retail industry. These acquisitions are expected to enhance the division's forecast 5 per cent organic revenue growth to 44 per cent.