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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to Ascential's Annual Results Presentation for the 12 months ended 31st December 2021. I'm Rory Elliott, Ascential's Director of Investor Relations. Firstly, we'd be grateful if you could familiarize yourselves with this disclaimer, particularly as it relates to forward-looking statements.
In a few moments, you'll hear from Duncan Painter, our CEO; and Mandy Gradden, our CFO. They'll provide a summary of our results, the financials, an overview of our strategy and outlook. You'll then have the opportunity to ask questions either here in the room or in writing by the webcast link.
To begin with, however, we'd like to show you a short video of the highlights of the year.
[Video Presentation] (00:01:02-00:03:36)
Thank you, Rory. And good morning, and welcome to the London Stock Exchange. Thank you for all of you who joined us personally. I know you've battled through the London transport system today. And obviously for those of you who are joining us live, so welcome everyone.
I'd like – let me take you through our financial highlights and business progress. I'm very pleased to report strong results ahead of market expectations. 2021 was a year of strong delivery, Product Design, Marketing, and Retail & Financial Services have achieved positive returns from the heights of the COVID-19 pandemic impact. And Digital Commerce continued its strong structural growth.
Overall revenue on a pro forma basis was up 48% to £349 million, with adjusted EBITDA of £89 million. This performance reflects our strategic positioning, the high quality of our products, the agility of our people, the strength of our underlying business models and customers with tighter budgets than ever prioritizing their spend in our market-leading products.
We've extended our global leadership position through the year with Digital Commerce delivering strong pro forma growth accelerating to 33%. Our organic growth was also strong – a strong performance at 19%, which when you consider Amazon's retail growth was 9% in the same period, shows the momentum that we have.
We successfully completed seven acquisitions that have extended our capabilities, customers, geographic reach, addressable market and high-quality talent. Product Design's revenues were up 7% with 30% in non-fashion segments. With subscription billings achieving 10% growth in this year, this business unit is very well positioned for future success. As we outlined at the half year, the Lions benchmark made an impressive return with revenue exceeding 2019. Money20/20 delivered excellent events in Amsterdam and Las Vegas. The Las Vegas event, the least affected by COVID, delivered a very strong return with revenues at 98% for 2019.
I would also like to acknowledge the outstanding efforts of all of our people this year. Our results are a testament to the talent we have in our company. Their commitment to our customers and their willingness to go above and beyond expectations, no matter how challenging the environments we operate within, has been fundamental to our performance. This also shows the value of our investments that we've made in our teams. Our continued commitment to empowering our diverse workforce has crystallized with improved scores in our annual engagement survey. For example, 94% of our people felt proud to work for Ascential. And 90% feel motivated. That's 3% up and 5% up respectively. There is always more to do to optimize an innovative culture. But I am pleased to report this progress.
And now, I'd like to hand over to Mandy who's going to take you through the numbers in detail.
Thank you, Duncan. And good morning, everyone. I'm now going to take you through the financial highlights of 2021. And as you've heard, in 2021, we demonstrated strong delivery against our strategic priorities as well as a robust recovery from that challenging backdrop in 2020. Revenue and profits grew very strongly due to the excellent structural growth coming out of both Digital Commerce and out of Product Design as well as the first year of what we expect to be a multiyear post-COVID recovery in the Marketing and Financial Services segments. So that's the introduction.
Let's look at the numbers. Now I should start by saying that these results and all the figures in this presentation, unless otherwise – unless we say otherwise, are presented on a continuing basis. And that means that we have stripped out the revenue of the Built Environment & Policy segment that we sold in Q1 of last year and also of the MediaLink business that we sold in December of last year. And those disposals were made as part of our strategy to release capital from the less core parts of our business to invest it in Digital Commerce.
You'll see that the results of these two discontinued operations appear in a single line at the bottom of the income statement in profit after tax. But in order to help analysts and investors who may not yet have updated their models, we also present at the back of the presentation on slide 25 an analysis which includes these. So you can look at it either way if you prefer.
So let's start at the top on the numbers. So we reported revenues of £349 million. That was up 52% reported or if you prefer 48% on a pro forma basis or 44% on a purely organic basis. And that's a combination of that structural digital growth and the first year of that cyclical Events recovery as I'm going to talk about in later slides.
Our EBITDA was £89 million, which was more than 4 times the EBITDA which we delivered in 2020, and along with revenue both ahead of market expectations. After depreciation, associates, and interests, we made £50 million in profit after tax – profit before tax, I apologize. And you will notice that the tax charge on these continuing operations is relatively small at £8.2 million, which is an effective tax rate of 17%, which is a combination of an underlying rate of 22% with some very discrete items that occurred during the year; the change in UK tax rates, and a favorable loss settlement with the US authorities.
And although you don't see it on this slide, which is all about our adjusted results, we also – our overall statutory tax charge is a credit of £1.6 million. And the reason for that is because of the very tax-efficient way that we conduct most of our acquisitions. We see a large credit that comes in that adjusting column. As a result of all the above, our earnings per share on continuing activities was £0.095, which is certainly a very good recovery from the £0.031 of loss per share that we recorded last year.
Looking briefly at cash, we'll do more in a second, but cash generation in the year was strong. 95% operating cash flow conversion. And we closed the year with low levels of debt and a 0.9 times leverage ratio.
The final thing on this – to say on this particular introductory slide is that the Board has concluded that it wishes to preserve capital to – for the ongoing investment in the business and in particular for potential acquisitions. We have a strong pipeline rather than paying a dividend for 2021. Now, the Board will of course, as it always does, keep capital allocation priorities and shareholder returns continually under review.
So let's look at the segmental overview. This is a bit of a snapshot slide of the four segments: Digital Commerce, Product Design, Marketing, and Retail & Financial services. Now, our largest segment by revenue at 42% of the company is Digital Commerce. Here, the clear highlight is its excellent revenue growth of 33% in the year, and that growth is pro forma for the results of all of the businesses that we've acquired during the year which obviously includes they're pretty much all early stage, very high growth businesses.
Next, Product Design performed strongly, accelerating in the second half, which is a really important point to note and with 7% revenue growth. And that's a really pleasing recovery from a flat performance that we saw in 2020.
You can see from this slide that Marketing segment has also demonstrated excellent recovery, and that's chiefly through the return of the Cannes Lions award benchmark, which was held entirely digitally in 2021. And finally on this slide at the bottom, you can see the return of Money20/20 Europe and USA driving significant growth for Retail & Financial Services.
But if you turn to the right-hand side of the slide, just a quick sort of reminder of our business model, you can see that in 2021, more than 70% of our revenues came from Digital Subscriptions & Platforms, and we expect that to show a similar sort of profile in 2022 even with the recovery of the Events revenue lines. You'll also see that more than half of our revenue comes from North America, which has – is as a result of our focus on Digital Commerce.
Now, we'll just look in a little more detail at each of the segments in turn starting with the largest, Digital Commerce. And here, 92% of our revenue in Digital Commerce comes from Digital Subscriptions & Platforms. And you'll probably remember that we offer two types of products within Digital Commerce, and execution platform where we serve both enterprise and challenger brands. And that's 70% of our revenues. And then Measurement & Benchmarking products, which is 30% of our revenues. As we've said, the segment grew at 33% pro forma.
And as you'll see from some KPIs that Duncan will present in his section, just over 10% of this 30 – 10 percentage points of this 33% growth is coming from growth within existing customers. So our net retention rate, and 20 – just over 20% of the growth is coming from the acquisition of new customers. So, very strong on both metrics.
Notably, as we've said, we welcomed a total of seven new products into the segment, and you can see their logos down at the bottom of the page. All are performing well and contributing to that extremely strong overall growth rate. In terms of our profit margin, our EBITDA margin, you'll notice it was 21%, which includes these early-stage businesses. And it is, of course, just above our medium-term targets for the segment of at least 20%.
Turning to Product Design. Product Design grew its revenue by 7% and that was a good acceleration in the second half. What we saw last year, we had a flat billings period, COVID impacted billings profile. But this year, we saw excellent 10% subscriptions billings growth in the year, again that accelerated from 9% in the first half, accelerated to 10% in the full year.
And that was driven both by great new business, but also by record levels of customer retention. And as you know, billings is a key indicator of the level of revenue growth that we would expect to do in the following year if you maintain that sort of pace. As you will remember – sorry, just sticking on billings for one second, that 10% billings growth is made up of 3 percentage points which comes from the acquisition of new customers. So, good growth in customer numbers and 7% coming from [ph] yields (00:17:09), which is of course a mixture of price increases and people taking more products. And more products is a great segue into the point about our strategy. And our strategy here is to really drive growth in our newer segments, which are Beauty, Insight, Food & Drink, et cetera.
Now, these non-fashion products now account for over 40% of our subscription base, and they grew by 30% overall last year, which is a real testament to the successful extension of that WGSN brand beyond fashion and into new markets. In August, we launched the new Consumer Tech product, which is trading well, and we also re-launched Lifestyle & Interiors as WGSN Interiors in order to further drive growth into these new segments.
Now, in terms of margin, we saw good expansion to 45% EBITDA margins within the segment, and we continue to target between 43% and 45% margins in general, which gives us enough headroom to invest in the creation of new products and services for our customers.
Let's turn to the Marketing business unit. You can see from this slide, the yellow bars, we've included the 2019 numbers to give you a bit of context for a sort of a fully – what a fully recovered Cannes Lions might look like. But in 2021, the Marketing segment demonstrated very strong growth and strong recovery. And that was particularly impressive because it was based effectively around the Lions benchmark, which returned completely digitally and actually grew revenues in 2021 compared to 2019, notwithstanding our digital format.
Revenue was obviously up over 100%, and EBITDA in this segment, therefore, moved from a loss of £6 million to a profit of £26 million. Now, both figures are clearly quite some way off their 2019 levels, which is giving us something to aim for when we look forward to that multi-year recovery in the segment, COVID permitting, of course.
We should also mention the performances of our digital products here. So WARC, which was up 16%, and [ph] the WARC (00:19:45) the subscription revenue stream within Cannes Lions, was up 23%. So, both are growing well, and you can see that in the business model on the top right-hand side that we now had in that particular year, about a third of our revenue coming from those digital sources. And, of course, all the eyes now will turn to the return of Cannes Lions in June after the absence of two years.
Looking at our fourth segment, Retail & Financial Services. As we mentioned earlier, the sharp recovery in both revenue and profits was driven by the successful return of in-person events in the year. In particular, Money20/20 Europe that took place in September, not in its normal slot of June, but we ran it in September last year. And then Money20/20 USA, which took place in its normal slot of October. And the particularly pleasing thing was that Money20/20 USA delivered 98% of the revenues that it had delivered in 2019. So, a really strong recovery, particularly given that some of our very largest customers didn't attend because of continuing COVID impacts at the back half of last year.
Again, as you saw in the prior slide, I've included the numbers in yellow from 2019, to give us a bit of a target to aim for in terms of the recovery of this segment, when activity levels at both regional editions of Money20/20 return to – return fully to historic norms.
So, let's talk about the balance sheet, and this next slide covers our net debt bridge. And this demonstrates how our net debt has reduced significantly overall in the year from £229 million at the start of the year to £74 million at the end of the year. As you can see from the bridging items the first couple, we've recorded a strong operating cash flow, which is obviously our combination of EBITDA and working capital movements being a conversion of 95% with free cash flow after CapEx and tax of 65%.
If you move along the bridge to the right-hand side, you can see the two big bars, which are paying a total of £374 million for our acquisitions and our investments in the year. And then paying for – then – which – I apologize, a combination of deferred consideration £127 million, the seven acquisitions which we acquired from 2021 which is £195 million, and our continued investment in associates such as Hudson MX. This was offset by the consideration that we received on the sale of BEP, which was £257 million, and on the sale of MediaLink, which was £95 million, as well as the inflow from our equity raise of £150 million.
So, finally after interest, lease costs, and FX movements, we closed the year with £74 million of net debt, which represents leverage on EBITDA of just 0.9% (sic) [0.9 times] (00:23:14). The leverage ratio is obviously clearly down from the start of the year with both that lower net debt number and also that significantly higher EBITDA number both playing a part.
So for my penultimate slide, I'll just mention a few words on capital allocation. We obviously have a number of competing uses of capital that we consider and we seek to balance on an ongoing basis. Starting in the top left, we have a £23 million organic investment in CapEx, which is mainly building new products, and those are primarily in Digital Commerce. And our annual capital expenditure typically tracks around 6% of our revenue levels.
There's an interesting point to note in that second bullet. We are making quite significant capital investments within our new Salesforce and ERP systems that we're using to drive efficiency and customer satisfaction. And importantly, as a result of the new accounting standard and the new interpretation issued by the IFRIC, we're no longer permitted to capitalize that.
And so – and that's because those systems are built on public cloud software, and we're required to expense them immediately to the P&L account. Given the materiality of the amounts in question, which were £16.9 million in 2021, and given the fact that it's a once-in-a-decade investment, we have treated this expense in exceptional items, and we would expect to see a similar level in the coming year.
Moving around the slide on the top right, we have our acquisitions where we have a healthy pipeline of bolt-on opportunities often in new geographic markets that both accelerate our strategy, but also bring important new capabilities to Digital Commerce. In 2021, we invested £374 million, and we have an estimated £150 million left to pay over the next four years in deferred consideration, which of course is based on our estimates of what those businesses are going to do over the next four years. Then bottom right, we talk about disposals and through careful prioritization, we generated around £340 million of cash in from the disposal of BEP and MediaLink.
And then onto shareholder returns, at the moment, as I've mentioned, in light of our strong organic investment opportunities and our pipeline of acquisitions, we are prioritizing our capital for Digital Commerce rather than for dividends or other forms of shareholder returns such as buybacks. As I said earlier, the Board will, however, keep this under continual review. And finishing off this slide clearly [ph] is either funded by debt (00:26:28), the 0.9 times leverage or by our shareholders, and we were very pleased to see the success of our £150 million equity raise earlier in the year.
For our last slide – for my last slide, I thought it would be helpful to review the progress that we've made in terms of the returns that we're starting to generate on the investments that we've made in M&A over the period. And so this slide covers the acquisitions that we've made in recent years dating back to Money20/20 in 2014. Now, we've excluded MediaLink from the analysis as it's an in and an out and it's not included in the profit number on the right-hand side.
So firstly on the left, we're aggregating all the disposal proceeds that we've received as a result of our capital allocation decisions since 2017, which are the heritage brands, exhibitions and Built Environment & Policy. And you can see here we've generated proceeds of nearly £600 million.
We've then invested, as you can see on the right, £754 million over that period in acquisitions mostly in building our Digital Commerce business from scratch. While many of these companies are at an early stage and not yet or only very marginally profitable, meaning that we're expecting to generate their returns, their return on capital employed, if you like, in years to come. We thought it would be useful just to highlight the early progress that we're making on the financial returns of acquired businesses, namely revenues of £240 million growing at 21% b overall or 33% in the case of Digital Commerce and EBITDA of £64 million.
So I hope this is a useful detail to end on to give you something to help you assess our progress on M&A. I'm now going to hand you back to Duncan to finish our presentation looking at strategic priorities and our outlook.
Thank you, Mandy, and – for covering all of that financial detail. I'd now like to take us through our strategic priorities. Digital Commerce is our largest structural growth engine. It is a rare and significant growth opportunity as e-commerce fast becomes the primary channel of consumer choice. At our Capital Markets Day in October, we set out some of the market characteristics and opportunities that make it so attractive. We also showed why we are so well-positioned to win in a market where sales are due to reach £6 trillion and account for approximately 40% of total sales by 2026.
Our strategy is paying off. We are performing well, having driven 5x growth since we started this visionary journey. We are well-positioned to benefit from many levers of growth. One key differentiator is our ability to manage and automate the total customer product experience in the digital marketplaces globally. More than 60% of our revenues are driven by this four-product management capability with less than 40% related to the task of media buying. Our net revenue retention exceeds 110%, combined with strong propositions which are attracting record numbers of new enterprise customers and challenger brands.
The business of Digital Commerce is extremely complex. Whilst we all recognize Amazon as a global marketplace, the reality is that Digital Commerce is both fragmented and local with new marketplaces emerging all of the time. We have been fast to recognize this, and these new marketplaces have become a key contributor at 30% of our growth in 2021.
When combined with our international markets outside of the US, this further extends our growth. We have previously highlighted the emergence of challenger brands. These companies benefit from online channels and are taking share from traditional players because of the marketplace model. We have executed well in this fast emerging space, which has contributed over a third of our growth.
But what does this look like in the real world? Let me take you through this case study example of how we helped a leading toy company reverse marketplace sales declines through 2021. We manage their products across Amazon, Walmart, and Target, highlighting our expertise across these marketplaces. The relationship started in April 2021, where we won the client through a competitive pitch process. They are a top 50 marketplace merchant by revenue. The company had experienced four consecutive months of sales decline when we won the account. Following our engagement, they grew by 9.4%.
Since beginning our work with them in mid-2021, the customer has taken an additional 2.9% of market share in H2 in incredibly competitive toys category. We have high conviction on the scale of long-term growth and opportunity we have as market leader in this segment.
So turning to our priorities for 2022, our total – our top priority continues to be how we accelerate our Digital Commerce business strategy, as well as maximizing the profitable growth of our Product Design, Marketing, and Retail & Financial Services businesses. We remain laser-focused on continuing our strong growth and expanding our global leadership in Digital Commerce, continuing to build and expand on the quality partnerships we have with the eCommerce marketplaces worldwide, accelerating the revenue growth of our Product Design business, while maintaining operating margins and maximizing the opportunities from the return of our live events products through 2022.
So I turn finally to our outlook statement. 2021, of course, reflects the success of our strategy, boosted by the first year of a cyclical recovery. 2022 has started well. Digital Commerce and Product Design look set to deliver excellent levels of growth in the coming year with Digital Commerce expected to make strong progress against these medium-term financial goals. We expect to see a recovery in Marketing and Retail & Financial Services over the coming years as we continue to successfully navigate the ongoing impacts of the pandemic.
Although COVID-19 is likely to continue to present challenges to our event products, the return of Money20/20 US has demonstrated that we can swiftly achieve full financial recovery. The Board is confident about our prospects for future success.
I'd now like to pass over to Mandy as we open the floor for questions, both from those in the room and of course, those of you on the webcast. Thank you.
Thanks very much. If you're on the webcast, please record your questions and they'll come flying through to my laptop here, and we'll be able to ask them. But if we could start in the room, and maybe Gareth.
Morning. Gareth Davies from Numis. Maybe I'll start with three for me. Firstly, on Digital Commerce, could you just talk a little bit about or give us an update around the competitive landscape? [indiscernible] (00:34:43) moving forward, what you're seeing from a competitive perspective? Is there anyone sort of trying to do everything you are doing? [indiscernible] (00:34:50) sort of new specialists coming? So any color you can give us there into what you're seeing.
Secondly on Cannes, I think it's still true that you're going to be running a hybrid event, so the digital alongside the physical. Can you just talk about the sort of balancing act there in terms of wanting to get as many people back to physical? Is there a sort of conflict with a seamless digital offering that could keep people away? And just how you're thinking about that and that balancing act? And then the final one, Mandy mentioned a small investment [indiscernible] (00:35:24). Hopefully, that doesn't mean I've got to start again, but...
No.
...the third one, Hudson MX. Mandy mentioned a small investment in 2021 – or a reasonable investment in 2021. From memory, there was the potential to buy out the lot in January of this year. I just wondered if you could give us an update there. Is that something that's imminent or is it kind of on hold for now and just some thinking there? Thank you.
Shall I take one and three Mandy, and you'll take...
Yeah. Yeah.
...two. Does that make sense?
Absolutely.
Yeah. So, on Digital Commerce, look, I mean clearly all boats are rising in Digital Commerce right now. And – but in terms of competitors Gareth, the landscape has not changed particularly. But what is reassuring is, many of those sort of midsized [ph] smaller P back (00:36:14) businesses have got well-funded through the last 18 months. So, it's pretty clear that we're not the only people that see the significant capital opportunity in this market and that there are clearly people investing, and investing at very high multiples to buy those smaller competitors in the space. So, that's an interesting outlook.
In terms of the global platform capability, we're not really seeing anyone with the capability to step across our scope in that. So, we do see ourselves really with some clear blue water for a period to establish ourselves as the major platform worldwide to help organizations with a global outlook. But of course, within individual countries, you can see the traditional players that we've been competing with for a number of years, are still very competitive and in the main doing a pretty good job. But as you've seen from our results that we just presented, I mean we just had record wins in new business and new logos across both segments of enterprise and challenger. So, we're certainly very confident that we're taking more than our fair share of market share.
And then just why don't I turn to three, which was the Hudson MX question and then perhaps hand to you Mandy on...
Yeah.
...on Lions, if that makes sense. So on Hudson MX, actually we're very pleased with the progress of that business, Gareth, and in that respect, that caused us to really focus our attention for our capital allocation this year. And so, we made a very clear decision and we hopefully came across in the presentation that for the next 24 months, all of our focus for our capital is really around the Digital Commerce divisions and making sure we are the true winner there.
And what that doesn't mean is we won't continue to invest alongside Hudson because it is doing well, but we wanted to make sure that we were very focused on the prize that's critical to Ascential today but by no means does that mean we're not going to continue to be an important shareholder in Hudson that we wouldn't have longer-term intentions around that business.
And so in terms of Cannes Lions and it being hybrid, the balance and the conflict, we are anticipating all being well to run Cannes Lions as a full physical experience, the full festival with both the Delegate Experience with all of the sponsorship and also bringing back our awards, judging and award shows on site. I know we can do them digitally as we did last year, but we certainly want to this year, if we're able to, to get back to the normal way of presenting that.
You're quite right, though, that there is – there are hybrid revenue streams that come from this and the launch of the membership proposition, which includes the digital show and the revenues that you get from that will definitely be a part of our proposition in 2022.
So we don't really see a particular conflict between the running – some digital revenue streams from the show as well as with a full physical show. And that's not lease because there will be certain countries that we won't expect to be able to attend. So, for example, we won't – we're not expecting our Chinese customers to be travelling in 2022. So, it's important to be able to offer them a festival experience during the interim period.
We have actually had a question on Cannes Lions that's come in from Will Packer, which I'll just answer at the same time. Will Packer at Exane has basically said, although my screen is moving. So, don't send me any more messages for a second. There was no specific mention of Cannes Lions in your outlook, said Will, have you been – how are you thinking about the 2022 edition? And how are you budgeting from a revenue perspective as a percentage of 2019?
Now, I think it would be a bit forward for me to come out and give you a budgeted number or an estimate as to where we are, because really it's too early to see how bookings in terms of delegates and award entries are going far too early in the cycle. What I can tell you is that the booking of sponsorship is going very well. And so, we are expecting to deliver a good result. But I would not expect to be getting back to the 2019 levels of revenue in 2022 because of what I've said about things like parts of the world not being readily able to travel to France.
So, I definitely expect a good return as a percentage of 2019, but certainly I'm not expecting to get there until probably 2023 from a budgetary perspective in terms of delivering back to 2019 levels.
Great. Katherine?
Good morning. It's Katherine Tait from Goldman Sachs. Three questions for me. Firstly on WGSN, really interesting to see how much of the business is now coming from non-fashion, but can we get a sense of how fashion is growing within that sort of mix? Obviously, very strong performance across the group, particularly in the second half, but is fashion growing? Is it declining? How should we be thinking about that specific segment? And I suppose linked to that, will the product investment that's going on, is that largely into fashion and sort of additional offerings there or is that more into these new sort of end markets?
Secondly on inflation, maybe just a couple of comments around how you anticipate the sort of group, particularly from a cost perspective to manage the sort of inflationary pressures we're seeing? And then finally just on Events, I appreciate you don't want to give us a hard and fast number in terms of what you're expecting of return. But can you talk about how flexible the cost basis perhaps just in the context of that uncertainty on the outlook? Thanks.
How would you like to divide those?
I'm – do you want to take WGSN? And I'll take the other two.
Yeah. Why not? And welcome back Katherine as well by the way, lovely to see you. So on WGSN, what I'd say on fashion is that it's sort of borderline whether it's back to growth or not, is sort of I think it depends how you [indiscernible] (00:42:47) you want to be on the analysis basically and we tend to be very [indiscernible] (00:42:52) so I would say it's sort of slightly – it's certainly progressed to where it was and it's sort of starting to get itself back to potentially being growth this year in fashion, which is obviously – feels relatively positive. But obviously, that's a sector that's still finding the pandemic tough to get through.
That said, what I would say about the business, and I think it's an interesting that we've been building for many years this new segment strategy and these are subscription businesses that obviously gather momentum as they go. And so, what I would say to you just by mechanics, WGSN will accelerate because we're seeing such fast growth on now a big portion of brand new products that are not facing.
So, it's a mix by mechanic of that subscription-based performance and frankly great performance by the business. We are expecting to see WGSN's revenues accelerate. But I think fashion certainly will become less of a drag to the business. But we're also not anticipating it becoming a big add either in the next couple of years.
And then in terms of investments, primarily we constantly invest in all the products. And that really is reflected I think in again record retention rates this year. So, it shows that we are making sensible investments across the board in that product because its performance when you look at it on a standalone basis is outstanding, right. I mean, it is a fantastic product line and a clear, clear market leader in its industry. But yes, it's – the bias of investment is to continue in that new markets growth.
Thanks, Duncan. And I know people on the line are finding the questions quite hard to read – quite hard to hear, so I'll just repeat.
Okay.
I'll just repeat the question before I answer it. So Katherine's next question was about inflation and our cost base. So, the main parts where we see inflation in our cost base in our staff costs, and a 1% increase in our staff costs – costs – that costs us about £1.6 million. We are – obviously there are parts of our cost base and our employee base where the skills are even in shorter demand, which would be more on our engineering side of life and the Digital Commerce side of engineering in particular.
From our perspective, the way we've looked at it though, is we do see some quite good opportunities to recover that cost base increase through revenue increases through price increases. And you can probably remember that for our Product Design products, over 80% of their revenue streams are linked to CPI. So each year the renewal is based on a minimum CPI level. So, we are starting to see that come through into this year's revenue, which is obviously very helpful. So, we definitely will see cost inflation in our cost base, and we will pay up to ensure we attract and retain the right staff. But we do see a bit of an offset coming through on the revenue side of life.
And then the final question was about the Events and the Events cost base and its flexibility. We've worked obviously throughout the last two years incredibly closely with our partners and suppliers in terms of their working with us to mitigate the impacts on our cost base. And we've been very fortunate to be able to – and typically to be able to extend contracts rather than have to suffer costs. But there is – there does come a time at which point there is obviously going to be some cost if you have to cancel Events at short notice.
That typically isn't what we're seeing even in the most pandemic-impacted product we ran last year, which was of course Money20/20 Europe in the Netherlands. Before social distancing has been stopped, we were the first event in the – the first major event in the Netherlands. Even then, we had weeks of [ph] run up to now (00:47:08) before we had to commit to the costs. So reasonable flexibility in the cost base except in the event of very last minute cancellations.
Paul, you had your hand up.
Yes. Hi. It's Paul Morland here from Alvarium. Couple of questions from me. The first one is on growth and the visibility of growth. First of all, looking at Digital Commerce, I think I'm right in saying that grew at 27% in the first half, so 33% in the full year suggest growth of close to 40% in the second half. So, when you're talking about an acceleration of growth, talking about the Product Design business, should we also be looking for an acceleration in growth in Digital Commerce?
And in terms of visibility, I think if I feel I could grow at 33%, I'll probably guide to 30%, which suggests to me that you've got very good visibility in that Digital Commerce business, which is quite unusual. I mean, it's very difficult to forecast when you're growing incredibly quickly. So, perhaps you could tell me a little bit of how – about how you set guidance there and what your visibility actually is?
And reference in that answer, the billings comment you made on the Product Design business where I think you said that you look at billings in one year and that feeds through to that sort of revenue growth in the following year, and you said 10% billings growth. So in that business, should we be looking at about 10% revenue growth this year, which would be an acceleration on the 5% to 6% guidance that you've given previously? Sorry, that was a bit [indiscernible] (00:48:50).
That's okay.
And the second question is much shorter. It's about acquisitions. People don't talk so much in the market these days about acquisition risk in relation to software businesses. But when you're paying those high multiples, acquisition risk is a very important part of the process. You seem to have overcome that very well with the acquisitions you've done. Can you just talk a little bit about the processes that you go through in mitigating that risk on acquisitions? Thank you.
Okay. Why don't I do Digital Commerce on growth and then...
Okay.
...acquisitions and you do billings? Does that make sense?
Yeah.
Yeah. So, I think Paul, on Digital Commerce itself, as you said, there has been an acceleration of growth. I think that's a combination of two factors. One, we've been investing through 2021 and earlier into the faster-growing challenger brands segment. And so obviously as that's becoming more significant in our mix, that's helping to growth. But what I would say is we get less visibility in that segment that tends to be – that to me, kind of we call it, [indiscernible] (00:50:02) and sort of smaller brands rather than we're not down at the real SME level there. But we are – we're certainly not in the enterprise clients, that is where the rest of the core business is built around.
So, we don't get huge visibility. And to be fair, what I think you would tend to use as a proxy is sort of how are the marketplaces themselves guiding on their growth in the year? And so, if I was to give their proxy where they would say they're expecting a sort of slightly slower first half with an expansion and faster growth in the second half really being affected still by supply chain or a slight readjustment of when they're doing their big cyclical events, which do drive a lot of the revenues. So the shopping day events have a big impact on the profile of the year. And a lot of that's going to move back to the second half where it always was.
And then, of course, there's still a reasonable level of like-for-like tough comps because, if you remember the beginning of 2021, we still had pandemics and people were boosting again. So, there is a little bit of that in the mix. So, that's how I'd sort of think about that. On the enterprise side, again we get good visibility on the subscriptions and we feel confident about the growth rates there but the majority is in our execution business where we're in the main still taking revenues related to sales performance in the market that we drive.
So a little bit again, back to the kind of outlook of the marketplace is. But of course, then factored slightly differently from the fact that we will tend to outride the sort of performance in the marketplaces depending on the number of new logos and the growth of the logos, the quality of the logos that we have, which is what you sort of saw in our second half because if you just take it at face value, we were even on an organic basis almost twice the run rate of growth of Amazon. And that tells you that that's got to come to a combination of our brands were doing better than the rest through our work with them. And then secondly, we had good follow-through of new business that then flows through.
We had a strong finish to the second half on new business, so we would expect some of that to flow through into 2022 to give us growth again. So that hopefully helps on the sort of how we think about Digital Commerce. But I think, look I would say with the markets overall, I think something around the mid-20s is still a sensible place for us to land. I know everyone wants us to go higher but I think that's genuinely what our guidance would be, right, because there's a lot of moving parts.
On acquisitions, look we spend a long time getting to know the businesses that we acquire. It's a multiyear engagement normally in nearly all of them. We don't tend – look, technically a lot of them will end up doing some sort of sales process towards the end of the process because they obviously want to [ph] keep us honest (00:52:53). But at the same time, that's not an all-blown auction and kind of process that goes on and we don't really – well, we don't buy in auctions, it's just not the way we tend to engage in these things.
So that really gives us time to work with those companies for a long time to try and remove some of those risks, Paul. But at the end of the day, you can only try to remove them, it doesn't mean that we don't go in clear-eyed into these acquisitions. And often, we're looking at them on a four to five year outlook of what's important to us on that outlook.
And so in many cases, we will change the emphasis of where those brands are putting their efforts, quite often to when we acquire them. And that's usually because we open up new opportunities to them that they as a standalone company couldn't have gone after. So, it's that sort of mix, but we just take our time, I think is the golden rule.
Mandy, sorry.
Okay. And in terms of the question about Product Design and its growth rate for 2022, and again, another question on the line from Will Packer, Exane. With billings growing at 10% for WGSN, is that a realistic benchmark for the business? Is 2022 organic growth a revenue growth?
I'm not sure we'd necessarily commit to double-digit, but certainly if we can maintain the pace of subscription billings growth of 10% in the first half, that should give us a very nice acceleration on the 7%. Now you'll probably remember that 7% was sort of like the new normal for WGSN. One year, we managed to get it up to 8%, but certainly given the – what we come into the year with, from a forward visibility perspective and how we've started, I would certainly expect to see a good acceleration on last year maybe in that 10% range. So, that was the point on WGSN and Product Design.
So shall I go to some of the questions [ph] on the wires (00:55:04)?
So, Duncan, this is one for you from Will Packer. The recent Informa disposal multiple is arguably a positive read across for WGSN. But have there been any recent transactions in Digital Commerce which provide a relevant read across for Digital Commerce? And are there any revenue or EBITDA multiples that we should have in mind?
Yeah. I think – okay. Thanks, Will. I'm sorry you can't be here today, but thanks for the question. Good question. Yeah. No, look firstly I think the Informa outcome was very strong, and I think does demonstrate the quality of Digital Subscription businesses particularly. And I think you read across the WGSN is a really good read across. I mean, it is – we would consider WGSN to be a very high-quality digital asset.
In terms of Digital Commerce, I think the most recent ones have really been the investments of private equity. They've met – there's been a number. Probably the most notable was in [indiscernible] (00:56:14) which is a US-based business, really competes against many of our sort of challenger brands. Actually, it's not really in the enterprise class, but it's coming up against. And that was reported to be a transaction where they invested. That would have been a 13 times revenue they invested at in terms of capital as a comparison. So I think that's probably a sort of reasonable.
But if you look at the last 18 months, even if you took a net average, the net average of the Stackline investment, the Assembly investment, the Syndigo investment, the step up in Salsify. You take all these various brands that are in and around our segment, I think the lowest multiple paid was 9 times revenue.
An interesting read across.
Yeah.
Just sticking on Digital Commerce, a question from Investec, Duncan. We've mentioned the relationships with Amazon and Walmart, but brands are increasingly selling through social media such as Instagram. So, we – they were wondering about how we are thinking about social commerce in general going forwards. A question from Investec.
Yes. Yeah. No. Thank you. And it's a good question. Look, headless or – which is a terrible term, I know, but it seems to be what the industry is calling. I think it should be really [indiscernible] (00:57:36) because headless sounds terrible. But kind of social media selling is definitely demand – is definitely generating more traffic off marketplace into marketplace. So, I think the important factor to remember is that the criticality of capability that the brand needs to leverage to get a product to someone's house preferably within a few hours, which is becoming the norm of consumer demand, really requires – the only companies that have got that infrastructure are the main marketplaces.
So even in the case of social commerce, that's really an act to push a consumer into then another marketplace to transact the sale. And in the case of Facebook with Instagram, that principally goes into Shopify. But it can go to other marketplaces.
So, we are definitely seeing through our work with all the marketplaces around their own expansion out into the upper funnel strong growth. We saw that particularly with our 4K Miles models acquisition out of China. The Chinese resellers or the Chinese brand sellers are the most pervasive when they come into the Western markets in terms of their use of both on-platform media and off-platform media. We saw growth rates in the hundreds of percents around that activity in 4K Miles.
So, it's definitely going to become more important. We're certainly with those capabilities able to support our clients to think about where they place their money off-market to generate real sales on-market. So we are definitely seeing a good uptick of demand from our clients in that space. And we would certainly see it keep coming. I think that is going to be a continuation of that tight combination between off-marketplace demand generation and how you really hard link that through to then real sales. And that's our USP in this mix as we help anyone who's doing that off-market activity really understand whether it's making sales or not. So it's – yeah, it's a buoyant part of the market.
Are you up for another one on Digital Commerce?
Why not.
The last one on the [ph] wires (00:59:47).
Why not. Why not.
So, this comes from Citi, where they say I'm still intrigued as to the multi-brand strategy within digital commerce. And in the past, you've said the danger of moving to a single integrated brand is that it might lead to expectations with customers of a discount. But doesn't that mean you're leaving yourself vulnerable to being dis-intermediated by an integrated offering at some point. Why not embrace integration, take the hit and become a best-in-class one-stop-shop?
That was a very strategic question, isn't that?
Yeah, it's a very good question. And it's a question of when I think, not if, in fairness. But that when is also about ensuring at the point you present that one-stop-shop that it's something that doesn't just exist in PowerPoint, it actually really exists in products. And so when you present to the customer the one-stop-shop, they actually go, oh, wow, yeah, that is a one-stop-shop, thank you. There's no doubt that the transition we made last year, the very clear focus we're putting into capital, both organic and inorganic growth in Digital Commerce is exactly because we're now starting to prepare for that move and moving towards a sort of integrated platform that addresses both the retail experience management, performance management benefits that we already highlighted is sort of 60% of our revenues, as well as then offering that sort of secondary aspect of allowing media optimization combined with that. And – but we do expect that to be a multi-year program to get to the point where you have that sort of totally integrated product.
But it is definitely a direction of travel for our Digital Commerce business and we're sort of commencing it, but it's not going to be – we're not going to be in the market in the next 12, 18 months with a totally integrated product. But you can expect within probably the end of the two year cycle, we're going to be much closer to that.
Our objective, our long-term strategic goal is that we really do believe that we're building a sort of next-generation sales force or those kind of platform that really will help in that next generation of demand-based selling, which is not contract selling, which is obviously what most of the products in the market deal with. That's exactly what we're targeting to build in the long-term.
Great .And I think we should finish off with some questions from Nick Dempsey at Barclays, and there are four. I'll do three of them and give you a break, and then I'll ask you to do one about Money20/20.
So Nick's asked four questions. And the first question is, he – backing out about the decline of fashion, what is the scale of the decline of fashion? And is there any chance that might ease in 2022? I'll just give you some numbers there.
Secondly, Nick has asked about the working capital facility on our reimbursables. Is it one-off or will you do it again? Thirdly, he's asked, is there any business update on Hudson MX in terms of it winning customers, et cetera? And then, fourthly, he's asked about Money20/20 and it doesn't look core to Ascential as it once did, and is it a good time to sell?
So, if I do the first couple of...
Yeah.
...of questions. So, fashion in 2021 declined. It declined by about 4% compared to obviously the growth of 30%, and these are billings numbers, so it declined to about 4%. And as Duncan has already mentioned, towards the end of the year, we started to get into some form of growth. Obviously, that is a target that the team is to return fashion to growth, but I think it would be too early for analysts and investors to expect that. So, that's what I'd say on that one.
Secondly, in terms of working capital, and you'll see this in the financial review if you dive deep into the release, on working capital, we do have quite an amount of working capital that we tie up in reimbursables where we buy media for our customers. And as you'll also see in the release on media under management, doubled last year. So, that obviously drives an increase in – and we're measuring this in hundreds of millions as opposed to tens of millions. And last year, our working capital needs, as a result of that, went up by about £25 million.
And so, what we did was we put in place a working capital facility with one of the banks to essentially release, and we released £24 million of that working capital. So, it was not a benefit to our net working capital, it was just a funding of that media reimbursables. We would expect to expand as there is a requirement to fund those reimbursables through our own working capital. We would expect to continue to ensure that that does not have a meaningful adverse impact on the overall working capital and funding of Ascential using similar sorts of working capital facilities.
So, Duncan, do you want to...
[indiscernible] (01:05:29) business update on Hudson?
That's right.
So, look the business update on Hudson is, please don't read into our – my resource prioritization of capital into Digital Commerce as a misguide that Hudson isn't doing pretty well, actually. So, Hudson, in fact, already has one live global agency group on the platform, which is clearly a massive milestone to get someone trading at that scale onto the platform. It has a second one lined up to go live in the second half, and that's progressing very well.
And what was really interesting actually in the last sort of six months was that they very successfully won an actual end media brand, so a client who wanted to use Hudson to take that to manage all of their in-house media purchasing. And that, in fact, was a very major win. It's a very high profile company. It's not for us to release the details. Hudson is a private company. It's up to them if they choose to announce that. But that opens up for Hudson a substantive new area of the market that had not been factored in originally to our business plans, and the opening of the TAM on that perhaps is substantive.
So, if anything, I would say the Hudson business is getting – sort of has been galvanized through those three activities, and is getting more ambitious about its rollout and growth for the company, which of course, is something we have to factor into our thinking around our investment alongside it. And probably was a feature of why we didn't consolidate, because if they go aggressively after their growth, that's going to create more losses, that's the world of a software company. And right now, I don't want that if we did do that to constrain us in any way in meeting our number one mission of Digital Commerce. But certainly as a company, Hudson is in very good position.
Yeah. Making great progress. And then the final question was from Nick. Money20/20 has been doing really well, it doesn't look so core, is it a good time to sell?
I would say it's not a good time to sell. And things for us are core until we choose them not to be core. We have yet to get back to 2019 levels. Although we – obviously in Money20/20 USA, we had a really great performance. So look, it's – hopefully we'll come back even better in 2022, but it's certainly not something that we have any immediate plans to do anything with – from a corporate perspective.
Yeah. I would sort of slightly extend that as well, Mandy, to say, look I think it's a task for the entire Events industry to which we believe with our number one – we've got a small number, but a very high quality number one event. I think it's – we all have an obligation to demonstrate that these business models can fully return to the high returns of where they were. And we feel, as you can tell, pretty confident that we're going to demonstrate that in our high-quality products. And at that point, I think that if you were thinking about valuation of those businesses, that's the point you could be front-footed about it. But until the industry has done that, and until we're through probably this year and into next year, I think it's all a little bit too early to talk about it.
And there are no more questions. And if there's no more in the room, thank you very much for attending our presentation, and have a great day.
Thank you very much, everyone. Thank you for coming.