Goldman reinstates Ascential at 'buy' after exhibitions sale

Goldman Sachs reinstated coverage of Ascential, formerly EMAP, with a 'buy' rating and 560p price target, saying the new business mix will support double-digit organic growth to 2020.

The bank said that following the sale of the slower growth exhibitions and festivals assets to ITE Group, which completed this month, the remaining business is set to deliver double-digit organic growth and over 500 basis points of EBITDA margin expansion by 2020.

"In our view, the new shape of the group reflects a rare asset, well positioned to benefit from the disruption and direction of growth within consumer/retail and advertising markets combined with an attractive financial profile of high growth, margins and cash conversion."

Goldman also said it sees further scope for M&A, particularly given the recent proceeds the company received from the sale to ITE.

"Historically, acquisitions have been a significant contributor to revenue as the company re-oriented its portfolio towards growth," GS said.

"While we see margin dilution as a risk, the company has a strong track record of delivering on previous acquisitions, and we believe that further focus on the stated strategy is likely to support a further multiple re-rating."

Ascential announced back in May that it had agreed to sell its exhibitions business following a strategic review. It said the sale was in the best interests of shareholders in order to allocate capital to higher growth areas of the business.

At 1320 BST, the shares were up 2.3% to 467.60p.