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Nielsen expects spinoff to be delayed by COVID-19, lowers guidance

Facing the impact of COVID-19, Nielsen Holdings PLC expects a delay of its plan to split into two separately traded companies.

The plan to create two independent, publicly traded companies — Global Media and Global Connect — through a spinoff will now not likely occur in November 2020.

CEO David Kenny said on an April 30 earnings call that Nielsen plans to file some required materials in connection with the split in early May. But with the shutdown of government agencies needed to sign off on the transaction, the company now does not expect the process to be completed until the first quarter of 2021.

Nielsen Global Media provides data to media and advertising clients with various metrics, while Nielsen Global Connect supplies consumer packaged goods manufacturers and retailers with data. The costs in 2020 associated with the separation are now expected to be between $275 million and $300 million, compared to an earlier estimate of $350 million to $400 million.

On the call, Nielsen guided full-year revenue to decline between 1% and 4%, from its previous projection calling for an increase of 1% to 3%. On the media side, Nielsen scaled back its earlier growth call of between 1% and 2% to a drop of between 1% and 3%. Relative to its connect business, the forecast of a 2.5% to 4.5% gain has now flipped to a decrease of between 2% and 5%.

As to adjusted EBITDA, the company is now projecting between $1.79 billion and $1.86 billion, versus an earlier forecast of $1.83 billion to $1.91 billion. The cash flow target for 2020 has been revised to a range of $460 million to $530 million, down from $530 million to $580 million.

These estimates exclude the $275 million to $300 million of cash separation-related costs in 2020, the majority of which will occur close to the separation date.

The company said the new guidance is based on a recovery from the coronavirus beginning in the second half of 2020. CFO Linda Zukauckas said if COVID-19 triggers a prolonged recession into 2021, the company would "plan even more significant cost actions," including the deferment or cancellation of certain projects.

Kenny said Nielsen is taking out at least $200 million in temporary costs. He noted that COVID-19 is driving the company to become more efficient and focused, and the information it learns will drive permanent cost-saving actions.

Zukauckas said momentum slowed toward the end of the first quarter, and she expects to see the largest impact from COVID-19 in the current period, with revenues declining in the mid- to high single digits on a constant-currency basis. Adjusted EBITDA margins in the second quarter are projected to fall approximately 200 basis points, "with some pressure in Media and significantly more in Connect, reflecting the aggressive cost actions we are taking," she said.

First-quarter revenues slid to $1.55 billion from $1.56 billion but were up 1.5% on a constancy-currency basis. Media revenues rose 1.9% to $842 million, but Connect revenues dropped 2.7% to $717 million, with the pandemic impacting retail measurement and exerting pressure on insights in its Predict/Activate business.

Nielsen reported a net loss attributable to shareholders of $18 million, or 5 cents per share, during the first quarter, compared to a net gain attributable to stockholders of $43 million, or 12 cents per share, in the first quarter of 2019.

The S&P Global Market Intelligence GAAP EPS consensus estimate for the quarter was a loss of 5 cents.

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