Gaining strength in US and UK

YouGov 31 January 2020 Update
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YouGov

Gaining strength in US and UK

Half-year trading update

Media

31 January 2020

Price

644p

Market cap

£681m

$1.30/£

Net cash (£m) at 31 July 2019

37.9

Shares in issue

105.7m

Free float

91.1%

Code

YOU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.5

17.7

47.2

Rel (local)

3.2

15.7

36.9

52-week high/low

672p

435p

Business description

YouGov is a global research data and analytics group, with over eight million online panellists across 42 countries. It offers a complementary data-led suite of products and services including YouGov BrandIndex, YouGov Profiles, YouGov Omnibus, YouGov Direct and custom research.

Next events

Interim results

24 March 2020

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5700

YouGov is a research client of Edison Investment Research Limited

YouGov’s H1 trading update confirms that the group is on track to meet management expectations for the year and our forecasts are unchanged. Data Products remains the driving force behind the overall progress, with the US and the UK markets highlighted, despite these markets being the longer-established in the group. Management’s five-year plan to FY23 targets doubling both revenue and adjusted operating profit margin, as well as achieving a 30% CAGR in EPS (25% EPS CAGR in the earlier plan). In this context, the valuation premium to slower-growing peers looks well underpinned.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

EV/EBITDA (x)

P/E
(x)

Yield
(%)

07/18**

116.6

16.4

10.8

3.0

31.0

59.7

0.5

07/19

136.5

20.5

13.9

4.0

21.5

46.4

0.6

07/20e

152.1

26.5

17.8

5.0

17.9

36.2

0.8

07/21e

163.7

33.6

22.1

6.3

14.6

29.1

1.0

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **FY18 restated for change in treatment of amortisation and share-based payments.

Trading in line

Beyond the continuing success in growing Data Products, the statement also draws attention to the maintenance of strong margins in Custom Research. In FY19, adjusted operating margin in this segment rose from 20% to 22% as greater integration with the group’s syndicated data leads to a more heavily engineered solution. The newly established YouGov Sport, built around the SMG Insight business (consolidated from May 2018, when ownership increased from 20% to 100%), is reported to be performing particularly strongly.

Permissioned data shows its importance

Google’s intention to withdraw third-party tracking cookies from web browsers within two years, and other recent publicised issues around corporate data harvesting and privacy, have drawn further attention to the extent of data gathering and use. YouGov’s highly and explicitly permissioned model allows brand owners and advertisers to avoid any taint from such breaches. YouGov Direct, the blockchain-enabled offering with panellists making their opinion and behavioural data available for research in a marketing context, takes this one stage further. This has now been launched in the US, having successfully been trialled in the UK.

Valuation: Outperformance continued

YouGov’s share price has performed strongly, up by 47% over the last 12 months, giving a 10-year CAGR of 32%. Earnings multiples are at the top end of the range of global peers, although it can be argued that none are directly comparable. On a reverse DCF basis, at our unchanged FY21e EBITDA margin of 26% (which should prove conservative given the ambitions in the five-year plan), the current share price implies top-line growth of 11.4% in FY22–27, well below the level needed to meet the new growth target of doubling revenue within five years.

Exhibit 1: Financial summary

£'000s

2017

2018

2019

2020e

2021e

Year end 31 July

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

107,048

116,559

136,487

152,076

163,678

Cost of Sales

(21,339)

(21,495)

(24,206)

(26,461)

(27,692)

Gross Profit

85,709

95,064

112,281

125,615

135,986

EBITDA

 

 

15,702

20,907

28,578

35,405

42,505

Operating Profit (before amort., except.)

 

 

14,528

12,650

18,288

25,021

32,121

Intangible Amortisation

(6,483)

(7,026)

(8,809)

(8,809)

(8,809)

Share based payments

(1,508)

(3,571)

(2,401)

(1,250)

(1,250)

Exceptionals

(488)

(826)

1,529

0

0

Other

103

204

200

0

0

Operating Profit

6,152

12,028

20,017

25,021

32,121

Net Interest

254

(51)

(361)

186

238

Profit Before Tax (adj)

 

 

16,393

16,374

20,528

26,457

33,609

Profit Before Tax (FRS 3)

 

 

6,406

11,773

19,456

25,207

32,359

Tax

(3,273)

(3,615)

(5,085)

(6,530)

(8,358)

Profit After Tax (norm)

13,120

12,759

15,443

19,927

25,251

Profit After Tax (FRS 3)

3,133

8,158

14,371

17,427

22,751

Average Number of Shares Outstanding (m)

104.8

105.4

105.4

105.6

105.6

EPS - normalised fully diluted (p)

 

 

7.8

10.8

13.9

17.8

22.1

EPS - FRS 3 (p)

 

 

3.0

7.7

14.2

16.5

21.5

Dividend per share (p)

2.0

3.0

4.0

5.0

6.3

Gross Margin (%)

80.1

81.6

82.3

82.6

83.1

EBITDA Margin (%)

14.7

17.9

20.9

23.3

26.0

Operating Margin (before GW and except & share-based payments) (%)

12.2

7.8

11.6

15.6

18.9

BALANCE SHEET

Fixed Assets

 

 

64,637

78,019

98,006

98,197

98,388

Intangible Assets

54,960

65,357

82,374

82,565

82,756

Tangible Assets

9,332

12,471

15,632

15,632

15,632

Investments

345

191

0

0

0

Current Assets

 

 

54,918

66,735

72,581

92,810

108,098

Stocks

0

0

0

0

0

Debtors

30,699

34,672

33,726

45,237

48,688

Cash

23,481

30,621

37,925

46,643

58,480

Current Liabilities

 

 

(34,177)

(41,445)

(48,503)

(50,285)

(53,689)

Creditors

(33,915)

(41,445)

(48,503)

(50,285)

(53,689)

Short term borrowings

(262)

0

0

0

0

Long Term Liabilities

 

 

(4,905)

(11,238)

(11,238)

(11,238)

(11,238)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(4,905)

(11,238)

(11,238)

(11,238)

(11,238)

Net Assets

 

 

80,473

92,071

110,846

129,484

141,559

CASH FLOW

Operating Cash Flow

 

 

18,914

23,617

35,230

35,405

42,256

Net Interest

4

22

183

186

238

Tax

(2,487)

(5,501)

(4,520)

(3,873)

(5,871)

Capex

(7,661)

(8,181)

(12,166)

(10,000)

(10,000)

Acquisitions/disposals

0

(885)

(6,583)

(7,000)

(8,600)

Financing

175

259

(3,652)

(1,500)

0

Dividends

(1,470)

(2,106)

(3,327)

(4,499)

(6,204)

Net Cash Flow

7,475

7,225

5,165

8,719

11,820

Opening net debt/(cash)

 

 

(15,553)

(23,219)

(30,621)

(37,925)

(46,644)

HP finance leases initiated

0

0

0

0

0

Other

191

177

2,138

0

0

Closing net debt/(cash)

 

 

(23,219)

(30,621)

(37,925)

(46,644)

(58,464)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by YouGov and prepared and issued by Edison, in consideration of a fee payable by YouGov. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by YouGov and prepared and issued by Edison, in consideration of a fee payable by YouGov. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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