YouGov |
Larger contract wins underpin growth |
Interim results |
Media |
25 March 2021 |
Share price performance
Business description
Next events
Analyst
YouGov is a research client of Edison Investment Research Limited |
Interim results are as indicated at the period end, with 9% underlying growth. As flagged, the closure of the Kurdistan operation and adverse forex weighed on the statutory figures. A strong sales performance gives good momentum into H221 and through to FY22, with a greater number of larger, strategic contracts now on the books. We have lifted our estimated FY21 revenue by 6%, resulting in an uplift to adjusted EPS of 8%. YouGov remains valued towards the top of its peer set, reflecting its strong market positioning, attractive cash generation and cash-positive balance sheet.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
EV/EBITDA |
P/E |
Yield |
07/19 |
136.5 |
20.4 |
13.8 |
4.0 |
31.0 |
72.8 |
0.4 |
07/20 |
152.4 |
24.7 |
15.7 |
5.0 |
26.2 |
64.1 |
0.5 |
07/21e |
170.0 |
30.6 |
17.4 |
5.5 |
22.3 |
57.7 |
0.5 |
07/22e |
185.0 |
37.0 |
21.3 |
6.5 |
18.9 |
47.2 |
0.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Improving prospects into FY22
Statutory reported revenue growth of just 3% reflects the ending of the Kurdistan contract, along with the impact of foreign exchange (42% of H121 revenues were generated in the US, at an average rate of $1.32:£ vs $1.27:£ in H120). Stripping out these factors, and the small change due to acquisitions, gives the underlying increase of 9%. At the operating profit level, the statutory number, down 22% at £7.4m, is after deduction of £3.1m in contingent consideration, which is due to a better than anticipated performance from acquisitions. We have edged up our FY21 revenue estimate £5m to £168m, with an unchanged adjusted operating profit due to a higher share-based payments charge than we had previously modelled. In view of management comments on the progress on sales, we have lifted our FY22 revenue and adjusted operating profit numbers by 6% and 8%, respectively.
Stepping up investment in global panel and tech
YouGov spent £6.1m in panel recruitment in H121, expanding its penetration in the US and adding 15 new countries, taking coverage to 59 markets. The group had 15.8m panellists across the globe at end January, up 65% on the prior year. This allows it to target larger, multinational studies, helped by a shift in approach to key client account management. This transition was initially disruptive but is now helping drive up the average contract value, integrating data products and tools. YouGov has also stepped up its investment in its technology platform, spending £5.2m in H121, up 49% on H120, to facilitate the scaling up of the business.
Valuation: Remains at top end of the global peer set
Despite a pause in share price appreciation to date in 2021, YouGov’s valuation multiples remain towards the top end of the global peer group, where the more data and analytics-weighted groups trade at a clear premium. YouGov’s rating also reflects its strong market positioning, attractive cash generation (92% cash conversion of adjusted EBITDA in H121) and cash-positive balance sheet.
Margins set to expand again in H221
YouGov’s business has weathered the ongoing impact of the COVID-19 pandemic well, with agencies holding up and the tech sector continuing to grow. There was also a strong uplift in this reporting period from tactical Data Services projects, as can be seen below. We would estimate that the reduction in the Custom Research revenues is largely, if not totally, attributable to the ending of the Kurdistan contract, which will also have diluted the achieved segmental operating margin.
The overall group achieved adjusted operating margin in H121 of 13.3% (H120: 14.8%) will also have been diminished by:
■
The shift in business mix towards Data Services, which earns lower gross and operating margins than Data Products. In H121, Data Products gross margin was 92.8% to Data Services’ 83.5%; adjusted operating margin 33.2% to 17%.
■
The net impact of foreign exchange moves, which management estimates to have cost £0.3m at the operating profit level.
Exhibit 1: Half-year summary
£m |
H120 |
H220 |
FY20 |
H121 |
Change vs H120 |
Underlying change vs H120 |
Revenue |
||||||
Data Products |
25.1 |
26.2 |
51.3 |
26.5 |
6% |
8% |
Data Services |
18.4 |
19.5 |
37.8 |
21.8 |
19% |
18% |
Custom Research |
33.9 |
30.7 |
64.6 |
30.1 |
-11% |
2% |
Eliminations |
(0.5) |
(0.9) |
(1.3) |
0.6 |
||
Total |
76.9 |
75.5 |
152.4 |
79.0 |
3% |
9% |
Adjusted operating profit |
11.3 |
10.5 |
21.8 |
10.5 |
-7% |
15% |
Group adjusted operating margin |
14.8% |
13.9% |
14.3% |
13.3% |
-10% |
5% |
Source: Company data
Our full-year estimates build in a recovery in adjusted operating margin to 15.3% for FY21, as the revenue balance shifts away from Data Services and the new, larger integrated project and tracking work comes through. We expect this to drive further adjusted operating margin expansion in FY22e to 18.4%. The group’s FY19–23 published growth plan targets doubling adjusted operating margin across the period.
Changes to share-based payments, depreciation, amortisation
As we have noted in previous reports, YouGov is reporting under a technical change to the accounting treatment of the share-based payments (non-cash). Under the previous scheme, charges were weighted to the end of the five-year period, whereas for this scheme the accounting will be smoothed. We had already built this into our model, but have now increased the full year level of charge from £2.9m previously to £5.0m to reflect the higher level of share price.
The investment in panel (£6.1m, up 45% on prior year) and in technology (£5.2m, up 49%) mean higher depreciation and amortisation charges in the modelling.
Cash position remains strong
Net cash at the half year-end (end January) was £27.5m (H120: £27.2m) and we now model £40.1m at the end of FY21 (was £40.6m), with the change reflecting the higher levels of investment. The group carries no debt, beyond lease liabilities, which stood at £13.8m at the half year. The balance sheet now shows acquisition-related contingent consideration of £9.5m, all short term. The projection of £48.0m of cash at end FY22 assumes that FY21 will have been the peak investment in panel and platform. This level of funding gives plenty of scope for further M&A to add in attractive niches, such as sports, gaming and e-sports where the group has recently added resource.
Exhibit 2: Financial summary
£'000s |
2019 |
2020 |
2021e |
2022e |
||
Year end 31 July |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
136,487 |
152,441 |
170,000 |
185,000 |
Cost of Sales |
(24,206) |
(23,375) |
(26,038) |
(27,678) |
||
Gross Profit |
112,281 |
129,067 |
143,962 |
157,321 |
||
EBITDA |
|
|
31,698 |
39,215 |
47,894 |
54,319 |
Operating Profit (before amort. and except.) |
|
|
18,492 |
21,830 |
25,752 |
32,177 |
Intangible Amortisation |
(8,809) |
(12,885) |
(14,300) |
(14,300) |
||
Share based payments |
(2,401) |
(2,900) |
(5,000) |
(5,000) |
||
Exceptionals |
1,529 |
(6,630) |
(3,105) |
0 |
||
Other |
200 |
0 |
0 |
0 |
||
Operating Profit |
20,221 |
15,200 |
22,647 |
32,177 |
||
Net Interest |
(665) |
7 |
(175) |
(150) |
||
Profit Before Tax (norm) |
|
|
20,428 |
24,737 |
30,577 |
37,027 |
Profit Before Tax (IFRS16) |
|
|
19,356 |
15,207 |
22,472 |
32,027 |
Tax |
(5,086) |
(5,812) |
(8,588) |
(12,240) |
||
Profit After Tax (norm) |
15,342 |
18,925 |
21,988 |
24,787 |
||
Profit After Tax (IFRS16) |
14,270 |
9,395 |
13,883 |
19,787 |
||
Average Number of Shares Outstanding (m) |
105.4 |
106.7 |
109.5 |
110.6 |
||
EPS - normalised (p) |
|
|
13.8 |
15.7 |
17.4 |
21.3 |
EPS - IFRS 16 (p) |
|
|
14.1 |
9.0 |
12.7 |
17.9 |
Dividend per share (p) |
4.0 |
5.0 |
5.5 |
6.5 |
||
Gross Margin (%) |
82.3 |
84.7 |
84.7 |
85.0 |
||
EBITDA Margin (%) |
23.2 |
25.7 |
28.2 |
29.4 |
||
Operating Margin (before GW and except) (%) |
13.5 |
14.3 |
15.1 |
17.4 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
108,534 |
108,122 |
112,280 |
110,638 |
Intangible Assets |
82,374 |
84,611 |
87,511 |
88,211 |
||
Tangible Assets |
26,160 |
23,511 |
24,769 |
22,427 |
||
Investments |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
72,581 |
70,255 |
79,911 |
90,923 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
33,726 |
34,239 |
38,658 |
43,082 |
||
Cash |
37,925 |
35,309 |
40,547 |
47,134 |
||
Current Liabilities |
|
|
(51,395) |
(52,813) |
(62,452) |
(57,116) |
Creditors |
(51,395) |
(52,813) |
(62,452) |
(57,116) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(22,277) |
(16,226) |
(17,446) |
(17,446) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(22,277) |
(16,226) |
(17,446) |
(17,446) |
||
Net Assets |
|
|
107,443 |
109,338 |
112,293 |
126,999 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
38,115 |
38,411 |
46,445 |
54,059 |
Net Interest |
183 |
(7) |
175 |
150 |
||
Tax |
(4,520) |
(3,184) |
(8,588) |
(12,240) |
||
Capex |
(12,166) |
(18,559) |
(21,000) |
(17,500) |
||
Acquisitions/disposals |
(6,583) |
(7,451) |
(3,824) |
(9,500) |
||
Financing |
(3,652) |
(4,739) |
(2,200) |
(2,000) |
||
Dividends |
(3,327) |
(4,298) |
(5,420) |
(6,081) |
||
Net Cash Flow |
8,050 |
173 |
5,588 |
6,887 |
||
Opening net debt/(cash) |
|
|
(30,621) |
(37,925) |
(35,309) |
(40,547) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(747) |
(2,789) |
(350) |
(300) |
||
Closing net debt/(cash) |
|
|
(37,925) |
(35,309) |
(40,547) |
(47,134) |
Source: Company accounts, Edison Investment Research
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