YouGov — Positive branding

YouGov (AIM: YOU)

Last close As at 28/03/2024

902.00

−34.00 (−3.63%)

Market capitalisation

990m

More on this equity

Research: TMT

YouGov — Positive branding

YouGov is continuing to deliver on its growth strategy, with FY17 revenues up 21% y-o-y (9% in constant currency). Data products and services now represent 44% of group revenues. This concentration on its core strengths, using its own proprietary panel, is increasing group margins and giving better visibility to earnings through subscription income. Cash conversion remains strong, allowing continued investment in data analytics, geographic expansion and panel recruitment. The dividend has been stepped up 43%, reflecting the greater maturity of the business model and the cash-rich balance sheet. These strengths are reflected in the continuing valuation premium to peers.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

YouGov

Positive branding

Preliminary results

Media

16 October 2017

Price

324p

Market cap

£341m

£1:$1.32

Net cash (£m) at end July 2017

23.2

Shares in issue

105.1m

Free float

91.4%

Code

YOU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

23.9

20.0

40.6

Rel (local)

21.1

17.5

28.8

52-week high/low

324.0p

215.2p

Business description

YouGov is an international market research and data and analytics group offering a data-led suite of products and services including YouGov BrandIndex, YouGov Profiles, YouGov Omnibus and custom research.

Next events

AGM

6 December 2017

Interim results

26 March 2018

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

YouGov is a research client of Edison Investment Research Limited

YouGov is continuing to deliver on its growth strategy, with FY17 revenues up 21% y-o-y (9% in constant currency). Data products and services now represent 44% of group revenues. This concentration on its core strengths, using its own proprietary panel, is increasing group margins and giving better visibility to earnings through subscription income. Cash conversion remains strong, allowing continued investment in data analytics, geographic expansion and panel recruitment. The dividend has been stepped up 43%, reflecting the greater maturity of the business model and the cash-rich balance sheet. These strengths are reflected in the continuing valuation premium to peers.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

07/16

88.2

13.3

8.5

1.4

38.1

0.4

07/17

107.0

16.4

10.5

2.0

30.9

0.6

07/18e

115.1

18.3

12.4

2.3

26.1

0.7

07/19e

125.1

20.9

13.2

2.5

24.5

0.8

Note: *PBT and EPS are normalised and fully diluted, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Step up in margins

YouGov’s organic (constant currency) revenue growth of 9% is made up of 29% growth in data products and 19% growth in data services, well ahead of the market, offset by flat revenues from custom research. Within data products and services, BrandIndex grew 20% (constant currency) to £20m, while YouGov Profiles is proving its value to marketing professionals, more than doubling its revenues to £4m. Custom research revenues were flat as it focused on projects that utilised its own panel resource and pared back work in Germany and the Middle East that no longer fit with the model. The change in mix, and the focus on custom research projects that utilise own-panel resource, drove group gross margin up from 78% to 80%, while operating margins climbed from 12.4% to 13.6%. CFO Alan Newman retires at the end of December and the search for a successor is underway.

FY19e forecasts initiated

Our first estimates for FY19 show a continuation of the pattern of growth from data products and services. We are showing 9% revenue growth and an improvement in adjusted operating margin to 14.6% from 13.7% in FY18e. Normalised earnings per share in our model grow 6%, (+18% in FY18e), with a progressive dividend policy.

Valuation: Premium growth reflected in rating

YouGov’s rating remains towards the top of the ranking of global peers. Much of the traditional market research sector still struggles with legacy infrastructures. YouGov continues to refine and productise its offerings, driving a higher earnings CAGR than the sector and funding a progressive dividend stream. The group’s clear and consistent strategy is translating into profits and, at least as importantly, into cash.

Key points from FY17

The key features of the FY17 results are as follows:

top-line growth of 21% (9% in constant currency)

adjusted operating profit up 33%; 24% growth in adjusted EPS

growing subscription revenue base

BrandIndex now 18% of group revenue, up 20% in constant currency

Profiles significant in its own right, with £4m of revenues; also increasingly sold in combination with BrandIndex

Omnibus also growing well (up 23% in constant currency) increasing its multi-country studies, especially Asia Pacific.

Custom research flat in constant-currency terms as the business is reoriented; operating margin increased from 12.6% to 14.8%

legacy and non-core custom research business in Germany and Middle East is wound down or disposed

the conspicuous success of the new methodology used for the 2017 UK General Election, which built up from a micro level by constituency and correctly predicted a hung parliament – this approach has potentially significant commercial applications

dividend up 43%, with cover now just over 5 times

net cash of £23.2m from £15.6 at end-July 2016, £15m at end-January 2017

Exhibit 1: FY17 operating profit by geography

Exhibit 2: FY17 operating profit by segment

Source: Company accounts, Edison

Source: Company accounts, Edison

Exhibit 1: FY17 operating profit by geography

Source: Company accounts, Edison

Exhibit 2: FY17 operating profit by segment

Source: Company accounts, Edison

Cash gives options

The group’s inherently strong cash conversion inevitably prompts questions on capital allocation priorities. Acquisitions have not been a focus over recent periods, especially given the potential for premium growth from developing the internally generated business opportunities and by rolling them out internationally. With the increased scale of the business, the lower dividend cover is appropriate and does not compromise the ability to invest. With the current rapid pace of innovation in data science and analytics, YouGov has the firepower to ensure that it can invest organically in order to keep the group at the forefront of developments and to make incremental acquisitions, if necessary.


Exhibit 3: Financial summary

£000s

2015

2016

2017

2018e

2019e

Year end 31 July

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

76,110

88,202

107,048

115,064

125,075

Cost of Sales

(17,472)

(19,476)

(21,339)

(25,314)

(27,517)

Gross Profit

58,638

68,726

85,709

89,750

97,559

EBITDA

 

 

9,273

11,736

15,218

17,687

20,193

Operating Profit (before amort. and except).

 

 

8,529

10,921

14,515

16,984

19,490

Intangible Amortisation

(4,633)

(5,478)

(6,483)

(6,500)

(6,500)

Share based payments

(669)

(1,138)

(1,508)

(1,200)

(1,200)

Exceptionals

(1,072)

(1,108)

(488)

0

0

Other

41

(4)

116

0

0

Operating Profit

2,196

3,193

6,152

9,284

11,790

Net Interest

(220)

1,199

254

162

169

Profit Before Tax (norm)

 

 

9,019

13,254

16,393

18,346

20,859

Profit Before Tax (FRS 3)

 

 

1,976

4,392

6,406

9,446

11,959

Tax

580

(2,111)

(4,912)

(4,678)

(6,258)

Profit After Tax (norm)

9,640

11,139

13,107

13,667

14,914

Profit After Tax (FRS 3)

3,266

3,415

4,641

5,765

7,214

Average Number of Shares Outstanding (m)

101.0

103.9

105.5

105.5

105.5

EPS - normalised & fully diluted (p)

 

 

6.7

8.5

10.5

12.4

13.2

EPS - FRS 3 (p)

 

 

3.2

3.3

4.4

5.4

6.8

Dividend per share (p)

1.0

1.4

2.0

2.3

2.5

Gross Margin (%)

77.0

77.9

80.1

78.0

78.0

EBITDA Margin (%)

12.2

13.3

14.2

15.4

16.1

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

10.3

11.1

12.2

13.7

14.6

BALANCE SHEET

Fixed Assets

 

 

53,726

62,366

64,637

64,534

64,534

Intangible Assets

46,145

53,140

54,969

54,969

54,969

Tangible Assets

7,377

8,984

9,323

9,323

9,323

Investments

204

242

345

242

242

Current Assets

 

 

33,329

45,339

54,918

61,476

72,164

Stocks

0

0

0

0

0

Debtors

22,507

28,643

30,699

32,338

35,151

Cash

10,017

15,553

23,481

28,400

36,275

Current Liabilities

 

 

(22,983)

(27,823)

(34,177)

(36,989)

(40,207)

Creditors

(22,983)

(27,823)

(33,915)

(36,989)

(40,207)

Short term borrowings

0

0

(262)

0

0

Long Term Liabilities

 

 

(2,449)

(5,793)

(4,905)

(4,905)

(4,905)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(2,449)

(5,793)

(4,905)

(4,905)

(4,905)

Net Assets

 

 

61,623

74,089

80,473

84,116

91,586

CASH FLOW

Operating Cash Flow

 

 

10,091

14,139

18,914

19,064

22,156

Net Interest

(233)

11

4

162

169

Tax

(730)

(2,365)

(2,487)

(4,854)

(4,995)

Capex

(5,754)

(6,076)

(7,661)

(7,000)

(7,000)

Acquisitions/disposals

(470)

(171)

0

0

0

Financing

454

16

175

0

0

Dividends

(773)

(1,028)

(1,470)

(2,202)

(2,465)

Net Cash Flow

2,585

4,526

7,475

5,170

7,865

Opening net debt/(cash)

 

 

(7,245)

(10,017)

(15,553)

(23,219)

(28,400)

HP finance leases initiated

0

0

0

0

0

Other

187

1,010

191

11

0

Closing net debt/(cash)

 

 

(10,017)

(15,553)

(23,219)

(28,400)

(36,265)

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by YouGov and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by YouGov and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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