people-692005

Revenue momentum remains strong

YouGov 13 October 2022 Update
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YouGov

Revenue momentum remains strong

Full year results

Media

13 October 2022

Price

795p

Market cap

£886m

Net cash (£m) at 31 July 2022

37.4

Shares in issue

111.5m

Free float

89.4%

Code

YOU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(17.2)

(11.5)

(31.5)

Rel (local)

(8.4)

(5.5)

(25.1)

52-week high/low

1,600p

790p

Business description

YouGov is an international online research data and analytics group. Its data-led offering supports and improves a wide spectrum of marketing activities of a customer base including media owners, brands and media agencies. It works with some of the world’s most recognised brands.

Next events

AGM

8 December 2022

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

YouGov is a research client of Edison Investment Research Limited

YouGov’s FY22 results (July year-end) show 20% underlying revenue growth, boosted to 31% by currency. Progress was good in all three segments, with a particularly encouraging performance in Custom Research, which is increasingly about connected data rather than one-off projects. FY23 is the last year of YouGov’s FYP3 strategic plan, with some elements of the ambitious built-in targets easier to achieve than others. A new FY24–26 plan is being drawn up, overseen by CEO Stephan Shakespeare, who transitions to the role of chair at end FY23. The share price performance has been affected by the market rotation out of high growth tech stocks.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

EV/EBITDA (x)

P/E
(x)

07/21

169.0

31.1

21.1

6.0

17.4

37.7

07/22

221.1

34.6

23.2

7.0

13.0

34.3

07/23e

255.0

51.4

33.0

10.0

10.9

24.1

07/24e

290.0

60.0

38.9

11.0

9.7

20.5

Note: *PBT and EPS are normalised and diluted, excluding amortisation of acquired intangibles and exceptional items.

All segments ahead

Data Products (34% FY22 revenues) contributed nearly half of group adjusted operating profits pre-central costs, with a further uplift in margin from 33% to 36%, on revenues ahead by 23% underlying. This includes a build-up in multi-year subscription products, which improve earnings’ visibility, with around one-third of targeted FY23 group earnings already secured. Data Services (FY22: 23%) had a better H222 after a more difficult start to the year, boosted by a good performance in Asia-Pacific, although operating margins here were affected by additional spend on panel and technology. Custom Research posted underlying revenue gains of 21%, with the inclusion of LINK (bought in December 2021 for £22m cash) lifting revenue by 46%. The shift from labour-intensive, large one-off projects to ongoing multi-territory tracking studies based on the connected data supplied by panellists underpins the increase in segmental adjusted operating margin from 21% to 22%.

Succession planning and new incentive plan

Roger Parry joined YouGov as non-executive chair in 2007 and retires at the end of this financial year. The new chair is to be Shakespeare, co-founder and CEO, which should lead to continuity of strategy into the next management plan, SP3. This runs from FY24–26, with details likely to be finalised by the planned capital markets day (CMD) in Spring 2023, at which point a new CEO should have been identified and who should start in the role in August. A further non-executive is also being sought.

Valuation: High growth out of fashion

YouGov’s share price has fallen 50% over the year to date, while its global peer set’s share prices have declined 34% as the market’s appetite for high growth and tech stocks has evaporated. The confirmation that Shakespeare has no intention of selling his 7.9% shareholding, despite his upcoming move to take the chair, should provide comfort that there is no associated overhang.

Revenue and adjusted operating profit in line

The group revenue and adjusted operating profit for the year to end-July are broadly in line with expectations. We were forecasting group revenue of £215m and an adjusted operating profit of £36.5m, so slightly more cautious on revenue and slightly overestimating the margin, due to assumptions about the mix of business.

Exhibit 1: Summary segmental performance

FY22 Revenue (£m)

u/l growth

Adj Op Profit
(£m)

Adj FY22 Op Margin

Adj FY21 Op Margin

Data Products

74.1

+23%

27.0

36%

33%

Data Services

50.7

+11%

7.7

15%

19%

Custom Research

95.6

+21%

21.0

22%

21%

Intra-group & central revenues/central costs

0.7

(19.4)

Group Total

221.1

+20%

36.3

16%

15%

Source: YouGov

The Custom Research business did particularly well in H222 as the LINK business settled in, but also as it gained ground in the core US market where the ability to connect data and re-target panellists proved a strong selling point with new clients across the technology and gaming sectors.

It is also worth highlighting the improving quality of earnings in the Data Products segment, where multi-year subscription deals are increasing in the mix.

Further down the income statement, there is greater divergence from our, and market, estimates. The group generates considerable amounts of cash in the US (Americas accounts for 43% of group revenue and 57% of adjusted operating profit) and utilises intercompany loans, particularly between the US and the UK, from where panel acquisition and capex are mostly funded. The combination of an accelerated payback of the revolving credit facility (£20.0m drawn down in H122 and paid back in H222) and rapidly moving forex led to a net finance charge of £4.6m, despite the abundance of cash on the balance sheet.

Continued investment in technology and panel

Adjusted EBITDA converted to cash at 113% in the year, boosted by a working capital inflow of £6.6m. £8.0m was spent on panel acquisition in FY22, down from a high figure of £10.5m in FY21 when the group was seeking to scale up in new territories. This earlier expansion in Europe and Latin America has paid off, with the group winning several new substantial custom brand tracking clients that wanted to be consistent in their approach across territories. The panel now numbers 22m registered members globally, up 27% on the prior year.

Spend of software development was also down on the prior year, at £8.0m from £9.4m, with the bulk spent on continued improvements to the group’s own technology platform.

This includes the building out of the YouGov Platform (launched today), which now offers a public-facing dashboard that should democratise the ability to conduct (standardised) self-service research and data analytics of high quality, due to the immediacy of the panel and the extent of the data available from it. The aim is to make it as frictionless as possible and widen the pool of clients without the need for resource-hungry marketing drives.

Healthy cash balance to fund continued investment and pursue select bolt-on acquisitions

Net cash at the year-end was £37.4m (no bank debt, lease liabilities only), post capex of £17.5m and spend of £25.4m in FY22 on the acquisitions of LINK Marketing in Switzerland and Rezonence, which boosts the group’s ability to collect large amounts of data through publisher partnerships. M&A priorities include:

building YouGov’s exposure to the healthcare sector (though not in the pharmaceutical/clinical trial arena, rather, more to build on the type of work carried out during the height of the COVID-19 pandemic on individual behaviour for the World Health Organization);

accelerating the pace of growth in the US; and

adding technology and people with applicable skillsets.

Our modelling indicates that, without further acquisitions, net cash would build to £62.3m. Dividend payout is around 30% of post-tax income.

Outlook remains positive but circumspect

The momentum remains positive, with plenty of new initiatives and iterative improvements on existing elements in the offering. That said, the economic mood has obviously darkened and there is significant upward pressure on operating costs through labour cost inflation, with data specialists, in particular, in short supply. To some extent this is mitigated by the investment that the group has made in its CenX (centres of excellence), the latest of which is opening in Mexico, with the ability to meet servicing requirements in multiple time zones and multiple languages.

Management confirms that the current year has started well and that it expects to meet current market expectations for FY23 and our revenue and adjusted operating profit forecasts are unchanged, as they are for FY24e.

The targets for FYP2, which runs from FY19–23, are to:

double group revenue;

double group adjusted operating profit margin; and

achieve an adjusted EPS CAGR of over 30%.

Of these targets, the one that will be hardest to achieve is that for adjusted operating margin, particularly given current cost pressures.

Rather than meet a cliff edge at the end of this period, a new strategic plan (SP3) is being drawn up, which will cover FY24–26 and which, like FYP2, will have an associated long-term incentive plan to incentivise senior management.

More detail on this will be set out at the proposed CMD in the Spring, but with these results, management has outlined an overarching plan whereby standardised and scalable client interaction will be conducted via the YouGov Platform on what will effectively be a ‘hands free’ basis. This will operate alongside a custom research practice, which will handle more complex assignments. This would mean that the group could scale more effectively – and more quickly – while driving margins further. In the CEO’s words, ‘We’re not even halfway there yet.’

Retreat from highest premium rating

With the asset rotation away from tech and high growth stocks, particularly those that had previously performed very strongly, YouGov’s share price has fallen away steeply over the year to date, declining 50%. Peer share prices have retreated on average by 30%, but this figure is moderated by the Nielsen share price as it is taken back into private equity ownership at $28. Excluding Nielsen, the average fall is 38%.

It is now no longer rated right at the top of the range of peers, being closer to the average rating of this global group.

Exhibit 2: Peer price metrics

ytd performance (%)

Price - reporting currency

Quoted
Ccy

Market cap
(m)

EV/
Sales 1FY (x)

EV/
EBITDA last (x)

EV/
EBITDA 1FY (x)

EV/
EBITDA 2FY (x)

EV/
EBITDA 3FY (x)

P/E last (x)

P/E
1FY
(x)

P/E
2FY
(x)

P/E 3FY (x)

Div yield last (%)

EBITDA margin last
(%)

NEXT FIFTEEN

(41)

820

GBp

782

1.5

12.3

6.4

5.5

5.3

12.8

10.4

8.8

8.1

1.0

19.8

COMSCORE

(58)

1.47

USD

134

0.8

34.5

8.9

6.5

5.1

0.0

3.9

IPSOS

13

47.10

EUR

2,080

1.0

6.4

6.3

6.0

5.5

10.2

9.9

9.3

8.5

2.8

15.6

QUALTRICS

(72)

10.49

USD

6,150

3.8

61.3

37.0

23.4

560.8

81.6

0.0

FORRESTER

(35)

37.91

USD

719

1.2

16.7

8.7

7.4

45.8

16.4

14.2

0.0

12.9

GARTNER

(13)

294.40

USD

22,930

4.7

25.8

19.9

19.8

17.9

36.3

32.1

31.6

27.8

0.0

24.0

NIELSEN

36

27.96

USD

10,070

4.3

8.6

9.9

9.5

9.0

13.4

14.8

14.1

13.0

1.2

42.9

GLOBALDATA

(27)

1,035

GBp

1,220

6.9

24.4

17.6

14.9

13.2

70.4

26.5

22.5

19.5

2.0

34.0

WPP

(32)

751

GBp

8,240

1.1

8.5

6.6

6.5

6.1

21.3

8.0

7.4

6.8

2.8

15.1

S4 CAPITAL

(74)

168

GBp

934

1.1

36.5

9.3

6.8

5.2

14.9

13.8

10.4

8.0

0.0

14.3

Median

(34)

1.4

16.7

9.1

7.1

6.1

18.1

14.3

14.1

10.7

0.5

15.6

Average

(30)

2.6

19.3

15.5

12.0

10.1

28.1

16.5

75.5

21.7

1.0

20.3

YOUGOV

(49)

825

GBp

905

3.7

18.0

13.4

11.3

10.0

38.8

35.4

24.9

21.1

0.7

27.2

Source: Refinitiv. Note: Prices at 10 October 2022.

Exhibit 3: Financial summary

£'000s

2020

2021

2022

2023e

2024e

Year end 31 July

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

152,441

169,000

221,100

255,000

290,000

Cost of Sales

(23,375)

(26,200)

(33,700)

(39,796)

(45,190)

Gross Profit

129,067

142,800

187,400

215,204

244,810

EBITDA

 

 

39,215

45,900

61,600

73,200

82,400

Operating Profit (before amort. and excepts.)

 

 

21,830

26,100

36,400

48,500

57,100

Intangible Amortisation

(12,885)

(15,300)

(20,400)

(20,000)

(20,000)

Share based payments

(2,900)

(5,100)

(2,900)

(3,000)

(3,000)

Exceptionals

(6,630)

(6,500)

(6,300)

(2,500)

(2,500)

Other

0

0

0

0

0

Operating Profit

15,200

19,600

30,100

46,000

54,600

Net Interest

7

(100)

(4,700)

(125)

(125)

Profit Before Tax (norm)

 

 

24,737

31,100

34,600

51,375

59,975

Profit Before Tax (IFRS16)

 

 

15,207

19,500

25,400

45,875

54,475

Tax

(5,812)

(6,400)

(7,800)

(12,845)

(15,253)

Profit After Tax (norm)

18,925

24,700

26,800

38,530

44,722

Profit After Tax (IFRS16)

9,395

12,500

17,500

33,030

39,222

Average Number of Shares Outstanding (m)

106.7

109.7

109.9

111.5

111.5

EPS - normalised (p)

 

 

15.7

21.1

23.2

33.0

38.8

EPS - IFRS 16 (p)

 

 

9.0

11.5

15.7

29.6

35.2

Dividend per share (p)

5.0

6.0

7.0

10.0

11.0

Gross Margin (%)

84.7

84.5

84.8

84.4

84.4

EBITDA Margin (%)

25.7

27.2

27.9

28.7

28.4

Operating Margin (before GW and except) (%)

14.3

15.4

16.5

19.0

19.7

BALANCE SHEET

Fixed Assets

 

 

108,122

116,091

145,200

152,900

155,167

Intangible Assets

84,611

89,611

118,355

125,755

127,755

Tangible Assets

23,511

26,413

26,791

27,091

27,358

Investments

0

67

54

54

54

Current Assets

 

 

70,255

82,409

95,200

126,251

167,148

Stocks

0

0

0

0

0

Debtors

34,239

40,700

53,700

59,861

68,872

Cash

35,309

35,509

37,400

62,290

94,175

Current Liabilities

 

 

(52,813)

(67,200)

(90,500)

(94,642)

(105,216)

Creditors

(52,813)

(67,200)

(90,500)

(94,642)

(105,216)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(16,226)

(19,300)

(24,900)

(24,900)

(24,900)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(16,226)

(19,300)

(24,900)

(24,900)

(24,900)

Net Assets

 

 

109,338

112,000

125,000

159,609

192,198

CASH FLOW

Operating Cash Flow

 

 

38,411

45,100

68,800

77,226

84,910

Net Interest

(7)

(500)

(900)

125

125

Tax

(3,184)

(7,100)

(6,900)

(12,845)

(15,253)

Capex

(18,559)

(21,100)

(17,500)

(23,300)

(24,500)

Acquisitions/disposals

(7,451)

(2,800)

(25,400)

(6,100)

0

Financing

(4,739)

(2,200)

(9,900)

(2,000)

(2,000)

Dividends

(4,298)

(5,500)

(6,679)

(7,802)

(11,146)

Net Cash Flow

173

5,900

1,521

25,304

32,136

Opening net debt/(cash)

 

 

(37,925)

(35,309)

(35,509)

(37,400)

(62,290)

HP finance leases initiated

0

0

0

0

0

Other

(2,789)

(5,900)

370

(415)

(250)

Closing net debt/(cash)

 

 

(35,309)

(35,309)

(37,400)

(62,290)

(94,175)

Source: Company accounts, Edison Investment Research


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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 £60,000 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.

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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 £60,000 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.

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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.

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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.

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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

1185 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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