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Research: TMT
YouGov’s trading update for H122 describes continuing good growth, notably in custom tracking and data products, indicating full-year results ‘slightly’ ahead of management expectations. Our revenue forecasts were at the low end of the range and, also adjusting for December’s acquisition of LINK, we lift our FY22e number by 14% while moderating our margin assumption from 17.9% to 17.0% to reflect additional investment to drive future growth. We expect a good uplift in revenue to £250m for FY23, with operating margin improving to 19.0%. The reorientation of the sales effort to focus on larger, strategic clients underpins management’s ambitious growth aspirations, reflected in the premium rating.
YouGov |
Custom tracking driving growth |
Half-year trading update |
Media |
28 January 2022 |
Share price performance
Business description
Next events
Analyst
YouGov is a research client of Edison Investment Research Limited |
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YouGov’s trading update for H122 describes continuing good growth, notably in custom tracking and data products, indicating full-year results ‘slightly’ ahead of management expectations. Our revenue forecasts were at the low end of the range and, also adjusting for December’s acquisition of LINK, we lift our FY22e number by 14% while moderating our margin assumption from 17.9% to 17.0% to reflect additional investment to drive future growth. We expect a good uplift in revenue to £250m for FY23, with operating margin improving to 19.0%. The reorientation of the sales effort to focus on larger, strategic clients underpins management’s ambitious growth aspirations, reflected in the premium rating.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
EV/EBITDA |
P/E |
07/20 |
152.4 |
24.7 |
15.7 |
5.0 |
32.3 |
78.5 |
07/21 |
169.0 |
30.5 |
17.6 |
6.0 |
28.6 |
69.7 |
07/22e |
210.0 |
40.6 |
24.0 |
7.5 |
23.3 |
51.2 |
07/23e |
250.0 |
52.5 |
32.1 |
10.0 |
19.0 |
38.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
New LINK in the chain
In December, YouGov acquired LINK Marketing Services, a Zurich-based market and social research agency, for £21.7m from cash funds (1.1x FY20 revenue and 13.2x adjusted PBT). This purchase steps up the group’s European offering, particularly in larger-scale, regional tracking, and brings in an additional Swiss panel of 113k people. Obviously, there is little contribution from LINK in H122 to end January, but our modelling assumes a revenue contribution of around £11m for FY22 and a full year in FY23. The trading update does not specify a cash figure (technically the period end is still a few days off), but the figure will obviously reflect the LINK payment. YouGov has taken on a new three-year revolving credit facility, with an option to extend for two years and an initial draw down of £20m, so still has plenty of resource to continue investing in its panel, technology and platform, which will drive both the top-line growth and the intended margin expansion.
Strong underlying H122 performance
The trading update indicates good underlying trading in H122, with the success of the custom tracking particularly highlighted by management. Year-on-year comparisons will be flattered by a duller performance in H121. Sales momentum is reportedly continuing to be strong into H222, benefiting from the shift in emphasis towards the larger, more strategic contracts both in the US and in mainland Europe.
Valuation: Premium maintained despite retrenchment
The share price has retrenched sharply over recent weeks, in common with other high-growth stocks, falling 23% year to date. Nevertheless, YouGov continues to trade at the high end of the (wide) range of ratings accorded to other global data-led research and analytics groups on both EV/EBITDA and P/E, which reflects its good growth record and prospects and financial strengths.
Changes to FY22 forecasts, new FY23 forecasts
We have revised our FY22 estimates based on the FY21 results published in October, the positive H122 trading update and the contribution from the acquisition of LINK.
We now expect revenues of £210m (up 14% versus our previous estimates), which is a 24% uplift on the prior year, delivering an adjusted operating margin of 17.0% and translating to adjusted EPS of 24.0p (+13%), compared to 17.6p for FY21.
We also introduce our expectations for FY23. Here we anticipate continuing strong momentum from the custom tracking activities, boosted by a full year of the LINK contribution. Forecast revenue of £250.0m represents an increase of 19% on FY22. We have modelled a further increase in adjusted operating margin, to 19.0%. The expansions would be significantly greater but for the additional spend on sales and account management, plus the ‘standard’ investment in tech, platform and panel recruitment, which are all needed to drive sustainable growth in the medium term.
The management incentive plan includes incentives based around ambitious targets of doubling revenue and group operating margin over the period FY19–23e. This would equate to revenues of £273m and an adjusted operating margin of 27.0%. An EPS CAGR target of 30% over the same period would take EPS to 39.4p on our basis of adjustment.
Exhibit 1: Financial summary
£'000s |
2019 |
2020 |
2021 |
2022e |
2023e |
||
Year end 31 July |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
136,487 |
152,441 |
169,000 |
210,000 |
250,000 |
Cost of Sales |
(24,206) |
(23,375) |
(26,200) |
(39,528) |
(52,865) |
||
Gross Profit |
112,281 |
129,067 |
142,800 |
170,472 |
197,135 |
||
EBITDA |
|
|
31,698 |
39,215 |
45,900 |
57,300 |
70,175 |
Operating Profit (before amort. and except.) |
|
|
18,492 |
21,830 |
25,500 |
35,700 |
47,575 |
Intangible Amortisation |
(8,809) |
(12,885) |
(15,300) |
(16,500) |
(17,500) |
||
Share based payments |
(2,401) |
(2,900) |
(5,100) |
(5,000) |
(5,000) |
||
Exceptionals |
1,529 |
(6,630) |
(6,500) |
(2,500) |
(2,500) |
||
Other |
200 |
0 |
0 |
0 |
0 |
||
Operating Profit |
20,221 |
15,200 |
19,000 |
33,200 |
45,075 |
||
Net Interest |
(665) |
7 |
(100) |
(150) |
(125) |
||
Profit Before Tax (norm) |
|
|
20,428 |
24,737 |
30,500 |
40,550 |
52,450 |
Profit Before Tax (IFRS16) |
|
|
19,356 |
15,207 |
18,900 |
33,050 |
44,950 |
Tax |
(5,086) |
(5,812) |
(7,400) |
(9,732) |
(12,586) |
||
Profit After Tax (norm) |
15,342 |
18,925 |
23,100 |
30,817 |
39,864 |
||
Profit After Tax (IFRS16) |
14,270 |
9,395 |
11,500 |
23,317 |
32,364 |
||
Average Number of Shares Outstanding (m) |
105.4 |
106.7 |
109.7 |
111.3 |
111.3 |
||
EPS - normalised (p) |
|
|
13.8 |
15.7 |
17.6 |
24.0 |
32.1 |
EPS - IFRS 16 (p) |
|
|
14.1 |
9.0 |
10.5 |
20.9 |
29.1 |
Dividend per share (p) |
4.0 |
5.0 |
6.0 |
7.5 |
10.0 |
||
Gross Margin (%) |
82.3 |
84.7 |
84.5 |
81.2 |
78.9 |
||
EBITDA Margin (%) |
23.2 |
25.7 |
27.2 |
27.3 |
28.1 |
||
Operating Margin (before GW and except) (%) |
13.5 |
14.3 |
15.1 |
17.0 |
19.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
108,534 |
108,122 |
113,491 |
140,400 |
133,709 |
Intangible Assets |
82,374 |
84,611 |
89,611 |
116,111 |
119,911 |
||
Tangible Assets |
26,160 |
23,511 |
23,813 |
24,222 |
13,731 |
||
Investments |
0 |
0 |
67 |
67 |
67 |
||
Current Assets |
|
|
72,581 |
70,255 |
82,409 |
78,754 |
113,569 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
33,726 |
34,239 |
40,700 |
48,904 |
58,219 |
||
Cash |
37,925 |
35,309 |
35,509 |
23,650 |
49,150 |
||
Current Liabilities |
|
|
(51,395) |
(52,813) |
(67,200) |
(77,611) |
(89,118) |
Creditors |
(51,395) |
(52,813) |
(67,200) |
(77,611) |
(89,118) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(22,277) |
(16,226) |
(16,700) |
(16,700) |
(16,700) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(22,277) |
(16,226) |
(16,700) |
(16,700) |
(16,700) |
||
Net Assets |
|
|
107,443 |
109,338 |
112,000 |
124,843 |
141,460 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
38,115 |
38,411 |
56,600 |
61,707 |
72,367 |
Net Interest |
183 |
(7) |
(300) |
150 |
125 |
||
Tax |
(4,520) |
(3,184) |
(7,100) |
(9,732) |
(12,586) |
||
Capex |
(12,166) |
(18,559) |
(23,800) |
(23,800) |
(23,800) |
||
Acquisitions/disposals |
(6,583) |
(7,451) |
(12,600) |
(31,200) |
0 |
||
Financing |
(3,652) |
(4,739) |
(2,200) |
(2,000) |
(2,000) |
||
Dividends |
(3,327) |
(4,298) |
(5,500) |
(6,679) |
(8,349) |
||
Net Cash Flow |
8,050 |
173 |
5,100 |
(11,555) |
25,757 |
||
Opening net debt/(cash) |
|
|
(30,621) |
(37,925) |
(35,309) |
(35,509) |
(23,650) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
(747) |
(2,789) |
(4,900) |
(304) |
(258) |
||
Closing net debt/(cash) |
|
|
(37,925) |
(35,309) |
(35,509) |
(23,650) |
(49,150) |
Source: Company accounts, Edison Investment Research
|
|
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