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Research: TMT
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.
YouGov |
Gaining strength in US and UK |
Half-year trading update |
Media |
31 January 2020 |
Share price performance
Business description
Next events
Analysts
YouGov is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
EV/EBITDA (x) |
P/E |
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
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Research: Real Estate
A business update for the quarter ended 31 December 2019 (Q320) shows an increase in IFRS NAV per share to 107.55p. Including dividends paid the accounting total return was 1.53% (6.3% annualised). Rent indexation and portfolio acquisitions increased annualised rent roll and the run-rate of dividend cover increased further to 97%. We make no change to our forecast set out in our detailed post-interim results note.