YouGov — Moving up margins

YouGov (AIM: YOU)

Last close As at 01/03/2024

902.00

−34.00 (−3.63%)

Market capitalisation

990m

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Research: TMT

YouGov — Moving up margins

YouGov’s FY17 year-end trading update confirms that positive trading momentum continued in the second half for Data Products and Services. Results should be ahead of our previous forecasts and well ahead of market growth. The results reflect the growth in high-margin products as well as margin improvements in custom research in addition to some currency benefit. We have moved our PBT numbers up by 5% for FY17e and 9% for FY18e. The shares continue to trade at a premium to the global sector, although that is being eroded by YouGov’s faster growth.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

YouGov

Moving up margins

Year-end trading update

Media

7 August 2017

Price

270.00p

Market cap

£284m

£1:$1.30

Net cash (£m) at end January 2017

15

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

(6.4)

(5.3)

42.1

Rel (local)

(8.6)

(8.3)

26.4

52-week high/low

293.5p

188.0p

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

Final results

6 November 2017

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’s FY17 year-end trading update confirms that positive trading momentum continued in the second half for Data Products and Services. Results should be ahead of our previous forecasts and well ahead of market growth. The results reflect the growth in high-margin products as well as margin improvements in custom research in addition to some currency benefit. We have moved our PBT numbers up by 5% for FY17e and 9% for FY18e. The shares continue to trade at a premium to the global sector, although that is being eroded by YouGov’s faster growth.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

07/15

76.1

9.1

6.7

1.0

40.3

0.4

07/16

88.2

13.3

8.5

1.4

31.8

0.5

07/17e

106.5

15.6

10.9

1.6

24.8

0.6

07/18e

115.0

18.3

12.4

1.8

21.8

0.7

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

Strategy continues to produce the returns

Management’s emphasis on building a scalable business through productising its offering is fuelling premium organic growth as it gains traction in its markets, notably in the US. BrandIndex and Profiles are building across more geographic markets as well as increasing client numbers and we anticipate this continuing through FY18e. Data Services (principally Omnibus) is also increasing its global reach, with UK growth more muted but still ahead of the market. Custom Research is being concentrated on its more profitable aspects, particularly using the group’s own panel, so that the top line is static (in constant currency terms) but the operating margin is moving ahead. The success of the MRP modelling of the seat-by-seat results of the UK general election is significant for its validation of the methodology rather than for any immediate financial impact. This has many potential applications, not only in marketing but also in broader planning contexts.

Margin progression

Our FY17e revenue number is edged up 3%; FY18e is broadly unchanged due to assumptions on Custom Research. The increased margin indicated here, though, helps lift our projections for PBT by 5% in FY17e and 9% in FY18e, with growth in EPS marginally lower due to the impact of the geographic mix on tax. The group operating margin (before exceptional/share-based payments) was 11.0% in FY14. By FY18e, we are anticipating that it will have expanded to 14.7%. We now expect FY17e year-end net cash of slightly over £22m from £15m at the half-year.

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.

Exhibit 1: Financial summary

£'000s

2014

2015

2016

2017e

2018e

Year end 31 July

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

67,375

76,110

88,202

106,500

115,000

Cost of Sales

(15,812)

(17,472)

(19,476)

(23,430)

(25,300)

Gross Profit

51,564

58,638

68,726

83,070

89,700

EBITDA

 

 

8,020

9,273

11,620

15,003

17,603

Operating Profit (before GW, except and share-based payments)

7,936

9,239

12,055

15,500

18,100

Intangible Amortisation

(3,965)

(4,633)

(5,478)

(5,000)

(5,000)

Share based payments

(547)

(669)

(1,138)

(1,200)

(1,200)

Exceptionals

(2,385)

(1,072)

(1,108)

0

0

Other

(14)

41

(4)

0

0

Operating Profit

1,025

2,906

4,327

9,300

11,900

Net Interest

(292)

(220)

1,199

106

170

Profit Before Tax (norm)

 

 

7,630

9,060

13,250

15,606

18,271

Profit Before Tax (FRS 3)

 

 

733

2,686

5,526

9,406

12,071

Tax

(316)

580

(2,111)

(3,824)

(4,842)

Profit After Tax (norm)

7,314

9,640

11,139

11,783

13,429

Profit After Tax (FRS 3)

417

3,266

3,415

5,583

7,027

Average Number of Shares Outstanding (m)

98.0

101.0

103.9

104.6

104.7

EPS - normalised (p)

 

 

5.8

6.7

8.5

10.9

12.4

EPS - FRS 3 (p)

 

 

0.4

3.2

3.3

5.3

6.7

Dividend per share (p)

0.8

1.0

1.4

1.6

1.8

Gross Margin (%)

76.5

77.0

77.9

78.0

78.0

EBITDA Margin (%)

11.9

12.2

13.2

14.1

15.3

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

11.0

11.3

12.4

13.4

14.7

BALANCE SHEET

Fixed Assets

 

 

52,259

53,726

62,366

62,366

62,366

Intangible Assets

46,650

46,145

53,140

53,140

53,140

Tangible Assets

5,609

7,377

8,984

8,984

8,984

Investments

0

204

242

242

242

Current Assets

 

 

29,873

33,329

45,339

55,142

65,363

Stocks

0

0

0

0

0

Debtors

21,687

22,507

28,643

31,818

34,220

Cash

7,429

10,017

15,553

22,181

30,000

Current Liabilities

 

 

(21,480)

(22,983)

(27,823)

(33,926)

(36,779)

Creditors

(21,296)

(22,983)

(27,823)

(33,926)

(36,779)

Short term borrowings

(184)

0

0

0

0

Long Term Liabilities

 

 

(2,700)

(2,449)

(5,793)

(3,000)

(3,000)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(2,700)

(2,449)

(5,793)

(3,000)

(3,000)

Net Assets

 

 

57,952

61,623

74,089

80,582

87,950

CASH FLOW

Operating Cash Flow

 

 

8,600

10,091

14,139

17,850

19,216

Net Interest

(295)

(233)

11

106

170

Tax

(287)

(730)

(2,365)

(4,030)

(4,078)

Capex

(5,759)

(5,754)

(6,076)

(5,750)

(5,750)

Acquisitions/disposals

(1,003)

(470)

(171)

(36)

0

Financing

(101)

454

16

0

0

Dividends

(566)

(773)

(1,028)

(1,556)

(1,765)

Net Cash Flow

589

2,585

4,526

6,584

7,794

Opening net debt/(cash)

 

 

(6,656)

(7,245)

(10,017)

(15,553)

(22,181)

HP finance leases initiated

0

0

0

0

0

Other

0

187

1,010

44

25

Closing net debt/(cash)

 

 

(7,245)

(10,017)

(15,553)

(22,181)

(30,000)

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.

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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

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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