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Research: TMT
YouGov’s H122 results show impressive underlying revenue growth of 25%, led by strong progress in Data Products and Custom Research, with the United States and Europe the best-performing regions. Sales momentum has continued in H222 and FY22 results are expected to be slightly ahead of earlier guidance. We increase our revenue forecasts by £5m for FY22 and FY23, keeping our operating margin assumptions unchanged (raise in gross margin offset by higher costs). As with other high-growth stocks, the share price has retrenched over the year to date but the shares retain their premium rating, reflecting management’s ambitious growth aspirations.
YouGov |
Sustained momentum |
Interim results |
Media |
22 March 2022 |
Share price performance
Business description
Next events
Analyst
YouGovYouGov is a research client of Edison Investment Research Limited |
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YouGov’s H122 results show impressive underlying revenue growth of 25%, led by strong progress in Data Products and Custom Research, with the United States and Europe the best-performing regions. Sales momentum has continued in H222 and FY22 results are expected to be slightly ahead of earlier guidance. We increase our revenue forecasts by £5m for FY22 and FY23, keeping our operating margin assumptions unchanged (raise in gross margin offset by higher costs). As with other high-growth stocks, the share price has retrenched over the year to date but the shares retain their premium rating, reflecting management’s ambitious growth aspirations.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
EV/EBITDA |
P/E |
07/20 |
152.4 |
24.7 |
15.7 |
5.0 |
30.2 |
72.7 |
07/21 |
169.0 |
30.5 |
17.6 |
6.0 |
26.8 |
64.6 |
07/22e |
215.0 |
41.4 |
24.6 |
7.5 |
21.5 |
46.4 |
07/23e |
255.0 |
53.4 |
32.7 |
10.0 |
17.6 |
34.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Data Products and Custom Research leading
Underlying group revenues were up 25% with Data Products (34% group H122 revenues) up by 32% and Custom Research (42%) up by 28%, boosted to a gain of 39% including acquisitions. Data Services posted (still good) underlying growth of 9%, as government and non-profit spend settled as COVID-19 pandemic concerns eased. Operating margins progressed for both Data Services (17% to 18%) and Custom Research (16% up to 19%), off slightly for Data Products from 33% in H121 to 32%. Some underlying cost pressure, partly from scaling up, partly from inflation, shows more clearly in the geographic operating margin breakdown where the UK figure dipped from 30% to 26%, while the benefits of scale boosted the US margin from 29% up to 35% as revenues grew 36% underlying, now representing 46% of group.
Elements to lift margins coming into place
The increasing utilisation of the global Centres of Excellence and standardisation of both the offering and the delivery should help continue to boost operating margin, which is one of the three targets set by management under FYP2, its long-term growth plan which runs through to end FY23. This comprises ambitious targets of doubling revenue and group operating margin over the period FY19–23e. Meeting this in full would equate to revenues of £273m and an adjusted operating margin of 27.0%. An EPS CAGR target of 30% over the same period (the metric for vesting on management’s LTIPs) would take EPS to 39.4p on our basis of adjustment.
Valuation: Reflects growth and prospects
In common with other high-growth stocks, the share price has retrenched sharply over recent weeks, falling 29% 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 we believe reflects its good growth record and prospects and financial strengths.
Progress on revenue, margin and cash conversion
The revenue growth appears to be broadly based, with new business wins and growth in the volume of business transacted with existing clients.
Exhibit 1: H122 performance by segment
£m |
Rev H122 |
Underlying rev gth |
Adj Op margin H122 |
Adj Op margin H121 |
Data Products |
34.8 |
+32% |
32% |
33% |
Data Services |
23.7 |
+9% |
18% |
17% |
Custom Research |
42.0 |
+28% |
19% |
16% |
Central costs |
0.7 |
u/c |
- |
- |
Group |
101.2 |
+25% |
14% |
13% |
Source: Company
The figures include some contribution from acquisitions, particularly LINK, which is included in the Custom Research segment. Working backwards from the difference between revenue growth and underlying revenue growth for Custom Research and from mainland Europe (LINK is based in Switzerland) suggests a contribution of £2.8–3.5m from acquisitions.
Geographic highlights are the strong US performance particularly notable in both Data Products and Custom Research, boosted by strong spend from clients in the technology sector. Mainland Europe, where the group has previously struggled to get the business into shape, now looks to be building a robust and coherent business offering.
The management of operating margin is centred on expanding the YouGov Platform, now in its second phase, which we believe should facilitate standardisation across geographies and the bolstering of the various Centres of Expertise, termed CenX, to drive efficiency in delivery of client projects.
Overall group adjusted operating profit of £14.0m is up 33% (36% underlying) from H121. Adjusted EPS were up 11%. These results were achieved despite a currency headwind, with a(n unrealised) foreign exchange loss on intercompany loans of £1.4m.
Exhibit 2: H122 performance by geography
£m |
Rev H122 |
Underlying rev gth |
Adj Op margin H122 |
Adj Op margin H121 |
UK |
26.7 |
+10% |
26% |
30% |
Americas |
46.1 |
+36% |
35% |
29% |
Mainland Europe |
20.0 |
+23% |
13% |
13% |
Middle East |
2.8 |
+25% |
18% |
(5%) |
Asia Pacific |
9.3 |
+26% |
6% |
1% |
Central items |
(3.7) |
+30% |
- |
- |
Group |
101.2 |
+25% |
14% |
13% |
Source: Company
Cash resource in place to fund growth plans
At the end of 2021, YouGov took on a new three-year revolving credit facility, with an option to extend for two years and an initial draw down of £20m. The period end net cash figure of £20.1m is after the payments for LINK of £21.7m in cash, which represented 1.1x FY20 revenue and 13.2x adjusted PBT and for Rezonance of £4.1m, which are helping scale up automated data collection. The reorganisation of the group sales and account management function is now broadly completed.
Cash conversion was very strong in the first half at 120%, so the group still has plenty of resource to continue investing in its panel, technology and platform, which we believe will drive both the top-line growth and the intended margin expansion. We now expect a year-end cash figure of £24.5m (was £23.7m).
Exhibit 3: 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 |
215,000 |
255,000 |
Cost of Sales |
(24,206) |
(23,375) |
(26,200) |
(34,400) |
(44,304) |
||
Gross Profit |
112,281 |
129,067 |
142,800 |
180,600 |
210,696 |
||
EBITDA |
|
|
31,698 |
39,215 |
45,900 |
58,100 |
71,100 |
Operating Profit (before amort. and excepts.) |
|
|
18,492 |
21,830 |
25,500 |
36,500 |
48,500 |
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) |
(3,600) |
(2,500) |
||
Other |
200 |
0 |
0 |
0 |
0 |
||
Operating Profit |
20,221 |
15,200 |
19,000 |
32,900 |
46,000 |
||
Net Interest |
(665) |
7 |
(100) |
(150) |
(125) |
||
Profit Before Tax (norm) |
|
|
20,428 |
24,737 |
30,500 |
41,350 |
53,375 |
Profit Before Tax (IFRS16) |
|
|
19,356 |
15,207 |
18,900 |
32,750 |
45,875 |
Tax |
(5,086) |
(5,812) |
(7,400) |
(9,644) |
(12,845) |
||
Profit After Tax (norm) |
15,342 |
18,925 |
23,100 |
31,706 |
40,530 |
||
Profit After Tax (IFRS16) |
14,270 |
9,395 |
11,500 |
23,106 |
33,030 |
||
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 |
24.6 |
32.7 |
EPS - IFRS 16 (p) |
|
|
14.1 |
9.0 |
10.5 |
20.8 |
29.7 |
Dividend per share (p) |
4.0 |
5.0 |
6.0 |
7.5 |
10.0 |
||
Gross Margin (%) |
82.3 |
84.7 |
84.5 |
84.0 |
82.6 |
||
EBITDA Margin (%) |
23.2 |
25.7 |
27.2 |
27.0 |
27.9 |
||
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 |
81,081 |
116,562 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
33,726 |
34,239 |
40,700 |
50,381 |
59,862 |
||
Cash |
37,925 |
35,309 |
35,509 |
24,500 |
50,500 |
||
Current Liabilities |
|
|
(51,395) |
(52,813) |
(67,200) |
(79,049) |
(90,556) |
Creditors |
(51,395) |
(52,813) |
(67,200) |
(79,049) |
(90,556) |
||
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 |
125,732 |
143,014 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
38,115 |
38,411 |
56,600 |
62,468 |
73,127 |
Net Interest |
183 |
(7) |
(300) |
150 |
125 |
||
Tax |
(4,520) |
(3,184) |
(7,100) |
(9,644) |
(12,845) |
||
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 |
(10,705) |
26,258 |
||
Opening net debt/(cash) |
|
|
(30,621) |
(37,925) |
(35,309) |
(35,509) |
(24,500) |
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) |
(24,500) |
(50,500) |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
TIE Kinetix is focused on 100% digitalisation of document streams in the supply chain. FY22 will be a transformative year as it is heavily investing in accelerating growth and improving margins in the next few years. While this will put short-term pressure on profitability, the company has set targets to accelerate organic growth in software-as-a-service (SaaS) revenues to more than 20% per year by FY25, with an EBITDA margin of up to 20%. Now fully focused on SaaS, recurring revenues are expected to increase from more than 80% to more than 90% over the next few years, further improving the predictability of its results.
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