Delivery of strong FY18, good prospects FY19e
The salient points of the FY18 results are as follows:
■
A 9% increase in group revenues (12% at CC)
■
2% of revenue growth attributable to acquisitions
■
Adjusted operating profits up 35% (figures quoted here are after share-based payments)
■
Improved operating margins in all three segments and across all geographic segments
■
Asia-Pacific moved into operating profit, with strongest revenue growth ion group at 62%.
■
Near-doubling of Central costs reflects inclusion of £2.5m previously attributed to Custom Research and £1.8m of additional costs relating to the LTIP; ex-these, increase was 37%.
■
Investment in technology: £4.4m (of which £3.9m was software); Investment in panel: £2.8m; other capex on PPE £1.0m
■
New offices Spain, Italy, India
■
Dividend increased by 50% to 3.0p
Exhibit 1: Summary results by segment
|
H118 (£m) |
Gth |
h218 (£m) |
Gth |
FY18 (£m) |
Gth / prior year |
Constant currency gth (%) |
Revenue |
|
|
|
|
|
|
|
Data Products - Brand Index |
11.40 |
18% |
12.30 |
22% |
23.700 |
20% |
|
Data Products - Other |
2.98 |
129% |
3.76 |
25% |
6.746 |
56% |
|
Data Products - Total |
14.38 |
31% |
16.06 |
12% |
30.445 |
26% |
30% |
Data Services - Omnibus |
12.70 |
24% |
14.52 |
25% |
27.219 |
24% |
|
Data Services - Other |
0.74 |
1% |
1.00 |
51% |
1.737 |
24% |
|
Data Services – Total |
13.44 |
22% |
15.52 |
26% |
28.956 |
24% |
26% |
Custom Research |
29.135 |
-2% |
29.5 |
-3% |
58.657 |
-3% |
0% |
Eliminations |
-0.64 |
134% |
-0.859 |
|
-1.499 |
50% |
|
GROUP TOTAL |
56.96 |
|
61.10 |
|
116.560 |
9% |
12% |
Operating Profit |
|
|
|
|
|
|
|
Data Products - Total |
4.785 |
73% |
6.9 |
61% |
11.659 |
66% |
|
Data Services – Total |
3.511 |
41% |
4.5 |
39% |
8.002 |
40% |
|
Custom Research |
6.863 |
60% |
7.3 |
57% |
14.121 |
59% |
|
GROUP TOTAL |
15.16 |
59% |
18.62 |
54% |
33.782 |
56% |
|
Operating Margin |
|
|
|
|
|
|
|
Data Products - Total |
33.3% |
|
42.8% |
|
38.3% |
29.2%^ |
|
Data Services – Total |
26.1% |
|
28.9% |
|
27.6% |
24.6%^ |
|
Custom Research |
23.6% |
|
24.6% |
|
24% |
14.8%^** |
|
OPERATING MARGIN (pre-Central Costs) |
26.6% |
|
30.5% |
|
29.0% |
13.6%^** |
|
Central Costs |
-6.329 |
|
-7.779 |
|
-14.108 |
98%** |
|
Operating Profit |
|
8.830 |
|
10.84 |
|
19.674 |
35% |
GROUP OPERATING MARGIN |
15.5% |
|
17.7% |
|
16.9% |
13.6%^ |
|
Source: Company accounts Note: ^Prior year; ** change in allocation
The operating profit referred to here is as per the company’s definition, including share-based payments, and hence is a lower figure than that shown in our model excerpt in Exhibit 5, below.
Management believes that the current financial year has started well and it “remains confident of future growth potential”.
The statement contains detailed descriptions of the data products and services and the enhancements that are currently being assessed and launched. These all underline the group’s move further away from being a traditional project-led, consultancy-style business model of market research into a partner providing real-time data and analytics based on rich, connected data provided by the group’s in-house panel and sold on a subscription basis. The growth in the Data Products (BrandIndex, increasing coupled with Profiles, which accounts for the bulk of ‘other’ in the Data Products segment) and in Data Services (94% of which is Omnibus) clearly demonstrated this progress, which is reinforced by the change in the type of custom work being undertaken.
Exhibit 2: Adjustments to forecasts
|
EPS |
PBT |
EBITDA |
|
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
2018 |
14.3 |
15.6 |
+9 |
23.0 |
26.9 |
+17 |
22.3 |
24.6 |
+10 |
2019e |
15.8 |
17.2 |
+10 |
26.2 |
27.5 |
+5 |
25.5 |
26.5 |
+4 |
2020e |
- |
18.3 |
N/A |
- |
29.5 |
N/A |
- |
28.7 |
N/A |
Source: Company accounts, Edison
The FY18 figures were around 10% better than our previous forecasts, partly reflecting the small acquisitions that we had not built into the numbers, with a small additional benefit from currency, but mostly from good trading. The larger discrepancy in the adjusted PBT number shown in the table above is due to Edison’s policy on adding back the share-based payments to the adjusted figures. In this instance, the share-based payments were considerably higher than we had anticipated – double at £3.646m, reflecting the increased likelihood of a full payment – see below. Stripping these out, the difference between the FY18 adjusted PBT and our prior forecast is also 10%.
We have adjusted our FY19e forecasts, lifting our EBITDA number by 4% (to give 8% year-on-year growth), which may prove to be conservative if the trading momentum continues at the current rate. Forecast EPS is lifted by a greater amount, as we have altered our anticipated blended tax rate down from 25% to 23% to reflect the lower corporation tax now prevalent in the US.
The LTIP put in place in 2014 was based on five-year CAGR in earnings per share, with full payout requiring 25% growth in adjusted EPS. Other targets, such as an average operating margin of over 12% (which would happen even if the group was only to breakeven at the operating profit level in FY19e), and the trebling of share price needed to trigger a further payment to the CEO if the other targets are met in full, look very likely to have been achieved. 25% CAGR in EPS would be FY19e EPS of 17.9p on our basis, against our current forecast of 17.2p.
The new scheme that is being drawn up currently will overlap with the 2014 scheme for one year in order not to drive any short-termism that might be engendered by this target.
