YouGov — Update 22 March 2016

YouGov (AIM: YOU)

Last close As at 16/04/2024

902.00

−34.00 (−3.63%)

Market capitalisation

990m

More on this equity

Research: TMT

YouGov — Update 22 March 2016

YouGov

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

YouGov

Premium growth story

Interim results

Media

22 March 2016

Price

133p

Market cap

£139m

Net cash (£m) at 31 January 2016

10.1

Shares in issue

104.2m

Free float

83%

Code

YOU

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.8)

(8.6)

7.7

Rel (local)

(4.6)

(10.1)

20.1

52-week high/low

154.0p

102.8p

Business description

YouGov is an international, full service online market research agency offering custom research, omnibus, field and tab services, qualitative research, syndicated products and market intelligence reports.

Next events

Pre-close update

August 2016

Prelims

10 October 2016

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

Half-year results show more strong progress in data products and services, driving group revenue growth well above market levels. Between them, key brands BrandIndex and Omnibus should account for over one-third of FY16 revenues. The US and UK markets provide the model for operations in other regions for penetrating these key products and for growing profitable custom business. The group has the cash resource to continue to invest in its offer and in delivering it efficiently, underpinning projections for continuing premium growth, readily justifying the valuation.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

07/14

67.4

7.6

5.8

0.8

22.9

0.6

07/15

76.1

9.1

6.7

1.0

19.9

0.8

07/16e

83.5

10.7

7.6

1.2

17.6

0.9

07/17e

91.8

12.1

8.4

1.4

15.8

1.1

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

BrandIndex and Omnibus continue to lead the way

YouGov’s concentration on building its value-adding syndicated products and services is meshing well with its clients’ requirements for in-depth information on their own customers and markets. BrandIndex and Omnibus are powering ahead, growing revenues 45% and 28% respectively, with the US and UK markets still fertile territory. Profiles is starting to gain meaningful traction with media planners, in line with expectations. The heavier investment phase in Profiles is working through and margin in Data Products picked up from 19% to 24%. Data services’ margin was dampened by investment in France. Custom research is also growing above market levels, with the margin notching up as a greater standardisation is built in. In Germany, the balance of business is more heavily skewed to Custom Research for historical reasons, and this has been a more difficult market. Germany is now to be run with the Nordic businesses under a regional CEO.

Reversion to normal cash conversion

Our adjusted profits and earnings forecasts are unchanged. Although implied H2 growth rates are more subdued, there is some phasing effect and the stronger US dollar has boosted revenue. H116 cash conversion reverted to more normal levels than a year ago at 90%, with working capital not suffering from the spike it faced in H115. £2.6m investment in H116 was a little under H115 and the group ended January with £10.1m net cash. Our model shows year-end net cash of £12.3m.

Valuation: Price reflects premium growth

The share price has drifted back from the highs it reached in November 2015. The quoted US-based peers are the most highly rated of the international cohort; YouGov lies at the median on 11.5x calendar 2016 EV/EBITDA, with the European players more lowly rated. The market is looking for revenue growth from the quoted sector of 5.1% in CY16 followed by 4.7% for CY17, but a further tick up in margins. YouGov is set to outstrip both indicators, justifying its comparative rating.

Data products and services gain share

Exhibit 1: H1 summary

H116

Revenue (£m)

Revenue growth
(%)

Operating profit
(£m)

Operating margin
(%)

BrandIndex

6.80

45%

Other Data Products

0.90

40%

Total Data Products

7.70

44%

1.9

24%

Omnibus

7.40

28%

Other Data Services

0.70

-13%

Total Data Services

8.10

22%

2.0

25%

Total Data Products & Services

15.8

32%

3.9

25%

Custom Research

25.7

6%

2.7

11%

Central costs

(2.3)

Group

41.5

15%

4.3

10%

Source: YouGov

Building the syndicated product suite

BrandIndex makes up the bulk of Data Products revenues; Omnibus makes up the majority of Data Services. The balance of Data Products is Profiles and in YouGov market intelligence Reports business. The latter is being rationalised into a smaller range of reports informed by YouGov Cube data (see Outlook report). BrandIndex continues to gain marketing communications clients and brand owners and advertisers. Since its launch in November 2014, Profiles has been growing strongly as it establishes its reputation and builds its subscription client base. It logged sales of £2m in the twelve months to 31 January 2016. New clients added in the period include JC Decaux and AutoTrader in the UK and Crossmedia in Germany. Selling Profiles in conjunction with BrandIndex is the obviously a key aim and this approach is meeting success in the US with some strong new client names on the roster, including Viacom and NASCAR.

Omnibus grows its footprint

Omnibus has been benefiting from the depth and breadth of the YouGov panel, which enables clients to obtain data from narrowly defined segments such as shoppers, small and medium-enterprises, car drivers and pet owners. The increased geographic roll-out is also enabling more multi-country projects for multi-national clients.

Key markets performing strongly

On a geographic basis, the largest markets of the UK and US grew their revenues by 17% and 14% respectively, with a big step up in UK operating margins from 14% to 22% as the investment phase moved through. The investment in rolling out Profiles in the US meant a small dip in operating margin in that territory from 23% to 21%. As mentioned above, the German operations had the most difficult experience, with demand for custom research poor, although revenues from BrandIndex climbed 47%. Business in the Middle East region ran positively, with revenues ahead 29% and an increased margin on the back of new client wins in UAE and Saudi, project work in Kurdistan and a developing business in Egypt. Asia Pacific is growing very fast, albeit off a small base.

Exhibit 2: Financial summary

£'000s

2014

2015

2016e

2017e

Year end 31 July

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

67,375

76,110

83,500

91,800

Cost of Sales

(15,812)

(17,472)

(18,788)

(20,196)

Gross Profit

51,564

58,638

64,713

71,604

EBITDA

 

 

8,020

9,273

10,646

11,826

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

7,936

9,239

10,843

12,223

Intangible Amortisation

(3,965)

(4,633)

(5,000)

(5,000)

Share based payments

(547)

(669)

(900)

(1,100)

Exceptionals

(2,385)

(1,072)

0

0

Other

(14)

41

0

0

Operating Profit

1,025

2,906

4,943

6,123

Net Interest

(292)

(220)

(143)

(123)

Profit Before Tax (norm)

 

 

7,630

9,060

10,700

12,100

Profit Before Tax (FRS 3)

 

 

733

2,686

4,800

6,000

Tax

(316)

580

(2,461)

(2,965)

Profit After Tax (norm)

7,314

9,640

8,239

9,136

Profit After Tax (FRS 3)

417

3,266

2,137

3,036

Average Number of Shares Outstanding (m)

98.0

101.0

103.9

104.2

EPS - normalised fully diluted (p)

 

 

5.8

6.7

7.6

8.4

EPS - FRS 3 (p)

 

 

0.4

3.2

2.0

2.9

Dividend per share (p)

0.8

1.0

1.2

1.4

Gross Margin (%)

76.5

77.0

77.5

78.0

EBITDA Margin (%)

11.9

12.2

12.8

12.9

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

11.0

11.3

11.9

12.1

BALANCE SHEET

Fixed Assets

 

 

52,259

53,726

54,294

54,294

Intangible Assets

46,650

46,145

46,000

46,000

Tangible Assets

5,609

7,377

8,039

8,039

Investments

0

204

255

255

Current Assets

 

 

29,873

33,329

37,774

42,455

Stocks

0

0

0

0

Debtors

21,687

22,507

24,692

27,418

Cash

7,429

10,017

12,325

14,483

Current Liabilities

 

 

(21,480)

(22,983)

(25,215)

(27,447)

Creditors

(21,296)

(22,983)

(25,215)

(27,447)

Short term borrowings

(184)

0

0

0

Long Term Liabilities

 

 

(2,700)

(2,449)

(3,000)

(3,000)

Long term borrowings

0

0

0

0

Other long term liabilities

(2,700)

(2,449)

(3,000)

(3,000)

Net Assets

 

 

57,952

61,623

63,854

66,302

CASH FLOW

Operating Cash Flow

 

 

8,600

10,091

10,700

12,000

Net Interest

(295)

(233)

(143)

(123)

Tax

(287)

(730)

(2,103)

(2,587)

Capex

(5,759)

(5,754)

(5,750)

(5,750)

Acquisitions/disposals

(1,003)

(470)

0

(36)

Financing

(101)

454

0

0

Dividends

(566)

(773)

(1,021)

(1,347)

Net Cash Flow

589

2,585

1,683

2,157

Opening net debt/(cash)

 

 

(6,656)

(7,245)

(10,017)

(12,325)

HP finance leases initiated

0

0

0

0

Other

0

187

625

0

Closing net debt/(cash)

 

 

(7,245)

(10,017)

(12,325)

(14,482)

Source: Company accounts, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 2016 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.
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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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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