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YouGov benefits from strategic clarity

The data analytics group booked record half-year sales
YouGov benefits from strategic clarity
  • In the last stages of the strategic development plan
  • Underlying margins heading in the right direction

There’s data and, then again, there’s data. In the information age, it’s no longer adequate to simply supply reams of information to clients – it’s about value-add. When we assessed YouGov’s (YOU) full-year figures in October we noted that “a customised approach to selling goods and services has become the default option”. That’s apparent again in the data analytics group’s half-year release, perhaps more so given the 39 per cent revenue increase in the group’s custom research segment. That fed into a one-third increase in the group’s adjusted operating profit to £14m, with a 50 basis point increase in the underlying margin. 

Of even greater significance for investors is the theoretical prospect of earnings growth outstripping any increase in sales going forward. YouGov is in the last year of its current strategic growth plan. Among other things, management is targeting an adjusted EPS compound annual growth rate of more than 30 per cent. That’s ambitious for an established player in an established industry.

To meet the strategic objectives on sales and earnings, the company has made sizeable, front-ended investments in the group’s platforms, technologies and support functions in the earlier stages of the growth plan. These are essentially sunk costs, perhaps analogous to those undertaken by a public utility, where proportional costs decrease relative to sales growth, generating increased earnings in the process. We may have to wait a while longer to see if this dynamic plays out, but the early signs are favourable, and it is already apparent that the group’s data products are scalable in nature.

That last point on scalability is doubly significant given that YouGov now boasts “one of the world's largest research networks”. Its European presence has been bolstered through the acquisition of LINK Marketing Services, a Switzerland-based market and social research agency. Management stressed that bolt-on acquisitions are now the preferred option, as opposed to big M&A deals that might necessitate any changes to existing platform models.

In a sense, the business model is moving increasingly in line with that of a consultancy, in that YouGov increasingly provides insights into how its clients should go about deriving maximum benefit from its data products. Looking ahead, focus should centre on the relationship between sales growth and underlying earnings. Consensus forecasts compiled by FactSet suggest that the strategic goals are achievable, as adjusted earnings growth is forecast at over a quarter between the 2023 and 2024 financial years, ahead of sales growth of 18 per cent in the same period. Buy.

Last IC View: Buy, 1,315p, 19 Oct 2021

YOUGOV (YOU)    
ORD PRICE:1,180pMARKET VALUE:£1.31bn
TOUCH:1,160-1,190p12-MONTH HIGH:1,600pLOW: 950p
DIVIDEND YIELD:0.5%PE RATIO:103
NET ASSET VALUE:104p*NET CASH:£6.6mn
Half-year to 31 JanTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
202179.07.804.80nil
20221019.205.70nil
% change+28+18+19-
Ex-div:-   
Payment:-   
*Includes intangible assets of £117m, or 105p a share.