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YouGov reaps rewards of five-year strategy

The planned portfolio shift has widened margins and boosted demand for the group’s data services
October 9, 2018

YouGov’s (YOU) subscription data strategy has been an enormous success. Since initiating its ‘five-year’ plan on 1 August 2014, adjusted pre-tax profits have risen at a compound annual rate of 32 per cent, while its share price is up three-fold. The big question now is whether that growth can be maintained.

IC TIP: Hold at 466p

Considering margin expansion from the shift in operations has been a key driver of the profit growth, sustained momentum looks like a tough ask. Management doesn’t plan to enhance the data products and services division (where margins are 33 per cent, compared to 24 per cent in the custom research business) any further as the portfolio is now “well balanced”.

What’s more, the group has been a trailblazer for responsible, trustworthy data collection at a time when other online media organisations are wallowing in the wake of multiple scandals. By pioneering a new model for data collection and analysis, YouGov has been peerless and consistently outpaced market growth, but there could come a time in the future when media giants such as Facebook and Google become more credible competitors.

Chief executive Stephan Shakespeare thinks the US is the key to future growth. In the year to July 2018, the division reported a 78 per cent increase in operating profits at constant currency to £16.6m. The US is both the largest and fastest growing established market in YouGov’s portfolio but Mr Shakespeare thinks “penetration has still got a long way to go”.

He is also confident that the group’s model of paying ‘panellists’ to contribute their data via safe online platforms will ensure it remains the market leader. The group is in the process of launching a new platform ‘YouGov Direct’ which will give panellists greater control over where their data is used to help attract new contributors. That is good news because reliable data donors are key to the group’s value, which may explain why intangibles are 45 per cent of the group’s total assets.

Broker Numis is confident about further growth and increased its pre-tax profit and EPS forecasts for the year to July 2019 to £26.8m and 17.8p respectively (2018: £23.3m and 15.6p).

YOUGOV (YOU)   
ORD PRICE:466pMARKET VALUE:£ 492m
TOUCH:457-475p12-MONTH HIGH / LOW:510p297p
DIVIDEND YIELD:0.6%PE RATIO:61
NET ASSET VALUE:87p*NET CASH£30.6m
Year to 31 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201467.40.70.40.8
201576.12.73.21.0
201688.25.53.31.4
20171077.94.42.0
201811711.87.73.0
% change+9+49+75+50
Ex-div:06 Dec   
Payment:17 Dec   
*Includes intangible assets of £65.4m, or 62p a share