YouGov’s FY16 results show the continuing benefits of its strategy to build on its Data Products and Services, delivering revenue and profit growth well in excess of the market. There was also some benefit from currency movements. The group’s transition from market researcher to global data and analytics business should drive continuing growth well ahead of industry rates, with the roll-out of scalable products and services internationally supporting margin and cash generation. The shares have performed strongly as this strategy has started to reap financial rewards, with the current price well supported.
FY16 figures were ahead of our estimates, with 16% growth at the top line (12% at constant currency). Data Products and Services continue to build strongly, growing revenues by 32%, with the operational gearing from the increasing proportion of productised offer driving an improvement in group operating margin from 11.3% to 12.4%. Foreign exchange conversion gains boosted net finance income, offset at the EPS level by a higher tax charge due to the strong growth in US earnings. Our FY17 forecasts move ahead by 14% at the EBITDA level; +17% in EPS. Our new FY18 estimates show further strong progress as BrandIndex, Profiles and Omnibus build their global client base. The group typically has 100%+ cash conversion, with the FY16 figure of 130% leading to an increase in year-end net cash to £15.6m and allowing for a 40% step up in the recommended dividend to 1.4p.
YouGov now has offices in 21 countries and is increasingly working with its clients across multiple territories. It is harnessing the data drawn from its five million panellists in a very different way from traditional market research (MR) methodologies, by collecting a wide range of data points and connecting it together in its multivariate database (known as the "Cube"). This will increasingly enable it to answer many of its clients' data requests from its existing database without needing to conduct additional bespoke surveys.
The share price has near-doubled in a little over 12 months as the market has seen that the group’s clear and consistent strategy is translating into profits and, at least as importantly, into cash. With much of the traditional MR sector still struggling with legacy infrastructures, it is unsurprising that YouGov’s rating is towards the top of the ranking of global peers, reflecting its much higher CAGR in earnings and progressive dividend stream.