Full Year Results for the year ended 31 July 2019

 

 

8 October 2019

 

 

YouGov plc

 

Full Year Results for the year ended 31 July 2019

 

Strong growth in earnings, exceeded targets for five-year plan

 

Summary of Results
	Year to 31 July 2019 £m	Year to 31 July 2018 £m	% Change
Revenue	136.5	116.6	17%
Adjusted EBITDA1	28.6	20.9	37%
Adjusted Operating Profit2	18.3	12.7	45%
Adjusted Operating Profit Margin (%)2	13%	11%	2% pts
Adjusted Profit before Tax2	20.5	16.3	26%
Statutory Profit before Tax	19.5	11.8	65%
Adjusted Basic Earnings per Share2	14.9p	11.5p	30%
Statutory Operating Profit	19.8	11.8	69%
Statutory Basic Earnings per Share	14.2p	7.7p	84%

 

Financial Highlights

·      Revenue growth of 17% (2018: 9%) - Underlying business³ growth of 10%

·      Adjusted operating profit² up by 45% to £18.3m - 45% underlying business² growth

·      Statutory operating profit up 69% to £19.8m

·      Adjusted profit before tax² up by 26% to £20.5m

·      Adjusted earnings per share² up by 30% to 14.9p (2018: 11.5p) 

·      Adjusted operating profit margin² up 2 percentage points to 13%

·      Net cash balances of £37.9m (31 July 2018: £30.6m)

·      Recommended dividend increase of 33% to 4.0p per share, payable in December 2019 (2018: 3.0p per share)

 

Operational Highlights

·      Data Products & Services revenue up by 32% to £78.7m (18% from underlying business³); now representing 56% of total (2018: 50%)

o  Data Products: Revenue increased by 36% (25% from underlying business³) to £41.5m. Adjusted operating profit up by 50% to £14.1m.

o  Data Services: Revenue increased by 28% (11% from underlying business³) to £37.2m. Adjusted operating profit up by 21% to £7.4m.

·      Custom Research revenue increased by 2% to £60.0m; continued strategic focus on higher margin work resulting in a 10% increase in adjusted operating profit to £12.9m

·      Strong performance from the UK and US: UK revenue grew by 31% (18% underlying) and US revenue grew by 17% (5% underlying)

·      First five-year plan complete - stretching targets exceeded

 

 

1.     Defined in the explanation of non-IFRS measures on page 15.

2.     Defined in the explanation of non-IFRS measures on page 15. In these Full Year results and in future, we are using a revised definition of adjusted operating profit that includes amortisation of intangible assets charged to operating expenses; comparative figures have been restated accordingly.

3.     Defined as growth in business excluding impact of current and prior period acquisitions £9.1m, the reduction in revenue as a result of the rationalisation of the Custom Research Business (£2.7m) and movement in exchange rates £2.4m.

 

Commenting on the results, Stephan Shakespeare, Chief Executive, said:  

"It has been a milestone year for YouGov. Five years ago we set ourselves ambitious growth targets which reflected our belief in the business' ability to expand its international reach, develop best-in-class products and dynamically respond to changing client needs. I am delighted that we have exceeded those targets. We have consistently delivered growth ahead of the market in that time, proving that YouGov's technologies, services and people are truly world leading.

 

We remain very ambitious. This year was also the first year of our next five-year plan and we have made a great start, delivering strong growth in earnings. We have been winning more clients, taking on larger contracts and projects, and strengthening our position across the globe. At the same time, we have continued to invest in our products and technology. The power of our data is driving our business forward, and we look forward to continuing this trend in the coming year. 

 

Trading in the current year has started in line with the Board's expectations, and our outlook for the business remains strong."

 

 

Enquiries:

 

YouGov plc Stephan Shakespeare / Alex McIntosh	020 7012 6000
FTI Consulting Charles Palmer / Leah Dudley	020 3727 1000
Numis Securities Limited (NOMAD and broker) Nick Westlake / Matt Lewis / Hugo Rubinstein	020 7260 1000

 

 

 

Chair's Statement

 

YouGov is an international data and analytics group. We provide our clients with the data and insights to help them plan, develop and evaluate the impact of their marketing and communication activities. We now operate from 36 offices in 22 countries. This enables us to serve clients in more than 40 national markets. We operate a global panel of over 8 million panellists who share their data with us in ways that are fully compliant with data protection, privacy and security laws.

 

We have achieved another year of strong organic revenue growth, well ahead of the market¹. This growth has led to a further increase in profitability, as we continue to focus on improving the business' margins.

 

Results and Dividend

 

Group revenues were up 17% in reported terms to £136.5m (10% up on underlying² business) while adjusted operating profit³ increased by 45% on the prior financial year to £18.3m. Improving margins has been a key component of YouGov's 2014-19 five-year plan for the business, and a significant driver of increased adjusted operating profit. This is in part a result of the business' strategy to focus on subscription data products.

 

These results reflect the Group successfully exceeding its five-year targets, as well as an encouraging start to the next phase of YouGov's growth. The Board remains confident in YouGov's potential, and is therefore pleased to recommend a dividend increase of 33% to 4.0 pence per share, payable on 16 December 2019.

 

Strategic Direction

 

This year was the final year of our first five-year plan ("FYP1"). Over the course of FYP1, we have taken a series of actions consistent with our stated plan of moving away from traditional, project-based, market research to a subscription-based syndicated data model with supplementary data analysis services. We have chosen this strategic direction based on the changing needs of our clients and the availability of new technologies. It informs our decisions on recruitment, training, technology and geographic expansion.

 

Our aspirational goal is to be recognised as the world's leading provider of high-quality market and opinion data and insights. Our cultivation of the world's largest and most engaged consumer panel will be a key enabler of this goal.

 

Long-Term Growth Plans and LTIP Targets

 

We choose to operate using the tool of five-year strategic growth plans to enable us to allocate resources, make investment decisions and to create a close link between corporate performance and executive remuneration. At the same time, as YouGov is growing fast in a dynamic and rapidly changing market, we place a high emphasis on remaining agile and nimble. Having a five-year plan does not mean we feel we can confidently predict exactly how our market and our business will evolve over time, but it does set fixed and challenging financial performance targets which will create significant shareholder value.

 

The key targets for FYP1 were to grow adjusted earnings per share² at a compound annual rate of more than 25%, and for the average adjusted operating  margin² to be at least 12% (on the previous adjusted operating profit definition), over the five years to 31 July 2019. As this year's results show, both of those stretching targets were exceeded and therefore the long-term incentive plan aligned with FYP1, the LTIP 2014, is due to vest in full in November 2019.

 

The Company's next long-term growth plan ("FYP2") has been approved by the Board and focuses on the achievement of our aspirational goals and targets. The key targets for the four years to 31 July 2023 which define FYP2 are:

-       Double group revenue

-       Double group adjusted operating profit margin²

-       Achieve an adjusted earnings per share² compound annual growth rate in excess of 30% 

 

Following consultation with the Company's major shareholders, the Board has approved a new long-term incentive plan aligned with FYP2, with full vesting to be determined by growth in adjusted earnings per share² at a compound annual rate of more than 35%. More detail on the YouGov Long-Term Incentive Plan 2019 (the "LTIP 2019") is provided on pages 34 to 36 of this announcement. The LTIP 2019 forms part of the 2019 Annual Report on Remuneration which shareholders will be invited to approve at the upcoming Annual General Meeting ("AGM").

 

 

 

Employee Benefit Trust

 

During the year we established a new Employee Benefit Trust and approved a Share Purchase Programme of up to 1,000,000 YouGov plc shares by the end of October 2019. As at 31 July 2019, the Trust held 755,000 Ordinary shares. These shares will ultimately be used by the Trust for the settlement of awards granted under the Company's employee share plans. At the time of writing, a continuation of the Share Purchase Programme for a further 12 months to October 2020 is under consideration by the Board.

 

Board Composition

 

Following the year end, we announced the retirement of two Non-Executive Directors from the Board. Ben Elliot stepped down in September 2019 after nine years' service and Nick Jones will be stepping down in December 2019 after ten years' service. Both Ben and Nick made significant contributions to YouGov over the years and, on behalf of shareholders, the Board offers them our sincere thanks.

 

Ashley Martin, who joined the Board during the year, has taken over from Nick as Chair of our Audit & Risk Committee. Rosemary Leith, who chairs our Remuneration Committee, will be taking on Nick's role as Senior Independent Director.

 

Following Nick's departure, our Board will consist of four independent Non-Executive Directors and three Executive Directors. We have in place a comprehensive succession plan for all Board members to ensure we continue to have the right balance of skills and independent oversight.

 

Stakeholders

 

YouGov now employs more than 1,000 staff across four continents. On behalf of the Board and shareholders, I would like to thank all our employees, as well as our panellists, partners and clients, for their contribution to YouGov's ongoing success.

 

Current Trading

                                                                                         

Trading in the current financial year is in line with the Board's expectations.

 

Roger Parry CBE

Chair

8 October 2019

 

 

 

1.     According to the ESOMAR Global Market Research Report published in September 2019, global research market turnover grew by 2.1% in 2018 (or by -0.3% after inflationary effects are factored in).

2.     Defined as growth in business excluding impact of current and prior period acquisitions £9.1m, the reduction in revenue as a result of the rationalisation of the Custom Research Business (£2.7m) and movement in exchange rates £2.4m.

 

3.     Defined in the explanation of non-IFRS measures on page 15.

 

Chief Executive Officer's Review

 

We have had another strong year, growing our revenue by 17%, our adjusted operating profit¹ by 45%, our adjusted operating margin¹ by 2 percentage points, and exceeding our ambitious five-year targets. Statutory operating profit increased by 69%.

 

There were three main drivers to this strong performance: continued emphasis on scalable data products and services; alignment of custom research with our key advantages of panel, methodology and technology; and the success of our acquisitions.

 

Our Data Products and Data Services divisions have continued to grow in number of clients, size of contracts and geographic spread; our Custom Research division has also grown significantly with greater emphasis on scalable work such as multi-wave global trackers. The two acquisitions we made in the prior year (the Australian research agency, Galaxy Research, and the sports marketing research agency, SMG Insights, now YouGov Sports) have integrated well and added many new clients.

 

The YouGov offer, based on the YouGov Cube (our connected data library) and Crunch (our data analytics and visualisation tool), is well aligned with trends in the market towards more sophisticated data and tools. Further, the increasing emphasis not only on the quality of connected data but also on the ethics of personal data has benefitted the YouGov model of a large, permissioned panel, with relationships based on accountability, and a transparent, efficient infrastructure.

 

Achievement of five-year plan targets

 

In 2014 we unveiled our first five-year growth plan ("FYP1") for improving profitability. The five-year target (essentially, trebling profit) forced us to make hard decisions about organisational strategy and structure and drove us to innovate boldly. The strategy was to focus on growing our Data Products and Data Services divisions, which have operational leverage, even though it meant withdrawing from custom research projects that, while profitable, did not benefit from the strengths of our unique connected-data system. Our investment in technology and products during the last five years has created a platform for scalable profit generation and has enabled our business to consistently deliver results ahead of the market². It is from this position of strength that we have begun to execute our new growth strategy.

 

When we laid out our FYP1 targets, they were considered stretching and ambitious. Today we are pleased to announce that we have exceeded those targets.

 

We remain no less ambitious in our aspirations for the future. In the Half Year Announcement (April 2019) we set out a new growth plan with even more stretching goals to ensure we continue at pace to build on the strong business we have worked hard to create.

 

New growth plan and long-term targets

 

Our new growth plan ("FYP2"), to be delivered within the next four years to 2023, deploys the same idea that very difficult targets force us to focus boldly, and to invest in innovation.

 

The underlying strategy that drives our FYP2 plan is defined by the mantra: "YouGov. Best panel - Best data - Best tools". Our plan builds on the market-leading position we have built through our GDPR³-compliant proprietary panel; the richness, relevance and connectedness of the data in the YouGov Cube; the power of our analytics platform, YouGov Crunch; the accuracy of our ground-breaking methodologies; and the ethical relationship we have with our panellists, who trust us with deep and extensive data about them because of our transparency and our commitment to mutual benefit.

 

Our ambition is to create a universal platform for the ethical and safe sharing of opinions and personal data, unleashing its power for the benefit of both panellists and clients. This ambition is supported by the three strategic pillars of FYP2: Data Integration, Ethical Activation, and Public Value.

 

 

Three strategic pillars

 

1.   Data Integration

 

Strategic focus: 

 

Only a panel in which millions of individuals are engaged over a long period of time can produce genuinely connected, high-value, structured data.

 

FYP1 saw us significantly driving up margins in our Custom Research division by focusing on the more profitable areas of custom research and aligning it with our syndicated data solutions and technology. This engineered approach has transformed our research services. The next stage of this transformation is integration and adaptation to custom needs. By allowing our model to be adapted to the specific needs of individual organisations, we create new connected data propositions that not only provide new revenue opportunities, but also further extend the utility of YouGov data subscriptions particularly for clients whose precise needs are not met through more traditional syndicated data sets.

 

Integration also means connecting the uses of our data, allowing custom research to be engineered on a framework of our syndicated data, gaining value from it in ways that cannot be matched by traditional tracking designs. In the past few years we have seen strong growth in our custom tracking offer, both in revenue and margin, and we intend to bring our syndicated data and custom offerings into ever closer alignment.

 

Progress so far:

 

Further investment in technology is creating additional value:

 

We are investing in our websites, mobile apps, interfaces and dashboards to make it easier for clients and the public to interact with and deploy our data, with a first version of the 'YouGov Screen' platform on track to be released by the end of the calendar year.

 

We continue with the development of Crunch, our proprietary data storage and analytics system, which allows clients to explore data with point-and-click ease and in the future will allow us to bring different kinds of data together to be analysed in 3D (i.e. as time series).

 

One important addition to the types of data we can connect is tracking data from social media-listening, led by our acquisition of Portent.io (now YouGov Signal).

 

New ways of reaching the public include our acquisition of Inconvo, the chat-bot system that engages audiences and creates data in message channels.

 

YouGov Collaborate, our 'aided self-service' tool for the creation of research projects, is now being used by clients in the US, UK, Germany, Spain and Italy. Further development of this tool (including integration with YouGov Direct) will expand the range of options for clients, and indeed the range of clients that can access our data and tools.

 

2.   Ethical Activation

 

Strategic focus: 

 

Conventionally, research is used to understand markets and plan campaigns, while activation - using data to create targetable audiences for advertisers and actually deliver marketing to them - is viewed as a separate process. We are now breaking down the barrier between the two with YouGov Direct.

 

With this new platform, YouGov Direct members can make their opinion and behavioural data available for in-depth, targeted research, which can be done outside of a pure research context and within a marketing and sales context. The data can be used in this way because members have permissioned each specific use with the security of accountability enabled through the YouGov Direct blockchain-encryption process.

 

The system is not only GDPR-compliant but GDPR-embracing - that is, it enables ethical use of data to create more control and value for members and clients alike. This means, with YouGov Direct, researchers and marketers have the unique opportunity to reach precise target audiences, upgrade their existing research-based advertising tests (understanding business outcomes rather than claimed intention), and create a seamless single audience view, from planning through to campaign execution and measurement. It addresses the single most important challenge to the marketing industry, namely the increasingly intense pressure on using personal data for advertisement targeting.

 

Progress so far:

 

The first pilot of YouGov Direct in early-2019 proved highly successful as a positive experience for members, and as a demonstration to potential clients of added power for both research and marketing.

 

A commercial version of the app has since been developed which includes a collaborative dashboard for clients, the start of a self-service facility. June 2019 saw the alpha version launch of the app in the UK, with an upgraded version due to be launched in the US this month. The third geography is planned to be in India, early in 2020.

 

A commercial head of the product, who previously headed our Data Products division, is in place, based in New York. The YouGov Direct team now consists of nine, across the UK and US, and we expect to grow this team significantly in the coming year.

 

3.   Public Value

 

Strategic focus:

 

YouGov creates more data specifically for public value than any other research company. We plan to further enhance our public offering in two ways: first, we are adding more trackers and daily polling, not only in politics but across a broad range of social and cultural trends; second, we are creating better tools for the public to be able to access and explore that data.

 

Our first significant initiative in this area is YouGov Ratings, launched on our US and UK websites in 2018. Ratings is our new popularity and awareness metric for thousands of entities - including celebrities, politicians, sports teams, music acts and brands - available for free on our website. Ratings forms part of our Public Value strategy to build a destination site that offers a wide and deep body of data that people can interact with (i.e. add data, as well as explore and use data) and gives the public the ability to help shape the agenda.

 

We believe this approach generates important social value, and serves to further increase public engagement in our work. This approach also helps to recruit and maintain panellists, as it creates additional channels and modes for being a panellist, which is critical as we continue to expand the size, complexity and reach of our data sets. Finally, and very importantly, this approach also showcases much of our commercial data to customers at a top-line level, driving traffic to our website and acting as an entry point for digital sales of our commercial offer.

 

Progress so far:

 

The interactive YouGov Ratings site has increased visibility for YouGov data. Curated Ratings data in Google Search has driven many more site visits. For example, in the US, the launch of Ratings increased the volume of organic search visitors from Google to YouGov tenfold in the space of six months. This is largely due to our publication of search-engine friendly data, which has led to YouGov data increasingly appearing as snippets within Google Search results, in areas as diverse as luxury brands, the popularity of celebrities and political topics.

 

We have been working on creating a new, more accessible and interactive data archive which will be launched in the new calendar year.

 

A new daily 'open survey' on our YouGov Daily mobile app and website facilitates quick-response polls, which have started to have a positive impact on our media presence in the UK. This will be expanded to our other key markets over the next year.

 

Current trading and outlook

 

Our pipeline of sales opportunities for our syndicated data products is strong and we continue to see opportunities for growth within those forms of custom research that are aligned with our core connected-data offering. We will keep investing in our technology platforms to support growth and expansion in line with our strategic objectives.

 

Trading since the year end has continued positively. While Brexit continues to create uncertainty in the economic and political environment, especially for UK and European businesses, the international spread of our revenues, with a significant and growing US weighting, cushions us from volatility. In the context of both the macro-environment and our own plans to accelerate our investment in technology and geographic expansion, we remain confident in our growth prospects for the year and beyond.

 

 

Stephan Shakespeare

Chief Executive Officer

8 October 2019

  

 

1.     Defined in the explanation of alternative performance measures on page 15.

2.     According to the ESOMAR Global Market Research Report published in September 2019, global research market turnover grew by 2.1% in 2018 (or by -0.3% after inflationary effects are factored in).

3.     The European Union General Data Protection Regulation 2016/679 ("GDPR").

 

 

Chief Financial Officer's Review

                       

The Group achieved continued growth in the 12 months to 31 July 2019 which marks the end of the first five-year growth plan which commenced in 2014.

 

Total Group revenue in the period rose to £136.5m, compared to £116.6m in the 12 months to 31 July 2018. Growth was 10% on an underlying¹ basis since the prior period (but 17% in reported terms due to the depreciation of £ Sterling against US Dollar and additional revenue generated by acquisitions in the period and prior period).

 

Included in the performance for the 12 months to 31 July 2019 are the consolidated results of the recent acquisitions:

·      Galaxy Research (December 2017)

·      SMG Insight (May 2018)

·      InConversation Media (August 2018)

·      Crunch.io (September 2018)

·      Portent.io (November 2018)

 

The acquisitions support the strategic aims of access to new technologies, geographic expansion and new panels. The acquisitions added £9.1m of revenue and reduced operating profit by £0.3m in the year to 31 July 2019.

 

Adjusted measures

 

Until now, our presentation of adjusted measures has excluded amortisation of intangible assets charged to operating expenses and separately reported items (see page 15 for the full definitions we currently use). As announced at the Half Year, in these Full Year results and in the future, we are using a revised definition of adjusted measures that includes amortisation of intangible assets charged to operating expenses. Our reported adjusted EBITDA is unaffected by this presentational change to the adjusted measures.

 

Adjusted operating margins and organic growth

 

In line with our stated strategy, a higher proportion of sales coming from higher margin products and services increased gross margins by 1% point. Adjusted operating margins² increased from 11% to 13%.

 

Group operating costs (excluding separately reported items) of £94.0m (2018: £82.4m) increased by 14% in reported terms, and 12% in constant currency terms. Group adjusted operating profit² (before separately reported items) increased to £18.3m (45% growth in the period) with strong continued growth in Data Products, coupled with margin improvement in the Custom Research division. The statutory operating profit (which is after crediting other separately reported items amounting to £1.5m) increased to £19.8m (2018: £11.8m).

 

Performance by Division

 

YouGov's lines of business fall into three divisions: Data Products, Data Services and Custom Research.

 

Data Products

 

Our syndicated data products include YouGov BrandIndex, YouGov Profiles and YouGov SportsIndex. YouGov Plan & Track (the combined BrandIndex and Profiles proposition) is available in 21 countries (2018: 14). BrandIndex alone is available in 40 countries, while SportsIndex is available in 38 countries.

 

The performance of our Data Products division has contributed significantly to our Group revenue and adjusted operating profit². Revenue from Data Products increased by 36% (25% growth in underlying business¹) in the period. The adjusted operating profit² from Data Products increased by 50% to £14.1m and the operating margin increased by 3% to 34%. The improving margin partly reflects the growing contribution from Profiles as well as a reduction in the use of third party data collection.

 

Geographically, the US remains the largest Data Products market and grew by 35% in in the period, (20% from the underlying business¹). The UK, France and Asia Pacific also contributed strong revenue growth of 35%, 30% and 31% respectively.

 

 

 

Data Services

 

Our Data Services division consists of our fast-turnaround research services, including our market-leading YouGov Omnibus.

 

In the year, revenue from Data Services increased by 28% (11% in underlying terms after adjusting for acquisitions, foreign exchange and reallocated revenue from the Custom Research division) to £37.2m. The focus on the US market and further territorial expansion has helped the division expand the revenue base beyond the core UK market. This growth contributed to an increase of 21% in the Data Services operating profit to £7.4m and the operating margin declined from 21% to 20% reflecting lower margin Omnibus business that we transferred from Custom Research in the Nordics.

 

Overall Data Services revenue growth included a 43% increase in reported revenue in the US (34% increase in underlying terms¹), and a 27% increase in Asia Pacific due to the Galaxy Research acquisition (4% decrease in underlying terms¹). France and Germany also grew strongly, by 16% and 24% respectively. In the UK, where YouGov Omnibus is the market leader, revenue grew by 14%.

 

Custom Research

 

Our Custom Research division includes tailored research projects and tracking studies.

 

The performance of the Custom Research service continued to be impacted by restructuring activities undertaken in the current and previous financial year. The largest reductions in revenue were Nordics (100% decline, due to the transfer of the business to the Data Services division) and the Middle East (23% decline). In the UK, revenue increased by 13% to £15.2m. The US was favourably impacted by foreign exchange gains, increasing revenue by 3% on a reported basis, however revenue declined by 4% on an underlying basis due to a reduction in client spend. 

 

During the period, the business revenue grew by 2% in reported terms and by 1% in underlying¹ terms to £60.0m. However, the adjusted operating profit² increased by 10% to £12.9m and the operating margin improved by 2 percentage points to 22%. This was largely due to operating costs as a percentage of sales reducing by 1% as a result of the restructuring of underperforming areas.

 

Revenue	Year to 31 Jul 2019 £m	Year to 31 Jul 2018 £m	Revenue growth %	Underlying business1 revenue change %
Data Products	41.5	30.4	36%	25%
Data Services	37.2	29.0	28%	11%
Total Data Products & Services	78.7	59.4	32%	18%
Custom Research	60.0	58.7	2%	1%
Intra-Group Revenues	(2.2)	(1.5)	44%	-
Group	136.5	116.6	17%	10%

 

Adjusted Operating Profit2	Year to 31 Jul 2019 £m	Year to 31 Jul 2018 £m	Operating Profit growth %	Operating Margin
				Year to 31 Jul 2019	Year to 31 Jul 2018
Data Products	14.1	9.4	50%	34%	31%
Data Services	7.4	6.0	21%	20%	21%
Total Data Products & Services	21.5	15.5	39%	27%	26%
Custom Research	12.9	11.7	10%	22%	20%
Central Costs	(16.1)	(14.6)	11%	-	-
Group	18.3	12.7	45%	13%	11%

 

Performance by Geography

 

YouGov's geographic footprint spans the UK, Mainland Europe, Americas, Asia Pacific and Middle East.

 

Revenue	Year to 31 Jul 2019 £m	Year to 31 Jul 2018 £m	Revenue growth %	Underlying business1 revenue change %
UK	41.2	31.3	32%	18%
Americas	56.4	48.2	17%	5%
Mainland Europe	23.9	21.6	11%	16%
Middle East	10.5	12.1	(13%)	(2%)
Asia Pacific	11.3	8.7	29%	8%
Intra-Group Revenues	(6.8)	(5.3)	-	-
Group	136.5	116.6	17%	10%

 

Adjusted Operating Profit2	Year to 31 Jul 2019 £m	Year to 31 Jul 2018 £m	Operating Profit growth %	Operating Margin
				Year to 31 Jul 2019	Year to 31 Jul 2018
UK	11.8	10.2	16%	29%	32%
Americas	13.2	13.8	(4%)	23%	29%
Mainland Europe	2.9	1.1	164%	12%	5%
Middle East	3.3	3.0	8%	31%	25%
Asia Pacific	0.2	0.2	2%	1%	2%
Central Costs	(13.1)	(15.6)	(16%)	-	-
Group	18.3	12.7	45%	13%	11%

 

 

 

During the year ended 31 July 2019 an increased proportion of the central costs were reallocated to the geographic hubs, leading to a reduction in the reported adjusted operating margins² compared to the year ended 31 July 2018.

 

Panel Development by Geography

 

We continue to invest in our consumer panel to increase our research capabilities, both in new geographies and specialist panels. At 31 Jul 2019, the total number of registered panellists had increased to 8.4m million, compared to 6.6 million at 31 July 2018, as set out in the table below. During the year, the Group invested in expanding our geographic capability to Poland and Canada.

 

 

Region	Panel size at 31 July 2019	Panel size at 31 July 2018	% Change
UK	1,630,985	1,355,751	20%
Americas	3,169,415	2,414,995	31%
Mainland Europe	1,209,209	952,039	27%
Middle East	1,064,205	934,696	14%
Asia Pacific	1,301,053	946,233	37%
Total	8,374,867	6,603,714	27%

 

 

Group Financial Performance

 

Amortisation of Intangible Assets

 

In the 12 months to 31 July 2019 amortisation charges for intangible assets of £8.8m were £1.8m higher than the previous year. Amortisation of the consumer panel increased by £0.7m to £3.2m reflecting the additional investment made to grow the panel in the past three years. Amortisation of software increased by £1.0m to £5.0m. £4.6m (2018: £3.5m) of the total software development charge related to assets created through the Group's own internal development activities, £0.3m (2018: £0.3m) related to separately acquired assets and £0.1m (2018: £0.2m) was for amortisation on assets acquired through business combinations.

 

Separately Reported Items

 

	Year to 31 July 2019 £m	Year to 31 July 2018 £m
Restructuring Costs	0.2	1.4
Acquisition-Related Costs	0.4	1.2
Fair-Value Movements	(2.1)	(1.7)
Total Separately Reported Items	(1.5)	0.9

 

Restructuring costs in the year are residual cost incurred in respect of the restructuring of the Custom Research business in Mainland Europe and the Middle East and the closure of the Reports business. 

 

Acquisition related costs in the year comprise: £2.8m of contingent consideration treated as staff costs in respect of the acquisitions of Galaxy Research Pty Ltd, InConversation Media Limited and Portent.io Limited and £0.8m of transaction costs in respect of the acquisitions made in the year, £0.2m of which is contingent less a reduction in expected SMG contingent consideration of £3.2m. 

 

Fair value gains in the year comprise: a £1.9m increase in the fair value assessment of the Group's 20% shareholding in SMG Insight Limited prior to acquisition and a bargain purchase gain, net of a fair value loss, in respect of the acquisition of Portent.io Limited of £0.2m.

 

 

 

Analysis of Operating Profit and Earnings per Share

Adjusted profit before tax² of £20.5m was an increase of £4.2m (26%) on the comparable result of £16.3m for the 12 months to 31 July 2018. The adjusted tax rate remained at 26%. Statutory profit before tax of £19.5m was reported compared to £11.8m in the year ended 31 Jul 2018, an increase of 65%.

 

During the period adjusted earnings per share² grew by 30% from 11.5p to 14.9p and statutory earnings per share grew by 84% from 7.7p to 14.2p.

 

	31 July	31 July
	2019	2018
	£m	£m
Adjusted operating profit 2	18.3	12.6
Share-based payments	2.4	3.6
Imputed interest	0.2	0.1
Net finance expense	(0.3)	(0.1)
Share of post-tax profit in associates	(0.1)	0.1
Adjusted profit before tax 2	20.5	16.3
Adjusted taxation2	(5.4)	(4.2)
Adjusted profit after tax 2	15.1	12.1
Adjusted earnings per share (pence) 2	14.9p	11.5p

 

 

Cash Flow, Capital Expenditure and Technology Investment

 

The Group generated £35.3m (2018: £23.6m) in cash from operations (before paying interest and tax) including a £6.0m (2018: £0.6m) net working capital inflow; as a result the cash conversion rate (percentage of adjusted EBITDA converted to cash) increased from 113% to 124% of adjusted EBITDA.

 

The Group invested £4.8m (2018: £3.9m) in the continuing development of our technology platform and increased the investment in panel recruitment to £4.0m (2018: £2.8m) for the year to support continued global expansion. Our investment in technology continued across three main areas: websites and mobile applications, survey systems, and our data analytics tool, Crunch. £2.7m (2018: £1.0m) was spent on the purchase of property, plant and equipment, resulting in a total investment in fixed assets of £12.2m (2018: £8.2m).

 

	31 July	31 July
	2019	2018
	£m	£m
Internally generated software	4.8	3.9
Panel recruitment	4.0	2.8
Other intangible assets	0.7	0.5
Total expenditure on intangible assets	9.5	7.2
Purchase of property, plant and equipment	2.7	1.0
Total capital expenditure	12.2	8.2

 

Other cash outflows included £2.3m for the purchase of InConversation Media Limited, Portent.io Limited and the business of Crunch.io Inc, £4.5m in settlement of deferred consideration amounts due and taxation payments of £4.5m (2018: £5.5m).

 

Net expenditure on financing activities increased by £4.8m to £6.8m, including the dividend payment of £3.2m (2018: £2.1m) and the purchase of treasury shares for £4.0m (2018: £nil).

 

Net cash balances at the year-end increased by £7.3m to £37.9m. Net cash inflow in the year was £5.2m (2018: £7.2m) and currency fluctuations in the year resulted in an exchange gain of £2.1m (2018: £0.2m).

 

 

Currency

The Group's results were affected by the net depreciation of £ Sterling as its average exchange rate was 4% lower against the USD in this period than in the 12 months to 31 July 2018. Movement against the Euro was effectively flat for the period. The net impact of foreign exchange on the Group's adjusted operating profit² was an increase of £0.6m compared to calculation in constant currency terms.

 

Balance Sheet

As at 31 July 2019, total shareholder's funds increased from £92.1 to £108.6m. Net assets increased from £92.1m to £108.0m, with a minority interest of £0.6m accounting for the difference. Net current assets decreased from £25.3m to £24.1m. Current assets increased by £5.9m to £72.6m with debtor days decreasing from 56 to 47. Current liabilities increased by £7.3m to £48.7m with creditor days increasing to 24 days from 21 days at 31 July 2018. Non-current liabilities increased by £2.9m to £14.1m partly due to £2.2m of contingent consideration payable in respect of acquisitions.

 

Proposed Dividend

 

The Board is recommending the payment of a final dividend of 4.0 pence per share for the year ended 31 July 2019. If shareholders approve this dividend at the AGM (scheduled for 11 December 2019), it will be paid on 16 December 2019 to all shareholders who were on the Register of Members at close of business on 6 December 2019.

 

 

Alex McIntosh

Chief Financial Officer

8 October 2019

 

 

 

 

1.     Defined as growth in business excluding impact of current and prior period acquisitions £9.1m, the reduction in revenue as a result of the rationalisation of the Custom Research Business (£2.7m) and movement in exchange rates £2.4m.

2.     Defined in the explanation of non-IFRS measures on page 15.

 

 

Explanation of Non-IFRS measures

 

Financial Measure	How we define it	Why we use it
Separately reported items	Items that in the Directors' judgement are one-off or need to be disclosed separately by virtue of their size or incidence	Provides a more comparable basis to assess the year-to-year operational business performance
Adjusted operating profit	Operating profit excluding  separately reported items
Adjusted operating profit margin	Adjusted operating profit expressed as a percentage of revenue
EBITDA	Operating profit before charging depreciation and amortisation
Adjusted EBITDA	EBITDA excluding separately reported items
Adjusted profit before tax	Profit before tax before share based payment charges, imputed interest and separately reported items.
Adjusted taxation	Taxation due on the adjusted profit before tax, excluding the tax effect of separately reported items and share based payment charges	Provides a more comparable basis to assess the underlying tax rate
Adjusted tax rate	Adjusted taxation expressed as a percentage of adjusted profit before tax
Adjusted profit after tax	Adjusted profit before tax less adjusted taxation	Facilitates performance evaluation, individually and relative to other companies
Adjusted profit after tax attributable to owners of the parent	Adjusted profit after tax less profit attributable to non-controlling interests
Adjusted earnings per share	Adjusted profit after tax attributable to owners of the parent divided by the weighted average number of shares.  Adjusted diluted earnings per share includes the impact of share options
Constant currency revenue change	Current year revenue change compared to prior year revenue in local currency translated at the current year average exchange rates	Shows the underlying revenue change by eliminating the impact of foreign exchange rate movements
Cash conversion	The ratio of cash generated from operations to adjusted EBITDA	Indicates the extent to which the business generates cash from commercial activities

Reconciliation of Non-IFRS measures

Adjusted Operating Profit Reconciliation	Year to 31 Jul 2019 £m	Year to 31 Jul 2018 £m	% Change
Statutory Operating Profit	19.8	11.8	69%
Separately Reported Items	(1.5)	0.9	N/A
Adjusted Operating Profit	18.3	12.7	45%

 

 

Adjusted EBITDA Reconciliation	Year to 31 Jul 2019 £m	Year to 31 Jul 2018 £m	% Change
Adjusted Operating Profit	18.3	12.7	45%
Depreciation	1.5	1.2	20%
Amortisation	8.8	7.0	25%
Adjusted EBITDA	28.6	20.9	37%

 

 

Publication of Non-Statutory Accounts

 

The financial information relating to the year ended 31 July 2019 set out below does not constitute the Group's statutory accounts for that year but has been extracted from the statutory accounts, which received an unqualified auditors' report and which have not yet been filed with the Registrar.

 

 

 

YouGov Consolidated Income Statement For The Year Ended 31 July 2019